MAGYAR NEMZETI BANK
2.1 Ecological constraints of production opportunities Exceeding the global ecological footprint of 1 raises important questions in relation to the sustainability of economic development. The degradation of environmental factors, and the impact thereof on the real economy and welfare, is a process that unfolds extremely slowly. The full impact on humanity, society and economy often may only be perceived after decades or even a full century. It should be examined whether the natural resources are also available for future generations, to ensure that they can also live in welfare and prosperity. On the other hand, the environmental factors, i.e. the natural capital is not only an important input in production, it is also the medium of human life and economic activity. Accordingly, the degradation and deterioration of environmental elements may deteriorate the growth contribution of other physical production factors (physical capital, labour, productivity).
2.1.1 TYPES OF NATURAL CAPITAL Sustainable management of natural assets increases the load-bearing capacity of the environment, thereby contributing in the long run to sustainable growth in production. However, natural assets are different, and thus we should differentiate the individual categories (Chart 2-1). Chart 2-1: Classification of the natural capital by management Extractable but renewable resources
Cultivated renewable resources
Nonrenewable resources
Nonprovisioning services
Source: World Bank (2012), MNB.
Exhaustible, but renewable energy sources (fishing, natural forests, soil and water) are usually collective property, i.e. nobody can be excluded from the consumption of the natural assets and the consumption of such influences the consumption of others. Accordingly, consumption of the 26
GROWTH REPORT • 2019
resource exceeds the optimal level (tragedy of the commons), and thus sufficient time is not left for renewal of the natural assets, which ultimately may lead to exhaustion of the resource. Due to the rising global population, food consumption is expected to increase. Consequently, the role of agricultural renewable energy sources (cultivated plants, farmed animals, aquaculture, forest plantations) is expected to increase in the future, and thus it is essential to manage them. Non-renewable energy sources (oil, gas, coal and minerals) may also represent an ecological constraint. Since the Meadows report in the 1970s, a report prepared for the Club of Rome, economic models have been examining whether – considering natural assets as limited factors of production – it is feasible to achieve sustainable growth. As a result of technological progress, it has become possible to replace non-renewable natural assets with renewable resources; the only question is when the time of technological transition will occur (Solow (1974), Stiglitz (1974)). Compared to these analyses, Stokey (1998) and Lieb (2001) present an extremely pessimistic vision, as according to them the output of the economy decreases in parallel with the exhaustion of resources and innovation cannot offset this in the long run. By contrast, according to Smulders (1994), Bovenberg and Smulders (1995, 1996), if the exhaustion rate of the future green innovation and resources is sufficiently low, a strict environmental policy will ensure sustainable development, considering the environment, in the long run. While at the time of the Meadows report, science took the position that the limits of the environment are primarily determined by the finiteness of energy resources, nowadays – despite the increasing population and uninterrupted development of the global economy – the issue of the scarcity of resources has been pushed to the background. In the case of certain resources which were previously considered to be finite, such as oil and natural gas, the volume of exploration is able to keep pace with the increasing consumption as a result of technological innovation (Kaderják et al., 2011). At the same time, the load-bearing capacity of nature in the area of other natural assets, such as e.g. rare earth metals, the biosphere or drinking water, appears to be limited. The aforementioned natural assets contribute directly to meeting mankind’s needs (food, water, energy, etc.). In addition, there are non-provisioning services, which appear indirectly. These essentially fulfil regulatory and support tasks but may also contribute to cultural services. This
