Why the Far-Distant Future Should Be Discounted at Its Lowest Possible Rate

A critical feature of the distant future is currently unresolvable uncertainty about what will then be the appropriate rate of return on capital to use for discounting. This paper shows that there is a well-defined sense in which the “lowest possible” interest rate should be used for discounting the far-distant future part of any investment project. Some implications are discussed for evaluating long-term environmental projects or activities, like measures to mitigate the possible effects of global climate change.     

Sustainability assessment of entire forest value chains: Integrating stakeholder perspectives and indicators in decision support tools

The optimization of value chains is an important process to promote sustainable development, since value chains are closely linked to the satisfaction of human needs and combine different driving forces for environmental change. This article presents a methodological approach for the participatory development of value-chain wide sustainability indicator sets and their integration into a decision support tool in the specific case study of the chain “construction and refurbishment with wood”. There are numerous indicator sets for sustainable development of forests and sustainable forestry available at different levels, ranging from local, regional and national to global scale assessments. Some efforts were also made to integrate later production stages of forest value chains (such as wood processing) in the assessment scope (e.g. for chain-of-custody certification). However, no indicator set has so far been available covering environmental, social and economic aspects for the entire value chain of building with timber. This gap was closed through applied sustainability research in the project “Holzwende 2020: Sustainable future markets for wood in the building sector”.     

Predicting national sustainability: The convergence of energetic,economic and environmental realities

The “constraint space” dictated by energetic, economic and environmental realities on scenarios for future organization of humanity and nature is explored from the perspective of the energy and resources driving economies. Net energy of energy sources is presented as an index (Emergy Yield Ratio; EYR) that must be evaluated for energy sources to better understand their potential contributions to society, but more important, as an indicator of the changes needed in the future if lower net yielding sources are to be relied upon. An aggregate EYR was calculated for the USA economy and shown to have decreased by 38% since 1950, from 11/1 to 6.8/1. Several measures of efficiency at the scale of national economies are explored and the data suggest that the most efficient economies are also the most energetically intense (as measured by empower intensity). An index of environmental loading is suggested as a measure to evaluate environmental efficacy. An obvious outcome is that the smallest most energetically intense countries have the highest environmental loads, and those with large land area and/or continental shelves have the lowest ratios. An Emergy Sustainability Index (EmSI) is defined, computed for countries, and proposed as a multi-dimensional measure of long-term sustainability. The most sustainable economies are those with the highest EYR and lowest environmental loads.     

The role of spatial scale in sustainable development

The role of spatial scale in sustainable development is assessed by dividing the world into multiple spatial units at different levels on a socio-political spatial scale. The basic patterns of sustainable development do not appear to be evident at all spatial levels, owing to the absence of some capital stocks and the conversion processes linking them, but environmental economics theory can be generalized to explain phenomena at various levels. Capital conversion processes influencing the sustainability of development of spatial units are constrained by processes at different levels, e.g. those imposing environmental conditions on development or affecting availability of investment capital. The autonomy of individual spatial units is also compromised by capital transfers to and from other units at the same level, so it is proposed that the sustainability of development of a particular unit should be estimated using net, rather than gross capital trends. Because of uneven development the same degree of sustainability should not be expected at the same time for all spatial units at the same spatial level.     

Is Current Consumption Excessive? A General Framework and Some Indications for the United States

Abstract:  Many prior studies have explored the implications of human population growth and environmentally problematic technologies for biodiversity loss and other forms of environmental degradation. Relatively few, however, have examined the impacts of the level and composition of consumption. We offer a framework that shows how the level and composition of a society's total consumption relate to the uses of various forms of capital and to the sustainability of natural resources and human well-being. We relate the framework to two main approaches—top–down macro studies and bottom–up computer models—for measuring whether overall consumption in the United States satisfies a sustainability requirement. Existing top–down studies have shortcomings that bias their results toward optimism, and current computer simulation models, although strong on revealing biophysical outcomes, are limited in their ability to evaluate impacts on human well-being. Although some ambiguities arise in determining whether overall consumption in the United States is excessive, our conclusions regarding the composition of U.S. consumption are unambiguous. Distorted consumption patterns and associated production methods lead to excessively rapid natural resource depletion; greater conservation would yield gains to current and future generations that more than compensate for the sacrifices involved. Public policies that deal with the composition problem not only would help conserve natural resources and improve current welfare but also would reduce the costs of meeting the goal of sustainability.     

Beijing environmental sustainable development from 1983 to 2003

Ever since the Earth Summit was launched at Rio de Janeiro, research has been done on the problems of developing indices for the health of the environment and for its sustainable development. However, this research has concentrated more on national and regional levels than on local levels, more on spatial comparisons than on time series analysis, more on short-term than on long-time analysis, more on qualitative than on quantitative analysis. In contrast, therefore, this paper presents an indicator system procedure for measuring Beijing (the capital of China) environmental sustainability based on the Pressure-State-Response (PSR) philosophy, evaluates the trend of Beijing environmental sustainability index (BESI) quantitatively for 21 years, from 1983 to 2003, and suggests three great opportunities in the near future that are expected to provide some dependable information to policy makers. The results suggest that Beijing is still far from environmental sustainable development. The total trend was better in the 1980s than in the 1990s, and has improved slightly since 2000.     

Models of withdrawing renewable and non-renewable resources based on Odum's energy systems theory and Daly's quasi-sustainability principle

This paper presents a theoretical model of withdrawing resources based on Odum's energy systems diagrams. According to the theory of a general pulsing principle, withdrawing resources changes in time shifting from the initial phases of growth and maturity to the phases of descent and low energy restoration. A simulation was performed in order to hypothesize potential future trends of withdrawing renewable and non-renewable resources and to show some aspects of their sustainability–unsustainability, respectively. According to Odum's theory, after the rapid growth of the last century, our civilization is living in a climax transition phase and it is now approaching a descent phase. A “way down” will be necessary due to the exhaustion of non-renewable and to the limited use of renewable resources. An integrated “renew–non-renew” model was developed by Odum to show how a “business as usual” trend will bring us to a drastic transition to a world that uses scarce renewable resources. Nevertheless, a different choice is possible, based on Daly's concept of quasi-sustainability that can inspire a new model. The latter argued that the exploitation of a non-renewable resource must be paired with a compensating investment in a renewable substitute. Our model shows that we can use non-renewable resources better to considerably improve our capacity of capturing renewable resources in the future. We present this as a necessary condition to address a sustainable environmental policy.     

Can household consumers save the wild fish? Lessons from a sustainable seafood advisory

Conservation organizations seeking to reduce over-fishing and promote better fishing practices have increasingly turned to market-based mechanisms such as environmental sustainability labels (eco-labels) in order to shift patterns of household consumption. This paper presents an analysis of consumer response to an advisory for sustainable seafood adopted by a regional supermarket in the United States. The advisory consisted of a label in which one of three traffic light colors was placed on each fresh seafood product to inform consumers about its relative environmental sustainability. Green meant “best” choice, yellow meant “proceed with caution,” and red meant “worst choice”. Using a unique product-level panel scanner data set of weekly sales and taking advantage of the random phase-in of the advisory by the retailer, we apply a difference-in-differences identification strategy to estimate the effect of the advisory on overall seafood sales as well as the heterogeneous impact of the advisory by label color and whether the seafood met additional health-related criteria. We find evidence that the advisory led to a statistically significant 15.3% decline in overall seafood sales, a statistically significant 34.9% decline in the sale of yellow labeled seafood, and a statistically significant 41.3% decline in the sale of yellow labeled seafood on a mercury safe list. We find no statistically significant difference in sales of green or red labeled seafood.     

Pressure cookers or pressure valves: Do roads lead to deforestation in China?

The effect of roads on forests is ambiguous. Many studies conclude that building and upgrading roads increases pressure on forests but some find that new and better roads may reduce the rate of deforestation. In this paper we use satellite remote sensing images of forest cover in Jiangxi Province, China, to test whether the existence and the size of roads (ranging from expressways to tertiary roads) in 1995 affected the level of forest cover in 2000 or the rate of change between 1995 and 2000. To account for road access for each of our 1 km² (“pixel”) units of forest cover we measure whether or not and what type of roads penetrate the “watershed” in which the pixel lies. These watersheds allow more plausible measures of accessibility than do traditional “crowfly” distance measures that ignore topography. To account for possible confounding we also use 12 additional covariates: geographic and climatic variables (e.g., elevation, slope, rainfall, temperature, soil properties); demographic and economic variables (e.g., local population and GDP per square kilometer); and distance variables (e.g., distance to the nearest provincial capital). Although simple univariate OLS regressions show that forest levels are lower and deforestation rates higher either when there is a road, or when there is a higher quality road, these results are not robust. Controlling for all of the covariates and also using recently developed covariate matching techniques to estimate treatment effects, we find that roads in China’s Jiangxi Province can most safely be described as having no impact on the level of forests and no impact on the rate of deforestation.     

What did Lotka really say? A critical reassessment of the “maximum power principle”

This paper presents a critical discussion of the so-called “maximum power principle”, often quoted in studies about the energy balance of living systems and also known in the emergy literature as “maximum em-power principle”. Several authors consider this principle highly relevant and some even proposed it as a “fourth law of thermodynamics”. A critical analysis of the original source, namely Alfred Lotka's 1921-22 papers, conducted both in an historical perspective (the connection between Lotka's writings and the ongoing debate at his time) and in a more modern context, leads to a more detailed and less biased assessment. It turns out that in spite of Lotka's very anticipatory and incredibly sharp vision of the possible interconnections between the second law of thermodynamics and evolutionism, doubts arise about the general applicability of his “maximum power principle”. From an accurate analysis of his writings, it can be concluded that: (a) Lotka explicitly and consistently addressed the “optimal use” of the flow of exergy (available energy), and therefore the quantity defined as “em-power” is an incorrect interpretation of Lotka's constrained maximum power principle; (b) “Lotka's principle” can be reformulated within Ziegler's “maximum entropy production” or Prigogine “minimum entropy generation” paradigm only under two different respective sets of rather stringent additional conditions which Lotka was probably already aware of but never explicitly stated.     

Weather,salience of climate change and congressional voting

Climate change is a complex long-run phenomenon. The speed and severity with which it is occurring is difficult to observe, complicating the formation of beliefs for individuals. We use Google search intensity data as a proxy for the salience of climate change and examine how search patterns vary with unusual local weather. We find that searches for “climate change” and “global warming” increase with extreme temperatures and unusual lack of snow. Furthermore, we demonstrate that effects of abnormal weather extend beyond search behavior to observable action on environmental issues. We examine the voting records of members of the U.S. Congress from 2004 to 2011 and find that members are more likely to take a pro-environment stance on votes when their home state experiences unusual weather.     

Minimax regret discounting

The paper considers an environmental policy decision in which the appropriate approach for discounting future costs and benefits is unknown. Uncertainty about the discount rate is formulated as a decision under Knightian uncertainty. To solve this, we employ minimax regret, a decision criterion that is much less conservative then the related criterion maximin—in particular, it can be shown to implement a “proportional response” in that it equally balances concern about the mistake of doing too little with that of doing too much. Despite the criterion's balanced nature, the minimax regret solution mimics a policy that maximizes the present discounted value of future net benefits with an effective (certainty-equivalent) discount rate that declines over time to the lowest possible rate. In addition to reinforcing Weitzman's (1998) original limiting result, the approach generates concrete policy advice when decision makers are unable to specify a prior over possible discount rates. We apply it to the Stern–Nordhaus discounting debate and find that the effective discount rate converges to the Stern rate in just under 200 years.     

A characterization of sustainability with indicators

Economists favor the use of criteria to characterize sustainability. In practice, policy-makers use indicators, i.e., measurements based on the current economic state and decisions, representing given sustainability issues. In this paper, I introduce a criterion characterizing sustainability with indicators and thresholds acting as constraints. I interpret the thresholds as minimal rights to be guaranteed to all generations, and define sustainable trajectories as those satisfying all the constraints at all times. The new criterion is a “generalized” maximin criterion. The approach is applied to a simple production-consumption economy with non-renewable resources. To derive some policy recommendations on the use of indicators to deal with sustainability, I discuss the implications of such a criterion in terms of trade-off between sustainability thresholds, efficiency, and time-consistency. In particular, the resulting problem is time-inconsistent, and sustainability thresholds may be revised over time. Following the time-inconsistent policy based on indicators, with dynamic revision of the thresholds, may, however, result in a sustained utility path, and even in utility growth.     

Sorted samples and quantitative counts in appendicularian catches

Sorting centers are important for processing material collected during extensive oceanic expeditions. Based on information obtained from samples of appendicularians, this paper demonstrates that usual procedures adopted in sorting centers produce samples which contain only a fraction of the organisms present in the original catch (or subsample). In addition, the proportion of individuals sorted varies considerably. In four Indian Ocean Standard Net catches collected in the Arabian Sea, subsamples (called sorted samples in this paper) are compared with careful microscopical counts (quantitative counts) performed by the author. The numbers of appendicularians found in quantitative counts were 2.4 to 19.2 times higher than those in the sorted samples. Sorting efficiency varies in different forms of appendicularians; it is particularly low in Fritillaria sp. Bad preservation and small body size further reduce the portion sorted out. Under certain conditions (e.g. net clogging), numerous small appendicularians are retained which normally would pass easily through the meshes of the plankton net.     

The G-Index: a sustainability reporting assessment tool

The subject of sustainability reports, especially those related to GRI, has become an interesting topic to academics and practitioners. This paper seeks to propose an easy-to-use sustainability reporting assessment tool that is suitable to the GRI G4 guidelines. Our idea is to provide a tool that can be applied by an organization, based in GRI indicators, in a quick and easy way. The tool, called G-Index, represents the organizational sustainability performance. The index is a sum of four factors, and a questionnaire about the GRI elements raised the data to elaborate a Mudge diagram, which was used to define the weight values. Finally, the method for the evaluation tool was established, and a case study with the automotive sector was performed. The results showed us the G-Index represents a good option to assess the organization’s disclosure practices in sustainability reports based on the GRI framework. The report analysis presented some important facts, it is more common the disclosure of the Management Approach then the application of External Assurance. Furthermore, even the General Standard Disclosures of the GRI guidelines being mandatory, some companies do not fully disclose them, as shown in the GS factor, that makes up, the G-Index.     

Green tax reform,endogenous innovation and the growth dividend

We study theoretically and numerically the effects of an environmental tax reform using endogenous growth theory. In the theoretical segment, mobile labor between manufacturing and R&D activities, and elasticity of substitution between labor and energy in manufacturing lower than unity allow for a growth dividend, even if we consider preexisting tax distortions. The scope for innovation is reduced when we consider direct financial investment in the lab, or elastic labor supply. We then apply the core theoretical model to a real growing economy and find that a boost in long-run economic growth following such a carbon policy is a possible outcome. Redistribution of additional carbon tax revenue by lowering capital taxation performs best in terms of effciency measured by aggregate welfare. In terms of equity among social segments the progressive character of lump-sum redistribution fails when we consider very high emissions reduction targets.     

Renewable Resources and Economic Sustainability: A Dynamic Analysis with Heterogeneous Time Preferences

In recent years there has been increasing interest in the study of economic sustainability and its relationship with natural resources. This paper attempts to shed some light on the issue by taking into account the individual variations in time preferences for consumption and resource amenity. We characterize the long-run steady state, analyze its asymptotic stability, and explore the transational dynamics from any initial state. The welfare implications of the optimal path are also discussed.     

A revised calculation of the econometric factors α- and β for the Extended Exergy Accounting method

Extended Exergy Accounting (“EEA”) is a method to compute the space- and time integral of the primary exergy required to produce a good or a service: the extended exergy of a commodity measures its “embodied exergy”, including externalities (Labour, Capital and Environmental Costa). A crucial point of the method is the calculation of two econometric coefficients, commonly referred to as “α” and “β”,used to calculate the extended exergy equivalents of Labour and Capital respectively. In previous applications of the EEA method, these coefficients have been assigned approximate values estimated on the basis of global system considerations. In this paper, a novel procedure is described that leads to the calculation of “exact” values of both econometric coefficients, based on detailed exergy- and monetary balances of the Society to which the EEA is applied. It is shown that both α and β depend in a non-trivial way from the consumption patterns, the technological level and the life- and socio-economic standards of each Country. It is also shown that the values are substantially different for developed (OECD) and underdeveloped Countries, and representative samples of values are calculated and critically analysed. On the basis of these new model coefficients, the specific exergy equivalents of Labour (ee_L) and of Capital (ee_K) are calculated, and shown to differ from the values used in previous EEA calculations.     

Relationships of the dimensions of sustainability as measured by the sustainable society index framework

This article presents a study of the interrelationships between the different dimensions of sustainability as measured by the sustainable society index framework. We examine the statistical relationships between the four indices making up the sustainable society index framework. The analysis uses the complete existing data set provided by Sustainable Society Foundation for the years 2006, 2008, 2010 and 2012 and for 151 countries. While the time period where data are available is quite short, we can make some preliminary observations about the apparent trends in the interrelationships of the different dimensions of sustainability. This study shows that the three dimensions of sustainability are far from all being synergic and positively correlated. There is a strong negative correlation between human well-being and environmental well-being. This is problematic from the point of view of the Brundtland Commission’s three-pillar definition of sustainability. However, the trade-off relationship between economic and environmental development measured by the economic well-being index and environmental well-being index is decreasing and the dimensions are becoming more de-linked. This trend is promising from the sustainability perspective.     

Multiple indicators, partially ordered sets, and linear extensions: Multi-criterion ranking and prioritization

This paper is concerned with the question of ranking a finite collection of objects when a suite of indicator values is available for each member of the collection. The objects can be represented as a cloud of points in indicator space, but the different indicators (coordinate axes) typically convey different comparative messages and there is no unique way to rank the objects while taking all indicators into account. A conventional solution is to assign a composite numerical score to each object by combining the indicator information in some fashion. Consciously or otherwise, every such composite involves judgments (often arbitrary or controversial) about tradeoffs or substitutability among indicators. Rather than trying to combine indicators, we take the view that the relative positions in indicator space determine only a partial ordering and that a given pair of objects may not be inherently comparable. Working with Hasse diagrams of the partial order, we study the collection of all rankings that are compatible with the partial order (linear extensions). In this way, an interval of possible ranks is assigned to each object. The intervals can be very wide, however. Noting that ranks near the ends of each interval are usually infrequent under linear extensions, a probability distribution is obtained over the interval of possible ranks. This distribution, called the rank-frequency distribution, turns out to be unimodal (in fact, log-concave) and represents the degree of ambiguity involved in attempting to assign a rank to the corresponding object. Stochastic ordering of probability distributions imposes a partial order on the collection of rank-frequency distributions. This collection of distributions is in one-to-one correspondence with the original collection of objects and the induced ordering on these objects is called the cumulative rank-frequency (CRF) ordering; it extends the original partial order. Although the CRF ordering need not be linear, it can be iterated to yield a fixed point of the CRF operator. We hypothesize that the fixed points of the CRF operator are exactly the linear orderings. The CRF operator treats each linear extension as an equal voter in determining the CRF ranking. It is possible to generalize to a weighted CRF operator by giving linear extensions differential weights either on mathematical grounds (e.g., number of jumps) or empirical grounds (e.g., indicator concordance). Explicit enumeration of all possible linear extensions is computationally impractical unless the number of objects is quite small. In such cases, the rank-frequencies can be estimated using discrete Markov chain Monte Carlo (MCMC) methods.