respectively for operationalising the concept in terms of policies.
This book was prepared as a report for the Department of Environment in the United Kingdom in 1987 to review the state of art on the relationship between the sustainable development concept, national accounting, resource accounting, satellite accounting and project appraisal procedures. This book, written by the three eminent environmental economists, provides an agenda for environmental policy. The main purpose of this book and three subsequent books under the Blueprint series is integration of economy and environment.
After reviewing different definitions of sustainable development, the authors define sustainable development as non-declining natural wealth. They argue that conserving natural capital is consistent with intergenerational equity, intragenerational equity, resilience to stress and shock, and risk aversion.
They stress the importance of valuing the environment correctly and integrating those correct values into economic policy. They state that total economic value is equal to actual use value plus option value and existence value. The option value is the sum of value in use by individuals plus value in use by future individuals and value in use by others. They suggest that a development project should be undertaken if the benefits of the development exceed the sum of the costs of the development and the benefits of preserving the environment by not developing the area. Chapter three also reviews direct and indirect valuation techniques and empirical measures of the values.
Approaches
The fourth chapter deals with the physical and monetary approaches to environmental accounting. They note three areas of measurement error in the monetary national accounts, namely, the use of defensive expenditures (expenditures to mitigate the impacts of environmental damage), the negative impact of any environmental damage on the economic welfare of the society, and the treatment of degradation or depreciation of natural and environmental resources. In 1993, the United Nations Statistical Division developed a Satellite System of Integrated Environmental and Economic Accounting. In India, the Central Statistical Organisation has initiated a few case studies on environmental accounting.
Chapter five deals with the implications of sustainable development for project appraisal. They are: "efforts to integrate environmental values into project appraisal should be greatly extended, both at the level of understanding environmental impacts, and at the level of valuing those effects"; and "making programmes of investment subject to a sustainability constraint to the effect that, as far as possible, environmental capital in the aggregate is not reduced." Chapter six deals with the controversial issue of discounting the future in project appraisal and cost-benefit analysis. The authors show that discount rates do not necessarily act to the detriment of the environment.
Policy in India
The seventh chapter deals with the use of economic instruments in ensuring sustainable development. They argue that a market-based incentive system can contribute to sustainable development when prices of goods equal their marginal social costs and prices of natural resources equal their marginal opportunity costs. They argue that pollution charge and creation of markets for pollution permits are generally better than command-and-control measures for environmental protection.
In India, even though the Ministry of Environment and Forests has taken a number of initiatives to design economic instruments for pollution control, levy of pollution charges or creation of markets for pollution permits is not feasible now. The reason is that all our environmental legislations come under criminal law and not under civil law. India's National Environmental Policy 2006 states that "civil law offers flexibility, and its sanctions can be more effectively tailored to particular situations."
The authors argue that the philosophy of sustainable development tends to favour strongly the anticipatory approach rather than the reactive approach to environmental policy. As the Approach Paper to the Eleventh Five-Year Plan envisages an annual GDP growth rate of 8 per cent or more, it is necessary to anticipate the implications of the high growth rate on the environment and undertake measures to achieve sustainable development.
This book contains seminal ideas, which are valid even today. Its practical proposals on environmental accounting, project appraisal and use of economic instruments will be of use to policy makers and students.
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