RENAISSANCE UNIVERSITY,

INDORE

School of Social Science

M.A. Psychology-2022
Semester -3

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 Environment, development and sustainability

Unit 1
What is sustainability? Concept of sustainability science, sustainable development and its
different constituents. Drivers of ecological changes and its implication for society.

Sustainability consists of fulfilling the needs of current generations without compromising the
needs of future generations, while ensuring a balance between economic growth,
environmental care and social well-being.
Sustainability means meeting our own needs without compromising the ability of future
generations to meet their own needs. In addition to natural resources, we also need social and
economic resources. Sustainability is not just environmentalism.
In the broadest sense, sustainability refers to the ability to maintain or support a process
continuously over time. In business and policy contexts, sustainability seeks to prevent the
depletion of natural or physical resources, so that they will remain available for the long term.
Sustainability means meeting our own needs without compromising the ability of future
generations to meet their own needs. In addition to natural resources, we also need social and
economic resources. Sustainability is not just environmentalism. Embedded in most definitions
of sustainability we also find concerns for social equity and economic development.

In the broadest sense, sustainability refers to the ability to maintain or support a process
continuously over time. In business and policy contexts, sustainability seeks to prevent the
depletion of natural or physical resources, so that they will remain available for the long term.
Where does the term come from?
While the concept of sustainability is a relatively new idea, the movement as a whole has roots
in social justice, conservationism, internationalism and other past movements with rich
histories. By the end of the twentieth centuries, many of these ideas had come together in the
call for ‘sustainable development.’
The Bruntdland Commission
In 1983, the United Nations tapped former Norwegian prime minister Gro Harlem Brundtland
to run the new World Commission on Environment and Development. After decades of effort
to raise living standards through industrialization, many countries were still dealing with
extreme poverty. It seemed that economic development at the cost of ecological health and
social equity did not lead to long-lasting prosperity. It was clear that the world needed to find
a way to harmonize ecology with prosperity.

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After four years, the “Brundtland Commission” released its final report, Our Common Future.
It famously defines sustainable development as:
development that meets the needs of the
present without compromising the ability
of future generations to meet their own needs.
The Commission successfully unified environmentalism with social and economic concerns on
the world’s development agenda. Sustainability is a holistic approach that considers ecological,
social and economic dimensions, recognizing that all must be considered together to find
lasting prosperity.
How Sustainability Works
Sustainable policies emphasize the future effect of any given policy or business practice on
humans, ecosystems, and the wider economy.
The concept often corresponds to the belief that without major changes to the way the planet
is run, it will suffer irreparable damage.
As concerns about anthropogenic climate change, biodiversity loss, and pollution have become
more widespread, the world has shifted to embrace sustainable practices and policies, primarily
through the implementation of sustainable business practices and increased investments
in green technology.

Concept of sustainability science

Sustainability science is the study of the dynamic relationship between humans and the
environment, particularly focusing on the vulnerability, robustness, resilience, and stability of
the coupled human-environment system. It is a transdisciplinary science that integrates natural
sciences with humanities and social sciences. It hinges on the environment-economy-society
nexus, and merges basic and applied research. The key components of sustainability often
change with time, place, and culture, and thus sustainability science needs to emphasize multi-
scale studies in space and time, with emphasis on landscapes and regions over a horizon of 50
to 100 years. It needs to focus on the relationship between ecosystem services and human well-
being, as influenced by biodiversity and ecosystem processes as well as climate change, land
use change, and other socioeconomic drivers.
Sustainability science is an emerging field of research dealing with the interactions between
natural and social systems, and with how those interactions affect the challenge of
sustainability: meeting the needs of present and future generations while substantially reducing
poverty and conserving the planet's life support systems.

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Sustainability has three main pillars: economic, environmental, and social. These three pillars
are informally referred to as people, planet, and profits. The concept of "environmental
sustainability" adds greater emphasis on the life support systems, such as the atmosphere or
soil, that must be maintained for economic production or human life to even occur. In contrast,
social sustainability focuses on the human effects of economic systems, and the category
includes attempts to eradicate poverty and hunger, as well as to combat inequality.
Social sustainability focuses on maintaining and improving social quality with concepts such
as cohesion, reciprocity and honesty and the importance of relationships amongst people. It can
be encouraged and supported by laws, information and shared ideas of equality and rights.
The concept of "economic sustainability" focuses on conserving the natural resources that
provide physical inputs for economic production, including both renewable and exhaustible
inputs.
Sustainable development and its different constituents
Sustainable development is the idea that human societies must live and meet their needs
without compromising the ability of future generations to meet their own needs.
The three concepts of sustainable development are: Economic viability, Environmental
protection and social equity.

A project is economically viable if the economic benefits of the project exceed its economic
costs, when analyzed for society as a whole. The economic costs of the project are not the
same as its financial costs—externalities and environmental impacts should be considered.

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Environmental protection is the practice of protecting the natural environment by
individuals, organizations and governments. Its objectives are to conserve natural resources
and the existing natural environment and, where possible, to repair damage and reverse trends.
Social equity is impartiality, fairness and justice for all people in social policy. Social equity
takes into account systemic inequalities to ensure everyone in a community has access to the
same opportunities and outcomes. Equity of all kinds acknowledges that inequalities exist and
works to eliminate them.

Constituents of sustainability
The major constituents of Sustainability are Economical, Human, Social and Environment.

Economic sustainability
Economic sustainability aims to maintain the capital intact. If social sustainability focuses on
improving social equality, economic sustainability aims to improve the standard of living. In
the context of business, it refers to the efficient use of assets to maintain company profitability
over time.
Human sustainability
Human sustainability aims to maintain and improve the human capital in society. Investments
in the health and education systems, access to services, nutrition, knowledge and skills are all
programs under the umbrella of human sustainability. Human sustainability focuses on the
importance of anyone directly or indirectly involved in the making of products, or provision of
services or broader stakeholders.
Social sustainability
Social sustainability aims to preserve social capital by investing and creating services that
constitute the framework of our society. The concept accommodates a larger view of the world
in relation to communities, cultures and globalization. It means to preserve future generations
and to acknowledge that what we do can have an impact on others and on the world.
Environmental sustainability
Environmental sustainability aims to improve human welfare through the protection of natural
capital (e.g. land, air, water, minerals etc.). Initiatives and programs are defined
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environmentally sustainable when they ensure that the needs of the population are met without
the risk of compromising the needs of future generations.

Drivers of ecological changes and its implication for society

The definition of a driver is any natural or human induced factor that directly or indirectly
causes a change in an ecosystem. There are mainly two kinds of drivers of ecological changes:
(1) Direct and (2) Indirect
The categories of indirect drivers of change are demographic, economic, sociopolitical,
scientific and technological, and cultural and religious. Important direct drivers include
climate change, plant nutrient use, land conversion leading to habitat change, and invasive
species and diseases.

Direct driver of ecological changes and its implications on society

A direct driver unequivocally influences ecosystem processes.
IMPLICATIONS:
For terrestrial ecosystems, the most important direct drivers of change in ecosystem services
in the past 50 years, in the aggregate, have been land cover change and the application of new
technologies, which have contributed significantly to the increased supply of services such as
food, timber, and fiber. Deforestation and forest degradation have been more extensive in the
tropics over the past few decades than in the rest of the world.
In 9 of the 14 terrestrial biomes (Biome refers to the community of plants and animals that
occur naturally in an area, often sharing common characteristics specific to that area),between
one half and one fifth of the area has been transformed, largely to croplands.
Only biomes relatively unsuited to crop plants, such as deserts, boreal forests (snow forest),
and tundra (Bitterly cold forest throughout the year), have remained largely untransformed by
human action.
Both land cover changes and the management practices and technologies used on lands may
cause major changes in ecosystem services.
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New technologies have resulted in significant increases in the supply of some ecosystem
services, such as through increases in agricultural yield. In the case of cereals, for example,
from the mid-1980s to the late 1990s the global area under cereals fell by around 0.3% a year,
while yields increased by about 1.2% a year.
For marine ecosystems and their services, the most important direct driver of change in the
past 50 years, in the aggregate, has been fishing. Improved marine fishing technology has made
it possible to extract considerable fish biomass from the marine system. In fact, humankind has
probably reached the maximum levels of fish biomass removal before significant ecosystem
changes are induced.
According to an estimate about half of the commercially exploited wild marine fish stocks for
which information is available are fully exploited and offer no scope for increased catches.
Fishing pressure is so strong in some marine systems that the biomass of some targeted species,
especially larger fishes, and those caught incidentally has been reduced to one tenth of levels.
Fishing has had a particularly significant impact in coastal areas but is now also affecting the
open oceans.
For freshwater ecosystems and their services, depending on the region, the most important
direct drivers of change in the past 50 years include modification of water regimes, invasive
species, and pollution, particularly high levels of nutrient loading.
It is speculated that 50% of inland water ecosystems (excluding large lakes and closed seas)
were converted during the twentieth Century. Massive changes have been made in water
regimes: in Asia, 78% of the total reservoir volume was constructed in the last decade, and in
South America almost 60% of all reservoirs have been built since the 1980s.
The introduction of nonnative invasive species is one of the major causes of species extinction
in freshwater systems. While the presence of nutrients such as phosphoarus and nitrogen is
necessary for biological systems, high levels of nutrient loading cause
significant eutrophication of water bodies and contribute to high levels of nitrate in drinking
water in some locations. (The nutrient load refers to the total amount of nitrogen or phosphorus
entering the water during a given time.)
Non-point pollution sources such as:
✓ Storm water runoff in urban areas
✓ Poor or nonexistent sanitation facilities in rural areas
✓ The flushing of livestock manure by rainfall and snowmelt are also cause of
contamination.
Pollution from point sources such as mining has had devastating local and regional impacts on
the biota of inland waters.
Over the past four decades, excessive nutrient loading has emerged as one of the most important
direct drivers of ecosystem change in terrestrial, freshwater, and marine ecosystems. Excessive
nitrogen loading can cause algal blooms, decreased drinking water, eutrophication of
freshwater ecosystems, hypoxia in coastal marine ecosystems , nitrous oxide emissions
contributing to global climate change, and air pollution by nitrogen oxides in urban areas.
Phosphorus application has increased threefold and these changes are mirrored by phosphorus
accumulation in soils, which maintains high levels of phosphorus runoff that can cause

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eutrophication of freshwaters and coastal waters. Climate change in the past century has
already had a measurable impact on ecosystems.

Indirect driver of ecological changes and its implications on society

An indirect driver operates more diffusely, by altering one or more direct drivers.
IMPLICATIONS
Demographic: Global population doubled in the past 40 years and increased by 2 billion people
in the last 25 years, reaching 6 billion in 2000, has exceeded to 7.9 billion as of September
2022. Developing countries have accounted for most population growth in the past quarter-
century, but there is now an unprecedented diversity of demographic patterns across regions
and countries.
Populations in all parts of the world are expected to experience substantial aging during the
next century while industrial countries will have the oldest populations, the rate of aging could
be extremely fast in some developing countries.
Economic: Global economic activity increased nearly sevenfold between 1950 and 2000.
Despite the population growth just described, average income per person almost doubled
during this period. Energy and materials intensity tend to decline with rising levels of GDP per
capita. Domestic policy distortions such as taxes and subsidies can have serious economic and
environmental consequences, both in the country where they are implemented and elsewhere.
Sociopolitical: Sociopolitical drivers encompass the forces influencing decision making and
include the quantity of public participation in decision making, the makeup of participants in
public decision-making, the mechanisms of dispute resolution, the role of the state relative to
the private sector, and levels of education and knowledge. The trend toward democratic
institutions has helped empower local communities, women, and resource-poor households.
There has been an increase in multilateral environmental agreements.
Cultural and Religious: To understand culture as a driver of ecosystem change, it is most
useful to think of culture as the values, beliefs, and norms that a group of people share. In this
sense, culture conditions individuals’ perceptions of the world, influences what they consider
important, and suggests courses of action that are appropriate and inappropriate. Cultural
factors, for example, can influence consumption behavior and may be a particularly important
driver of environmental change.
Science and Technology: The development and diffusion of scientific knowledge and
technologies that exploit that knowledge have profound implications for ecological systems
and human well-being. The twentieth century saw tremendous advances in the understanding
of how the world works physically, chemically, biologically, and socially and in the
applications of that knowledge to human endeavors.
The impact of science and technology on ecosystem services is most evident in the case of food
production. At the same time, unintended effects of technological advances can lead to the
degradation of ecosystem services.

Unit 2
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Principles of ecological economics- scope and usefulness. Prey- Predator and supply-
demand cycles.
What Is Economics?
Economics is the study of the allocation of limited, or scarce, resources among alternative,
competing ends.
Economics is about what we desire and what we’re willing to give up to get it. In fact, three
critical questions guide economic inquiry, and there is a clear order in which they should be
asked:
1. What ends do we desire?
2. What limited, or scarce, resources do we need to attain these ends?
3. What ends get priority, and to what extent should we allocate resources to them?
What is Ecology?
Ecology is a branch of science, including human science, population, community, ecosystem
and biosphere. Ecology is the study of organisms, the environment and how the organisms
interact with each other and their environment. It is studied at various levels, such as organism,
population, community, biosphere and ecosystem.

Ecosystem

An ecosystem is a geographic area where plants, animals, and other organisms, as well as
weather and landscape, work together to form a bubble of life. Ecosystems contain biotic or
living, parts, as well as abiotic factors, or nonliving parts. Biotic factors include plants, animals,
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and other organisms while abiotic are non-living components; such as water, soil and
atmosphere things within an ecosystem.

Types of Ecology

Global Ecology
It deals with interactions among earth’s ecosystems, land, atmosphere and oceans. It helps to
understand the large-scale interactions and their influence on the planet.
Landscape Ecology
It deals with the exchange of energy, materials, organisms and other products of ecosystems.
Landscape ecology throws light on the role of human impacts on the landscape structures and
functions.
Ecosystem Ecology
It deals with the entire ecosystem, including the study of living and non-living components and
their relationship with the environment. This science researches how ecosystems work, their
interactions, etc.
Community Ecology
It deals with how community structure is modified by interactions among living organisms.
Ecology community is made up of two or more populations of different species living in a
particular geographic area.
Population Ecology
It deals with factors that alter and impact the genetic composition and the size of the population
of organisms. Ecologists are interested in fluctuations in the size of a population, the growth of
a population and any other interactions with the population.
Population ecology examines the population distribution and density. Population density is the
number of individuals in a given volume or area. This helps in determining whether a particular
species is in endanger or its number is to be controlled and resources to be replenished.
Organismal Ecology
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Organismal ecology is the study of an individual organism’s behaviour, morphology(it is the
study of the size, shape, and structure of animals, plants) physiology, etc. in response to
Ecological challenges.
It looks at how individual organisms interact with biotic and abiotic components. Ecologists
research how organisms are adapted to these non-living and living components of their
surroundings.
Ecological economics
Ecological economics is a transdisciplinary effort to link the natural and social sciences
broadly, and especially ecology and economics.
Its goal is to develop a deeper scientific understanding of the complex linkages between
humans and the rest of nature, and to use that understanding to develop policies that will lead
to a world which is ecologically sustainable, has a fair distribution of resources (both between
groups and generations of humans and between humans and other species), and efficiently
allocate scarce resources including ‘natural’ and ‘social’ capital.
This requires new approaches that are comprehensive, adaptive, integrative, multiscale,
pluralistic, evolutionary, and which acknowledge the huge uncertainties involved.
Ecological economics recognises local to global Ecological limits. It ranges from research for
short-term policy and local challenges through to long-term visions of sustainable societies.
Ecological economists also consider global issues such as carbon
emissions, deforestation, overfishing and species extinctions.
Ecological economics believes that efficient allocation is important, but far from being an end
in itself.
Take the example of a ship. To load a ship efficiently is to make sure that the weight on both
sides of the keel is the same, and the load is distributed from front to back so that the ship floats
evenly in the water. While it is extremely important to load the cargo efficiently,
Ecological economists look at the Earth as a ship and gross material production of the economy
as the cargo. The seaworthiness of the ship is determined by its ecological health, the
abundance of its provisions, and its design. Ecological economists recognize that we are
navigating unknown seas and no one can predict the weather for the voyage, so we don’t know
exactly how heavy a load is safe. But too heavy a load will cause the ship to sink.
Ecological Economics addresses the relationships between ecosystems and economic systems
in the broadest sense. These relationships are the locus of many of our most pressing current
problems (i.e. sustainability, acid rain, global warming, species extinction, wealth distribution)
but they are not well covered by any existing discipline.

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Core concepts (Principles)
These include:
✓ “steady-state economies”,
✓ “carrying capacity”,
✓ “ecological footprints” and
✓ “Ecological justice”.

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Principles of ecological economics- scope and usefulness
It is assumed that the economy is producing two sets of goods, a composite good (M) which is
the aggregate of all existing goods and services, and second, an Ecological quality good which
also represents certain quantity of emission reductions.

If the economy moves from point S to point A on the ME curve, it means more production with
increase in economic activity without increased emission.
Scope of Ecological Economics:
Ecological economics is considered both a positive and a normative science. Therefore, it has
wide scope.
Economy-environment analysis:

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Ecological economics is primarily concerned with the impact of economic activities on
environment and its implications for the individual firm, industry and the economy as a whole.
Eco-development:
The main objective of Ecological economics is to maintain a balance between economic
development and Ecological quality. In order to reduce pollution and uplift the standard of
living of the people.
Welfare approach:
The welfare framework covers scarce resources and market failures due to property rights and
ethical aspects of different problems of pollution. Thus it suggests the best possible means to
tackle the Ecological problems.
Dynamic and stock-flow analysis:
Analysis about resources which have a stock and have a rate of depletion and replenishment
such as oil, minerals, and forests. Thus there is the inevitable stock-flow dimension to
Ecological issues.
Ecological values:
The neo-classical economists have analysed the use of various resources like fisheries, forests,
fossil fuels and water in a rational manner and with Ecological values. It is important for the
society to conserve its limited resources in the interest of economic efficiency and welfare.
Clean Technology:
Ecological economists are in favour of appropriate and clean technologies which provide the
most rational use of natural resources and energy and to protect the environment.
International Cooperation:
There are many international issues like hazards of trans-boundary shipments, unwanted
substances and common property resources which need international cooperation among
nations. There are many negative effects of inadequate toxic wastes generated within countries
and hazardous goods exported to other countries.
Conservation Policy:
The longstanding foundation of Ecological economics lies in conservation economics which
tends to emphasise the impact of economic activities on demand for productive resources and
energy resources. It suggests the optimal strategy in the utilization of natural resources in a
rational manner.
Multi-disciplinary base:
Ecological economics is inherently a multi-disciplinary subject. It consists of an integration of
many varied disciplines such as biology, ecology, physical sciences, ethics and main stream
economics. Therefore, it has wide scope.
Prey- Predator and supply-demand cycles
A predator is an organism that eats another organism. The prey is the organism which the
predator eats. Some examples of predator and prey are lion and zebra, bear and fish, and fox
and rabbit.

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The words "predator" and "prey" are almost always used to mean only animals that eat animals,
but the same concept also applies to plants: Bear and berry, rabbit and lettuce, grasshopper and
leaf.
Predator-prey models are the building blocks of the bio- and ecosystems as biomasses
are grown out of their resource.
Depending on their specific settings of applications, they can take the forms of resource-
consumer, plant-herbivore, parasite-host, tumor cells (virus)-immune system, susceptible-
infectious interactions, etc.
They deal with the general loss-win interactions and hence may have applications outside of
ecosystems. When seemingly competitive interactions are carefully examined, they are often
in fact some forms of predator-prey interaction in disguise.
Balanced cycles of predator-prey populations
Predator-prey cycles are based on a feeding relationship between two species: if the prey
species rapidly multiplies, the number of predators increases -- until the predators eventually
eat so many prey that the prey population dwindles again. Soon afterwards, predator numbers
likewise decrease due to starvation.
This in turn leads to a rapid increase in the prey population -- and a new cycle begins.

Predator-prey cycle

"Our ability to understand the dynamic behaviour of natural ecosystems largely relies on the
correctness of very simple theoretical assumptions -- including those about how predator-prey
cycles arise," Fussmann said

Unit 3
Valuation of ecosystem services and impact of intervention (malign and benign).
Sustainability of society, resources and framework.

Ecosystem services
Ecosystem services are the many and varied benefits to humans provided by the natural
environment and from healthy ecosystems. Such ecosystems include, for
example, agroecosystems, forest ecosystem, grassland ecosystems, and aquatic ecosystems.
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These ecosystems, functioning in healthy relationships, offer such things as natural pollination
of crops, clean air, extreme weather mitigation, and human mental and physical well-being.
Collectively, these benefits are becoming known as ecosystem services, and are often integral
to the provision of food, provisioning of clean drinking water, the decomposition of wastes,
and resilience and productivity of food ecosystems.

Types of ecosystem services

1- Direct
2- Indirect
3-Bequest
4-Existence
5-Option

Direct and Indirect ecosystem services

Ecosystem services are the benefits provided by ecosystems that contribute to making human
life both possible and worth living. Examples of ecosystem services include products such as
food and water, regulation of floods, soil erosion and disease outbreaks, and non-material
benefits such as recreational and spiritual benefits in natural areas. The term ‘services’ is
usually used to encompass the tangible and intangible benefits that humans obtain from
ecosystems, which are sometimes separated into ‘goods’ and ‘services’.
Some ecosystem services involve the direct provision of material and non-material goods to
people and depend on the presence of particular species of plants and animals, for example,
food, timber, and medicines. Other ecosystem services arise directly or indirectly from the
functioning of ecosystem processes. For example, the service of formation of soils and soil
fertility that sustains crop and livestock production depends on the ecosystem processes of
decomposition and nutrient cycling by soil micro-organisms.
Some scientists have advocated a stricter definition of ecosystem services as only the
components of nature that are directly enjoyed, consumed, or used in order to maintain or
enhance human well-being. Such an approach can be useful when it comes to ecosystem service
accounting and economic valuation. This is because some ecosystem services (e.g. food
provision) can be quantified in units that are easily comprehensible by policy makers and the
general public. Other services, for example, those that support and regulate the production
levels of crops and other harvested goods, are more difficult to quantify. If a definition based
on accounting is applied too strictly there is a risk that ecosystem service assessment could be
biased toward services that are easily quantifiable, but with inadequate consideration of the
most critical ones for human well-being.
Since ecosystem services are defined in terms of their benefits to people it should be recognised
that ecosystem services are context dependent, that is, the same feature of an ecosystem can be
considered an ecosystem service by one group of people but not valued by another group.
Indirect benefits are provided through the functioning of ecosystem processes that produce the
direct services (“supporting services”). For example Preventing soil erosion, Protection from
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flood, Saves soil from pollution and protects fish habitats, Reduce temperature of climate and
converts heat in water, evaporates so it makes shade, Pharma companies makes drugs from
plants.

Bequest value and existence value

A non-use value (feel good or warm glow) is a value associated that does not concern our use,
either direct or indirect, of the environment, its resources or services. Bequest value: The
current generation places value on ensuring the availability of biodiversity and ecosystem
functioning to future generations. This is determined by a person’s concern that future
generations should have access to resources and opportunities. It indicates a perception of
benefit from the knowledge that resources and opportunities are being passed to descendants.
Existence value: This is the benefit, often reflected as a sense of well being, of simply knowing
marine biodiversity exists, even if it is never utilised or experienced, people simply derive
benefit from the knowledge of its existence. The considerable importance which the wider
public attach to maintaining diverse marine life is revealed through their interest in marine
based media presentations, such as the ‘‘Blue Planet’’. For example, articles on cold water
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corals frequently appear in the media, despite the fact the majority of the general public will
never see a cold water coral, they are interested in them and benefit from their existence.
Option Value: Elements of biodiversity which may not provide ecosystem services at present
could be needed to provide valuable services in the future.
For example: A currently rare fish species might greatly increase in abundance and replace a
commercial species impacted by climate change (uncertainty over future biodiversity benefits)
If these ecosystems are lost so are these options (irreversibility of biodiversity loss)

Ecosystem Values
Ecosystem values are measures of how important ecosystem services are to people, what they
are worth. Economists measure the value of ecosystem services to people by estimating the
amount people are willing to pay to preserve or enhance the services.
Some services of ecosystems, like fish or lumber, are bought and sold in markets, many
ecosystem services, like a day of wildlife viewing or a view of the ocean, are not traded in
markets. Thus, people do not pay directly for many ecosystem services.
It is not necessary for ecosystem services to be bought and sold in markets in order to measure
their value in dollars.
What is required is a measure of how much purchasing power (Rs.) people are willing to give
up to get the service of the ecosystem, or how much people would need to be paid in order to
give it up, if they were asked to make a choice similar to one they would make in a market.
Valuation of Ecosystem Services
Ecosystem valuation can be a difficult and controversial task. Therefore, economic valuation
can be useful, by providing a way to justify and set priorities for programs, policies, or actions
that protect or restore ecosystems and their services.
In order to understand how economists approach ecosystem valuation, it is useful to review
some important concepts.
Ecosystem Framework
Ecosystem services are the beneficial outcomes, for the natural environment or people, that
result from ecosystem functions.
Some examples of ecosystem services are support of the food chain, harvesting of animals or
plants, and the provision of clean water or scenic views.
In order for an ecosystem to provide services to humans, some interaction with, or at least some
appreciation by, humans is required. Thus, functions of ecosystems are value-neutral, while
their services have value to society.
Some Factors that Complicate Ecosystem Management Decisions:
Various types of market failure are associated with natural resources and the environment.
Market failures occur when markets do not reflect the full social costs or benefits of a good.

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For example, the price of gasoline does not fully reflect the costs, in terms of pollution, that are
imposed on society by burning gasoline.

Sustainability of society

Public Goods:
Ecosystem services are often public goods, which means that they may be enjoyed by any
number of people without affecting other peoples enjoyment. For example, an aesthetic view
is a pure public good. No matter how many people enjoy the view, others can also enjoy it.
Other services may be quasi-public goods, where at a certain level of use, others enjoyment
may be diminished. For example, a public recreation area may be open to everyone. However,
crowding can decrease peoples enjoyment of the area.
Externalities Affect
Ecosystem services may be affected by externalities, or uncompensated side effects of human
actions. For example, if a stream is polluted by runoff from agricultural land, the people
downstream experience a negative externality. The problem with negative externalities is that
the people (or ecosystems) they are imposed upon are generally not compensated for the
damages they suffer.
Property rights for natural resources
Finally, if property rights for natural resources are not clearly defined, they may be overused,
because there is no incentive to conserve them. For example, unregulated fisheries are an open-
access resource anyone who wants to harvest fish can do so. Because no one person or group
owns the resource, open access can lead to severe over-harvesting and potentially severe
declines in fish abundance over time.
Impact of intervention
Ecosystem valuation can help resource managers deal with the effects of market failures, by
measuring their costs to society, in terms of lost economic benefits. The costs to society can
then be imposed, in various ways, on those who are responsible, or can be used to determine
the value of actions to reduce or eliminate environmental impacts.
For example, in the case of the crowded public recreation area, benefits to the public could be
increased by reducing the crowding. This might be done by expanding the area or by limiting
the number of visitors. The costs of implementing different options can be compared to the
increased economic benefits of reduced crowding.
In the case of a stream polluted by agricultural runoff, the benefits from eliminating the
pollution can be compared to costs of actions to reduce the runoff, or can be used to determine
the appropriate fines or taxes to be levied on those who are responsible.
In the case of open-access fisheries, the benefits from reducing overfishing can be compared
to regulatory costs or costs to the commercial fishing industry if access is restricted.

Why Estimate Ecosystem Values?

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Faced with tightening budgets and growing needs for environmental actions, government
agencies must make difficult decisions about how to allocate public investments to protect and
restore the natural environment.
In making such decisions, many objectives, including environmental quality, threats to
ecosystem integrity, and effects on people’s quality of life should be set.
Agencies must justify their decisions, not only in terms of benefits to the natural environment,
but also in terms of fiscal accountability and public support.
Thus, they are being asked to demonstrate the economic benefits of their investments,
preferably in Rs. terms.
For some decisions, such as those involving endangered species or serious public health or
safety concerns, economic considerations will be secondary.

Why are estimates of ecosystem benefits needed?

To justify and decide how to allocate public spending on conservation, preservation, or
restoration initiatives.
To consider the values, and encourage public participation and support for environmental
initiatives.
To compare the benefits of different projects or programs.
To prioritize conservation or restoration projects.
To maximize the environmental benefits per Rs. spent.

Unit 4
Natural resources accounting- concepts, methods and empirical evidences. Environment
and trade. Cost of environment, pollution, life cycle assessment. Impact of development
on biodiversity. Development indicators and human health.

Natural Resource Accounting (NRA)

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Natural Resource Accounting is a process of estimating the value of natural resource depletion
and environment degradation due to economic activities. The concept of NRA was emerged to
capture the intimate interplay between the various components of the natural environment and
the economic progress of a country. It is based on the concept - ‘measurement of a resource
leads to its better management’. Natural resource accounting is the compilation of data on
natural resources within an accounting framework.
Natural resource accounts may involve either physical quantities or stocks valued in monetary
terms. The aim of natural resource accounting is to provide information on the state of natural
resources and the changes affecting them.
The term 'sustainable development' is taken to mean a form of development which is capable
of meeting the needs of the present generation without jeopardising the ability of future
generations to meet their own needs.

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 Historical Perspective
The need for NRA took its first step at the United Nations (UN) conference on Human
Environment in 1970 (Stockholm Conference) when the relationship between economic
development and environmental degradation was discussed for the first time.
The Brundtland Commission, set up by the UN, articulated the idea of close association
between the environment and economic activities in 1987, which was followed up by
environmental accounting and the Earth Summit at Rio de Janeiro in 1992.

Initiatives Taken to Promote NRA

The CAG (Comptroller and Auditor General) established the Government Accounting
Standards Advisory Board (GASAB) in 2002 with the aim to improve standards of
Governmental accounting and financial reporting to enhance the quality of decision-making
and public accountability.
It consists of representatives of all accounting services in GoI, regulatory authorities like RBI,
ICAI and State Governments.
The CAG of India is also a member of an international body of Supreme Audit Institutions,
called WGEA (Working Group on Environmental Auditing), which suggested (2010) that the
audit institutions should aid their countries to adopt Natural Resources Accounts.
Significance of Natural Resource Accounting
Interrelation between Economy and Environment –
Quantifies the nonrenewal damage to the environmental resources and assists in determination
of development in real terms.
Aid to policy framing: sound database –
To help policy makers to understand the potential impact of their decisions.
Managing SDGs –
NRA has deep inter-linkages with the Sustainable Development Goals (SDGs) as 4 out of the
17 goals directly relate to management of natural resources and their accounting.
Combating Climate change –
Asset and flow accounts have been recognized as a useful framework for monitoring,
measuring and analysing climate change.
International commitments –
Besides fulfilling the SDGs, it would help India become a part of the group of elite countries
in generating Asset Accounts.

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 Challenges Related to Accounting of Natural Resources
There is lack of proper training and capacity building among state officers.
Limitations in preparing the asset accounts - mapping the periodicity of data.
Multiple agencies are involved in data collection for resources; it may give rise to the issues of
data sharing/data conflict.

Advantages
1- It is an environmental management system
2- Controls pollution
3- Report the performance and activities of environment
4- Way to promote sustainable development of resources
5-Helps to identify environmental problems
6-Undertake many governmental policies

Disadvantage
1-Existence of numerous ways to calculate natural accounting creates confusion
2-Not necessary for certain resources
3- Long term process.
4-Drawing conclusion becomes difficult

Methods to calculate NRA

• Environment financial accounting (to get true financial statement including env factors)
• Environment Management Accounting
• Environment cost accounting
• Physical Accounting (deals with physical data only)
• Green Accounting (modification of the System of National Accounts to incorporate
the use or depletion of natural resources
• Ecological Accounting(concerned with providing information to assist managers
with performance appraisal, control, decision-making and reporting for an
organisation or region. It is based on ecological concepts and on ecological measures
and values in addition to the familiar economics ones.)
• Social accounting matrix
• Pollution expenditure Accounting

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Cost of environment, pollution, life cycle assessment
E-LCA is a time tested assessment technique that evaluates environmental performance
throughout the life cycle of a product or from performing a service. The extraction and
consumption of resources (including energy), as well as releases to air, water, and soil, are
quantified throughout all stages. Their potential contribution to environmental impact
categories is then assessed. These categories include climate change, human and eco-toxicity,
ionizing radiation, and resource base deterioration (e.g. water, non-renewable primary energy
resources, land, etc.).
Life-cycle assessment, or LCA, is an environmental accounting and management approach that
considers all the aspects of resource use and environmental releases associated with an
industrial system from cradle to grave.
Specifically, it is a holistic view of environmental interactions that covers a range of activities,
from the extraction of raw materials from the Earth and the production and distribution of
energy, through the use, and reuse, and final disposal of a product.
LCA is a relative tool intended for comparison and not absolute evaluation, thereby helping
decision makers compare all major environmental impacts when choosing between alternative
courses of action.
The Life Cycle Initiative played a key role in the development of the life cycle assessment
midpoint-damage framework, which conceptualizes the linkages between a product’s
environmental interventions and their ultimate damage caused to human health, resource
depletion and ecosystem quality – information which is of critical importance to decision
makers.
This method expresses the external costs of one additional unit of pollution in money and
results in midpoint characterization factors that can be used for single-score exercises in life
cycle assessment (LCA).
Linking impact to money
To be able to calculate the price of pollution, you need to connect impact assessment models
and economic models such as social cost-benefit analysis. Combining these methods enables
to derive factors for pollutants with impacts on human health and ecosystems.

Using Environmental Prices in LCA

The Environmental Prices method was developed at three levels: pollutant level (per
substance), midpoint level (per impact category) and endpoint level (per damage category).
The outcome is beneficial for both the LCA and business worlds – LCA gains weighting sets
based on monetization and businesses can now use economic valuation for more types of
pollutants.
Impact of development on biodiversity
Overexploitation, habitat disturbance, pollution, and the introduction of exotic species
accelerate the loss of individual species within communities or ecosystems.

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More subtly, selective pressures arising directly and indirectly from human activities can result
in the loss of genetic variability.
Exploitation, habitat alteration, the presence of chemical toxins, or regional climate change
may eliminate some genetically distinct parts of a population yet not cause extinction of the
entire species.
As genetic variability is lost, however, the species as a whole becomes more vulnerable to other
factors and less adaptable to environmental change.
The most important single factor affecting the fate of biodiversity on Earth is the accelerated
rate of habitat destruction, particularly in the tropical forests.
When any habitat type is reduced to small patches, the organisms that depend on it are in greater
danger of extinction as their populations are reduced in number, isolated, and subject to the
highly altered impacts of sun, wind, water, soil conditions, other organisms, and human beings.

Development indicators and human health

The HDI was created to emphasize that people and their capabilities should be the ultimate
criteria for assessing the development of a country, not economic growth alone.

The Human Development Index (HDI) is a summary measure of average achievement in key
dimensions of human development: a long and healthy life, being knowledgeable and have a
decent standard of living. The HDI is the geometric mean of normalized indices for each of the
three dimensions.
The health dimension is assessed by life expectancy at birth, The education dimension is
measured by mean of years of schooling for adults aged 25 years and more and expected years
of schooling for children of school entering age. The standard of living dimension is measured
by gross national income per capita. The HDI uses the logarithm of income, to reflect the
diminishing importance of income with increasing GNI. The scores for the three HDI
dimension indices are then aggregated into a composite index using geometric mean.

Significance of HDI Calculation

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The HDI can be used to question national policy choices, asking how two countries with the
same level of GNI per capita can end up with different human development outcomes.
The HDI simplifies and captures only part of what human development entails. It does not
reflect on inequalities, poverty, human security, empowerment, etc. The HDRO provides other
composite indices as broader proxy on some of the key issues of human development,
inequality, gender disparity and poverty.

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