Environmental economic - Essay Example

The propriety of using the adjusted net savings is evaluated. The paper sets off by stating the need for sustainability measurement and identifying the three most popular sustainability indicators. Thereafter, the discussion focused on its characteristics together with criticisms of the indicator. In the end, a brief discussion with reference to Solo’s and Beckerman’s criticism is included for verification of the indicator’s fitness as the sustainability measuring tool. Before moving further, it will be quite beneficial to first examine the need for such measurement.

Current trend on national and global issues places environmental sustainability at the very core (Ollivier & Giruad, 2008). In equating sustainability with wealth and looking at the former from the capitalist’s approach, measurement guides policy maker into the future by being forward-looking (Atkinson). Major decisions are made from intelligent evaluation of trends and gathered statistics. It is important therefore that factors affecting any national or global issues be available in numerical form or visual trends such that decision makers need not labor more to understand the available information.

To measure performance or verify the current standing, indicators are used by interested institutions and policy makers. Numerous environment and sustainability indicators were conceived depending on the interest group that conceptualized the measurement tool or data collection method. For sustainability measurement, three aggregate indicators are prominent, The Ecological Footprint (EF) of World-wide Fund (WWF) for Nature International, Environmental Sustainability Index (ESI) supported by the World Economic Forum while the Adjusted Net Savings (ANS) also known as Genuine Savings was developed and published by the World Bank (Ollivier & Giruad, 2008).

The latter being a product of World Bank is receiving considerable interest and is the subject of this evaluation. The Adjusted Net Savings is an attempt of the World Bank to measure true savings rate of an economy after factoring in investments from human capital, depletion of natural resources, and damage to the environment as a result from pollution. This indicator is not wholly dependent on environmental indicators but infuses some macroeconomic and social indicator as can be seen in the current equation (Bolt, et al, 2002): ANS = (GNS - Dh + CSE - ?

Rn,i - CD) / GNI, where: ANS = Adjusted Net Savings Rate GNS = Gross National Saving Dh = Depreciation of produced capital CSE = Current (non-fixed-capital) expenditure on education Rn,i = Rent from depletion of natural capitali CD = Damages from carbon dioxide emissions GNI = Gross National Income at Market Prices. The above model suggests that sustainable economy is indicated by a positive or at the very least 0 ANS rating. For that to happen, the sum of gross national savings and expenditure on education must exceed the total amount of depreciation and depletion and damages combined.

All these factors are highly dependent on policies supported by an economy. It is highly important therefore to refer to ANS in evaluating or assessing the policies maintained with respect to sustainability as they indicate performance or direction to which an economy must thread on. As previously mentioned, it is advantageous to use ANS because of measurability.