Environmental Engineering Reference
In-Depth Information
of SO
2
. Panayotou came to three main conclusions. First, environmental
quality was inl uenced by the level of income rather than its growth rate.
Second, in the case of SO
2
, governmental policies and social institutions
played an important role in signii cantly reducing environmental degra-
dation at low income levels and speeding up the improvements at high
income levels, and thus mitigating the environmental externalities of eco-
nomic growth. Hence, improvements in environmental quality were not
automatic but depended on policies and institutions. Third, the structural
changes of supply and demand for goods and services throughout the
development process played an important role in determining the when
and how of environmental improvements. Therefore, markets as well as
policies determined the 'environmental price' of economic growth. In con-
clusion, Panayotou noted that improvements in the quality of policies and
institutions had higher payof s for pollution abatement at higher levels of
income as it tended to improve monitoring activities. Therefore, ef orts
should be focused on improving the quality of policies and institutions
rather than slowing down economic or population growth.
De Bruyn (1997) investigated the origins of change in emissions using
decomposition analysis in order to empirically explain the mechanisms
underlying the U-shaped relationship between SO
2
emissions and income
in developed economies during the 1980s. In other words, he attempted
to determine the factors that shape the patterns of emissions over time
to explain why a U-shaped relationship occurred between economic
growth and pollution. The emissions data were obtained from OECD,
Environmental Data Compendium (1995), Klaassen (1995) and World
Resources (1994-95), while the income data were obtained from the
World Bank, World Table (1995) for 1993 in thousands of US dollars
based on market exchange rates. He highlighted that the main three argu-
ments explaining the EKC hypothesis according to the literature were
valid, but scarce. First, as income increased, the positive income elasticities
of demand for environmental quality and a more open political system
resulted in ef ective environmental policies. De Bruyn explained that the
argument was valid but was likely to occur in democracies, which are
scarce with contradictory policies. Second, the composition changes of
production and consumption were associated with rising incomes, which
assumed that economic development passed through transition stages with
respect to the structure of production. In other words, a shift took place
in countries from agriculture to industry to service-oriented economies as
income increased and that, in turn, resulted in the pattern of the inverted
U-shaped curve with the highest point occurring in the industrial stage.
Third, if changes in the production structure were not accompanied by
changes in the consumption structure, then the EKC relationship resulted
