EUROPEAN STRATEGIES FOR THE INTEGRATION OF NATURAL CAPITAL IN

THE PROCESS OF ECONOMIC GROWTH

PhD. Student Constantin CONSTANTINESCU, constantin_constantinescu@gmail.com,

Romania, Bucharest, Piata Romana no. 6-10, +40. 213191900, www.ase.ro

Abstract: The concept of sustainable (sustainable) or sustainable development belongs to the new theory of
economic development, itself a relatively new branch of the general economic theory that separated and
individualized itself as an autonomous theoretical body in the 1950s and 1960s .Although generous and undercover
on the themes it issues, it consistently sends out the demonstration objectives in sociology, philosophy, ethics,
morals, law, etc. the theory of economic development and the construction of a minimum epistemological socket; a
notional and categorical system in which they use a work and exposes. Natural capital is the spectrum of physical
assets within the natural environment that deliver economic value through ecosystem services. Like a savings
account, natural capital can pay interest or be liquidated

Key words: strategy, economic growth, natural capital, conservation

JEL Classification: O5, Q43

1. INTRODUCTION
Among the most relevant macroeconomic aspects considered in the analysis of the impact of
economic growth on natural capital are: the effects of current economic policy decisions on the
welfare of future generations, the consequences of environmental costs on supply and aggregate
demand, the variation of economic indicators, environmental and aggregate indicators that reflect
the depreciation of stocks and flows of natural capital and also provide broader welfare
interpretations than those reflected by GDP per capita developments. Particular attention is paid
to economic sectors where energy consumption is high, which analyzes the intensity of pollution,
resource efficiency (e.g. the amount of energy used per unit of GDP) and how the environmental
impact can be reduced.

2. OBJECTIVES OF THE EUROPEAN UNION'S POLICIES ON THE CONSERVATION

OF NATURAL CAPITAL
The European Commission's strategy to support sustainable economic growth includes
the development of green energy use, energy security and substantial transformation in industry.
Among the relevant documents is the Europe 2020 Strategy, whose three main priorities
are: - smart growth- the development of a knowledge and innovation-based economy;
- sustainable growth- promoting a resource-efficient, greener and more competitive economy;
- inclusive growth- promoting a high-employment economy able to ensure economic, social
and territorial cohesion.
Economic analyzes of climate change have the level of spending needed today to avoid
the costs that global warming will require in the future. For $ 1 billion in 2007, for example, with
an interest rate of five percent, the cost of 2117 is $ 7.6 billion, as this is the total that, with a
five- percent, would increase to one billion dollars in a hundred years. On the basis of such
calculations, opinions have been formed that saving the amounts currently allocated to
combating the effects of climate change would enable them to be allocated more efficiently in
the future. Only the amount of climate change losses in the period considered is calculated to
reach a level up to seven times higher.
Also, Strategy 2020 aims to provide customers with an opportunity to achieve sustainability
under the generic label "20х20х20"
- reducing greenhouse gas emissions by 20%
- growth of energy efficiency by 20%, or decreasing of energy consumption by 20%;
Particular attention to decades of energy use is justified by both the finite nature of fossil
energy resources and the high impact it produces on the environment. As a result, essential
changes to the primary energy use model have become inevitable, and the evolution of fossil fuel
prices and the desire of states to achieve energy independence are pressures in this regard. In
view of this, it is increasingly evident that there are no urgent measures to improve the current
structure of the project as a result of long-term and long-term economic growth.

3. IMPORTANCE OF NATURAL CAPITAL IN THE PROCESS OF ECONOMIC

GROWTH

The complexity of the economic growth process leads us to take into account previous
interpretations of the influential factors involved. The analysis of how they manifest themselves
has revealed the vulnerability of economies to variations in factors such as the population,
natural resources, the relationship between production and the natural environment, and pollutant
residues. Restrictions due to the depletion or restriction of access to natural resources, starting
with the "oil crisis" of the last century, in the field of raw materials or on the protection of the
environment, lead us to look at the economic growth from a perspective aimed at obtaining
competitive products on the market and which also have a minimal impact on the environment.
Economic growth is seen as one of the main explanations for excessive use and
destruction of natural capital. Economists believe two are the most important reasons that can be
identified. The first concerns the externalization of environmental costs in both new and old
industries. The second reason refers to the production flows necessary for the realization of the
material goods and services.
In relation to the interdependence between the level of development and the state of
natural capital, the model by economist Simon Kuznets revealed the contradictory nature of the
relationship between economic growth and natural resources.
Expenditure to reduce environmental impact is increasing and is incorporated and
reflected in GDP in various forms. They help to achieve a higher value for this indicator with a
share that is not found in goods and services that are intended for unproductive consumption.
Therefore, the increase in the material wealth of the population is diminishing. Looking
at the process from a different perspective, economic growth offers instead the possibility of
raising the standard of living of the population.
The problem is right in this context in terms of the marginal efficiency judgment,
comparing the increase of the benefit with the increase in the cost. Balances for comparing
resources with environmental impact can be the support to be attached to the costs of achieving a
strategic objective to increase the efficiency of the use of natural capital. It is therefore not
necessary to seek to maximize environmental protection, as it should not be neglected, but an
optimal level of effects in the interest of man and society must be found in the comparison of
environmental protection and economic growth.
It is a natural tendency for priority resource exploitation of resources of superior quality,
involving low extraction costs and high profits. What is not often taken into account in these
cases is the relationship between the extraction rate and the decreasing quality of the available
reserves, as well as the important environmental implications. A possible measure is to raise
prices through taxes, taxes or other administrative tools, but many environmental issues can’t be
treated as externalities. The irreversible loss of rare plant and animal species as a result of habitat
destruction, for example, can’t be compensated by the sums of money generated by rising
resource prices. The public good character of these rare species makes it difficult to identify
ways to measure their value, to be incorporated into the cost and benefits of a project. Models
based on Game Theory point out the usefulness of finding a balance between regulatory
measures by the authorities of how common goods and taxation mechanisms are exploited.

4. RESULTS AND DISCUSSIONS

4.1. ECONOMIC DEVELOPMENT AND ITS COSTS

Global growth has contributed more rapidly to increasing human needs over the past
years and has put pressure on natural resources. As demand for agricultural and industrial
products grew, the quantities consumed increased steadily and the demand structure experienced
a constant change. As a result of social development and rising living standards, the economic
urbanization rate has evolved to the detriment of the environment. It has been noticed in this
context that the urbanization phenomena are accompanied not only by the concentration of
population and significant changes in the geographic space, but also by the modification of the
allocation of resources. At the same time, these urban concentrations are important factors of
pollution.

Figure
1- Increase
of the
degree
of

urbanization in the period 1950-2050

Source: United Nations Population Fund (UNFPA) (April 2018)
 Besides increased consumption of resources, economic growth inevitably generates
pollution, which leads to the search for development paths with the least impact on the
environment. The diversification of human needs has led to the inclusion of a growing number of
elements from the natural environment amongst the factors of production and a growing amount
of energy has been used. The use of energy obtained at relatively low prices from non-renewable
sources, mostly fossil fuels, has a major impact on the environment. Economic practice
demonstrates the existence of a direct link between economic growth and pollution, as well as
the implications of the type of growth in the extent of the impact on the natural environment.
Extensive quantitative growth can be gradually replaced as economic growth with a qualitative
increase, where the most important weight is the economic efficiency factors.
With the development of the Global Gross Domestic Product, it is expected that
environmental pressures will also increase, so that the general concern that the current direction
of evolution can’t be sustainable unless there is immediate action to combat greenhouse gas
emissions and unreasonable resource use.

Figure 2- Economic Growth in 1990-2016 (GDP, PPP, Trillion US Dollars)

Source: World Bank (April 2018)

The cost of organic capital increases in relation to the level of environmental degradation,
which leads to the persistence of unsustainable negative externalities. Under these circumstances,
there is a tendency for industrial production to be relocated to areas in the Globe where, due to
lower economic development, environmental protection requirements are lower. Production costs
are lower in developing countries, for example, because the market cost of pollution does not
amount to the real cost of environmental degradation.
The economic growth of developing countries has led to imbalances in energy, especially
as regards demand for non-renewable sources.
 To take one example, China became the world's second-largest consumer of energy in
2010, and in the year 2015 it exceeded the US, ranking first. Even under these conditions, the per
capita consumption per capita in this country is relatively low compared to the one in the
industrialized countries.
Table 1- States with the highest energy consumption (Millions tone of oil equivalent)

Annual consumption of
Country
energy (MTOE)
China 3.123
SUA 2.204
India 884
Russia 692
Japan 437
Germania 311
Brasilia 289
South Korea 288
Canada 273
Iran 248
France 243
Saudi Arabia 223

Source: ENERDATA (2017)

At EU level, it has been taken into account that sustainable development looks at the effects of
natural factors involvement in the economic growth process and seeks to reflect the costs of
environmental impact in the economic processes. In this context, the benefits of development must be
balanced with social costs, so that the contradiction between growth and the natural environment is
resolved by taking the most appropriate option for a certain stage of development.

4.2.. GLOBAL IMPACTS OF NATURAL CAPITAL DEGRADATION

Looking further at the market value and utility value of resource prices, it is found that an
overall view of the costs of environmental growth is needed. This choice must be seen from the
perspective of the cost of opportunity of economic growth.
A huge demand for non-renewable resources will put pressure on global security of
supply. At the same time, pollution is generated by increasing greenhouse gas emissions as a
result of the use of inefficiently obtained energy by combustion of fossil fuels. In this way are
created conditions of manifestation of the negative environmental externalities. The historical
evolution has demonstrated the influence of "the type of economic growth on the needs-
resources ratio, the natural factors having a major contribution to achieving the extensive
economic growth in a period of relative abundance and the necessity and possibility of sustaining
an intensive economic growth with the maintenance and enhancing the ecological balance.
Industrial economies have a high consumption of natural resources as a common feature,
leading to a continuous and widespread degradation of the environment. It has become a
necessity to replace the current unsustainable model with one based on increasing energy
efficiency, on the widespread use of renewable energies and the abandonment of fossil fuels and
on regional energy cooperation. These measures must be added without delay to deforestation
and to reduce the environmental impact of industrial activities. Increasing energy efficiency is a
priority objective and saving offers serious potential in this respect.

Table 2- The structure of energy imports into the EU

Energy form Weight

Oil 60%
Natural Gases 26%
Solid fuels 13%
Renewable sources 1%
Source : Eurostat

Despite the economic crisis, energy demand is on the rise, supported by infrastructure
development. The context is unfavorable to the EU, as energy imports have increased from
46.7% in 2000 to 52.7% of total consumer demand in 2010.
 Figure 6- Share of taxes in electricity prices in EU countries (left-handed households, industrial consumers on the
right)
Source- European Commission, "Energy, transport and environmental indicators "(2017 edition)

5. CONCLUSIONS

By maintaining the current economic growth model, the planet's energy future is
unsustainable. The forecasts indicate that, following the current evolution of emissions and
energy consumption, this model can’t be sustainable on a global scale. The two major energy
threats are not to have adequate and safe sources of energy at affordable prices and to the
environmental damage caused by too much consumption. On the one hand, the rise in energy
prices always reminds us of the essential role that affordable energy plays in economic growth
and human development. On the other hand, it is obvious that the current energy supply pattern
carries the threat of serious and irreversible damage to the environment - including global
climate change. As a result, government policies on energy taxes are the way to reconcile energy
security and environmental protection objectives. The needs to limit the increase in fossil energy
demand, to diversify sources of fuel supply and to mitigate emissions that cause climate change
by taxing is one of the ways in which natural capital.

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