Policymakers should take sustainability to heart in particular at this time when climate change and environmental pressure loom even larger almost every day every place around the world with more and more frequent extreme weather and environmental infliction on human economies. Since the 1992 Rio Earth Summit, United Nations have been calling for sustainable development. In 2012, the United Nations
Conference on Sustainable Development was held in Rio de Janeiro, Brazil—an exact twenty years after the 1992 Rio Earth Summit, and thus this conference was
nicknamed as “Rio+20”—convening state and government heads together to shape global environmental policy for sustainable development. Over the past decade, the goal of sustainable development has been impeded due to the complication from the anthropogenic greenhouse gases emissions induced climate change. Sessions and sessions of United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties have not come up with global consensus on nations’ obligation to tackle climate change. This embarrassment indicates inefficacy in environmental economic policies—failing to spur enough motivation for conserving environment when pursuing economic development.
Smulders (2008) advocates that green national accounting, as opposed to the current popularly adopted national income accounting, would offer better assessment for economic welfare and sustainability of welfare by factoring in the environmental costs. Over the past two decades, tremendous research efforts have been committed to this issue, among which System of Environmental-Economic Accounting (SEEA; see Figure 1 for its role in assessing sustainable development policy) and National
Accounting Matrix with Environmental Accounts (NAMEA; UN, 2005) enlisted international intellectuals to set up an environment integrated accounting system (see Figures 2 and 3) that are aimed at offering environmental indicators to inform
policymakers in evaluating policies towards sustainable development. Such integrated environmental economic accounting as SEEA and NAMEA has gained ground and popularity in most developed countries. SEEA and NAMEA accounting framework incorporates the environmental accounts by flanking the economic accounts in an integrated manner. SEEA and NAME record environmental impact and pressure (including air, water pollution, solid waste, natural resource use, environmental damage) caused by economic activities.
Figure 1. Role of SEEA in assessing sustainable development policy Source: UNSD (2012a).
Figure 2. Accounting scope of SEEA Source: UNSD (2012b, Figure 2.2.1)
Figure 3. Structure of SEEA
Source: UNSD (2012b, Table 2.3.4).
In addition to improved data intelligence, many methods are proposed for
evaluating sustainability-oriented policies. Environmental full cost accounting (EFCA) is suggested to be the basis for assessing economic, social, and environmental costs and benefits. This is referred to as Triple Bottom Line (TBL)—in which profit, people, and planet are considered in the policy evaluation with respect to economic, social, and ecological dimensions of a society. Various alternative approaches are also proposed for promotion of sustainable development. United Naitons Environment Programme (UNEP) proposed the ecoBUDGET (UNEP, 2012), an environmental management framework tool for local governments, in which ecological footprint is included as an indicator for sustainability. In private sectors, the concept of corporate social responsibility (CSR) (Wood, 1991) is also highly promoted and recent
development in the quantification of CSR includes the Triple Bottom Line (TBL) reporting.
Most of the sustainability-oriented policies are based on management tactics,
such as Green Accounting and Triple Bottom Line. This is rooted in the
production-based accounting of environmental impact, with which levels of pollution, for example, is recorded on site of production. The IPCC suggested guideline (IPCC, 2006) for greenhouse gases inventory accounting takes this production perspective.
Earlier international climate talks based the country-specific abatement obligations on a production accounting principle. For example, Kyoto Protocol and subsequent climate mitigation accords addressed national emissions abatement targets that only take into account emissions produced within the geographical territory of the nation.
However, with the globally dispersed production network, it is difficult for production-based accounting of environmental impact to be accepted by nations involved in exportation. Offshoring pollution by moving factories to countries with less stringent environmental regulation is readily observed over the past decade. Such carbon leakage offsets mitigation efforts of committed countries and stalls global climate talks for joint abatement of greenhouse gases emissions. The 2007-8 food price spike induced land grabbing (Borras, Hall, Scoones, White, and Wolford, 2011) and associated water grabbing (Mehta, Veldwisch and Franco, 2012; Franco and Kay, 2012) epitomized offshoring production chasing after natural resources.
Munksgaard and Pedersen (2001) proposed a consumption-based accounting principle to ascribe national responsibility for emissions. This consumption-based accounting principle attracted policymakers’ attention, especially those of
export-oriented developing countries’, as global trade becomes increasingly intensified due to the facilitation of technological progress in cross-continent
transportation. The ecological footprint (EF) indicator for measuring sustainability is also based on consumption perspective and it has recently become widely accepted in various developed and developing countries under the promotion of the Global Footprint Network (GFN, 2012a). The concept of Ecological footprint (EF) is coined by Rees (1992), Wackernagel and Rees (1998) and later further formulated by the researchers and organizations such as the Global Footprint Network (GFN, 2012b), and World Wildlife Foundation (WWF, 2008).
Ecological Footprint (EF) measures—in terms of global hectare (gha) which normalizes an one-hectare land based on the global average
productivity—environmental impact and pressure (e.g., pollution, and resource use) caused by human society on the capacity of the planet for sustaining the demand of global (or national) population (see Figure 4). WWF (2008) estimated that 13 billion global hectares (labeled as ecological footprint) is needed to sustain the demand of current global population. Wackernagel et al. (2002) and subsequent calculations (WWF, 2010) indicated that the global ecological footprint has been exceeding the planet’s bio-capacity every year since mid-1980’s and the gap keeps creeping up.
Figure 4. Scope of the ecological footprint indicator Source: GFN (2012).
With its current development, EF serves at best as a tool for environmental
education to promote sustainable consumption—or, as van den Bergh and Grazi (2010) criticizes, to turn unbelievers into believers in the seriousness of environmental
problems. Franz and Papyrakis (2011) argues that ecological footprint may end up dissuading behavior of sustainable consumption as the consumption of current population would in any case exceed the planet’s bio-capacity, even with the most prudent environmental friendliness in consumption. van den Bergh and Grazi (2010) raised six concerns about the Ecological Footprint indicator in its calculation method, applications and interpretations, and critiqued the policy irrelevance of EF in
suggesting the need of limiting consumption. Fiala (2008) criticizes that ecological footprint indicator did not factor in intensive production, and thus lead to erroneous comparisons to bio-capacity. Based on a developed welfare framework to analyze the spatial dimensions of sustainability which integrates relevant aspects of trade,
sustainability, global/local environmental externalities, and spatial economic structures with varying degree of industry and urban agglomeration, Grazi, van den Bergh, and Rietveld (2007) argues that ecological footprint indicator does not serve well as a good guide for regional sustainable development.
Neither allocating 100% of the responsibility of environmental impact to producers nor 100% to consumers is far from viable from the perspective of
policymaking conducive to alleviation of environmental pressure. Munasinghe (2010)
proposes to apply the sustainomics framework (Munasinghe, 2009) by promoting joint effort by both producers and consumer to save the planet, with producers
re-examining, with the life-cycle perspective, the entire value chain from raw material extraction to consumer end use and disposal, and with consumers making informed decisions on sustainable choices of consumption. Munasinghe et al. (2009) offers illustration on how to encourage the 1.2 billion richer humans of the world that accounts for 75% of total emissions towards sustainable consumption.
United Nations Environment Programme (UNEP) took the lead in incubating the concept of sustainable consumption and production (SCP, see Figure 5 for its
conceptual framework) since the 1992 UN Conference on Environment and
Development, held in Rio de Janeiro—from which the Agenda 21 report is developed, as a voluntary action plan towards sustainable development. Subsequent 2002 World Summit on Sustainable Development (WSSD) held in Johannesburg, South Africa, further called for countries to devote to “changing unsustainable patterns of
consumption and production” for global sustainable development. A follow-on 10-Year Framework of Programmes (10 YFP) was developed to accelerate the shift towards sustainable consumption and production, and to promote social and economic development within the carrying capacity of ecosystems by decoupling economic growth from environmental degradation (United Nations, 2002). SCP aims to help countries achieve overall development plans, reduce future economic, environmental and social costs, strengthen economic competitiveness and reduce poverty.
Figure 5. Sustainable Consumption and Production Cycle Source: UNEP (2010).
Tukker, Cohen, Hubacek, and Mont (2010) call for more research into questions pertaining to the role of policy measures to stimulate sustainable lifestyles, to
facilitate sustainable consumer behaviours, and to forge sustainable systems of
production and consumption. In the literature up-to-date, most research focused on the resulting environmental impact of production and consumption respectively.
Assessment for mitigation policies, such as carbon tax and cap-and-trade, are conducted based on the aforementioned calculation of environmental impact on site (of producers or consumers). Turner, Munday, McGregor, and Swales (2012) points out the need for identification of precisely whose responsibility for the gap between the local carbon emissions and the consumption-generated carbon footprint. Without proper attribution of the responsibility for pollution, an exporting country may well be absolved of its responsibility for pollution from exports production by switching from production accounting principle to consumption accounting principle in its
environmental accounting. In addition, it is also debatable whether 100% attribution of responsibility for the exports-produced pollution to consumers is legitimate.
Lenzen Murray, Sack, and Wiedmann (2007) proposed to split the pollution responsibility between the producers and consumer following the available economic indicator such as value-added. Attribution of the responsibility for environmental impact and pressure would be helpful for producers and consumers to make informed decision on the input selection and consumption choice. However, this responsibility map will be effective only in a society where both producers and consumers are environmentally-minded. For most countries, the status quo of economic thinking is still governed by market mechanism—that is, price (or cost) signals. With this observation and perception of the world, we adopted the Lenzen et al. (2007) approach to sharing the responsibilities for pollution (or environmental pressure) producer and consumer. This will serve as a basis for further environmental policy appraisal, particularly for tax incidence analysis and effectiveness assessment of responsibility-based environmental mitigation policies.
The report is organized as follows: Section 2 provides a description of the Lenzen et al. (2007); Section 3 presents and discusses the computation results;
Section 4 concludes the report.