Sustainable development meets the needs of the present without compromising the ability of future generations to meet their needs. It is a framework for understanding development that considers economic, social, and environmental factors. Current production and consumption patterns are unsustainable and will require two planets by 2050 if unchanged. Sustainable development policies aim to balance short-term gains with long-term impacts across sectors through a mix of market reforms, regulations, and community initiatives. No single policy can achieve sustainability alone; a critical mass of coordinated global and local actions is needed.

1. Sustainable Development
Development that meets the needs of the
present without compromising the ability of
future generations to meet their needs.
Presentation—Forum of Economists, IFMR
Balázs Horváth, UNDP
Bratislava Regional Center

2. Development—The Big Picture
Sustainability: the framework for understanding development
• Seeking to sustainably raise people’s welfare in a globalized world
• Talk takes a global view; not about Uzbekistan; some about region
In a nutshell: sustainable development is a useful, simple
overarching framework for understanding development
Growth is a prerequisite for welfare improvement, but not sufficient
• Higher income must be equitably distributed
• Must not be at expense of stocks of physical, human & natural capital
• The government, market & community initiatives each have a role to
play; each have inefficiencies (luckily, in different aspects)
• Need a patchwork of policies adding up to a critical mass globally.

3. Background
World population: 7 billion today; predicted to reach 9 bn by 2050…
2.6 billion 1.6 billion 1.3 billion no 1.1 billion
lack basic lack access access to lack
sanitation to electricity clean water adequate
housing
900 million have no access to modern health care
925 million are undernourished
The Richest 20% The Poorest 20% consume
consume 83% of the 1.3% of the resources
world’s resources

4. 4
If we keep current production & consumption
patterns  Two Planets Needed by 2050
Since 1990, our Ecological Footprint exceeds Earth’s bio-capacity;
Bottom line: We are not doing so well, and business as usual
will not work: rising environmental, social and
economic tensions, volatility.
1900 2002 2050 2100
4 4

5. Development is sustainable if human capital, knowledge
capital, natural capital and produced capital that society
disposes over do not decline over time (Arrow et al., 2004).
Economic, social & environmental pillars—interdependent
Three-legged stool: any leg weakdisbalance
» Economic: Iceland, Ireland, Greece
» Social: Tunisia, Egypt
» Environmental: Central Asia, Maldives, Bangladesh
Framework for analysis, and for robust policy ideas
• Synergies, trade-offs and feedback loops among the 3 pillars
• Short-term gains versus long-term losses

6. The sustainable development framework
Economic:
Issue of traditional growth path;
GDP, capital stock, and debt;
government’s role: provision of
public goods, regulation, energy
pricing
Social Environmental
Social inclusion, access to
Biodiversity, water, food,
jobs, health, education,
energy, climate change impact
good governance, culture
Green (and decent) jobs
Poverty-environment nexus; Social impact of ecosystem damage;
Social inclusion effects of pollution, and of environmental disasters.

7. Some Considerations
• Interaction of flows & stocks: e.g., rapidly running down the
natural resource base (depleting natural capital) raises ST
income flow, but lowers income path & HD level in M<
• It takes far less to avoid losses than to reverse them; some
losses (e.g., in biodiversity) irreversible;
• Critical, complementary roles of
government, the market & society;
At issue: intergenerational equity.

8. Globally, policies, private sector incentives, market
failures  outcome inconsistent with sustainability

9. No single policy instrument can reset incentives for all to
live & invest sustainably; goal is a critical mass of globally
consistent changes in policies, institutions, regulation &
community initiatives.
Necessary ingredients:
• Energy repricing: remove fossil fuel subsidies, price in externalities
• Regulation where markets fail, ensure contestability whenever possible; licensing
• Allow markets, community initiatives to function where they work best
• Assign property rights, then trade in externalities (R. Coase)
• Common property regimes (E. Ostrom)
• Direct government activities (e.g., nuclear power, national parks).
• Redistribute gains from reduced waste & revenues from energy repricing to
strengthen social protection (social pillar).

10. Elements available: build up critical mass of policies ―wedge-by-wedge‖
Perfect policy mix or global coordination is not required:
• policy mix to tip the balance toward sustainability in billions of
decisions about current and future actions
• Global coordination to yield a coherent patchwork of national policies
This is possible: consider ECIS region’s experience in past 20 years:
• most countries have seen rapidly rising inequality;
• real-life example: raising relative energy prices & changing incentives
& institutions can result in an absolute reduction in CO2 emissions
even while GDP grows substantially.

11. Elements of the Policy Mix I.
Institutions and Governance
Effective national, regional and global institutions are needed to
• reconcile horizons given costs & benefits including externalities
• facilitate global collective action transcending national borders (Doha)
• transfers to align broader & local/national incentives (within US, EU)
• facilitate local/national/global capacity building; technology transfers
• ensure stakeholder involvement, transparency, public participation
• common property regimes (Elinor Ostrom)—self-management by a local
community can overcome ―tragedy of the commons‖  common goods
sustainably managed without privatization or state administration.

12. Elements of the Policy Mix II. Common property regimes:
Protect the core resource; allocate the fringe through
community norms of consensus decision-making (Elinor Ostrom).
• Rules limit withdrawal from the common resource system to avoid overuse.
• Access to the resource is monitored; not free
• Common-pool resources are not public goods: outsiders excluded.
• 8 design prerequisites for a stable CPR arrangement:
– Clearly defined boundaries
– Congruence between appropriation rules and local conditions
– Collective-choice arrangements allowing participation of most stakeholders
– Effective monitoring by or on behalf of the appropriators
– Graduated sanctions for violating community rules
– Effective, low-cost conflict-resolution mechanisms
– Recognition of rights to organize
– Larger CPRs can exist as nested layers of small, local CPRs.
• No examples of common property regime to resolve overuse on global scale on its own.

13. Policy Considerations I.
Mancur Olson’s Logic of Collective Action: Small Groups
Can Prevail Over Very Large Ones
• Large groups: high costs of organizing collective action; Small groups: low costs.
• Individuals in large groups gain less per capita from success than in small groups
Powerful lobbies with huge, immediate gains prevail over large groups where the
individual gains are minor or far-off
even if
LT cumulative gains for the large group dwarf the total gains of the small group.
• Further complications: costs and benefits across generations living now and yet
unborn; groups with common interests that fail to vote [as a block].

14. Policy Considerations II. Political Economy of Low-
Carbon Reforms: Curse of Differing Horizons
• Typical: front-loaded costs
• Back-loaded benefits
• It’s a no-brainer, right?
• But now Assume elections in year 2
• Let’s examine time profile:
• Net benefits from year 3;
• Cumulatively from year 5
• Very likely: will not happen

15. Policy Considerations III.
Global adjustment to low-carbon life
will happen—the only choice is how
Will our generation facilitate a smooth adjustment path?
Failing to adjust is a decision  we opt for a ―bumpy ride‖ with accelerating climate
change and abrupt adjustment as binding constraints are reached.
Effective collective action toward sustainable development implies a smoother path that
• alleviates social conflict;
• stimulates technology improvement & diffusion; hence
• facilitates both adaptation and mitigation;
• is far more in line with intergenerational equity.
• Rio+20 Conference: countries acting together to ensure
sustainable development. It can be done; Uzbekistan
can make an important contribution; UNDP can help.

16. Policy Considerations IV.
Higher Energy Prices: Necessary Part of Sustainable Development
* Climate change threat makes prompt collective action worthwhile (even as insurance)
* Price lowered by subsidies; not reflecting externalities, depletion  wrong signal,
distorts toward CO2-heavy activity
* Energy versus food
* Renewables
Coordination: only appropriate price
signals can help fundamentally alter
consumption & investment decisions
of billions
 phase in CO2 "sin tax", or
 charge for traded carbon credits.
What is needed?
* Targeted social support for the poorest (higher revenues from sin taxes can cover this)
* Globally coordinated & enforced energy price change with no offsetting subsidies
* Effective regulation to avoid free-riding & guide reallocation of fossil fuel rents
* Relative prices also matter in setting incentives right.

17. Thank You for Your Attention
Questions, Comments Most Welcome