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Economics and SD

Bringing economic insight to environmental and social issues

Economics is the study of how societies use (scarce) resources. Although the traditional emphasis has been on how resources are allocated, attention is increasingly paid to the equity of the distribution of resources and the overall scale of economic activity. This has been driven, in large part, by concerns about the environmental and social impacts of economic decisions. Conversely, our choices in the environmental and social spheres have economic impacts. The challenge of sustainable development is to better understand and anticipate how decisions affect all three aspects.

To meet such a broad challenge, each IISD program includes economic as well as environmental and social inquiry. This interconnected endeavour requires the use of multiple methods and analytical tools and the field of economics provides many of these. Moreover, economics is increasingly informed by other fields of inquiry thus providing fertile ground for research on how environmental and social issues are affected by our economic choices and vice versa.

Reflecting the range of issues, our work in this area is broad, but it can be grouped into six general categories: mapping sustainable economy; values and valuation of natural capital and ecosystems; economic policy instruments; international trade; foreign investment and sustainable markets.

Contents

• Mapping Sustainable Economy
  Even though researchers, policy-makers and others have provided multiple and sometimes divergent visions of the concept of sustainable economy, we do not yet have the policy “nuts and bolts” in place to make it a reality and neither do we necessarily know what these policy nuts and bolts should be.

• Values and Valuation
  The environment contributes to the economy in numerous ways, but there is a great deal of uncertainty in assigning economic value to it. Many decisions about the environment, however, are based on economic values determined by the market, which typically doesn't consider life-supporting and other ecosystem benefits. IISD's intent is to find ways to conserve vital ecosystems by developing better economic and non-economic valuation methods and tools.

• Poverty and Environment
  Poverty reduction and human development are central to sustainable development. Ways to improve the lives of impoverished people without further degrading ecosystems need to be found. IISD is applying concepts, methods and tools from across its programs to address this issue.

• Policy Instruments
  Governments use various instruments—including economic instruments such as pollution taxes, subsidies, marketable permits, performance bonds and so on—to re-align market signals so that they promote environmentally responsible behaviour by all. These instruments often operate in tandem with mandated regulations and greatly impact sustainable development. IISD is investigating how to improve the design of economic instruments and their applications to benefit the environment and society.

Related IISD Research

• International Trade
  International trade has enormous potential to foster or frustrate sustainable development. By allowing for specialization, trade can increase incomes and contribute to increased well-being. Openness to investment and trade can bring new environmentally-friendly technologies and processes. But trade can also allow powerful global demand to deplete countries' natural resources and create increased pollution. And the benefits of trade are not always well distributed among and within nations.

• Foreign Investment for SD
  Investment is critical for sustainable development, which requires fundamental changes in how we produce, distribute and dispose of goods. Today this kind of change must come mainly through investment in new technologies and new processes that can replace unsustainable practices. In developing countries, where domestic sources of capital are scarce, foreign direct investment plays a significant role.
  
  But not all investment leads to sustainable development, and not all of the global rules and institutions relating to international investment have been conceived through a sustainable development lens. IISD's work on investment and sustainable development focuses on this critical linkage and provides new approaches to ensure that investment law and policy will make a positive contribution to sustainable development.

• Sustainable Markets and Responsible Trade (SMART)
  Over the past two and a half decades, there has been a rapid expansion of standards-based and voluntary markets for sustainable products. The rise of "fair trade," "organic" and a wide variety of other social and environmental labels is testament to growing consumer and industry awareness of the importance of individual decision-making power and responsibility in achieving sustainable development. IISD’s Sustainable Markets and Responsible Trade (SMART) initiative seeks to build an "enabling infrastructure" for the efficient, equitable and transparent use of voluntary initiatives as instruments for sustainable development.

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