Environmental Engineering Reference
In-Depth Information
Decomposition and structural models of the income-environment
relationship
A number of studies attempted to understand the underlying determinants
of the relationship between economic growth and the environment. In
doing so they used more structural and analytical models in their studies
instead of the reduced-form models, in order to identify the structural
forces that would inl uence the relationship. Panayotou (1997), in examin-
ing the relationship between income and the level of SO
2
using panel data
for 30 countries, identii ed three forces/ef ects inl uencing environmental
quality: (1) the scale ef ect, (2) the composition ef ect and (3) the abate-
ment ef ect. He found that expansion of the scale of an economy increased
the level of SO
2
concentrations monotonically, but at a diminishing rate.
It was particularly strong at income levels up to $3 million per square
kilometre. The composition ef ect, represented by the industry share of
GDP, also monotonically increased the level of SO
2
concentrations as its
share of GDP increased from 20 per cent to 43 per cent at income levels up
to $8000, then declined to 37 per cent when income levels reached $17 000
and then started to rise again. The abatement ef ect, which is the 'pure'
income ef ect after being stripped out of the scale and composition ef ect,
had a negative relationship with SO
2
concentrations up to income levels of
about $13 000.
Similarly, in a study, Islam et al. (1999), identii ed the same three forces
in examining the relationship between GDP per unit of area and ambient
level of SPM using data from the GEMS. The data contained 901 obser-
vations from 23 countries, including 56 cities, for the period 1977 to 1988.
They also used data from the World Bank Tables. The per capita GDP
data were in 1985 US dollars purchasing power parity. The authors found
that the level or scale ef ect increased monotonically, showing a positive
relationship between ambient level of SPM and the level of GDP per unit
of area. The composition ef ect showed an inverted U-shape with a hump-
shaped relationship between the level of SPM and the share of industry in
GDP. However, the peak was reached at a very high industry share level
at which the SPM level increased almost steadily. The abatement ef ect
generally declined.
Moomaw and Unruh (1997) tried to provide insight into the processes
that generated the changes in environmental quality and national economic
growth. They examined the structural transition changes in per capita CO
2
emissions and per capita GDP over 16 countries for the period 1950 to
1992 and compared the structural transition models to EKC models. They
used the data from the Oak Ridge National Laboratory (1995) for the CO
2
emissions and the Penn World Table for the income data in real per capita
GDP, measured in 1985 US dollars. The 16 countries were characterized
