It is now known that sustainable industrial development requires the preservation of the environment. Industries create a demand not only for waste-receptive services from the environmental media -- air, forests, land, and water -- but also for material inputs supplied by environmental resources (e.g., wood in the paper and pulp industry). Environmental resources can ensure a sustainable supply of these services if they are preserved at their natural regenerative level or if the demand for waste-receptive services is equal to the waste-assimilative capacity of environmental resources. Given that the demand for environmental services from various economic activities can exceed the natural sustainable levels of supply at a given time, and if measures are not taken to reduce this excess demand to zero, environmental resources can be degraded. The cost of reducing the demand for environmental services to the natural sustainable level of supply is regarded as the cost of sustainable use of environmental resources and, in the case of industrial demand for environmental services, it is the cost of sustainable industrial development. The measurement of this cost of sustainable industrial development is the main objective of this chapter.
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Notes
- 1.
See recent studies on pollution abatement cost functions in India (e.g., Mehta et al., 1995; James and Murty, 1996; Pandey, 1999; Misra, 1999).
- 2.
See Pittman (1981) for the definition of scale economies in the production function setting for the firms producing multiple outputs.
- 3.
Many earlier studies for estimating shadow prices of pollutants have used the translog functional form for estimating the output distance function. These include Pittman (1981), Färe et al. (1990), and Coggins and Swinton (1996).
- 4.
A Survey of Water Polluting Industries in India, Research Project on “Fiscal Instruments for Water Pollution Abatement in India,” Institute of Economic Growth, Delhi (1996).
- 5.
For empirical evidence about informal regulation by the local communities, see Murty et al. (1999) and World Bank (1999).
- 6.
There are now studies to show that the compliance to the pollution standards by the industries in the developing countries including India are due to both formal regulation (command and controls) and the informal regulation by the local communities (Murty et al., 1999; World Bank, 1999).
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Appendix: Estimates of Shadow Prices of BOD and COD and Technical Efficiency and Economies of Scale
Appendix: Estimates of Shadow Prices of BOD and COD and Technical Efficiency and Economies of Scale
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Kumar, S., Managi, S. (2009). Cost of Environmentally Sustainable Industrial Development. In: The Economics of Sustainable Development. Natural Resource Management and Policy, vol 32. Springer, New York, NY. https://doi.org/10.1007/978-0-387-98176-5_8
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