The economics of global environmental change : international cooperation for sustainability

EE

T he Economics of

Global Environmental

Change

INTERNATIONAL COOPERATION

FOR SUSTAINABILITY

Edited by Mario Cogoy and Karl W. Steininger

N EW H O R IZO N S IN

ENVIRONMENTAL

ECONOMICS

Series Editors

W A L L A C E E. O A T E S

HENK FOLMER

The Economics o f Global Environmental

Change

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NEW HORIZONS IN ENVIRONMENTAL ECONOMICS

Series Editors: Wallace E. Oates, Professor of Economics, University of

Maryland, College Park and University Fellow. Resources for the Future. USA and

Henk Folmer, Professor of Research Methodology, Groningen University and

Professor of General Economics. Wageningen University, The Netherlands

This important series is designed to make a significant contribution to the

development of the principles and practices of environmental economics. It

includes both theoretical and empirical work. International in scope, it addresses

issues of current and future concern in both Easl and West and in developed and

developing countries.

The main purpose of the series is to create a forum for the publication of high

quality work and to show how economic analysis can make a contribution to

understanding and resolving the environmental problems confronting the world in

the twenty-first century.

Recent titles in the series include:

Integrated Assessment and Management of Public Resources

Edited by Joseph c. Cooper, Federico Perali and Marcella Veronesi

Climate Change and the Economics of the World’s Fisheries

Examples of Small Pelagic Stocks

Edited by Rognvaldur Hannesson, Manuel Barange and Samuel F. Herrick Jr

The Theory and Practice of Environmental and Resource Economics

Essays in Honour of Karl-Gustaf Lofgren

Edited by Thomas Aronsson, Roger Axelsson and Runar Brànnlund .

The Iniemational Yearbook of Environmental and Resource Economics 2006/2007

A Survey of Current Issues

Edited by Tom Tietenberg and Henk Folmer

Choice Modelling and the Transfer of Environmental Values

Edited by John Rolfe and Jeff Bennett

The Impact of Climate Change on Regional Systems

A Comprehensive Analysis of California

Edited by Joel Smith and Robert Mendelsohn

Explorations in Environmental and Natural Resource Economics

Essays in Honor of Gardner M. Brown, Jr.

Edited by Robert Haivorsen and David Layton

Using Experimental Methods in Environmental and Resource Economics

Edited by John A. List

Economic Modelling of Climate Change and Energy Policies

Carlos de Miguel. Xavier Labandeira and Baltasar Manzano

The Economics of Global Environmental Change

International Cooperation for Sustainability

Edited by Mario Cogoy and Karl w. Steininger

Redesigning Environmental Valuation

Mixing Methods within Stated Preference Techniques

Neil A. Powe

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The Economics of

Global Environmental

Change

International Cooperation for Sustainability

Edited by

Mario Cogoy

Professor o f International Economics,

University o f Trieste, Italy

and

Karl W. Steininger

Professor o f Economics, Wegener Center fo r Climate

and Global Change, University o f Graz, Austria

NEW HORIZONS IN ENVIRONMENTAL ECONOMICS

Edward Elgar

Cheltenham, UK • Northampton, MA, USA

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Earlier versions of Chapters 1, 2,6, 7 and 8 were published online by Eolss

Publishers as Economics of Sustainable Development: International Perspectives

at www.eolss.net. Revised chapters are published here with permission.

All rights reserved. No part of this publication may be reproduced, stored in

a retrieval system or transmitted in any form or by any means, electronic,

mechanical or photocopying, recording, or otherwise without the prior

permission of the publisher.

Published by

Edward Elgar Publishing Limited

The Lypiatts

15 Lansdown Road

Cheltenham

Glos GL50 2JA

UK

Edward Elgar Publishing, Inc.

William Pratt House

9 Dewey Court

Northampton

Massachusetts 01060

USA

Reprinted 2009

A catalogue record for this book

is available from the British Library

Library of Congress Control Number: 2006934139

Published with the support of the University of Graz.

ISBN 978 1 84720009 9

Printed in the UK by the MPG Books Group

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Contents

List o f Figures viii

List o f Tables ix

Contributors x

PART I: OVERVIEW

1. The Economics o f Global Environmental Change 3

M ario Cogoy and K arl W. Steininger

1. Introduction 3

2. Global environmental change 6

3. International distribution o f environmental burdens and

responsibilities 13

4. International trade and foreign direct investment 20

5. The contributions o f this volume 24

6. Conclusions 31

PART II: THE ECONOMIC DIMENSIONS OF GLOBAL

ENVIRONMENTAL CHANGE

2. International Trade, Environment and Sustainable Development 37

C ees van Beers

1. Introduction 37

2. The impact o f international trade on economic welfare 38

3. Interaction between international trade, environment and

sustainable development: traditional economic approaches 42

4. Interaction between international trade, environment and

sustainable development: alternative theoretical approaches 48

5. The interaction between international trade, the environment

and sustainable development 51

6. Conclusions and questions for further research 57

3. International Dimensions o f Land Use Change 61

E van F raser a nd K laus H ubacek

1. Introduction 61

2. Socio-econom ic drivers o f land use change 65

3. Ecosystem processes as the basis for management 75

4. W ays o f promoting sustainable land use 81

5. Conclusion 91

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4. International Perspectives of Biodiversity Conservation 101

Birgit Friedl. Brigitte Gebetsroither and Michael Getzner

1. Introduction 101

2. Economic significance of biodiversity '03

3. Biodiversity conservation by international conventions and

frameworks 111

4. Policies for biodiversity conservation 116

5. Biodiversity and sustainable development 121

6. Conclusions 126

5. Integrated Water Resources Management (IWRM) as a Key for

Sustainable Development 134

Thomas Kluge

1. The concept of Integrated Water Resources Management 134

2. Intrasectoral perspective - integration of natural system

elements: ground and surface water 140

3. Intersectoral perspective - integration o f nature and society 143

4. Prognosis, complexity and uncertainty 145

5. A multiple view o f the scales 147

6. Participation 148

7. Future considerations 150

PART III: INTERNATIONAL COOPERATION IN GLOBAL

ENVIRONMENTAL CHANGE

6. Possibilities for Cooperation in International Pollution Control 157

Michael Finus

1. Introduction 157

2. Coalition models 162

3. Factors influencing the success of cooperation 166

4. Issues of treaty design influencing the success o f cooperation 173

5. Summary and conclusions 184

7. International Environmental Agreements and the Case o f Global

Warming j96

Johan Eyckmans

1. Introduction 1%

2. An integrated assessment model for transboundary stock

pollution problems 197

3. The theory of international environmental externalities 200

4. Confronting theory and reality for the case of global

wanning 2 12

5. Conclusion 220

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8. Transforming Environmental and Natural Resource Use

Conflicts 225

Sim on A. M ason and Adrian M uller

1. Introduction 225

2. Conflicts over the indirect use o f natural resources 229

3. Conflicts over the direct use o f natural resources 232

4. Approaches to dealing with conflicts 235

5. Transformation o f environmental conflicts 242

6. Examples o f environmental conflict transformation 246

7. Water conflict transformation in the N ile basin 248

8. Means to transform environmental conflicts 251

9. Conclusions 254

Index 273

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Figures

2.1 Welfare effects of an exported commodity in a small open

country 40

2.2 Welfare effects of an imported commodity in a small open

country 41

2.3 Welfare effects o f an exporting commodity in a small open

country including small environmental effects 44

2.4 Welfare effects o f an exported commodity in a small open

country including large environmental effects 45

3.1 The ‘Environmental’ Kuznets Curve showing how the burden

o f different environmental risks shifts as income levels grow 68

3.2 Typology o f the types o f goods land can create 72

4.1 The drivers of biodiversity loss according to the Millennium

Ecosystem Assessment 106

4.2 Ecosystem services, values and markets 108

5.1 Integrated Water Resources Management 139

7.1 Participation constraints and social optimal allocations 210

7.2 Marginal abatement cost functions and Kyoto objectives 217

8.1 Comparison o f demand- and supply-side management 244

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Tables

1.1 Costs and benefits o f CFC control estimated for the United

States in 1987 by the EPA 10

1.2 C 0 2 em issions in 2002 by region 14

4 .1 Estimated number o f described species 104

6A.1 Selected international environmental agreements 192

8.1 Schematic comparison o f the economic approach and the

interactive (Harvard, human needs and conflict

transformation) approaches 242

8A. 1 International freshwater conflicts 263

8A.2 International fish conflicts 267

8A.3 Other international environmental conflicts 269

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Contributors

Cogoy, Mario Education in philosophy, sociology and economics at the

Universities of Pisa, Freiburg and Frankfurt. Previously Professor of

Sociology at the University of Frankfurt, since 1988 Professor of

International Economics at the University of Trieste. Visiting Professor in

Leuven and Graz. Research interests in environmental and resource

economics, in the economics o f consumption and in materials flow analysis.

Eyckmans, Johan Professor in Economics at the European University

College Brussels (EHSAL) and affiliated researcher at the Center of

Economic Studies o f the Katholieke Universiteit Leuven in Belgium. His

research interests include microeconomics, game theory and normative

economic theory applied to environmental economics. His main publications

deal with international environmental agreements in general and

international climate policy in particular.

Finus, Michael Associate Professor in Economics, Institute o f Economic

Theory, University o f Hagen. His interests include microeconomics, public

economics and game theory. His research focuses on environmental

economic topics, especially the game-theoretical analysis of international

environmental agreements.

Fraser, Evan Lecturer at the Sustainability Research Institute, School of

Earth and Environment, University o f Leeds. His main research interests

focus on food security and sustainable agriculture in a world buffeted by

major environmental and economic changes. Specifically, he is interested in

the resilience of community food systems in light o f climate change and

economic globalization. He has also published on how community

participation can meet these challenges and result in both social and

environmental benefits.

Friedl, Birgit Assistant Professor at the Department o f Economics,

University of Graz, Austria, and Research Fellow at the Wegener Center for

Climate and Global Change, University of Graz, Austria. Working in the

field of resource and environmental economics, her focus lies on sustainable

management of natural resources including biodiversity, sustainable

transport and land-use. Earlier she managed the Human Dimensions

Programme Austria.

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G ebetsroither, Brigitte Researcher at the Wegener Center for Climate and

Global Change and lecturer at the University o f Graz. Her research is

concentrated on environmental economics, especially transport economics

and valuation methods for natural resources.

Getzner, M ichael Associate Professor o f Economics, University o f

Klagenfurt; director o f the international postgraduate Master o f Science

programme 'Management o f Protected Areas’. His main fields o f research

are ecological and environmental economics, public finance, energy

economics, cultural economics, public choice. Currently project partner for

AQUAM ONEY, a research project funded by the European Commission

and focusing on environmental and resource costs in the Water Framework

Directive.

H ubacek, K laus Reader at the Sustainability Research Institute, School o f

Earth and Environment, University o f Leeds, UK. He has also been

affiliated with the Land Use Change project at the International Institute for

Applied Systems Analysis (IIASA), Laxenburg, Austria since 1999. His

main research interests are on integrated ecological-econom ic modelling,

participatory resource management and governance.

K luge, T hom as Co-founder o f the Institute for Social-Ecological Research

(ISOE) and head o f the Institute’s Research Area, Water and Social￾Ecological Planning. 1999 habilitation at the University o f Kassel on the

subject o f Water and Society: From Hydraulic Machinery to Sustainable

Development, since then private lecturer at the University o f Kassel. His

main research interests lie in the fields o f water, sustainable environmental

strategies and regional sustainability.

M ason, Sim on A. Environmental scientist, Swiss Federal Institute o f

Technology, ETH Zurich; PhD on water conflicts and cooperation in the

N ile Basin. From 2003 onwards he was project coordinator o f the sub￾project on water and conflict transformation o f the NCCR North-South,

focusing on dialogue workshops for transforming water conflicts. Presently

he is senior program officer at the Center for Security Studies (CSS), ETH

Zurich, in the Mediation Support Project (joint project with swisspeace),

focusing on the determinants o f third-party interventions in mediation and

facilitation processes.

M uller, A drian Theoretical physicist. University o f Zurich. Currently a

post-doctoral researcher at the Center for Corporate Responsibility and

Sustainability (CCRS) at the University o f Zurich. He works on a range o f

topics in environmental and resource economics with a focus on policy

instruments and sustainable development. Further interests are economics

ethics, the role o f the corporation in society and the notion o f power and

responsibility in economics.

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Steininger, Karl W. Professor at the Department o f Economics at the

University of Graz, Austria and chair o f the Human Dimensions Programme

at the Wegener Center for Climate and Global Change, University o f Graz.

Previously he was with the World Bank. His research focuses on economic

modelling, particularly in international and environmental economics, and

on sustainability, transport and energy issues.

Van Beers, Cees Associate Professor of Economics at the Delft University

o f Technology. His research fields are innovation, international and

environmental economics. Many o f his scientific publications have been on

trade and environment issues and on the quantification of the impact of

government policy failures on environmental degradation.

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PA R T I

Overview

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1. The Economics of Global

Environmental Change: International

Cooperation for Sustainability

Mario Cogoy and Karl W. Steininger

1. INTRODUCTION

Worldwide, substantial changes in environmental and social indicators have

been observed over the most recent decades. For example, in a few

generations, humankind has embarked upon the process o f exhausting fossil

fuel reserves that it took several hundred million years to generate. As a

result the carbon dioxide concentration in the atmosphere has increased by

more than 30 per cent since the beginning o f the Industrial Revolution and

that o f methane has increased by 100 per cent (IPCC, 2001a). Nearly half the

land surface has been transformed by direct human action so far, with

significant consequences for biodiversity, nutrient cycling, soil structure and

biology, and climate. More than one-fifth o f terrestrial ecosystem s have been

converted into permanent croplands; most o f the temperate, old-growth

forest has been cut (GLP, 2005). In terms o f another crucial resource, water,

more than 50 per cent o f all accessible freshwater is used directly or

indirectly by humankind; our underground water resources are being

depleted rapidly (GWSP, 2005).

Nevertheless, some 300 million people worldwide still live on less than

US$1 a day, with the largest concentration occurring in Africa’s poorest

countries, where two-thirds o f the population belong to this group, and nine

out o f ten people live on less than $2 a day (in purchasing-power terms in

both cases). But the share o f people in poverty has significantly declined

since 1970. Even the absolute numbers have too, by some 400 million over

the last three decades (using the poverty specification just mentioned).

Within-country inequality has most likely gone up during recent decades, as

has across-country inequality, at least on average. In 1960 the incomes o f the

richest 20 per cent were 11 times bigger than the incomes o f the poorest 20

per cent (in terms o f purchasing power), while they were 15 times bigger in

1997. Often the market exchange rates are used for this comparison, which

do not take account o f the lower cost o f living in poor countries The

corresponding ratios are then 30 and 74. Yet, mainly due to two large and so

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