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sustainability
Article
Natural Resource Economics, Planetary Boundaries
and Strong Sustainability
Edward B. Barbier * ID and Joanne C. Burgess
Department of Economics, Colorado State University, Fort Collins, CO 80523-1771, USA;
jo.barbier@colostate.edu
*Correspondence: Edward.barbier@colostate.edu; Tel.: +1-970-491-6324
Received: 29 September 2017; Accepted: 15 October 2017; Published: 17 October 2017
Abstract:
Earth systems science maintains that there are nine “planetary boundaries” that
demarcate a sustainable, safe operating space for humankind for essential global sinks and
resources. Respecting these planetary boundaries represents the “strong sustainability” perspective
in economics, which argues that some natural capital may not be substituted and are inviolate.
In addition, the safe operating space defined by these boundaries can be considered a depletable
stock. We show that standard tools of natural resource economics for an exhaustible resource can
thus be applied, which has implications for optimal use, price paths, technological innovation, and
stock externalities. These consequences in turn affect the choice of policies that may be adopted to
manage and allocate the safe operating space available for humankind.
Keywords:
natural capital; natural resource economics; ecological economics; planetary boundaries;
strong sustainability; weak sustainability; sustainable development
1. Introduction
There is a growing scientific literature emphasizing that human populations and economic activity
are rapidly approaching and even exceeding the limits of key sub-systems and processes of the global
environment, which could lead to abrupt phase changes, or “tipping points” in the Earth system [
1
–
6
].
This literature has identified “nine such processes for which we believe it is necessary to define
planetary boundaries: climate change; rate of biodiversity loss (terrestrial and marine); interference
with the nitrogen and phosphorus cycles; stratospheric ozone depletion; ocean acidification; global
freshwater use; change in land use; chemical pollution; and atmospheric aerosol loading.” [
2
] (p. 472).
For example, terrestrial net primary (plant) production could provide a measurable boundary
for human consumption of Earth’s biological resources [
3
]. Freshwater supplies and ecosystems need
to be protected by a limit on global and basin-wide consumptive uses of water [
4
,
5
]. A planetary
boundary for biodiversity loss could be based on extinction rates but also measures of functional and
genetic diversity as well as biome conditions [
4
,
6
]. Limits on land-system change could be set in terms
of forested land as a percentage of original forest cover or potential forest [
4
]. Finally, the global carbon
budget is the cumulative amount of anthropogenic CO
2
emissions that would prevent global warming
from exceeding 2 ◦C [7].
The purpose of establishing these planetary boundaries is to demarcate a “safe operating space
for humanity” [
2
] (p. 472). The safe operating space places an absolute limit on how much economic
activity can safely exploit critical global biophysical subsystems or processes. To date, the focus has
been on characterizing and quantifying the various planetary boundaries rather than suggesting “how
to maneuver within the safe operating space in the quest for global sustainability” [
4
] (p. 744). Yet,
if planetary boundaries limit some uses of the global environment, it is essential to develop models
that inform stewardship of this “safe operating space” [
8
]. Here, we outline the key features of such a
modeling approach, and explore its implications for policy.
Sustainability 2017,9, 1858; doi:10.3390/su9101858 www.mdpi.com/journal/sustainability
Sustainability 2017,9, 1858 2 of 12
First, we suggest that respecting planetary boundaries conforms to the “strong sustainability”
perspective in economics, which argues that some natural capital may not be substituted and are
inviolate [
9
]. In addition, the safe operating space defined by these boundaries can be considered a
depletable stock. Our analysis therefore has implications for optimal use, price paths, innovation and
the valuation of “stock externalities”. These implications in turn affect the choice of policies that may
be adopted to manage and allocate the safe operating space available for humankind.
2. Materials and Methods
2.1. Key Definitions and Concepts
We first establish the link between, on the one hand, the concepts of planetary boundaries and
safe operating space in the Earth system science literature, and on the other, the concepts of weak and
strong sustainability in economics.
The key rationale for establishing planetary boundaries on anthropogenic processes is to avoid
“tipping points” or “thresholds” that could lead to irrevocable changes in this system, with potentially
catastrophic impacts for humanity. As noted in the Introduction, scientists have identified nine
processes resulting from human activity that should be subject to planetary boundaries [1–6]:
•Climate change
•Loss of biosphere integrity (e.g., marine and terrestrial biodiversity loss)
•Land-system change
•Freshwater use
•Biochemical flows (e.g., effluents that interfere with nitrogen and phosphorous cycles)
•Ocean acidification
•Atmospheric aerosol loading
•Stratospheric ozone depletion
•
Novel entities (e.g., new substances and modified organisms that have undesirable
environmental impacts).
If unchecked, these processes could place human population growth and economic activity on
an unsustainable trajectory that crosses critical thresholds and de-stabilizes the global environment.
Establishing planetary boundaries therefore “aims to help guide human societies away from such a
trajectory by defining a ‘safe operating space’ in which we can continue to develop and thrive” [
4
]
(p. 737). In addition, the boundary defining the safe operating space should include a “buffer” that
both accounts for “uncertainty in the precise position of the threshold” and “also allows society time
to react to early warning signs that it may be approaching a threshold and consequent abrupt or
risky change” [
4
] (pp. 737–738). Figure 1illustrates how setting a planetary boundary to designate
the safe operating space is impacted by the uncertainty and lack of information over possible future
threshold effects.
The concept of a planetary boundary that imposes an absolute limit on human activities that
threaten critical Earth system resources and sinks is directly relevant to the capital approach to
sustainability [
9
–
11
]. This approach suggests that economic wealth comprises three distinct assets:
manufactured, or reproducible capital (e.g., roads, buildings, machinery, factories, etc.); human capital,
which are the skills, education and health embodied in the workforce; and natural capital, including
land, forests, fossil fuels, minerals, fisheries and all other natural resources, regardless of whether
or not they are exchanged on markets or owned. In addition, natural capital also consists of those
ecosystems that through their natural functioning and habitats provide important goods and services
to the economy. For example, [
12
] (p. 395) state, “the world’s ecosystems are capital assets. If properly
managed, they yield a flow of vital services, including the production of goods (such as seafood and
timber), life support processes (such as pollination and water purification), and life-fulfilling conditions
(such as beauty and serenity).”
Sustainability 2017,9, 1858 3 of 12
Sustainability 2017, 9, 1858 3 of 12
(a) (b)
Figure 1. Setting the planetary boundary to define the safe operating space: (a) When past
environmental responses (solid line curve) to human impacts are likely to provide a good indication
of future responses (dotted line curve), the planetary boundary demarcating the safe operating space
(vertical solid line) may be established relatively close to the predicted threshold (vertical dotted line);
(b) When past environmental responses (solid line curve) are unlikely to provide a good indication
of future responses (dotted line curves), and there is uncertainty over irreversible threshold effects,
the desired planetary boundary (vertical solid line) may be set so that the safe operating space is
relatively far from the predicted threshold (vertical dotted line).
The capital approach to sustainability asserts that the value of the aggregate stock of all capital—
reproducible, human and natural—must be maintained or enhanced over time to ensure that overall
welfare does not decline. However, within this approach, there are contrasting weak versus strong
sustainability views, which differ in the treatment of natural capital (see Table 1). As pointed out by
[9] (p. 42), “the main disagreement is whether natural capital has a unique or essential role in
sustaining human welfare, and thus whether special ‘compensation rules’ are required to ensure that
future generations are not made worse off by natural capital depletion today”. Weak sustainability
assumes that there is no difference between natural and other forms of capital (e.g., human or
reproducible), and thus as long as depleted natural capital is replaced with more value human or
reproducible capital, then the total value of wealth available to current and future generations will
increase. In contrast, strong sustainability argues that some natural capital is essential (e.g., unique
environments, ecosystems, biodiversity and life-support functions), subject to irreversible loss, and
has uncertain value. Consequently, the sustainability goal of maintaining and enhancing the value of
the aggregate capital stock requires preserving essential natural capital.
Thus, scientists [1–6] who advocate the need for planetary boundaries to limit human impacts
on critical global sinks and resources are aligning with the strong sustainability perspective, which
argues that some natural capital may not be substituted and are inviolate. Based on this scientific
view, some economists have begun examining how such planetary boundaries should be established,
given the uncertainty over thresholds, abrupt and irreversible change, and the magnitude of welfare
impacts [8,13].
Equally important, however, is determining how to manage efficiently and sustainable the safe
operating space available for exploitation by humankind [4,8]. For this purpose, the weak sustainability
perspective is relevant. Here, we show how such a perspective can be adopted to develop a model that
informs “wise stewardship” of any safe operating space defined by planetary boundaries.
Specifically, we consider the safe operating space defined by any planetary boundary to be a
depletable stock that has value either as a source of natural resource inputs into an economy or a sink
for emitted waste. The safe operating space can therefore be treated as an economic asset that should
earn a rate return comparable to holding other assets in an economy. Following the principles of
weak sustainability (Table 1), sustainable management of this asset requires efficient use over time.
Figure 1.
Setting the planetary boundary to define the safe operating space: (
a
) When past
environmental responses (solid line curve) to human impacts are likely to provide a good indication
of future responses (dotted line curve), the planetary boundary demarcating the safe operating space
(vertical solid line) may be established relatively close to the predicted threshold (vertical dotted line);
(
b
) When past environmental responses (solid line curve) are unlikely to provide a good indication of
future responses (dotted line curves), and there is uncertainty over irreversible threshold effects, the
desired planetary boundary (vertical solid line) may be set so that the safe operating space is relatively
far from the predicted threshold (vertical dotted line).
The capital approach to sustainability asserts that the value of the aggregate stock of all
capital—reproducible, human and natural—must be maintained or enhanced over time to ensure that
overall welfare does not decline. However, within this approach, there are contrasting weak versus
strong sustainability views, which differ in the treatment of natural capital (see Table 1). As pointed
out by [
9
] (p. 42), “the main disagreement is whether natural capital has a unique or essential role in
sustaining human welfare, and thus whether special ‘compensation rules’ are required to ensure that
future generations are not made worse off by natural capital depletion today”. Weak sustainability
assumes that there is no difference between natural and other forms of capital (e.g., human or
reproducible), and thus as long as depleted natural capital is replaced with more value human
or reproducible capital, then the total value of wealth available to current and future generations will
increase. In contrast, strong sustainability argues that some natural capital is essential (e.g., unique
environments, ecosystems, biodiversity and life-support functions), subject to irreversible loss, and
has uncertain value. Consequently, the sustainability goal of maintaining and enhancing the value of
the aggregate capital stock requires preserving essential natural capital.
Thus, scientists [
1
–
6
] who advocate the need for planetary boundaries to limit human impacts on
critical global sinks and resources are aligning with the strong sustainability perspective, which argues
that some natural capital may not be substituted and are inviolate. Based on this scientific view,
some economists have begun examining how such planetary boundaries should be established,
given the uncertainty over thresholds, abrupt and irreversible change, and the magnitude of welfare
impacts [8,13].
Equally important, however, is determining how to manage efficiently and sustainable the safe
operating space available for exploitation by humankind [
4
,
8
]. For this purpose, the weak sustainability
perspective is relevant. Here, we show how such a perspective can be adopted to develop a model that
informs “wise stewardship” of any safe operating space defined by planetary boundaries.
Specifically, we consider the safe operating space defined by any planetary boundary to be a
depletable stock that has value either as a source of natural resource inputs into an economy or a sink
for emitted waste. The safe operating space can therefore be treated as an economic asset that should
Sustainability 2017,9, 1858 4 of 12
earn a rate return comparable to holding other assets in an economy. Following the principles of weak
sustainability (Table 1), sustainable management of this asset requires efficient use over time. This has
consequences that, in turn, affect the choice of policies that may be adopted to manage and allocate the
safe operating space available for humankind.
Table 1. Weak versus Strong Sustainability.
Weak Sustainability Strong Sustainability
•
Natural, human and reproducible capital can be
substituted for each other.
•
Natural, human and reproducible capital are an
aggregate, homogeneous stock.
•Cannot always substitute for natural capital
with reproducible or human capital.
•Cannot view natural, reproducible and human
capital as a homogeneous stock.
•Natural capital should be used efficiently
over time.
•As long as depleted natural capital is replaced
with even more valuable reproducible and
human capital, then the value of the aggregate
stock will increase.
•Certain environmental sinks, processes and
services are unique and essential, subject to
irreversible loss, and there is uncertainty over
their future value and importance.
•Maintaining and enhancing the value of this
aggregate capital stock is sufficient
for sustainability.
•Maintaining and enhancing the value of the
value of the aggregate capital stock is necessary
but not sufficient.
•Sustainability also requires preserving unique
and essential natural capital.
2.2. The Safe Operating Space as an Economic Asset
The starting point for our modeling approach is to treat the safe operating space defined by
planetary boundaries as an economic asset.
Let the initial safe operating space associated with a given planetary boundary be denoted as
S
0
. Depending on the planetary boundary, this measurable limit could be terrestrial net primary
production, available freshwater for consumption, species richness, assimilative capacity for various
pollutants, forest land area, or the global carbon budget [
1
–
6
]. No matter how it is delineated and
measured, S
0
is a finite, depletable stock that can be safely used, exploited or converted through
economic activity. Consequently, the initial safe operating space can be considered an economic asset.
At time t, some of the initial S
0
will already have been “used up” by the economy. Define
C(t)=Rt
0c(s)ds
as the cumulative amount of the safe operating space that has already been depleted
by economic activity. The remaining stock of this asset at time tis therefore S(t), and it follows that
Zt
0c(s)ds =S0−S(t),.
S=−c(t), (1)
where a dot over a variable indicates its derivative with respect to t.
As the safe operating space is an economic asset, its cumulative exploitation must earn a rate of
return that is comparable to all other forms of capital available to the economy. Let the average rate
of return across all the latter assets be denoted as some interest rate r. Also, assume that cumulative
exploitation of the safe operating space up to time tis for various market-oriented activities, which have
market prices that can be aggregated into some average price index
p(t)
. For analytical convenience,
we assume that the market price is net of any cost of exploitation. Thus, cumulative exploitation is
sold at this market price and the proceeds p(t)(S0−S(t)) are invested at interest rate r.
Depending on the type of planetary boundary, the available safe operating space at time tmight
increase, due to natural (i.e., biological) growth or recovery of assimilative capacity. This is especially
true for any
S(t)
that is defined in terms of biological or land resources, such as forest land or species
stocks. But it might also hold true for sinks of carbon, ocean recovery from acidification, nitrogen and
Sustainability 2017,9, 1858 5 of 12
phosphorus cycles, replenishment of freshwater ecosystems, and so on. Representing such natural
growth or recovery as
F(S(t))
,
F0>
0, we assume that any such additional augmentation of the
available safe operating space at time twill be immediately exploited at the rate
x(t)=F(S(t))
, and
also sold at the same market price p(t)for cumulative exploitation.
There are two additional values of the safe operating space that should be considered.
First, the remaining
natural asset
S(t)
may realize capital gains or losses if market prices change.
These gains or losses at any time tare
.
pS(t)
. Second, the available safe operating space, especially if
it includes maintenance of important habitats, ecosystems or biological species, may generate wider
social benefits, or “stock externalities”, such as biodiversity values, watershed protection, carbon
sequestration and ecotourism. We assume that, for any remaining
S(t)
, the aggregate value of stock
externalities is
V(t)
, which can be expressed in turn as a “markup” vof the market price of exploiting
the safe operating space. The rationale for such a markup is straightforward: If the social value of any
stock externalities is less than or equal to the market price of exploiting the safe operating space, then
S(t) would not be conserved. Thus, the social benefit associated with any such stock externalities is
V(t)S(t)=vp(t)S(t).
Consequently, optimal management of the safe operating space at time trequires choosing the
amount of remaining S(t)that maximizes all the above values associated with this asset, i.e.,
Max
S(t)W(t)=rp(t)(S0−S(t)) +p(t)F(S(t)) +.
pS(t)+v p(t)S(t). (2)
Suppressing the time argument for analytical convenience, the first-order condition yields
.
p
p+F0+v=r, (3)
which is the optimal portfolio balance equation for
S(t)
. The left-hand side represents the marginal
returns for holding on to the remaining safe operating space rather than exploiting it. The right-hand
side is the opportunity cost, in terms of foregone interest income from other economic assets,
from retaining
S(t)
. Note that
r−.
p/p≥F0+v→S(t)=0
, which implies that the remaining safe
operating space is at risk if
r−.
p/p
is large, or
F0
and vare small. Also, if natural growth or recovery
and stock externalities are negligible, then (3) resembles the more familiar Hotelling efficiency condition
associated with a pure exhaustible resource, i.e., .
p/p=r.
For analytical convenience, we assume that the marginal rate of biological growth of recovery
is constant, so that we can denote
F0(S(t)) =f
. This allows Equation (3) to be rewritten as
.
p−(r−v−f)p=0, which yields the following solution for the price path
p(t)=p0eρt,ρ=r−v−f. (4)
The market price associated with exploiting the safe operating space should evolve at a rate equal
to the net rate of return
ρ
earned from investing the proceeds from such exploitation. This price path is
increasing if
r>v+f
, suggesting that there are positive net returns from exploiting and investing the
proceeds. Consequently, it pays to exploit the safe operating space today, there will be less available
for exploitation in future periods, and so pmust rise over time. Alternatively, as
ρ→0
, then there are
no net returns to the invested proceeds earned from exploiting
S(t)
, and the safe operating space will
be conserved indefinitely.
3. Results
3.1. Optimal Exploitation of the Safe Operating Space
The above efficiency conditions Equations (3) and (4) for managing the safe operating space as an
economic asset also allow determination of the optimal exploitation of the remaining stock S(t).
Sustainability 2017,9, 1858 6 of 12
We assume that such exploitation occurs over a finite time period
[0, T]
, and that any time tthere
is an inverse demand function for the marketed products
p=p(c(t))
. The net social benefit from
exploitation is therefore
B(c(t)) =
c(t)
R
0
p(s)ds
. If follows that we can specify the discounted social
welfare over the entire planning horizon as
U=ZT
0B(c(t))e−ρtdt,B(c(t)) =
c(t)
Z
0
p(s)ds,∂B
∂c=p(c). (5)
Note that in Equation (5) the discount rate for social welfare is the net rate of return earned from
investing the proceeds of exploitation
ρ
derived previously. This allows optimal exploitation of the
safe operating space
c(t)
to satisfy the optimal portfolio balance condition Equation (3) associated with
managing
S(t)
as an economic asset. Moreover, it also means that the net price of exploitation must
equal the marginal value associated with conserving the safe operating space.
To see this, let
λ(t)
be the shadow value in terms of social welfare of having an additional
unit of
S(t)
, which by definition is
∂U/∂S
. Two necessary conditions for maximizing social welfare
Equation (5) with respect to (1) are therefore
∂B/∂c=λ
and
.
λ=ρλ
. However, from Equation (5),
the marginal benefit of exploiting the safe operating space must equal the price of any marketed
products, i.e.,
∂B/∂c=p
. It follows that the optimal level of exploitation occurring in every time
period must ensure that its price equals the marginal value of the remaining safe operating space,
i.e.,
p(t)=λ(t)
. Optimal exploitation therefore also requires
.
p=.
λ
, and thus the optimal price path
follows condition (4). Note that the marginal value of the remaining safe operating space
λ(t)
may also
be thought of the user cost, or scarcity value, associated with depleting
S(t)
. For example, [
14
] develop
a user cost model of one particular type of safe operating space—the 2
◦
C global carbon budget—to
show how this scarcity value may be affected, and the remaining carbon budget preserved, under
different policy scenarios. See also [15].
For any positive net rate of return
ρ>
0, if there is no additional terminal value associated with
maintaining the safe operating space at the end period Tor beyond, then optimal exploitation over
[0, T]
requires that the safe operating space
S0
is fully used up. That is, by final period T,
S(T)=
0
and thus
c(T)=
0. Consequently, the optimal solution must have the property that exploitation of the
safe operating space goes to zero when the net price determined by the inverse demand function
p(c)
reaches some maximum or “choke” price. Denoting the latter by k, the implication is that price reaches
this level by time T, i.e.,
p(T)=k
. It follows that the time period Tover which full exploitation of the
safe operating space takes place should have the following properties
Lim
t→Tp(t)=k,Lim
t→Tc(t)=0, T=T(ρ,S0),∂T
∂ρ<0, ∂T
∂S0
>0, Lim
ρ→0T=∞. (6)
To see this, assume an iso-elastic inverse demand function
p(c)=ke−αc
. Using (4) and the
conditions
p(T)=k
and
RT
0c(t)dt =S0
, optimal exploitation at any time tis
c(t)=ρ
α(T−t)
and the
optimal time for exploiting the safe operating space is
T=2αS0
ρ1
2
. This implies that
Lim
t→Tc(t)=
0,
and Tvaries inversely with
ρ
but increases with a larger safe operating space
S0
. Also, it follows that
Lim
ρ→0T=∞.
Condition (6) implies that, with a rise in the net rate of return
ρ
, the time horizon for exploiting
the safe operating space is shorter, and there is more rapid depletion of
S0
; however, for a larger safe
operating space, the time Tfor depleting
S0
will be extended. Finally, as noted previously, as
ρ→0
,
the safe operating space will be conserved indefinitely.
Sustainability 2017,9, 1858 7 of 12
3.2. Technological Innovation
Both exploitation and the life of the safe operating space can be affected by technological
innovation that reduce the economy’s dependence on and demand for using the various natural
resources and pollution sinks that may comprise a safe operating space. For example, the safe
operating space for climate change might be the global carbon budget, which is the cumulative
amount of anthropogenic CO
2
emissions that would limit global warming to less than 2
◦
C [
7
,
14
,
15
].
Innovations that reduce greenhouse gas (GHG) emissions, such as carbon capture and sequestration,
hybrid vehicles, GHG abatement technologies, and switching to renewables, would lessen depletion
of the remaining 2 ◦C global carbon budget. Similarly, a safe operating space for land-system change
could be set in terms of forested land as a percentage of original forest cover or potential forest [
4
].
Feeding a growing world population is expected to require an addition 3 to 5 million hectares (ha) of
new cropland each year from now until 2030, which could contribute to additional clearing of 150 to
300 million ha in total area of natural forests [
16
]. Consequently, technologies that improve agricultural
yields, foster sustainable management and generate zero net land degradation might reduce the
pressure for cropland expansion and thus the demand for converting more natural forests [17].
Using diagrams to represent the modeling relationships developed previously, Figure 2indicates
the likely effects of a technological innovation that reduces the demand for exploiting a given safe
operating space
S0
. The diagram assumes a positive net rate of return
ρ>
0, and consequently,
S0
is
completely depleted in finite time T. The solid lines show the optimal exploitation and price paths
before any innovation takes place. The upper right quadrant shows that the price path corresponding
to (4), which rises exponentially at the rate
ρ
to end at the choke price kat time T. The upper left
quadrant indicates the inverse demand curve for exploitation
p(c)
, which indicates that exploitation
ceases at the choke price. As shown in the bottom left quadrant, given the demand curve and the price
path, optimal exploitation
c(t)
must begin at an initial level
c0
corresponding to
p0
, decline over time,
and eventually equal zero at time Twhen the choke price kis reached.
However, innovation can reduce the economy’s dependence on and demand for exploiting the
given safe operating space
S0
. In Figure 2, this is represented in the upper left quadrant by a shifting
inward of the demand curve to
p(c)0
, although the choke price remains at k. Given this change,
the price path must move outward so that initial price
p00
and exploitation
c00
are lower, and thus the
price must take longer to reach k. It follows that the lifetime of the safe operating space is extended,
from Tto T’. The new exploitation path
c(t)0
still depletes
S0
eventually, but it takes more time for this
to occur. For example, in the case of an iso-elastic inverse demand function
p(c)=ke−αc
, changes in
the parameter
α
reflect the impact of innovation. As shown previously, for this demand curve that
the optimal time for exploiting the safe operating space is
T=2αS0
ρ1
2
. It follows that
∂p
∂α<
0 and
∂T
∂α>0, which are the effects depicted in Figure 2.
Sustainability 2017,9, 1858 8 of 12
Sustainability 2017, 9, 1858 8 of 12
Figure 2. The effect of innovations that reduce the demand for exploiting the safe operating space.
3.3. Stock Externalities
As noted previously, if the remaining safe operating space
()
St
includes maintenance of
important habitats, ecosystems or biological species, it may generate wider social benefits, or “stock
externalities”, such as biodiversity values, watershed protection, carbon sequestration and
ecotourism. From condition (4), if these values are extremely large, then the markup v will be high,
the net rate of return ρ earned from investing the proceeds from exploiting the safe operating space
will be lower, and the price path
()
pt
will evolve more slowly. It will take longer to exploit fully the
remaining safe operating space. If stock externalities are extremely high, then the net rate of return ρ
will approach zero, and
()
St
will be conserved indefinitely.
Figure 3 illustrates these effects. The solid lines show the optimal exploitation and price paths
before any increase in values. More valuable stock externalities mean that v rises and ρ falls. The price
path shifts so that initial price
0
'p
is higher, price rises much more slowly along the new price path
()
'pt
, and the price takes longer to reach k. It follows that the lifetime of the safe operating space is
extended, from T to T’. The new exploitation path
()
'ct
still depletes
0
S
eventually, but it takes
more time for this to occur. In the extreme case where stock externalities are so valuable, then the
condition
0
LimT
ρ→
=∞
in (4) is reached, and the initial price immediately jumps to the choke price, i.e.,
0
pk=
and
0
0c=
. It is no longer optimal to exploit the safe operating space at all.
Figure 2. The effect of innovations that reduce the demand for exploiting the safe operating space.
3.3. Stock Externalities
As noted previously, if the remaining safe operating space
S(t)
includes maintenance of
important habitats, ecosystems or biological species, it may generate wider social benefits, or “stock
externalities”, such as biodiversity values, watershed protection, carbon sequestration and ecotourism.
From condition (4), if these values are extremely large, then the markup vwill be high, the net rate of
return
ρ
earned from investing the proceeds from exploiting the safe operating space will be lower,
and the price path p(t)will evolve more slowly. It will take longer to exploit fully the remaining safe
operating space. If stock externalities are extremely high, then the net rate of return
ρ
will approach
zero, and S(t)will be conserved indefinitely.
Figure 3illustrates these effects. The solid lines show the optimal exploitation and price paths
before any increase in values. More valuable stock externalities mean that vrises and
ρ
falls. The price
path shifts so that initial price
p00
is higher, price rises much more slowly along the new price path
p(t)0
, and the price takes longer to reach k. It follows that the lifetime of the safe operating space is
extended, from Tto T’. The new exploitation path
c(t)0
still depletes
S0
eventually, but it takes more
time for this to occur. In the extreme case where stock externalities are so valuable, then the condition
Lim
ρ→0T=∞
in (4) is reached, and the initial price immediately jumps to the choke price, i.e.,
p0=k
and
c0=0. It is no longer optimal to exploit the safe operating space at all.
Sustainability 2017,9, 1858 9 of 12
Sustainability 2017, 9, 1858 9 of 12
Figure 3. The effect of increases in the value of stock externalities associated with the safe operating space.
The outcome depicted in Figure 3 indicates why it is important to quantify and value any stock
externality values associated with the remaining safe operating space available for human
exploitation. If the safe operating space includes important habitats, ecosystems or biological species
that generate wider social benefits, such as biodiversity values, watershed protection, carbon
sequestration and ecotourism, then the inclusion of these values will delay full exploitation of the
remaining
()
St
, and perhaps extend its lifetime for significantly longer periods than if these
additional stock externality values are ignored. Similar results are obtained by [18] through
employing various competing land use models applied to ecosystems.
4. Discussion
A growing literature has focused on establishing a planetary boundary framework necessary to
define a “safe operating space” for ensuring the sustainability of human economic activities and
livelihoods [1–6]. Applying such a framework must take into account
the uncertainty over thresholds,
abrupt and irreversible change, and the magnitude of welfare impacts [4,8,13]. As we have
emphasized in this paper, recognizing
the need for planetary boundaries to limit human impacts on
critical global sinks and resources is synonymous with the “strong sustainability” perspective in
economics (Table 1). This view maintains that some forms of natural capital are essential, and thus
cannot be substituted by reproducible and human capital; consequently, the sustainability goal of
maintaining and enhancing the value of the aggregate capital stock requires preserving essential
natural capital. By suggesting limits on nine damaging processes resulting from global human
activity—climate change, loss of biosphere integrity, land-system change, freshwater use,
biochemical flows, ocean acidification, atmospheric aerosol loading, stratospheric ozone depletion,
Figure 3.
The effect of increases in the value of stock externalities associated with the safe operating space.
The outcome depicted in Figure 3indicates why it is important to quantify and value any stock
externality values associated with the remaining safe operating space available for human exploitation.
If the safe operating space includes important habitats, ecosystems or biological species that generate
wider social benefits, such as biodiversity values, watershed protection, carbon sequestration and
ecotourism, then the inclusion of these values will delay full exploitation of the remaining
S(t)
, and
perhaps extend its lifetime for significantly longer periods than if these additional stock externality
values are ignored. Similar results are obtained by [
18
] through employing various competing land
use models applied to ecosystems.
4. Discussion
A growing literature has focused on establishing a planetary boundary framework necessary
to define a “safe operating space” for ensuring the sustainability of human economic activities and
livelihoods [
1
–
6
]. Applying such a framework must take into account the uncertainty over thresholds,
abrupt and irreversible change, and the magnitude of welfare impacts [
4
,
8
,
13
]. As we have emphasized
in this paper, recognizing the need for planetary boundaries to limit human impacts on critical global
sinks and resources is synonymous with the “strong sustainability” perspective in economics (Table 1).
This view maintains that some forms of natural capital are essential, and thus cannot be substituted by
reproducible and human capital; consequently, the sustainability goal of maintaining and enhancing the
value of the aggregate capital stock requires preserving essential natural capital. By suggesting limits
on nine damaging processes resulting from global human activity—climate change, loss of biosphere
integrity, land-system change, freshwater use, biochemical flows, ocean acidification, atmospheric
aerosol loading, stratospheric ozone depletion, and novel entities—the planetary boundary literature is
arguing that key global sinks and resources are essential, may not be substituted, and thus are inviolate.
Sustainability 2017,9, 1858 10 of 12
However, if planetary boundaries place limits on some uses of the global environment, this “safe
operating space” must still be managed efficiently and sustainably [
8
]. Here, we have shown that,
if the safe operating space defined by planetary boundaries is treated as a depletable stock, then the
principles of weak sustainability should be applied (Table 1). That is, the safe operating space is
a capital asset, and its sustainable management requires efficient use over time. Standard tools of
natural resource management of an exhaustible resource economics can then be applied, and various
conditions for optimal use, price paths, technological innovation and the presence of stock externalities
can be explored.
Because our analysis treats any given safe operating space as an exhaustible resource exploited in
finite time, optimal exploitation paths always end in eventual depletion of this asset.
However, we also
show that technological innovation and the presence of valuable stock externalities can extend
the lifetime of the safe operating space—possibly even indefinitely. Innovations that reduce the
economy’s dependence on and demand for using the various natural resources and pollution sinks
that may comprise a safe operating space prolong its exploitation further into the future, and thus
postpone eventual depletion. The remaining safe operating space may include habitats, ecosystems
or biological species that generate wider social benefits, or “stock externalities”, such as biodiversity
values, watershed protection, carbon sequestration and ecotourism. If the value of these additional
social benefits rises, then the net rate of return earned from investing the proceeds from exploiting
the safe operating space will be lower. Once again, less exploitation will occur, and depletion of the
remaining safe operating space will be delayed.
These results suggest that policies associated with “greening” economic activity are likely to
promote better stewardship of the safe operating space defined by planetary boundaries. For example,
it has been argued that “making economies more sustainable requires urgent progress in three key
policy areas: valuing the environment, accounting for the environment, and creating incentives for
environmental improvement” [9] (p. 1).
The first two policy initiatives are essential to ensuring that the wider social benefits of stock
externalities, especially those associated with valuable ecosystems, habitats and biodiversity, are
properly valued and accounted for in environmental decision making. Valuing ecosystem goods and
services has become a major focus for interdisciplinary collaboration between economists, ecologists
and natural scientists, which offers hope for valuing many complex but environmental benefits, such
as storm protection and flood mitigation by wetlands, soil and sedimentation control in watershed,
fish diversity in coral reefs, and biodiversity of tropical forests [
18
]. These ecological values need also
to be incorporated into our measures of economic wealth, so that we can more accurately account for
the depreciation in valuable natural systems, resources and sinks that comprise our endowment of
natural capital [9–11].
The third policy initiative is important for fostering innovations that reduce the economy’s
dependence on and demand for using various natural resources and pollution sinks [
9
,
10
]. Today,
the use of market-based instruments and other incentives to promote the “proper pricing” of pollution
and natural resource use is gaining prevalence. Equally important is the removal of harmful subsidies
that distort markets and foster excessive environmental degradation and resource use. Such price
incentives are important to promoting innovations that reduce greenhouse gas (GHG) emissions, such
as carbon capture and sequestration, hybrid vehicles, GHG abatement technologies, and switching to
renewables [
15
]. Proper pricing could support the adoption of technologies that improve agricultural
yields, foster sustainable management and generate zero net land degradation might reduce the
pressure for cropland expansion and thus the demand for converting more natural forests [17].
However, price incentives may be necessary but not sufficient. Private investors tend to
under-invest in the research and development (R&D) necessary to develop new “green” innovations,
because they are unable to capture the full benefits of these advances as they rapidly spread throughout
the economy and even to overseas competitors [
10
,
19
–
21
]. Overcoming this disincentive cannot be
achieved solely through the use of price incentives but requires the simultaneous implementation
Sustainability 2017,9, 1858 11 of 12
of “technology-push policies”, such as R&D subsidies, public investments, protecting intellectual
property, and other initiatives [
10
,
19
]. Such technology-push policies directly address the tendency
of firms and industries to under-invest in green R&D, and thus are important complements to price
incentives in reducing overall demand for resource use and pollution.
Finally, our analysis applies to the case where there is a well-defined safe operating space.
As some proponents of the planetary boundaries framework have pointed out [
2
,
4
], the cumulative
anthropogenic impacts on genetic diversity, nitrogen and phosphorous have led to such high risk
of transgressing critical thresholds that no further human impacts should be tolerated. Although
the individual planetary boundaries for genetic diversity, nitrogen and phosphorous may have been
irrevocably breached, it may still be possible to define a safe operating space in other ways. For example,
as the major threats to both the nitrogen and phosphorous cycles arises from fertilizer application in
agriculture worldwide, it has been suggested that a biogeochemical planetary boundary can be set
simultaneously for a combined nitrogen-phosphorous ratio, thus allowing a reasonable safe operating
space to be delineated [
4
]. Similarly, Running [
3
] has proposed that several key planetary boundaries,
including genetic diversity, can be captured in a single measurable global unit, which is net primary
production. If scientists can determine reasonable planetary boundaries, our analysis shows that any
resulting safe operating space should be treated as a capital asset, and consequently, it is relatively
straightforward to develop the conditions for efficient and sustainable management of this depletable
asset over time.
Acknowledgments: We are grateful to Vincent Pinilla and two anonymous referees.
Author Contributions:
E.B. and J.B. conceived and designed the research; E.B. developed the analysis; E.B. and
J.B. wrote the paper.
Conflicts of Interest: The authors declare no conflict of interest.
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