Transitions to a Sustainable Future
The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development
Edited by Valentina Bosetti, Reyer Gerlagh and Stefan P. Schleicher
Chapter 1: Economic Models for Sustainable Development
Richard S.J. Tol 1.1 INTRODUCTION This chapter is about how economic models can be used to advise policymakers on sustainable development. Van den Bergh and Hofkes (1998) and Moffat et al. (2001) devote whole books to this topic. In a single chapter, I cannot match them for detail. Instead, I highlight and classify the broad connections between sustainable development as a policy issue and economic models as tools for policy analysis. In Section 1.2, I first interpret sustainable development. This is to acquaint the reader with my view on this issue, and to help the reader interpret what I write later. In Section 1.3, I turn to the use of economic models – distinguishing between cost–benefit analysis and costeffectiveness analysis for setting targets, and policy implementation. Sections 1.2 and 1.3 focus on the environment. Section 1.4 extends the discussion by including all three pillars of sustainability: environmental quality, economic well-being and social cohesion. Section 1.5 concludes. 1.2 SUSTAINABILITY Sustainable development is development that meets the needs of the present generation without compromising the ability of future generations to meet their needs (WCED, 1987). It is hard to be against sustainable development. It spares future generations without compromising the present. There is no trade-off. You can have your cake and eat it. Sustainable development is like motherhood and apple pie. It is therefore no surprise that Brundtland’s magnificent definition took the world by storm. Coined in 1987, every nation and every large company in the world has supported sustainable development, at...
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