Kazuhiro Ueta

We have only one Earth. In order to create a sustainable society on it, I realize only too well the importance of going back to be Adam Smith's so-called 'Impartial Spectator', someone who can understand and empathize with other people's point of view. Prof. Ueta is now active as an environmental economist, whose career began when he entered the Faculty of Engineering at Kyoto University in 1971. At that time pollution was a major social problem facing Japan.Through his research work into water quality,

Prof. Ueta realized that the pollution problems had not come about through a lack of technology, but rather as a result of economic and social factors such as businesses failing to use the technology which was available. Before long he shifted his field of research towards economics, in the belief that the problems besetting the environment were fundamentally economic in nature, such as with the issue of garbage, where it is not so much a matter of developing better technology for its disposal, but rather of considering the social and economic aspects of a society which does not produce so much garbage.

The sustainable society which Prof. Ueta has sought to make a reality over the 30-odd years since then has nowadays become a global aspiration. He travels all around the world expanding his research activities, lecturing and reporting his idea, taking it upon himself as a specialist in the field to set out strategies to achieve this goal. Prof. Ueta explains about the need for dialogue with the third players such as future generations, other forms of life, and the present global situation. He stresses the need to  understand and empathize with the points of view of each of these players. He notes that Japan has been faced with issues such as pollution, and the country has solved those problems while developing its economy at the same time, and believes that we should now share the knowledge we have gained from that experience with the rest of the world, and assume a leadership role in the international community. His feels frustrated at Japan's current introverted and negative attitude.

At the age of 18, Prof. Ueta left his home for the first time to go to Kyoto University, not only with a sense of liberty, but also with the feeling of responsibility which all freedom brings. He wanted to be of some use to society and to the Earth. Those same strong feelings still motivate Prof. Ueta today.

Environmental economics for sustainable development

One of the most frequently asked questions about environmental issues and policies is "which is more important, environmental conservation or economic growth?" This question has been repeated often, because an answer has not been found that is acceptable to everyone. Behind this situation is the fact that people have tended to think that environmental conservation suppresses economic growth, and that economic growth always damages the environment. This concept is known as a "trade-off between the environment and growth (two elements which cannot be enhanced simultaneously)."

However, as people place greater importance on nonmarket social, cultural and ethical values, environmental policy has been established as an independent field of public policy, with environmental conservation institutionalized into the legal system, corporate social responsibility positioned clearly in business administration, and people increasingly stressing the importance of environment-friendliness in many economic activities and various decision-making pursuits.

However, the trade-off theory between environmental conservation and economic growth is still persistent and has become a prevailing notion. Of course, more and more people have the opinion that the economic growth rate cannot be an indicator of qualityof- life and/or well-being. People started questioning how economic development is different from economic growth, and what should be aimed at and pursued. They are also conducting vigorous discussions to investigate an ideal state of development that is different from conventional growth patterns in which the improvement of the economic growth rates is autotelic. The typical and influential issues include ideas such as sustainable development.

If we recognize the need for economic growth because we consider economic growth to be closely related to job growth and social welfare, and if we also recognize the need for the environmental conservation, we should investigate a way to break away from the trade-off between environmental conservation and economic growth in order to satisfy both the environment and employment, or the environment and welfare. Environmental economics is a relatively new field of study. One of the major subjects of my research is an investigation of ways to break away from the trade-off between the environment and growth for sustainable development. Some ideas to avoid the trade-off have been proposed based on the progress of research in environmental economics during the last two decades. We should keep in mind that some ideas have appeared in the concrete form of policies. I will now introduce some of the major ideas.

One idea is the so-called decoupling of environmental conservation and economic growth in which relationships between fluctuations of the economic growth rate and environmental burdens arising from economic growth are dissolved by technological progress and technological innovation. As a result, economic growth does not increase the environmental burden. This idea has several variants.

One is the dematerialization theory. The dematerialization theory is based on the concept of ecological economics that the amount of materials used in the economic process increases the environmental burden in the long run. This theory requires the investigation of an economic society in which the amount of materials required for economic growth is as small as possible. Similar theories include Factor 4 proposed by Ernst Ulrich von Weizsäcker and his colleagues. Factor 4 aims at fourfold eco-efficiency compared to the current situation by simultaneously doubling wealth and reducing the resource use to half. As seen from discussions about Factor 4, a new index of the relationship between "economic growth or wealth" and "environmental burden or resource use" has been created in a series of discussions, and terms pointing the way for technological progress to improve these relationships have been developed. Examples of the former include ecoefficiency and resource productivity. Examples of the latter include cleaner production, zero emission and inverse manufacturing. The question is what kind of policies and institutional reforms should be introduced to realize an ideal state of economy and society to create such innovation.

Another interesting discussion emphasizing technological innovations in connection with environmentrelated issues is the so-called Porter Hypothesis. The Porter Hypothesis formulated by economist Michael Porter focuses on the mechanism by which environmental policy accelerates technological innovation, and as a result the competitive power of products and companies is enhanced. According to this theory, environmental policy should not have negative implications for the economy and management, but instead, the fundamentals of economy and management are strengthened from a strategic standpoint by using environmental policy to create innovation and to enhance technical development capabilities. This idea is not a fantasy but is based on the analysis of many cases. One major case study is the analysis and evaluation of the effects of Japanese motor vehicle emission controls on industry and the economy in the 1970s.

Porter focused attention on the mechanism by which the environmental regulations exposed a latent social need for the reduction of automobile emissions, inducing the technological innovation, which in turn enhanced product competitiveness. He then compared and analyzed the severity of environmental regulations and productivity growth rates for the 15 years from 1970 to 1985 in West Germany, Japan and the U.S. He found that the productivity growth rates in Japan and West Germany, where environmental regulations were more stringent at that time, was higher than in the U.S. This fact also reinforced his theory describing how environmental policy used in a strategic way, could accelerate technological innovation.

An idea more closely related to socio-economic structural reform was the ecological tax reform proposed by the German economist Hans Christoph Binswanger. Specifically, he proposed a reform of the taxation system to impose higher tax rates on energy, and that the tax revenue should be used to fund job growth. He proposed this idea for the first time in 1983. At the beginning of the 1980s, ecological problems were an important political issue in Germany. Binswanger did not have any objection to the establishment of ecological values in public policy. However, Binswanger and his colleagues requested an end to unemployment, which was another critical challenge faced by European society. If employment is proportional to the economic growth rate, and if environmental policy reduces that growth rate, execution of environmental policy inevitably increases unemployment. Binswanger et al. did not seek a compromise between the environment and employment because they were incompatible. They designed a policy to accomplish both goals at the same time from the standpoint the environment and employment were b oth important. The result was an ecological tax reform.

Under this tax reform, people could receive not only dividends for such things as environmental conservation and energy saving through taxation, but also other dividends such as those to encourage for job growth, using tax revenue. Therefore, this is known as a "double dividend." This is now actually executed in Germany through a system similar to the idea proposed by von Binswanger and his colleagues. Many countries have officially discussed the double dividend since the end of the 1980s in as a way to prevent global warming by introducing an environmental tax. At the same time, many countries started casting a spotlight on the potential amount of the tax revenue. Countries all over the world have actively discussed the use and role of these tax revenues. A considerable number of countries have executed this tax reform, though not on such a large scale.

The double dividend and Porter hypothesis have been discussed from an academic point of view since the early 1980s. Some people point out that execution of these ideas is not always so easy. However, perhaps more people involved in policies and policy making should pay attention to these ideas because they provide specific institutions and policies that counter the conventional wisdom that there must be a trade-off between environmental conservation and economic growth. In this regard, however, we should take note that these discussions relate mainly to the economies of industrialized countries, and only taking the national economy into consideration within any given country.

One of the most fundamental questions for social science in our age is how to implement the concept of sustainable development. Environmental economics can contribute to answering this question through constructing public policy which overcomes the trade-off between the environmental conservation and economic growth.