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Tradeoffs and sustainable development
Case 1. Win-win: preserve natural assets and keep growing
Addressing both growth objective and preservation or restoration of
environmental assets can sometimes be critical to raising production and
incomes, even in the short to medium term. That would be the case in
Madagascar, where almost three-quarters of the people, most of them poor, live
in rural areas. The bulk of rural poor people are in agriculture, and
productivity growth in agriculture is critical to poverty reduction. Yet
agricultural productivity has been stagnant for the past four decades.50
One of the deep constraints to increasing agricultural production in Madagascar
is resource degradation and low soil fertility. The country has already lost 80
percent of its original forest cover, more than half in the past 40 years (see
box 8.3 in chapter 8). In the
east of the country, under the tavy agricultural system, rice is grown
on steep slopes after slashing and burning of virgin or secondary forests. In
the central highlands population pressure forces people from the valley bottoms
to farm the hillsides, evident in the big increase in rainfed agriculture. The
resulting erosion causes nutrients to wash off the already poor soil and to
silt irrigation schemes in the valleys.
The annual cost of environmental degradation-from soil erosion, silting,
declining soil fertility, and lost forest-is high, estimated at over 5 percent
of GDP, and the agricultural resource base has not kept up with population
growth. That is why arresting this cycle-through agricultural intensification
to reduce the pressure of cultivating new uplands-is paramount. Today, little
use is made of fertilizers and of new higher yielding varieties-for several
reasons. The absence of secure
land tenure reduces the incentives for investing in intensification.
The lack of credit and liquidity hampers the use of inputs. And the very poor
quality of rural infrastructure constrains the supply of inputs and makes it
more expensive.
Indeed, for countries that rely heavily on renewable natural resources and have
few alternatives in the short to medium term (because they are poor in human
and human-made assets), it is especially important to contain environmental
depletion or degradation. For these countries, maintaining natural assets is a
critical component of economic growth. For example, in southern Africa, the
Caribbean, and the Indian and Pacific Oceans, nature-based tourism has become
an important source of foreign exchange and local income.
In some cases restoring or maintaining an environmental asset may not be
critical for economic production (other factors of production could replace its
functions), but it may be more economically efficient (box 2.6).
Box 2.6
Replacing natural assets with human made assets can be costly
For years the Catskill watershed provided New York City residents with water of
such high quality that it needed no filtration or chemical treatment. New York
could even bottle and sell its water to other cities.
This began to change in the 1990s. The U.S. Environmental Protection Agency
warned the city that it would soon have to invest in a filtration plant-for $6
to $8 billion, with annual operating costs of about $300 million. Given the
huge sums, the city began to ask why a watershed that performed so well for so
long was now beginning to fail. The main causes were uncontrolled land
development in the Catskills and the intensified use of land in and around the
watershed. The combination of pollutants from residential communities and farms
was overwhelming the soil microbes that naturally filtered and cleansed the
water as it percolated through.
Because there had been little deforestation or soil erosion, and because much
of the natural infrastructure of the watershed was still intact, it was
possible to reverse the situation. New York City then faced a choice: restore
the watershed, or build and run a filtration plant. Costs of the first
option-improving sewerage treatment in the watershed and buying lands to
prevent development-were estimated in the range of $1 to $1.5 billion,
one-fifth the cost of an artificial filtration system.
The choice was clear. As the commissioner of the city's Department of
Environmental Protection commented at the time, "All that human-made filtration
does is solve a problem. Preventing the problem, through watershed protection,
is faster, cheaper, and has lots of other benefits."
Source: Heal (2000).
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