Environmental Resistance ? Exactly what is it?

[Alneyan]

The direct link is here Narf.

Atrocities, the effect you describe is linked to the +/- 5 points in ER = +/- 1 point in Happiness/Reproduction rule. Lowering Environmental Resistance does lower Reproduction and Happiness (very midly, as 45% happiness is not enough to start losing happiness), resulting in lower reproduction rates, which can be offset by raising Reproduction.

Note, however, that happiness does not affect construction rates, as you seem to be implying in the last part of your post (unless they are rioting, in which case they simply do not produce). Happiness does lower the amount of resources producted however (80% for Angry colonies, 120% for Jubilant colonies).