1. Tema 3. The sustaintability of growth
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment

2. Basic Economic activities
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
Humans & environment
Basic Economic activities
Consumption.- The use by human individuals of goods an services to satisfy some of their needs and wants. Not all consumption is ‘consumptive’
Production.- Commodities to be consumed by individuals or by firms 
Investment.- …in Capital Stock, which provides capital services
Life support services: the purification of our air and water; the stabilisation, and moderation, of the climate; nutrient cycling; the pollination of plants. All of the other plants and animals that we use as natural resources, which participate in waste assimilation, and which contribute to the provision of amenity services, also depend on these life support services.

3. Reproducible or human-made
1. Economic activity and Environment
2. Constituents of human well-being
The concept of Ecological Economics
Interdependent systems
Sustainability
Capital Stock
Reproducible or human-made
Durable capital.- Tools, machinery, buildings, infrastructures..
Human Capital.-Stock of learned skills
Intellectual capital.- Accumulated knowledge and skills
Social capital.- Set of institutions and customs
Natural capital.- Stocks in the environment that deliver services to the economy.

4. Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
Two questions
Can be consumption held constant indefinitely, if the population is constant in size, given that non-renewable resources are a necessary input to production?
How to allocate efficiently the environmental resources in case of market failures?

5. Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
The Hartwick rule
Constant consumption in a model economy can be achieved if the total value of the economy’s stock of reproducible capital together with its stock of non-renewable resources is held constant over time by investing the rent.
The amount of investment in reproducible capital that is needed to exactly offset declining stocks of non-renewable resources.

6. The optimum pollution level
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
The optimum pollution level
Economic Equilibrium: (P)
BMg=CMg privado
Environmental Equilibrium: (P*) - OL*. Lesser resources consumption and higher prices
BMg = CMg total (privado + ambiental)

7. Campesinos deciden individualmente
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
The tragedy of commons
Explotación conjunta de pastos comunales.- Valor de leche producida es f(L) y coste de una vaca es c.
Campesinos deciden individualmente
Si PMe [f(L+1)/(L)] es mayor que el coste  llevará la vaca, pero…
…Incorporar una vaca adicional disminuye la producción media del resto (coste social)  sobreexplotación
El pasto no se explota hasta el nivel de maximizan los beneficios sino hasta el nivel en que Bº=0  sobre explotación

8. “visions” on sustainability
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
“visions” on sustainability
Neoclassical economics focus on the level of consumption
Hartwick rule: total of natural and human-made capital together remains constant over time “Weak sustainability”
Correcting market failures: Internalising externalities
Ecologists think about sustainability in terms of the extent to which the prevailing structure and properties of the ecosystem can be maintained  Resilience
Ecological economics accept that resilience is important for sustainability, and they argue that following the Hartwick rule and correcting market failure will not suffice to achieve sustainability. “Strong sustainability”
natural and human-made capital are complements rather than substitutes.
critical natural capital, which acknowledges substitutability close to zero for some parts of capital and assumes higher substitutability for others

9. The “unlimited-growth” limits
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
The “unlimited-growth” limits
Neoclassical and the Weak sustainability rule:
𝑲 = 𝑲 𝒎 + 𝑲 𝒉 + 𝑲 𝒏
The total stock of capital remains for the next generation
Critics:
Life support services?.... ‘Ozone’
Uncertainties and Unknowledges…. ‘Tropical forests’
Irreversibility and resilience… ‘capital for the future’
Which is the elasticity substitution?
*durable(Km), human(Kh) and natural (Kn)

10. The “unlimited-growth” limits
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
The “unlimited-growth” limits
Ecological and the Strong sustainability rule:
𝑲 =𝑺− 𝜹 𝒎 𝑲 𝒎 + 𝜹 𝒉 𝑲 𝒉 + 𝑲 𝒏 𝜹 𝒏 ≥𝟎
𝑲 𝒄 𝒏 ≥𝟎
Neither the total stock of capital, nor the the critic-natural capital decrease
Critics:
How to calculate and monetize Kcn
*durable(Km), human(Kh) and natural (Kn)

11. 𝑰≡𝑷∗𝑨∗𝑻 𝐼𝑚𝑝𝑎𝑐𝑡≡𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛∗𝐴𝑓𝑓𝑙𝑢𝑒𝑛𝑐𝑒∗𝑇𝑒𝑐ℎ𝑛𝑜𝑙𝑜𝑔𝑦 The IPAT Identity?
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
The IPAT Identity?
𝐼𝑚𝑝𝑎𝑐𝑡≡𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛∗𝐴𝑓𝑓𝑙𝑢𝑒𝑛𝑐𝑒∗𝑇𝑒𝑐ℎ𝑛𝑜𝑙𝑜𝑔𝑦
𝑰≡𝑷∗𝑨∗𝑻
IPAT is a tautology -- it states what must be true. It is, nonetheless, very useful.
It reflects the “trade-off” between growth and environment.
An increasing demand (P or A), raises the pollution at least…
… something happen with technology (T)
It points us to the proximate determinants of the environmental impacts of economic activity.
It does not tell us about the fundamental, or underlying, determinants.

12. Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
The IPAT Identity?
Arto y Dietznbacher (2014): Drivers of the growth in global GHG emissions (gigatonnes of CO2eq)

13. Modelling growth and the environment
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
Modelling growth and the environment
IPAT doesn’t give information about the determinants of P, A, T.
Cobb-Douglas production function  Substitution
Leontieff production function  Not substitution
𝑌=𝑓 𝐾,𝐿,𝑅 = 𝐾 𝛼 · 𝐿 𝛽 · 𝑅 𝛿 =∝𝐾+𝛽𝐿+𝛿𝑅
𝑌=𝑓 𝐾,𝐿,𝑅 =min⁡( ∝∗𝐾 , 𝛽∗𝐿 , 𝛿∗𝑅 )

14. The Scenarios Analysis
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
The Scenarios Analysis
A scenario is an internally consistent story about one way in which the future could unfold. It is not a prediction or a forecast.
Scenario
Proyections 2050 P I T
Impact
People
GDP/pc
Tonnes/$
Tonnes Co2 A
Baseline
7.000
0,00055 B
Low Fertility
31% C
Medium Fertility
55% D
High Fertility
82% E
Growth 1%
11.512
64% F
Growth 2,5%
24.060
244% G
Growth 3%
49.747
611%
Best
Worst
the commodity composition of GDP can be regarded as the ‘technology’ by means of which needs and desires are satisfied in a particular economy… and it could be calculated the coal embodied.

15. Scenarios Example: Carbon footprint of nuclear energy
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
Scenarios Example: Carbon footprint of nuclear energy
Zafrilla, J. E., M.-Á. Cadarso, F. Monsalve and C. de la Rúa. (2014): How Carbon-Friendly Is Nuclear Energy?

16. Kuznets Curve Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
Kuznets Curve

17. Kuznets Curve Remarks: GDP composition: Services vd industry
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
Kuznets Curve
I = Resources/waste per cápita
y = Income per cápita
t = Time
Z = other variables variables
Remarks:
GDP composition: Services vd industry
Leakages effects.- Globalization and value chains
Technological progress
Society preferences
Green Legislation: energy, consumption, recycling

18. Kuznets Curve Estimación de la curva: Confirman la curva de Kuznets:
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
Kuznets Curve
Estimación de la curva:
Confirman la curva de Kuznets:
Pico: € per cápita
1857 y 1986 relación positiva.
relación inversa.

19. Piketty’s Inequality in twenty-first century
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
Piketty’s Inequality in twenty-first century
When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.

20. Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
Boyce Thesis
Greater inequalities of power and wealth lead to more environmental degradation:
The excess environmental degradation driven by powerful winners is not offset by the environmental degradation prevented by powerful losers;
Inequality raises the valuation of benefits reaped by rich and powerful winners relative to cost imposed on por and less powerful losers;
Inequality raises the rate of time preference applied to environmental resources by both the poor and the rich, by increasing their poverty and political insecurity.

21. Spanish household consumption
Economic and environmental sustainability
The IPAT identity
The Environmental Kuznets Curve
Inequality and environment
Spanish household consumption
Figure 4. Carbon footprint by SCU and type of household (TCO2eq.).
* López, L. A., Arce, G., Morenate, M., & Monsalve, F. (2015). Assessing the inequality of Spanish households through the carbon footprint. The 21st Century Great Recession effect.
López, L. A., Arce, G., Morenate, M., & Monsalve, F. (2015).