At the G7 conference in Bavaria on 7 and 8 June 2015, it was agreed to phase out the use of fossil fuels by the end of the century. But despite this significant objective, there were no short-term measures put in place to start on the process of achieving this goal. Nevertheless, the agreement contained commitments to further developments in carbon markets, elimination of fossil fuel subsidies, incentives for the development of green energy and support for developing countries in reducing hydrofluorocarbons.
The agreement also sent a strong message to the 21st United Nations International Climate Change conference scheduled to meet in Paris from 30 November to 11 December 2015. The G7 communiqué states that binding rules would be required if the target was to be met.
The agreement should enhance transparency and accountability including through binding rules at its core to track progress towards achieving targets, which should promote increased ambition over time. This should enable all countries to follow a low-carbon and resilient development pathway in line with the global goal to hold the increase in global average temperature below 2°C.
But many environmentalists argue that a more fundamental approach is needed. This requires a change in the way the environment is perceived – by both individuals and politicians. The simple 
selfish model of consumption to maximise consumer surplus and production to maximise profit should be rejected. Instead, the environment should be internalised into decision making.
What is more, there should be an integral ecology which brings together a wide range of disciplines, including economics, in analysing the functioning of societies and economies. Rather than being seen merely as a resource to be exploited, respect and care for the environment should be incorporated into our whole decision-making process, along with protecting societies and cultures, and rejecting economic systems that result in a growing divide between rich and poor.
In his latest encyclical, On care for our common home, Pope Francis considers integral ecology, not just in terms of a multidiciplinary approach to the environment but as an approach that integrates the objectives of social justice and care for the environment into an overarching approach to the functioning of societies and economies. And central to his message is the need to change the way human action is perceived at a personal level. Decision making should be focused on care for others and the environment not on the selfish pursuit of individual gain.
With a change in heart towards other people and the environment, what would be seen as externalities in simple economic models based on rational self-interested behaviour become internal costs or benefits. Care and compassion become the drivers for action, rather than crude self interest.
A key question, of course, is how we get here to there; how society can achieve a mass change of heart. For religious leaders, such as the Pope, the approach centres on spiritual guidance. For the secular, the approach would probably centre on education and the encouragement for people to consider others in their decision making. But, of course, there is still a major role for economic instruments, such as taxes and subsidies, rules and regulations, and public investment.
Articles
G7 leaders agree to phase out fossil fuels by end of centuryEU Observer, Peter Teffer (8/6/15)
Integral Ecology Approach Links ‘Welfare of God’s People and God’s Creation’ Catholic Register (11/6/15)
President’s Corner Teilhard Perspective, John Grim (May 2015)
In his encyclical on climate change Pope Francis reveals himself to be a master of scientific detail Washington Post, Anthony Faiola, Michelle Boorstein and Chris Mooney (18/6/15)
Pope Francis Calls for Climate Action in Draft of Encyclical New York Times, Jim Yardley (15/6/15)
Pope Francis letter on climate change leaked: Draft Vatican encyclical released three days early Independent, Kashmira Gander and Michael Day (15/6/15)
The Pope is finally addressing the gaping hole in the Judaeo-Christian moral tradition Independent, Michael McCarthy (15/6/15)
Pope Francis warns of destruction of Earth’s ecosystem in leaked encyclical The Guardian, Stephanie Kirchgaessner and John Hooper (16/6/15)
Explosive intervention by Pope Francis set to transform climate change debate The Observer, John Vidal (13/6/15)
Pope Francis’ Leaked Encyclical Draft Attributes Climate Change To Human Activity Huffington Post, Antonia Blumberg (15/6/15)
Pope Francis’ Integral Ecology Huffington Post, Dave Pruett (28/5/15)
Videos
Pope Francis: Climate change mostly man-made BBC News, Caroline Wyatt (18/6/15)
Pope urges action on global warming in leaked document BBC News, Chris Cook (16/6/15)
Questions
- What do you understand by ‘integral ecology’?
- Is an integrated approach to the environment and society consistent with ‘rational’ behaviour (a) in the narrow sense of ‘rational’ as used in consumer and producer theory; (b) in a broader sense of making actions consistent with goals?
- Can cost–benefit analysis be used in the context of an integrated and cross-disciplinary approach to the environment and society?
- What types of incentives would be useful in achieving the approach proposed by Pope Francis?
- Why do many companies publicly state that they pursue a policy of corporate responsibiliy?
- To what extent does it make sense to set targets for the end of this century?
- In what crucial ways might GDP need to be adjusted if it is to be used as a measure of the success of the approach to society, the economy and the environment as advocated by Pope Francis?
It’s a relatively common dish to see on a menu at a restaurant: mackerel. This particular fish has been promoted as a healthy and sustainable dish, but now its sustainability is coming into question and the Marine Conservation Society has taken it off its ‘fish to eat’ list. My brother Hugh is a marine biologist and often comments on which fish we should be avoiding due to sustainability issues (especially given how much I like fish!) So, how is this an economics issue?
There a couple of key things to pick out here. Firstly, with the conservationists’ warning of this issue of unsustainability, they have been asking consumers to reduce the amount of mackerel they buy. This will naturally have an impact on fisherman. If consumers do listen to the conservationists and hence reduce their demand for mackerel, we could see a fall in the price of this fish and a reduction in the fishermen’s turnover. It could be that we see a switch in consumption to other more sustainable fish, especially if we see some form of intervention.
Another area concerning economics is the idea of over-fishing. For years, there have been disputes over who has the rights to these fish stocks. In the past, the Faroe Isles and Iceland have increased their quotas significantly, as mackerel appear to have migrated to their shores, contributing to this question of sustainability. Iceland and the Faroe Isles have ‘unilaterally agreed their quotas … as they are not governed by the common fisheries policy’.
The question is: when fisherman catch one additional mackerel, what are they considering? Do they think about the private benefit to them (or their company) or do they consider the external cost imposed on others? Whenever one fish is taken from the sea, there is one less fish available for other fishermen.
This leads to over-consumption of fish and contributes towards the well-documented depletion of fish stocks and ‘The Tragedy of the Commons’, if account is not taken of the external cost imposed on other fishermen.
The total catch is now far in excess of what has been scientifically recommended and previously agreed upon by all participating countries. Negotiations to introduce new catch allowances have so far failed to reach agreement.
There are hopes that an international policy on quotas can be agreed to ensure mackerel levels return to or remain at a sustainable level. However, at present no progress has been made. Until some form of an agreement is reached, fishermen around Iceland and the Faroe Isles will continue to battle against the conservationists. The following articles consider this fishy topic.
Mackerel taken off conservationists’ ‘fish-to-eat’ list The Guardian, Rebecca Smithers (22/1/13)
Warning over mackerel stocks Scottish Herald (22/1/13)
Fishing quota talks begin amid ongoing disputes and finger-pointing The Scotsman, Fran Urquhart (14/1/13)
Mackerel no longer an ethical choice because of over-fishing The Telegraph, Louise Gray (22/1/13)
Ths fishy tale of macro-mismanagement The Guardian, Annalisa Barbieri (22/1/13)
You can still eat mackerel – just make sure it’s British The Telegraph, Louise Gray (22/1/13)
Dispute means mackerel is no longer fish of the day BBC News, Matt McGrath (22/1/13)
Mackerel struck off sustainable fish list Associated Press (22/1/13)
Questions
- Why are quotas set by the EU for fishing? Who do they apply to?
- Why is there an externality from fishing?
- What is the Tragedy of the Commons? Using a diagram with average and marginal revenue product and average and marginal cost illustrate the market equilibrium and the social optimum. Why are they different?
- Following on from question 3, what does this suggest about the role of governments?
- If the conservationists’ request regarding buying less mackerel is successful, what impact might this have on fishermen and fisheries?
- If consumers do switch to buying other fish, what would happen to the equilibrium in the mackerel market and in the market for other fish? Think about this question in terms of general equilibrium analysis.
World leaders have been meeting in Rio de Janeiro at a United Nations Conference on Sustainable Development. The conference, dubbed ‘Rio+20’, refers back to the first UN Conference on Environment and Development (UNCED) held in Rio 20 years ago in June 1992.
The 1992 conference adopted an Agenda 21. It was “comprehensive plan of action to be taken globally, nationally and locally by organizations of the United Nations System, Governments, and Major Groups in every area in which human impacts on the environment.”
The 2012 conference has looked at progress, or lack of it, on sustainability and what needs to be done. It has focused on two major themes: “how to build a green economy to achieve sustainable development and lift people out of poverty, including support for developing countries that will allow them to find a green path for development; and how to improve international coordination for sustainable development.” Issues examined have included decent jobs, energy, sustainable cities, food security and sustainable agriculture, water, oceans and disaster readiness.
But just what is meant by sustainable development? The conference defines sustainable development as that which meets the needs of the present without compromising the ability of future generations to meet their own needs. “Seen as the guiding principle for long-term global development, sustainable development consists of three pillars: economic development, social development and environmental protection.”
The articles below look at prospects for national and global sustainability. They also look at a new measure of national wealth, the Inclusive Wealth Index (IWI). This index has been developed under the auspices of the International Human Dimensions Programme on Global Environmental Change (IHDP) and published in its Inclusive Wealth Report 2012 (see report links below).
The IWR 2012 was developed on the notion that current economic production indicators such as gross domestic product (GDP) and the Human Development Index (HDI) are insufficient, as they fail to reflect the state of natural resources or ecological conditions, and focus exclusively on the short term, without indicating whether national policies are sustainable.
The IWR 2012 features an index that measures the wealth of nations by looking into a country’s capital assets, including manufactured, human and natural capital, and its corresponding values: the Inclusive Wealth Index (IWI). Results show changes in inclusive wealth from 1990 to 2008, and include a long-term comparison to GDP for an initial group of 20 countries worldwide, which represent 72% of the world GDP and 56% of the global population. (Click on chart for a larger version.)
So will growth in IWI per capita be a better measure of sustainable development than growth in GDP per capita? The articles also consider this issue.
Articles: summit
Rio+20 deal weakens on energy and water pledges BBC News, Richard Black (17/6/12)
Rio+20: Progress on Earth issues ‘too slow’ – UN chief BBC News, Richard Black (20/6/12)
Rio+20 Earth Summit Q&A The Telegraph, Louise Gray (16/5/12)
Rio+20 Earth Summit: campaigners decry final document Guardian, Jonathan Watts and Liz Ford (23/6/12)
A catastrophe if global warming falls off the international agenda Observer, Will Hutton (24/6/12)
Analysis: Rio +20 – Epic Fail The Bureau of Investigative Journalism Brendan Montague (22/6/12)
Articles: IWI
Accounting for natural wealth gains world traction Atlanta Business NewsKaty Daigle (17/6/12) (see alternatively)
New index shows lower growth for major economies Reuters, Nina Chestney (17/6/12)
A New Balance Sheet for Nations: UNU-IHDP and UNEP Launch Sustainability Index that Looks Beyond GDP EcoSeed (20/6/12)
World’s leading economies lag behind in natural capital Firstpost (18/6/12)
Beyond GDP: Experts preview ‘Inclusive Wealth’ index at Planet under Pressure conference EurekAlert, Terry Collins (28/3/12)
New sustainability index created that looks at more than gross domestic product bits of science (17/6/12)
For Sustainability, Go Beyond Gross Domestic Product Scientific AmericanDavid Biello (17/6/12)
Report
Inclusive Wealth Report 2012: Overview IHDP
Inclusive Wealth Report 2012: Summary for Decision-makers IHDP
Inclusive Wealth Report 2012: full report IHDP
Questions
- What progress has been made towards sustainable development over the past 20 years?
- What are the limitations of conferences such as Rio+20 in trying to achieve global action?
- With the current challenges faced by the eurozone and the global economy more generally, is this a good time to be discussing long-term issues of sustainable development?
- Explain how IWI is derived and measured?
- Looking at the chart above, explain the very different positions of countries in the three columns.
- What are the strengths and weaknesses of using growth in IWI compared with using growth in GDP as measures of (a) economic development; (b) economic wellbeing?
A huge majority of the British population are in agreement on one thing: UK drinking is out of control. At a cost to the NHS of over £2 billion per annum, it’s quite obvious that the current ‘binge drinking’ culture is unsustainable for those doing the drinking and for the NHS.
This issue was raised back in January 2010, when the Labour government came under pressure to impose a minimum price on alcohol. (see All-you-can-drink bans) The report published in early January suggested that a minimum price on alcohol of 50p per unit would save more than 3000 lives per year. Dr. Richard Taylor said:
“The evidence we took showed that minimum pricing was the most effective way forward and at the moment you can sometimes buy beer cheaper than water. Our message is that the price would be put up but only by a little for moderate drinkers. Surely that is a sacrifice to pay for the good health of young people.”
The Coalition’s plan is to introduce a minimum price for alcohol, which would increase the price of a can of lager to a minimum of 38p and a litre bottle of vodka would be a minimum of £10.71. By increasing the price of alcohol, it is hoped that demand will be reduced and this will go some way to tackling the problem of binge drinking.
However, many argue that the proposal will be ineffective. Some believe that the minimum price is not high enough and that such a small increase will have no effect. Others argue that it will only affect small supermarkets and will have a significantly adverse effect on pubs, which are already struggling. Furthermore, a concern is that by raising the price of alcohol, the only people who will suffer are the so-called ‘sensible’ drinkers. Those who go out and binge drink will be largely unresponsive to the higher price.
Articles
How can raising the price of alcohol improve health BBC News, Michelle Roberts (18/1/11)
Pub association responds to alcohol minimum price BBC News (18/1/11)
SNP refuses Britain-wide alcohol minimum price Telegraph, Simon Johnson (19/1/11)
Experts say the new minimum prices on alcohol sales are not enough Wales Online, Abby Alford (19/1/11)
UK drinking ‘is out of control’, two thirds of public believe Guardian, Alan Travis (18/1/11)
Alcohol price plans will only save 21 lives per year, says expert Telegraph, Tom Whitehead (19/1/11)
Supermarkets forced to charge ‘minimum price’ for alcohol in bid to curb binge drinking Mirror News, James Lyons (18/1/11)
Report
Alcohol House of Commons Health Committee (10/12/09)
Questions
- Using a diagram, explain how a minimum price control on alcohol will work. What are the likely effects?
- Which factors will determine the effectiveness of the minimum price?
- Why is it that ‘binge drinkers’ may not be responsive to the higher price?
- The Mirror article refers to ‘loss leaders’. What are they and how are they relevant here?
- What other policies could be used to tackle binge drinking?
- Given that taxes on products such as alcohol and cigarettes raise so much tax revenue for the government, would there be an adverse effect by raising the minimum price on alcohol?
- Why is the current drinking culture unsustainable?
- Is alcohol a de-merit good? Why is it an example of market failure?
The pound is regarded as an international currency. However, the financial crisis has caused the value of the pound to fall, reaching a four-month low against the euro in September. This recent weakening of sterling is partly the result of worries that the Lloyds Banking Group will find it difficult to meet the ‘strict criteria to leave the government’s insurance scheme for toxic banking assets’ set for it by the Financial Services Authority.
However, one of the main reasons relates to recently published figures showing UK debt (see for data). The UK’s public-sector net borrowing has now reached £16.1bn and the government’s overall debt now stands at £804.8bn: 57.5% of GDP. This represents an increase of £172bn in the past year. Over the longer term, this is unsustainable. The government could find it increasingly difficult to service this debt. This would mean that higher interest rates would have to be offered to attract people to lend to the government (e.g. through bonds and bills), but this, in turn, would further increase the cost of servicing the debt. Worries about the potential unsustainability of UK govenrment debt have weakened the pound.
But isn’t a lower exchange rate a good thing in times of recession as it gives UK-based companies a competitive advantage over companies abroad? The following articles consider UK debt and the exchange rate.
Pound plumbs five-month euro low BBC News (21/9/09)
Market data Telegraph (22/9/09)
Pound slides back against dollar and euro Guardian (21/9/09)
Pound drops as UK stocks fall for first time in seven days Bloomberg (21/9/09)
Public sector borrowing soaring BBC News (18/9/09)
Govt spending cuts ‘could help pound’ Just the Flight (21/9/09)
Pound dips to four month euro low BBC News (18/9/09)
Weak pound hits eurozone holidaymakers Compare and save (21/9/09)
Questions
- What is the relationship between public debt and the value of the pound? How do interest rates play a part?
- What is quantitative easing and has it been effective? How does it affect the exchange rate?
- What are the advantages and disadvantages of a freely floating exchange rate relative to a fixed exchange rate?
- If the UK had joined the euro, do you think the country would have fared better during the recession? Consider public debt levels: would they have been restricted? What would have happened to interest rates? What would have happened to the rate of recovery
At the G7 conference in Bavaria on 7 and 8 June 2015, it was agreed to phase out the use of fossil fuels by the end of the century. But despite this significant objective, there were no short-term measures put in place to start on the process of achieving this goal. Nevertheless, the agreement contained commitments to further developments in carbon markets, elimination of fossil fuel subsidies, incentives for the development of green energy and support for developing countries in reducing hydrofluorocarbons.
selfish model of consumption to maximise consumer surplus and production to maximise profit should be rejected. Instead, the environment should be internalised into decision making.
With a change in heart towards other people and the environment, what would be seen as externalities in simple economic models based on rational self-interested behaviour become internal costs or benefits. Care and compassion become the drivers for action, rather than crude self interest.