Environmental sustainability through project appraisals

Patrice Harou, Herman Daly and Robert Goodland
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Patrice Harou: Economic Development Institute, The World Bank 1818 H Street N.W., Washington, DC, 20433, USA, Postal: Economic Development Institute, The World Bank 1818 H Street N.W., Washington, DC, 20433, USA
Robert Goodland: Economic Development Institute, The World Bank 1818 H Street N.W., Washington, DC, 20433, USA, Postal: Economic Development Institute, The World Bank 1818 H Street N.W., Washington, DC, 20433, USA

Sustainable Development, 1994, vol. 2, issue 3, 13-21

Abstract: Environmentally sustainable development's final aim is to bring a better quality of life for all time. To reach that objective, some economists see man-made capital as the main constraining factor for economic growth. Others argue that such a unidirectional search for growth will not bring economic development since natural capital is the main constraint to long- term growth. A reconciliatory position is proposed in this paper by which the search for improved general welfare over time can only be pursued with consideration of the earth's sustainable capability to produce the resources we need and to absorb the waste we generate. Once the sustainability constraints are set, a benefit|cost framework is useful to establish development project priorities.

To establish sustainability constraints requires changing mindsets, implementing new policies, both macro-economic and sectoral, and changing and creating new laws and institutions, among other challenging tasks. As all these reforms are complex and cannot always be implemented quickly and efficiently, project appraisal has an important role to play in attaining incrementally a stage of sustainable development. The basic principle underlying appraisal of projects which have an important environmental dimension remains the same, once the right policies have been established. Some important additional considerations are supplementary streams of environmental inputs and outputs for which there may be inappropriate or no market prices and which should be valued indirectly, duly calculating user costs in both cases, a discount rate encompassing both the opportunity cost of capital and society's rate of time preference, and a different analysis of uncertainty which embodies the irreversibilities and discontinuities inherent in ecosystems. Projects need to be monitored carefully and be the object of homeostatic feedbacks similar to those encountered in natural ecosystems, if they are to fit in a strategy of sustainable development. Following this approach of appraisal and monitoring projects once an appropriate policy framework has been set in place, development banks are attempting to translate the concept of sustainability into economic development incrementally, project by project.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:wly:sustdv:v:2:y:1994:i:3:p:13-21

DOI: 10.1002/sd.3460020303

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