Environmental Engineering Reference
In-Depth Information
path for an individual country? Fourth, what is the irreversible damage
to the ecological thresholds as a result of economic growth in terms of the
carrying capacity of the biosphere, ecosystem resilience and sustainability?
Fifth, what is the role played by institutions and policies in (1) explaining
the shape of the environment-income-growth relationship, (2) reducing
environmental damage and (3) ensuring sustainability of outcomes in the
future (Panayotou, 2000)?
Empirical models on economic growth and the environment
Most of the empirical models used in the studies on the economic-
growth-environment relationship consisted of reduced-form equations
relating environmental indicator(s) as the dependent variable(s) to a
measure of income as the independent variable. They basically captured
the net impact of income on the environment, without understanding the
various inl uences underlying this relationship. Some studies also control-
led for other variables, such as population density/growth, international
trade, income distribution, institutional policies and geography. The
environmental indicators were either in the form of pollutant emissions
(such as sulphur dioxide (SO
2
)), particulates, nitrogen oxides (NO
x
),
carbon dioxide (CO
2
), carbon monoxide (CO) or ambient concentrations
of various pollutants as recorded by monitoring stations. The measure
of income that was commonly used was income per capita, however,
some studies used income data converted into purchasing power parity
(PPP) or income at market exchange rates. The shape of the relationship
between income and environmental degradation was econometrically
estimated using cross-sectional or panel data and the functional equation
used was usually quadratic, log-quadratic or cubic form. The reduced-
form approach turned the income-environment relationship into a 'black
box' as it did not consider the underlying determinants of environmental
quality and which, in turn, limited its use in policy formulation. This
led to studies using decomposition analysis in order to disentangle other
ef ects, such as scale or level of production, composition and structure,
abatement technology, trade, preferences, the role of institutions and
environmental policies to understand the controlling ef ects behind the
relationship between income and environmental degradation (Panayotou,
2000).
The types of models used in these empirical studies dif ered. As seg-
regated by Panayotou (2000), the simplest model was the one examin-
ing the relationship between per capita income and an environmental
indicator(s). In some cases, these models included a time trend and were
usually in linear, quadratic, log-linear or log-quadratic forms (Shai k and
Bandyopadhyay, 1992; Hettige et al., 1992; Rothman, 1998; Kahn, 1998):
