Economic growth and the environment - Environmental Management - page 397

by having sustainable income growth with a stable or decreasing level of
CO 2 emissions per capita over time. From their i ndings they made three
conclusions. First, the transition initiated in the countries did not correlate
to changes in income levels but to historic exogenous events, such as oil
price shocks in the 1970s, and policies. Second, the positive CO 2 emissions
elasticities (also called marginal propensity to emit) in these countries hap-
pened as a sudden, discontinued transition, instead of a gradual change,
and therefore, the decrease in CO 2 emissions did not correlate to specii c
income levels, but to specii c points in time. Third, the relationship had
an N-shape, which was the result of data aggregation instead of income
dependence. The turning points were $12 813 and $18 333, which implied
a very narrow range for CO 2 to decline as emissions increased again once
the second turning point was passed.
They concluded that neither the U- nor the N-shaped relationship
between CO 2 emissions and income provided a reliable indication that
at low income levels, environmental quality would deteriorate and then
would improve above a certain income threshold or transition value,
and therefore the model was inappropriate for forecasting future emis-
sions behaviour. They also added that CO 2 emissions would continue to
rise as economic growth was pursued in countries. Moomaw and Unruh
provided two main explanations for their conclusions. First, individuals
would not sacrii ce consumption for investment in environmental quality
and that was why pollutant emissions increased at low income levels. This
was because the environment was assumed to be a luxury good, and there-
fore individuals would only be willing to trade consumption for improve-
ments in environmental quality at high levels of income. Second, CO 2
emissions created global and not local disutility to the public, who would
only demand controls on the level of pollutants that would create disutility
at the local level.
Also Moomaw and Unruh (1998) evaluated whether income was the
determining variable for the reduction of CO 2 emissions by applying tech-
niques of non-linear dynamical analysis. This technique was used in order
to account for temporal patterns and discontinuous changes that might
have taken place. The study was conducted on 16 OECD countries that
showed an EKC pattern in previous studies using data from Penn World
Table (1994). The countries were Austria, Belgium, Canada, Denmark,
Finland, France, West Germany, Iceland, Italy, Japan, Luxembourg, the
Netherlands, Sweden, Switzerland, United Kingdom and United States.
The per capita income used was measured in 1985 US dollars PPP. The
authors arrived at two conclusions. First, income was not the determin-
ing variable for reducing CO 2 . They added that emissions were expected
to follow a regular, incremental path until they were subjected to a shock