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Natural resources, development models and sustainable development

Richard M Auty

Discussion paper, 21 pages

This paper starts out from the optimistic assumption that the basic policies for environmental economic development are known but uncertainties surround their implementation. In many developing countries the key obstacle is poor governance. Consequently, renewable resources continue to be mined, non-renewable resources are depleted irresponsibly, and reductions in pollution intensity lag. Recent research identifies resource abundance as an important cause of policy failure. This is because the primary sector remains large in relation to GDP so that differences in the scale of natural resource rents condition macro policy in important ways. Most developing countries are resource-rich, but deploy resource rents in ways that cumulatively distort the economy so it falls into a staple trap, which undermines economic growth and environmental sustainability. Sound macroeconomic policy is critical to the success of micro measures like much of environmental policy. In the long term, improved governance will enhance environmentally sustainable management of renewable resources, finite resources, and global pollution sinks, but until such improvements occur, environmental policies are likely to under-perform unless they are adapted to take account of flawed macro policies. Environmental reformers therefore need to support efforts by the international financial institutions to improve macroeconomic management.

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