Handbook of Green Economics

Sevil Acar,Erinc Yeldan

• Publisher: Academic Press
• Year: 2019
• ISBN:
  9780128166444
• Topic: Economia
• Subtopic: Economia dello sviluppo

Handbook of Green Economics reveals the breadth and depth of advanced research on sustainability and growth, also identifying opportunities for future developments. Through its multidimensional examination, it demonstrates how overarching concepts, such as green growth, low carbon economy, circular economy and others work together. Some chapters reflect on different discourses on the green economy, including pro-growth perspectives and transformative approaches that entail de-growth. Others argue that green policies can spark economic innovation, particularly in developing and emerging market economies. Part literature summary, part analysis and part argument, this book shows how the right conditions can stimulate economic growth while achieving environmental sustainability.

This book will be a valuable resource for graduate students and academic researchers whose focus is on the green economy. With an increasing interest in the topic among researchers and policymakers, users will find different theoretical perspectives and explore policy implications in this growing subject area.

• Covers the failures of the past, the challenges of the present, and the opportunities of the future
• Surveys 10 aspects of the green economy, including conceptualization, natural capital, poverty and inequality, welfare, and finance
• Emphasizes the theoretical and empirical aspects of greening approaches that are policy-relevant

Chapter 1

Greening the national accounts

Basic concepts and a case study of historical environmental accounting for Sweden

Magnus Lindmark

Abstract

This chapter presents reconstructions of historical environmental accounts for Sweden for the period after 1970 with the purpose of both presenting key methodological issues pertaining to historical environmental accounting and demonstrating how historical series can be used for analysis of long-term economic and environmental change. The chapter also demonstrates how historical environmental accounts may be created by piecing together various data sources. Main empirical findings are that Swedish carbon emissions have decreased at approximately the discount rate suggested by William Nordhaus and that Environmental Protection Expenditures since 1972 have nearly been constant as a share of GDP, suggesting that environmental expenditure may have Cobb-Douglass characteristics.

Keywords

Economic growth; Environmental accounting; Historical National Accounts; Sweden

Introduction

This chapter presents reconstructions of historical environmental accounts for Sweden for the post-1970 period with the purpose of both presenting key methodological issues pertaining to historical environmental accounting and demonstrating how historical series can be used for analysis of long-term economic and environmental change.

Historical environmental accounting is important, since the metrics produced by official statistical bodies only cover relatively short periods. This is problematic since environmental adaptation involves long-term economic and regulatory processes, which means that the dynamic shifts including possible delinking between economic growth and environmental degradation are seldom covered by systematically organized statistics. For instance, a historical Environmental Kuznets Curve (EKC), where cross-sectional data suggest a turnaround income level, corresponding to the leading countries' incomes in, say, 1970 implies that the historical process is not covered by the official metrics. It is therefore important to reconstruct data series for periods for which official statistics do not exist. Historical reconstruction of economic data is in turn a field of research in economic history known as Historical National Accounting. The historical GDP reconstructions collected by Maddison (1991) are even today one of the most commonly used sources for long-term growth studies. One of the first Historical National Accounts were done in Sweden in the 1930s, as recognition of the need to understand economic growth and aggregated demand (Lindahl et al., 1937). This means that the first Historical National Accounts were elaborated well after researchers and practitioners had identified growth as an important economic phenomenon, but before the first official National Accounts had been produced in the 1950s. Again, it would take another 20 odd years before the official statistics had produced long-enough GDP series for any serious analysis of long-term growth.

A similar process can be recognized regarding sustainable economic growth. Since the early 1960s, several accounting principles, indices, and metrics have been suggested for measuring what today had been defined as sustainable welfare, taking into account degradation of environmental quality and depletion of natural resources. This includes measures such as Herman Daly's Index of Sustainable Economic Welfare, with a point of departure in the thinking of ecological perspectives first introduced in the 1960s by such economists as Nicholas Georgescu-Roegen and Kenneth Boulding, but also the World Bank's Genuine Savings (GS), grounded in more neoclassical environmental economics by economists such as Partha Dasgupta. Since the 1990s, there have also been guidelines for green national accounting as an extension of the System of National Accounts. Recently, Eurostat has also adapted a system accounting for as economic activities to prevent environmental degradation and to conserve and maintain the stock of natural resources, hence safeguarding against depletion.

The historical environmental accounts presented here include estimates of the Environmental Goods and Services Sector (EGSS), damage cost approaches similar to the concepts used in the System of Integrated Environmental and Economic Accounts (SEEA), and finally, GS.

From the silent spring to environmentally adjusted welfare measures

Following the pioneering works of Rachel Carson's Silent Spring, which dealt with the dangers of biocides, Kenneth Boulding published his famous essay “The Economics of the Coming Spaceship Earth,” in which he argued that the economic system necessarily needed to adapt to the ecological system's limited pools of resources (Carson, 1966; Boulding, 1966). Thus, Boulding highlighted a positive relationship between economic growth and environmental degradation. Boulding was followed by others, not the least Nicholas Georgescu-Roegen who took the entropy law, a cornerstone of modern physics, as the point of departure for criticism of the standard economic theory, proposing a natural scientific theoretical foundation of the economy as open toward nature (Georgescu-Roegen, 1971, 1977). This is still the basis of ecological economics. The Limits to Growth report, published in 1972, put forth empirical evidence for the same basic idea, forecasting the consequences of exponential economic growth in a world with a finite supply of raw materials and a biosphere with a limited capability for assimilating pollutants (Meadows et al 1972). In short, these ecological economists suggested that economic growth was merely an illusion of progress since growth undermined further welfare achievements due to environmental degradation and resource depletion. Several neoclassical economists, arguing that substitution and technological progress would counterbalance resource scarcity, opposed this view (Maurice and Smithson, 1984). Given well-defined property rights, price signals would promote the necessary technology. Other economists, such as Erik Dahmén, pointed at “environmental taxes,” an idea originally promoted by Arthur Cecil Pigou in the 1920s, as a mean to put a price on the environment (Dahmén, 1968). While the ecological economists pointed at a negative, linear relationship between growth and a good environment, the neoclassical economists rather suggested a positive one. A third position was suggested in the late 1980s and early 1990s with, first, the WCED report, in which the concept of sustainable development rejected an unavoidable trade-off between growth and the environment, conditional on environmental regulation, social progress, and generally sound institutions (Brundtland et al., 1987). Based on empirical generalizations, the so-called EKC hypothesis suggested a dynamic relationship between growth and the environment, where an initial negative relationship transforms into a positive one, due to the income elasticities of environmental demand and technological change.

Apart from environmental issues, the early 1970s also saw a discussion on the shortcomings of GDP as an appropriate measure of welfare. William Nordhaus and James Tobin were the first ones to suggest and estimate a welfare-adjusted macro aggregate in their Measure of Economic Welfare (MEW), which considered the value of leisure time and the amount of unpaid work, government final expenditures into intermediates, consumption and net investment, and a reclassification of some household expenditures and to some extent environmental degradation (Nordhaus and Tobin, 1972a,b). The latter was estimated as the “disamenity premium,” the difference between urban and rural incomes, assumed to reflect a compensation for the disadvantage of pollution in the city. The MEW served as inspiration for further developments of welfare measures. In 1981, Xenophone Zolotas estimated an Index of the Economic Aspects of Welfare (EAW), in which he deducted half of the control costs for air and water pollution, all control costs for solid waste, and all estimated damage costs for pollution (Zolotas, 1981). Thus, the EAW was more comprehensive than the MEW from an environmental point of view, since the EAW included, at least indirectly, depreciation of environmental capital.

A next attempt to measure sustainable welfare was Herman Daly's and John Cobb's Index of Sustainable Economic Welfare (ISEW), which continued in the vein of previous measures, but with a more elaborated theoretical framework (Daly and Cobb, 1990). The ISEW was the empirical measurement of the Hicksian income of the nation, corresponding to the maximum le...