Environmental Engineering Reference
In-Depth Information
models showed that preferences that were consistent with a high income elas-
ticity of demand for environmental quality were attenuated by high and rising
abatement costs or a high impact of pollution on production. Hence, it would
be feasible for pollution to decline with a zero income elasticity of demand for
environmental quality, or to increase with a high income elasticity of demand
for environmental quality.
In another study, Kahn (1998) examined the ef ect of per capita income
on hydrocarbon emissions of vehicles. He used the 1993 Random Roadside
Test created by the California Department of Consumer Af airs Bureau of
Automotive Repairs, whereby vehicles at random are selected to have
an emissions test. He used the 1990 Census of Population and Housing,
which included the zip code median household income as a proxy for
household income. The hydrocarbon emissions were measured in parts per
million (ppm) and household income was measured in thousands of US
dollars. The author tried to study the total annual contribution of a house-
hold to local pollution in relation to its income. He presented evidence of
an inverted U-shaped relationship between income and emissions, with a
turning point between $25 000 and $35 000. He also found that average
emissions for vehicles owned by households with income levels below
$35000 were twice as high as those for households with income levels
over $45 000, showing a higher demand for better vehicle quality at higher
levels of income.
Pfaf et al. (2001) examined the linkage between income and house-
hold choices and its impact on the environment. The model they used
emphasized two main features. First, environmental degradation was a
by-product of the household activities. Second, households could recog-
nize their activities, and therefore would substitute for more expensive,
less environmentally degrading commodities, with higher income. They
highlighted that this would occur with the assumption that environmental
quality was a normal good and given the elimination of natural constraints
of desirability and feasibility of substitution. They found a non-monotonic
relationship between income and environmental quality, generating an
EKC at the household level as substitution constraints were eliminated.
In another paper, Pfaf et al. (2002) provided an explanation for the
EKC using their household-choice framework. They showed that at low
income levels, the marginal rate of substitution between household con-
sumption and the environment made abatement undesirable for the house-
hold. As income increased, both consumption and abatement expenditure
rose. They concluded that both household consumption preferences and
abatement technologies were necessary and sui cient conditions to gener-
ate the EKC path. They also applied their model to a set of externalities
and multiple agents who voted for environmental spending and taxation.
