Environmental Engineering Reference
In-Depth Information
However, economic growth and liberalization should not be thought of as a panacea for
environmental problems, particularly in the developing world. Recent work has demon-
strated the unpleasant implications for many less developed countries (LDCs) that are
entering the stage of economic development where emission levels are set to rise rapidly
(Cole and Neumayer, 2005).
The theoretical case
Why might economic growth bene
t the environment? There are a number of theoretical
explanations that suggest the sink side of the environment will be less impacted as incomes
rise. First, environmental quality is often cited as a normal good, if not even a luxury
good. In other words, the income elasticity of demand for environmental quality is greater
than zero, possibly even greater than one. In other words, as income grows, environmen-
tal concern rises as well, perhaps even more than proportionally so (Beckerman, 1992;
World Bank, 1992). In addition, rich countries may be better able to meet the higher
demands for environmental protection through their higher institutional environmental
capacity (Neumayer, 2003b, p. 77). However, it is contested whether rich people care more
about the environment than the poor (e.g. Martinez-Alier, 1995), and the available evi-
dence is far from conclusive (see Kriström and Riera, 1996). Second, it is likely that eco-
nomic growth increases the possibility that more modern and less pollution-intensive
man-made capital and technology are introduced (Grossman and Krueger, 1995). Yet,
while pollution per unit of output might go down, absolute pollution levels might very
well go up as economic growth increases. Therefore the e
fi
ff
ect of technological change on
pollution is in principle ambiguous (Lopez, 1992).
Third, as economic development progresses and income grows, the share of industry will
go down as the share of services goes up; thus sectoral changes may favor less-polluting
sectors (e.g. Jänicke et al., 1997). Yet if starting from low income levels, structural changes
in the economy will most likely have a detrimental e
ect on the environment. Pollution will
increase as the share of agriculture goes down and that of industry goes up. Also there may
be limitations in the scope of these changing patterns of output, given that people's
revealed preferences indicate that pollution-intensive material goods are still highly valued
(Neumayer, 2003b, p. 81). It is also suspected that high-income countries have become
cleaner because they have exported their pollution-intensive industry to LDCs; this is
known as the 'pollution haven hypothesis'. By importing goods that are resource or pol-
lution intensive, developed countries' environmental track records appear cleaner than
they actually are. Despite some recent evidence for such claims, the empirical record for
this argument remains somewhat inconclusive (see our discussion further below).
Fourth, rising income brings population growth rates down, therefore population pres-
sure on the environment decreases. Although not all agree that population growth is detri-
mental to the environment (Simon, 1996), the evidence is clear: larger populations
generate more emissions (Cole and Neumayer, 2003). However, with considerable vari-
ance in the data, it is clear that population growth is determined by factors other than a
country's income level as well (Neumayer, 2003b, p. 82). Thus economic growth is neither
a necessary nor a su
ff
cient condition for reducing population growth. For example, it is
argued that investing in education for women and providing retirement insurance schemes
are the best ways to reduce population growth (ibid.).
Underpinning the above arguments is the assumption that economic growth is not log-
