As environmental degradation increasingly threatens economic development, the Bank intensifies its efforts to integrate environmental considerations into its day-to-day work
In recent years, environmental degradation has become a matter of central concern for both developing and industrialized countries. The evidence is increasing that sound environmental management—far from being a luxury—is an essential ingredient for maintaining the natural resource base upon which most nations depend for their continued economic development. Developing nations will have to find a path to growth that differs markedly from the one traversed by their predecessors. And the industrialized ones will have to modify their behavior, curbing excessive use of resources and managing waste more efficiently.
The changing environmental problems of the world have, in recent years, heightened awareness of the dangers posed to all mankind. Traditionally, these problems were limited to those associated with the effects of urban and industrial waste disposal on local populations. However, critical environmental issues now include global warming (also known as the greenhouse effect), threats to the ozone layer, tropical deforestation, the transboundary movement of hazardous wastes, acid rain, soil erosion, desertification, siltation of dams, threats to indigenous peoples and species, and overuse and misuse of pesticides. Moreover, these problems even call into question the very relevance of conventional economics.
In developed and developing nations alike, governments have been increasingly investing in conservation measures (such as watershed protection and reforestation schemes), building ameliorative components into projects (such as pollution control equipment), strengthening environmental institutions, and introducing appropriate regulatory or legislative mechanisms. The World Bank has long stood committed to help in this regard—the first environmental advisor was recruited in 1969, establishing an Office of Environmental Affairs shortly thereafter, and numerous projects have contained environmental objectives, even if not labelled as such. But the rapidly unfolding events of the past two decades have called for a substantially greater attention to environmental matters and a more comprehensive approach than had been previously pursued by the Bank, as public discussion of these subjects has grown louder. In particular, a number of Bank lending operations, such as the Polonoroeste project in Brazil, the Botswana Livestock project, and the Indonesia Transmigration project, have been the subject of intense public criticism.
For a fuller discussion, see Development Committee paper number 22, “World Bank Support for the Environment: A Progress Report,” 1989. Two earlier papers in this series are: “Environment and Development: Implementing the World Bank’s New Policies,” number 17, 1988; and “Environment, Growth, and Development,” number 14, 1987. See also “Striking a Balance: The Environmental Challenge of Development,” available without charge from the World Bank Publications Sales Unit, Washington, DC 20433 USA.
In 1987, in part spurred by this criticism, the Bank sharply adjusted its policies so as to favor environmental management. Underlying this change was the growing evidence and conviction that environmental degradation in its many forms constitutes a threat to economic development and growth. Utilizing the concept of “depreciation of natural capital” allows environmental deterioration to be translated into macroeconomic terms. For example, a recent study by the World Resources Institute estimates that although the GNP of Indonesia increased 7 percent a year between 1970 and 1984, the true growth rate would fall to 4 percent a year if such depreciation were allowed for.
The Bank is now convinced that the pervasive nature of environmental problems dictates a new approach: integrating environmental management into economic policymaking at all levels of government, supplementing the traditional project-by-project approach. The Bank also recognizes that special attention needs to be given to designing economic incentives in such a way that they induce environmentally sound practices, and experience shows that the two can be mutually supportive. Over the past two years, the Bank has made substantial progress on many fronts, particularly in the area of project lending. But much remains to be done, especially when it comes to country and sector work.