Many economists and business people tend to take the first point of view, which argues that a community can use up natural resources and degrade the natural environment so long as they compensate for the loss with human capital (skills, knowledge and technology) and human-made capital (buildings, machinery, etc). The Business Council of Australia, for example, argues that:

The principle of sustainable development does not require that the physical configuration of the environment or the economy's capital stock remains constant. The current generation does not owe future generations a share of particular resources. Rather, it requires that the capacity to generate resources from the total stock of environmental, physical and human capital resources not be diminished. Whether productive capacity should be transmitted to future generations in the form of mineral deposits or advanced technological knowledge or in other forms of capital is more a matter of efficiency than equity. (1991, p. 4)

They point out that a depleted resource, say oil, could be compensated for by other investments which generate the same income. The ESD working group chairs suggest that if the money obtained from exploiting an exhaustible resource, such as oil, is invested so that it yields a continuous flow of income, this is equivalent to holding the stock of oil constant. They therefore argue that not only is some substitution inevitable when it comes to the commercial exploitation of minerals but that it is consistent with ESD 'provided that the community returns from that exploitation are reinvested to give an equivalent income indefinitely'. (1992, p. 37)

The Business Council of Australia argues that intergenerational equity means that the present generation has an obligation to develop both knowledge itself and the institutions which store and extend knowledge, so that future generations are best equipped to handle new and unforeseen problems. It argues that, to give future generations the widest choices about how they will meet their needs, people now need to increase economic growth so as to maximise technological and cultural achievements (1992, p. 3).

Economists usually take a similar view. Professor Stuart Harris, chair of the ESD working groups on energy production, manufacturing and mining, said at a Royal Australian Institute of Public Administration conference in Canberra:

As an economist I would say that loss of natural capital can be compensated for by human made capital but in practice I would advise policy-makers to avoid depletion of natural resources unless there was a good reason. For example there might be good reason to build a space port at Cape York. The decision could be made on the basis of a cost-benefit analysis. We could require benefit/cost ratio of 1.2 or even 1.5 which gives extra weight to natural resources. (9 December 1991)

The Commission for the Future's economist displays a similar dualism:

As biological beings, a healthy natural environment is the most important bequest we can make to future generations … As economic beings, however, the knowledge, technologies, and resources with which to generate a livelihood is our most important bequest. Obviously, the two overlap: preserving soil productivity and ozone layer, for example, protects both the biosphere and future livelihoods. (1990, p. 27)

However, the Commonwealth Government (1990, p. 6) argues that there are limits on the extent to which natural resources can be replaced without changing some biological processes and putting ecological sustainability at risk. We do not know what these limits are; but if they are crossed, the options for future generations would be severely limited 'unless adequate substitutes for the assets can be developed'. It argues that 'increasing future productive capacity cannot fully compensate future generations for severe environmental degradation or destruction', and that the extent of damage caused by resource exploitation must be taken into account before it is given the go-ahead. Even environmental damage that is limited to a small area may be significant enough to stop a project if the local habitat is rare in national or international terms.

On the other hand the Commonwealth Government argues that to interpret intergenerational equity as meaning that there should be no consumption of non-renewable resources is an extreme and unrealistic view.

It ignores the fact that the use of non-renewable resources will generate additional income and add to the nation's capital stock, so enhancing future productive capacity. It also ignores the fact that, in many cases, exploitation of resources transforms rather than destroys the resource. So a resource can often be recovered and used again, albeit at a price.

A more balanced approach might be to allow for current use if that would raise living standards more than future use would do. (1990, p. 8)

The idea of passing on an equivalent stock of goods to future generations that may contain fewer environmental goods and more human-created sources of wealth depends on the use of cost benefit analysis for its implementation. David Pearce, in Blueprint 2 (1991), argues that the requirement to keep the total amount of capital constant 'is consistent with "running down" natural capital;i.e. with environmental degradation' as long as human-made capital can be substituted for natural capital. He says that this means that the Amazon forest can be removed so long as the proceeds from removing it 'are reinvested to build up some other form of capital.' (pp. 2& 3)

However, Pearce points out that this principle requires that environmental assets be valued in the same way as man-made assets, otherwise we cannot know if we are on a "sustainable development path". Some environmental assets could not be 'traded-off' because they are essential for life-support systems and as yet they cannot be replaced; but, generally, valuation would allow trade-offs between the environment and wealth creation.

However, the valuation of future benefits and costs is subject to discounting. Normally, future environmental benefits are discounted, because it is assumed that they are not worth as much as benefits immediately available to people today. David Godden of the Department of Agricultural Economics at the University of Sydney defends the use of discounting, arguing that:

Choosing a zero (or any other low) discount rate may be said to discriminate against the current generation. This is particularly important since, in developed economies at least, society has benefited from increasing living standards over the last two centuries or so. If this trend increases, future generations will be wealthier than current generations, and not discounting by the expected rate of growth of real per capita incomes will discriminate against the current generation. (quoted in Beder 1991)

The chairs of the ESD working groups also recognise that 'intergenerational equity considerations may conflict, for example, with considerations of equity within the present generation' and that 'today's poor may be reluctant to make what may appear to them as sacrifices for those who may be tomorrow's rich' (p. 15). They do not make any recommendation about the use of discount rates, but merely recommend that 'greater weight be given to intergenerational issues' and that project evaluations and environmental impact assessments make an 'explicit statement' about the project's intergenerational implications.

Weak sustainability provides a rationale for continuing to use non-renewable resources at ever-increasing rates, since any use at all reduces the stocks available to future generations. The ESD working group on mining says, 'Inevitably, as we deplete the stock of resources, there are less resources for future generations. While this can cause temporary shortages it is not regarded as a matter of longer-term concern' (1991b, pp. 78& 9). This is because, it says, during times of shortage the prices will go up and new reserves will be found, substitutes discovered and more efficient use encouraged. It is for this reason that Pearce and his colleagues (1989) suggest that what should remain constant is not the stocks of non-renewable resources but the economic value of the stock.

The working group on mining argue that for the mining sector, intergenerational equity relates 'predominantly to the security of mineral supplies, to the distribution of economic benefits across generations, and to long-lasting effects on the environment' (1991b, p. 78). The group argues that this involves continuing exploration so that future generations have adequate resources (although it seems unlikely that such exploration is aimed at identifying deposits for future generations), maximising recycling, minimising 'non-assimilable waste', making more efficient use of resources and ensuring that the community gets enough income from the 'depletion of non-renewable mineral resources'. The income would have to be used for the reduction of debt or the creation of capital rather than consumption, so that future generations could benefit from it. For this reason, the working group recommends that 'governments be able to demonstrate that funds at least equivalent to net royalty payments are being used for the purposes of long-term public sector investment' (ESD Working Groups 1991b, pp. 137& 8).

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