Acceptable Strategy for Using Nature Capital

Pearce, Markandya, Barbier, 1989

An acceptable strategy for using the natural resources in CEE countries can be identified in terms of sustainability, i.e., in terms of a requirement to maintain the services and quality of natural capital stock (sustainable development as non-declining natural wealth). Constancy of natural capital stock has several meanings. A common interpretation is in terms of constant physical capital stock. This is acceptable for renewable resources but not for exhaustible ones. An alternative interpretation is in terms of constant economic value of the stock. This allows for a declining physical stock with rising real price over time. One problem with this is trying to reflect all of nature's values deriving from multifunctional resources and taking into account 'threshold effects' as well.

The main obstacles to the application of such a strategy in the transforming CEE countries arise from the realization of a very liberal economic model (hard-core liberalism), which relies predominantly on the self-interested behaviour of people (Sejak, 1992). If we leave the allocation of natural resources to the unfettered market, it will tend to continue over-using the services of the natural environment. Every government must be wise enough to create a very firm and clear institutional framework for environmentally friendly behaviour of individuals. This means:

• valuing and pricing all forms of natural capital usage (including indirect use by means of environmental damages);
• all kinds of pollution must be taxed at such a level that it will be more efficient for polluters to stop or significantly reduce emmisions (polluter pays principle); and
• a strategy must cope not only with current pollution problems, but must solve the question of old damages, as well.

In the Czech Republic this problem is solved within the process of privatization (Sejak, Slocock, 1993).

International Aspects of Proper Use of Natural Capital

The second main internationlal issue is transboundary externalities, air and water pollution, mainly. For example, DM 26 billion is the estimated annual cost of sulphur emissions reduction in Europe in order to reach the deposition target of a 1979 Convention on Long-range Transboundary Air Pollution. Nearly half of this would have to be spent in the former socialist countries. In the CEE countries air pollution is still the most serious and the area where most costs will have to be met in the short-term. It is generally accepted that priority should be given to the control of those pollutants which are likely to adversely affect human health (e.g., suspended particulates with heavy metals ^[4]).

Currently, economists criticize the uniformity of obligations as inefficient, especially the 1985 Sulphur Protocol. For better solutions of these problems there is the principle of joint implementation and the game theory applied to find more efficient international cooperation. Great attention was given to these questions at the International Conference on Economic Instruments for Air Pollution Control, IIASA, Laxenburg, Austria, 18-20 Oct. 1993.