On the Effects of Commodities Prices on Sustainable Development: An Opportunity?

Development is a dynamic concept that pertains the evolution of human societies. Over the past few years policy makers, as well as academics, have incorporated a very important, yet sometimes neglected, component in the concept of development which is environmental costs and sustainability. One of the key aspects that affects sustainability is energetic consumption, therefore our aim is to determine if changes in oil, coal, and gas, prices during the period 2000–2010 influenced sustainable development.

We modified the Human Development Index (HDI) by adding energy consumption component, and propose what we call the Modified Human Sustainable Development Index (HSDI) which captures a broader definition of sustainable development. Then we employ econometric techniques to study the effects of changes in commodity prices on our index in the short run.

Our results show a nonlinear effect of commodity prices on our index, low and middle-income countries display a positive effect of prices on our HSDI, with smaller effects in the former ones, while high-income countries do not seem to exhibit a significant effect. While low and middle-income countries are typically commodity producers.

Middle-income countries are able to obtain larger benefits in terms of sustainable development due to a better institutional structure which constitutes an opportunity for them in the aftermath of the crisis.

Middle- and low-income countries should design policies that enable them to take advantage of the rises and protect their economies from the falls.

We address the problem of sustainable development and commodity prices in a post-crisi world, which was not reviewed in the literature. In addition we build a measurement of the Human Sustainable Development Index that considers energy consumption as one of its factors. Which is in line with previous results about energy consumption and the Human Development Index.