Environmental and resource economics in South Africa: Status quo and lessons for developing countries

Introduction All nations face the challenge of simultaneously meeting two imperatives: developing their economies to meet the needs of their people, and ensuring that the productivity and viability of the underlying ecosystems and ecosystem services are maintained at healthy levels over time. Essentially, these imperatives are enshrined in the concept of sustainable development, which is commonly defined as ‘Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.’ From an economic perspective, sustainable development requires that social welfare (well-being) is at least maintained over time. One way of interpreting this is in terms of maintaining the stock of productive capital upon which social welfare depends, which includes human capital (intangible skills and knowledge) and natural capital (ecological systems and natural resource deposits), as well as manufactured capital (tangible produced assets). Under the weak definition of sustainability, the different forms of capital are assumed to be substitutable, and sustainable development simply requires maintaining the total stock of capital. Thus, welfare can be sustained even while natural capital is depleted, so long as this is compensated for through an increase in other forms of capital. By contrast, strong sustainability recognises that natural capital is not readily substitutable with other forms of capital, and requires that the stock of natural capital is maintained in its own right. A compromise may be to allow some substitution between different forms of capital, so long as some minimum, core stock of critical natural capital is maintained. Achieving sustainable development requires recognition of the inter-dependencies between the natural environment, economic stability and social well-being. Environmental and resource economics (ERE) is a sub-discipline of economics that explicitly recognises these inter-dependencies and has developed a variety of tools and methods for addressing the inevitable trade-offs and challenges that must be faced in the pursuit of sustainable development. It therefore seems capable of offering much in terms of advancing sustainable development, particularly in developing countries, where these trade-offs and challenges are particularly pronounced. However, there are also a number of limitations to the application of ERE, particularly in the developing-country context. This paper aims to review the potential contributions of ERE to the achievement of sustainable development in developing countries, as well as to highlight some of the limitations associated with applying ERE in a developing country context, using examples from South Africa. The paper concludes with lessons for developing countries with regards to undertaking ERE research, applying ERE tools and methods, and providing appropriate advice to policy and decision makers for the advancement of sustainability.