Teaching Notes · Economic Development and Growth

Environment, Climate Change, and the Sustainable Development Goals

For most of the twentieth century, environment and development were treated as separate subjects, one for ecologists, the other for economists. That separation has largely collapsed. Environmental degradation turns out to be both a cause and a consequence of poverty, and the global policy framework that has grown up around sustainable development now treats economic, social, and environmental goals as genuinely inseparable.

Natural capital and why markets tend to ignore it

Economists increasingly describe the natural environment using the language of capital. Natural capital is the world's stock of natural resources, air, water, soil, biodiversity, and ecosystems, that provide the goods and services on which human wellbeing ultimately depends. Environmental capital is the broader systemic capacity of that stock, combined with human, social, and manufactured capital, to keep generating those services over time. The core economic problem is that, unlike produced capital, natural capital is largely invisible in ordinary market transactions until it is degraded or lost. Because natural systems are rarely priced directly, they tend to be treated as free and effectively inexhaustible, which encourages overuse and depletion precisely because the market sends no price signal warning that a limit is approaching.

This matters disproportionately for the poor, who are simultaneously among the most affected victims of environmental degradation and, in many settings, among its most direct agents, through reliance on biomass fuels, unsustainable farming on marginal land, or informal use of common resources that no one has a clear incentive to conserve. Environmental problems translate fairly directly into economic ones: lost agricultural productivity, the health burden of unsanitary conditions and lack of clean water, and the pollution that comes with heavy reliance on biomass fuel for cooking and heating.

Climate change and the developing world

The scientific case for anthropogenic climate change has strengthened steadily across successive assessment reports from the Intergovernmental Panel on Climate Change, and the consequences fall disproportionately on developing countries. The specific impacts identified in this research include prolonged droughts and expanding desertification, more severe storms with flooding and erosion, longer and more intense heat waves, reduced river flow and water shortages, falling grain yields, the spread of pests and disease into new ranges as temperatures shift, contaminated groundwater, degraded freshwater and coastal ecosystems including coral reefs and mangroves, coastal flooding, loss of pollinators and other species essential to agriculture, and an increase in forest and crop fires. Agriculture in tropical and subtropical regions, where many developing countries are concentrated, is hit particularly hard, and competition over increasingly scarce natural resources carries a real risk of fueling conflict.

There is an underlying unfairness built into this picture: the bulk of historical greenhouse gas emissions has come from developed countries and from rapid industrial growth in a handful of large emerging economies, while the physical impact lands hardest on developing countries that contributed the least to causing it. Policy responses are usually grouped into mitigation, reducing the emissions that cause climate change in the first place, through instruments such as carbon taxes or subsidies for cleaner technology, and adaptation, adjusting to the climate change that is already underway or already locked in, which can be planned in advance through deliberate policy or can happen autonomously as individuals and firms respond to changing conditions on their own.

Who can do what

Policy proposals in this area are typically organized by who is best placed to act. Developing countries can pursue proper pricing of natural resources, genuine community involvement in resource management, clearer property rights over land and resources, better economic alternatives for the poor so they are not forced to degrade the environment simply to survive, improved economic status for women, investments such as better road networks that pay off regardless of how the climate actually changes, and a proactive rather than reactive stance toward adaptation. Developed countries can lower the cost developing countries face in protecting their own environment, reduce trade barriers and harmful subsidies, offer debt relief, including debt for nature swaps that forgive debt in exchange for conservation commitments, and provide development assistance targeted at environmental goals. On behalf of the global environment specifically, developed countries are also typically asked to control their own emissions, invest in research on green technology, transfer that technology to developing countries, and restrict clearly unsustainable forms of production.

The Sustainable Development Goals

The clearest expression of this integrated view of environment and development is the 2030 Agenda for Sustainable Development, adopted by the United Nations in 2015. It sets out seventeen goals and one hundred sixty nine measurable targets, building on the earlier Millennium Development Goals and on decades of international environmental negotiation stretching back to 1992. As the former UN Secretary General Ban Ki-moon put it, saving the planet, lifting people out of poverty, and advancing economic growth are, in this framework, treated as one and the same fight rather than three competing priorities to be traded off against each other.

The seventeen goals are often organized into three broad clusters that map closely onto the economic, social, and environmental challenges discussed above. Economic goals include decent work and economic growth, reduced inequality, sustainable consumption and production, industry and innovation, and ending poverty and hunger. Social goals include good health, quality education, gender equality, clean water and sanitation, and peace and justice. Environmental, or biosphere, goals include climate action, life on land and below water, and clean energy, with several goals, such as sustainable cities and global partnership, cutting across all three clusters at once.

The framework is also backed, in principle, by a dense web of existing international treaties, from the 1992 climate change convention and its 2015 Paris Agreement, to conventions on biodiversity, desertification, and hazardous waste, giving the SDGs more legal and institutional weight than a simple voluntary target list would otherwise carry, even though enforcement in practice still depends heavily on each country's own domestic commitment.

Sources: “Environment, Development, and the SDGs,” following M. P. Todaro and S. C. Smith, Economic Development (Pearson); Intergovernmental Panel on Climate Change, Fourth and Fifth Assessment Reports; World Bank, World Development Report (2009) and “Turn Down the Heat” reports (2012, 2013); United Nations, Transforming Our World: The 2030 Agenda for Sustainable Development (2015); and United Nations Framework Convention on Climate Change and Paris Agreement texts.