Financing sustainable development by reducing incremental resource requirements

Description

Governments have become increasingly aware that obviating the need for additional financial resources is a cost-effective way of financing sustainable development. Of course, eventually some supply expansion becomes necessary but its postponement and smaller scale conserves financial and environmental resources.

Implementation

1. Meeting growing energy demand by improving energy efficiency and conservation (through full-cost pricing of energy, for instance) rather than by expanding supply obviates the need for new power plants and hence the need for funds to finance scrubbers to reduce sulphur dioxide (SO2) or to plant trees to offset the additional carbon dioxide (CO2) emissions. The savings in financial resources could be enormous, while the economy is guided closer to sustainable development.

2. Water pricing that improves use efficiency and conservation obviates the need for construction of additional reservoirs, water treatment and waste water disposal plants to meet growing demand; financial resources necessary for mitigation of environmental impacts of dam construction are also saved.

Claim

While it is true that full-cost pricing implies higher prices for the consumers and producers in the short-run, the long-term benefits in terms of sustainable economic growth outweigh these costs, although some cushioning of the impact on low-income groups might be necessary.