The Economic Growth vs. the Environmental Sustainable Development free essay sample

The Economic Growth Vs. the Environmental Sustainable Development Contents I. Introduction3 II. Distinguish between Economic Growth and Environment Sustainable Development5 III. Natural Environment and the Economy 5 1. Natural Environment and the Economy5 2. Relationship between economic growth and the environment6 2. 1 Environmental Kuznets Curve 6 2. 2 Alternative views on the economy-environment relationship7 2. 3 Case study in Cambodia 8 3. Current Cambodia’s Economy and Development10 IV. Sustaining Economic Growth in The Long-Term12 . The Combination of Economic Growth 12 2. The critical thresholds over the environmental assets12 3. The limited resources of non-renewable environmental 13 4. The impacts of the changes to natural assets toward many generations13 5. Effective use and supplying of natural assets14 V. Conclusion15 Bibliography16 I. Introduction â€Å"The relationship between economic growth and the environment is controversial. Traditional economic theory pos its a trade-off between economic growth and environmental quality. Since the early 1990s, however, the rapidly expanding empirical and theoretical literature on the Environmental Kuznets Curve (EKC) has suggested that the relationship between economic growth and the environment could be positive and hence growth is a prerequisite for environmental improvement. † (Lee et al. 2005) However, in this 21st century environment is a hot issue, which international organizations have given special attention to, especially climate change. Regarding to previous research study, one of the mainly contributing factors is human activity. Particularly, industrial revolution has direct effects. Haze from factories creates greenhouse gases and air pollution. Moreover, the waste from industries is polluting drinkable water and diluting utilized soil. Thus, states need to consider the impact on environmental and social concerns caused by the rapid growth of economy. Cambodia is a developing country that is really important to think of economic growth before environmental improvement if we do not take it into a deeper consideration and discussion. However, according to the World Bank group (2011), sustainable use of Cambodia’s natural resources is a  key feature to the country’s development. Approximately three-quarters of the population are directly engaged in agriculture and depend upon the land for their daily survival. Nearly 40  percent  of the country’s Gross Domestic Product (GDP) comes from agriculture and forestry (The World Bank 2011). Tourism, which is based on the country’s cultural and natural wonders, also contributes considerably to economic development. Reliance on these industries means that sustainable management of natural resources and other aspects of the environment are vital for improving rural livelihoods and economic growth. While economic studies often distinguish between â€Å"economic growth†, and â€Å"economic development†, what will be the better choice for Cambodia to choose in order to improve her economy? Many previous researchers have conducted research in terms of economics’ evolution toward economic growth and economic development. Actually, their study widely focused on global situations, while this term paper will be conducted to contribute to government policy, especially in Cambodia whether we should intensify our production to achieve high per capita income for every Cambodian or we should slow down to leave room for environmental protection. This term paper aims to: (1) analyze the differences between economic growth and economic development in Cambodia; (2) identify the bad impacts of economic growth on Cambodia’s environment and sustainable development; (3) examine the importance of the economic development for Cambodia as a whole; (4) investigate the current economic situation and the possible future of governmental policy toward economic evolution. This study does not attempt to answer the question of what the sustainable level of economic growth might be, but instead examines the link between economic growth and the environment. Moreover, rather it has the objectives of revisiting Cambodia’s policy toward the balance of production and environment in economic development. II. Distinguish between Economic Growth and Environment Sustainable Development Economic Growth and Sustainable Development have many different characteristics that can draw readers to understand clearly why some states choose to develop their economic rather than improving their sustainable development and why the other states choose to give more attention to their environmental sustainability instead. Hence, before doing the analyzing and providing the data related to the topic research, these two factors have to be distinguished more accurately. Hereby, economic growth refer to the grow of GDP per capital and other measurements of total income in quality of goods and services in society whereas sustainable development refer to the resource that can provide to meet the demand of human while conserve the environment and make sure that next generation can enjoy their well-being in the future like the present. III. Natural Environment and the Economy 1. Natural Environment and the Economy â€Å"Natural capital is defined as natural assets in their role of providing natural resource inputs and environmental services for economic production† (Tim et al). Natural capital contributes to economic output through two main channels—directly as an input to the process of economic activity, and indirectly through its effect on the productivity of the other factors of production. For instance, natural resources such as oil, coal, natural gas, water etc. re the raw materials and sources of energy for industry, which is the main part of economic growth. Besides, â€Å"Beyond the commercially traded goods and services of primary production, nature also produces non-marketable services, which do not have or not yet and explicit market price, generate positive externalities that benefit other activities, or that add directly to human well-being like hydrological, climatic and recreational servic es provided by a forest (Loyer, 2006). 2. Relationship between economic growth and the environment After discussing the importance of natural environment and its contribution to economic growth in the above section, this section aims to show the relationship between economic growth and environmental quality. 3. 1 Environmental Kuznets Curve The Environmental Kuznets Curve (EKC) is often used to define the relationship between economic growth and environmental pollution. Referring to the hypothesis of and inverted U-shaped describes the relationship between GDP per capita and some measures of environmental quality (figure 1). The curve can be explained as follows: As GDP per capita raises, environmental degradation increases. However, when GDP per capita growths in a certain point, the environmental damage seems decrease accordingly due to some reasons: * At low incomes, individuals are using their limited income to fulfill their basic consumption needs, which causes pollution in a low level. * Once a certain level of income is achieved, individuals start considering the trade off between environmental quality and consumption, which causes environmental damage in a higher level. After a certain point, individuals prefer improvements in environmental quality rather than further consumption, which causes environmental quality beginning to improve along economic growth. EKC relationship demonstrates the logic that at the early stage of industrialization and development, environmental damage is caused by the uses a lot of natural resources and dirty technologies for production by economy. Whereas, when the de velopment improves the quality of life, the demands for an environmental-friendly society are rising. As a result, it is burden for government to implement policies to improve environmental quality (CDRI, 2009). Figure 1: Environmental Kuznets Curve Environmental Damage Environmental Damage GDP/Capita 3. 2 Alternative views on the economy-environment relationship The relationship between economic growth and environmental quality has also been described by other alternative theories as in figure 2. The limits theory considers the possibility of breaching environmental levels before the economy reaches the EKC turning point. This theory explains the economy-environment relationship in terms of environmental damage hitting a certain level beyond which production is so badly affected the economy. (Figure 2. 1) Another theory questions, the existence of turning points and considers the possibility that environmental quality has been continued damaging more serious parallel to the increase of economic growth. (Figure 2. 2) This has similarity to the new toxics view. The other model is known as race to the bottom, which discusses the relationship between economic growth and the environment as the result of international competition. International competition primarily causes the increase of environmental damage up to the certain point when developed countries initiate deduction their environmental impact, but also outsource polluting activities to poorer countries. (Figure 2. 3) Figure 2: Alternative views between the economic growth and environmental damage relationship Environmental Damage Environmental Damage Environmental Damage Environmental Damage Environmental Damage Environmental Damage GDP/Capita GDP/Capita GDP/Capita GDP/Capita GDP/Capita GDP/Capita 2. 3. Race to the Bottom 2. 3. Race to the Bottom 2. 1 Limits Theory 2. 1 Limits Theory 2. 2. New Toxics amp; Davidson 2. 2. New Toxics amp; Davidson 3. 3 Case Study in Cambodia Sustainable use of Cambodia’s natural resources is a main aspect to the country’s development. About 75 percent of the total population are directly involved in agriculture and depend on the land for their daily subsistence. Nearly 40 percent of the country’s Gross Domestic Product (GDP) is from agriculture and forestry’s contribution. Tonle Sap is the largest lake in Southeast Asia, which associates with the Mekong River through Phnom Penh, and provides fertile, irrigated fields for rice production. Approximately 40 -70 percent of Cambodia’s protein in-take and 5 percent of GDP are provided alone by a fishing industry supported by the unique eco-system in the Tonle Sap Basin. Unfortunately, as a result of economic growth Cambodian environment has suffered remarkably. Various aspects of illegal logging, land clearing and the hunting of rare/endangered species caused the degradation of forests and los of biodiversity, which are the most instant concerns of the rapid economic growth. Furthermore, some of the environmental problems are considered cross-boundary in nature; therefore, Cambodia is playing an active role in the Greater Mekong Sub-region, Mekong River Commission, and ASEAN in addressing these challenges. Figure 3: Recent economic indicators and Changes in Forest Cover Source: CDRI, Annual Development Review 2011-12 Figure 4: Changes in Forest Cover, 1965-2010 As we can see the above tables—the first table shows the recent economic indicators from 2006 to 2010, and it indicates the growth rate by each indicator increases accordingly from year to year. This can be inferred that economic growth in Cambodia is higher from year to year. Whereas, percentages of area forest in 2005 is 59. 09 % while in 2010 it has only 56. 94%, which is showed in the second table. This reveals the fact that deforestation rises at the time as the economic growth increases as well. 3. Current Cambodia’s Economy and Development The evolution of Cambodia’s economy today over the last two decade is a process of policy transformation from a â€Å"centrally planned† to a â€Å"market-oriented† economy that favors investment, trade and private sector development within regional (ASEAN and East Asia), sub-regional (GMS), and global contexts. The economic growth has rapidly increased after the reforming policy together with the end of civil society conflict and political stability. The transformation from an agrarian economy to a more balanced mix of agriculture, industry, tourism, and services have contributed to the growing of economy averaging 7. percent between 1994 and 2010 and the lifting per capita from USD248 to USD735. To ensure sustainable economic development, Cambodia have adopted trade and investment liberalization as the priority policies, which aim to (1) strengthen the cooperation and economic integration among sub-regional, regional and global as a whole; (2) create a favorabl e macroeconomic and financial environment; (3) foster economic and trade diversification and competitiveness; (4) strengthen the private sector participation; and (5) attract investment via a more conductive business and investment climate. Figure 5: Projection of solid waste generation rate (WGR) in Phnom Penh Source: National Institute of Statistics, Ministry of Planning (2000) Figure 6: CO2 Emissions (Tons per capita) Source: The World Bank 2008 Figure 7: Climate Change Trends UNDP Cambodia, 2012 IV. Sustaining Economic Growth in The Long-Term 1. The Combination of Economic Growth The process of economic growth is typically indicated in term of producing of goods and services for consumers. Those products involves in four main different combination factors such as: (1) produced capital like machinery, building and roads. (2) Human capital like labor skills and knowledge. 3) Natural capital (raw materials) that we extract from the earth, carbon sequestration services provided by forests and soils, and (4) Social capital, including institution and ties within communities. In order to increase the economic output we need to increase in these four capitals in productions. Among these capitals, natural capital is distinct from those three types for many reasons. Some parts of natural capital can cause striking and unexpected changes and have finite limits. Those natural resources are non-renewable and affect across many generations such as flood and climate change. Consequently, while natural capital is potentially used to ensure the economic growth, it has to be extracted in proper ways to secure the sustainable and efficient growth in the long run. Despite the non-renewable resources, the renewable resources like forests; fisheries and ecosystem services such as carbon sequestration and biodiversity need to be considered respectively. The reason is that how we consume and preserve both non-renewable and renewable resources for sustainable development of economic growth and wealth creation in the long run since Cambodia depends n tourism and agricultural fields as the main factors for government income. 2. The critical thresholds over the environmental assets Ecosystems are always subject to the environmental assets, inclusive of limited sources such as fish stocks and topsoil. There will be a change or sudden failure in ecosystem when breaching this threshold and the water or the soil get the chemical substances called sink limits, which is t he result from the output of production, and it can cause short-term or long-term disruption to the ecological activities. However; it must be better for the government to have precaution fundamental to recommend prohibiting degradation properly before these thresholds are happened. 3. The limited resources of non-renewable environmental Non-renewable environmental assets, metals and oil reserve, are scarce resources, which we surely need for economic growth in the long term not just for the short term as the power reserves remains, so it should be identify where and when it face limits. Theses resources are likely the most driven materials for improving sustainable economic development. The changes, depletion and degradation to the natural capitals are potentially irrecoverable and depend on timescales of national or personal interest. For example, anonymous person destroyed the oil reservation in Iraq and it was unable to restore. 4. The impacts of the changes to natural assets toward many generations There will have an impact caused by the current generation or one country’s activities on human welfare of future generation as well as the people all over the world. For instance, the damage of Green House Gas (GHG) is not only for the one nation or one generation but it also affects to the whole living condition of people in this globe. Therefore, regarding the destruction or consume of environmental resources need to be careful and take into account over time scale toward economic growth decisions. In addition, it is too complicated to evaluate the cost of environmental assets into economic decisions. For example, the economists will not be able to calculate the price and advantages of activities that is too far in the future. . Effective use and supplying of natural assets Economic growth is not depend only on natural capital, but it also depend on produced, human and social capital, so there would be a substitution of these three capital to the natural capital if necessary or possible by improving human capital like labor skills and knowledge or invest in social or physical structures such as infrastructures in order to ensure and secure the sustainable development in the long run. Otherwise, some services and materials cannot be replaced or substituted by any other goods and services of social or human or technology, and environmental capital have critical thresholds, so there should be consider only ensuring a minimum stock of natural capital. For instance, technology and other types of capital cannot provide the substitution of the ecosystem service (ozone depletion). The effective of economic involves between the inputs of production and the consumed of production output that equal or up to the peak through the value of consume additional unit. In the case of additional products, market force and the society’s interests normally determine price when the resources is used together with the natural inputs. Therefore, to keep sustainable economic growth, we need to calculate the value of natural resources correctly and categorize them into production and consumption decisions. When we use resource more and more until it leads to the scarcity, there should be protection by making the response in price, accelerating the methods of re-us and recycling of the resource, and generate the substitute products for its daily consumption. This is not only preserve the natural resource in effectiveness but also benefit for the whole economy. I. Conclusion This study has already described the complexity of the relationship between environment and economic growth and how to put economy in the sustainable development. Economic growth is the potential instruments for national development while its serious impacts of that growth could not be rejected and affects the environment and people’s lives. Economic development, green growth, is the fundamental method for sustainable growth in the long run and it helps to ensure the world security caused by uncertain weather. Therefore, after examine the link between economic growth and sustainable economic development we can see clearly through the situation in Cambodia that this country should have the policy of sustainable development in order to assure the welfare of its own people and make sure that the availability of resource that today generation are using can be able to provide the good effect for the next generation over a period of time. 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