Natural Capital, Institutional Quality and SDG Progress in Emerging Market and Developing Economies

Abstract

Whether environmental impacts, natural capital depreciation, and effective governance have impacted progress in emerging market and developing economies (EMDEs) to achieving the 17 Sustainable Development Goals (SDGs) of the UN Agenda 2030 has become a significant policy topic. We determine estimates of the changes in net welfare that indicate progress over 2000–2019 in terms of meeting the 17 SDGs for 99 EMDEs. We compare these estimates with the environmental impacts associated with SDGs 11–15, natural resource depletion as a share of national income, and average institutional quality. Net SDG welfare gains over 2000–2019 were often accompanied by adverse environmental impacts, natural capital depletion, and poor-quality institutions. This is especially the case for low- and lower-middle-income economies. Higher net SDG welfare gains are correlated with reduced losses associated with SDGS 11–15, and larger welfare gains from attaining SDG 1 No Poverty are associated with better governance. These results suggest that long-term progress towards the SDGs in EMDEs hinges on improved management of natural capital and the environment, as well as more effective governance. Three policies can be implemented to achieve these objectives without additional financing or imposing fiscal burdens: fossil fuel subsidy swaps, tropical carbon taxes, and improved management and distribution of resource revenues.