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Wednesday, August 23, 2006

About That Environmental Kuznets Curve...

Andrew Leonard at Salon reviews research raising questions about the environmental Kuznets curve:

Outsourcing pollution The richer they are, the cleaner they get?, by Andrew Leonard, Salon: ...In 1990 Taiwan passed a law requiring catalytic converters on new cars and motorcycles. In the intervening years, concentrations of ... carbon monoxide, NO2, and assorted airborne particulates, have decreased. A loud and vigorous environmental movement, growing in step with Taiwan's thriving economy, has also asserted itself. Accordingly, Taiwan would seem to offer excellent proof of a concept known in economics as the "Environmental Kuznets Curve" or EKC.

The EKC holds that there is a bell-shaped, "inverted U" curve describing the relationship between a society's economic growth and the problem of environmental degradation. Simply put, at early stages of growth, environmental degradation gets worse, but as citizens get richer, things start to get better. ... So if we could just achieve economic growth all over the world, then voilà, environmental despoilation would diminish.

But alas, life doesn't seem to be so simple. The New Economist today highlighted another blog Natural Capital, specializing in environmental economics and written by Robert Metcalfe, a graduate student at the London School of Economics. In his most recent post, Metcalfe summarizes a recent paper that finds evidence for the EKC to be "fragile," if it exists at all.

The new paper states that the validity of the EKC has become the most investigated topic in environmental economics... At first, scads of studies found evidence supporting the EKC relationship. But in recent years the idea has come under concerted assault. A few points stand out.

First, it makes a big difference what pollutants you study. There is clear evidence that airborne particulate matter declines steadily with income growth, and pretty good evidence that pollutants like NO2, carbon monoxide and sulfur dioxide fit neatly into EKC models. But the correlation is much less clear when investigating things like deforestation or carbon dioxide emissions. The quick and dirty rule seems to be that if you can't see it or smell it in your local urban neighborhood, then, no matter how rich you are, you aren't going to do much about it.

Second, the early work demonstrating supposed EKC relationships did not take into account the impact of globalization. The industrialized world may have succeeded in cleaning up its own act (relatively speaking) simply by exporting the dirtiest industries abroad. So, in a global context, nothing really improved: The impact of pollution was simply outsourced. This holds ... true for Taiwan... If there has been improvement in Taipei's air quality over the past decade, it just happened to come at precisely the period during which Taiwan moved most of its nastiest manufacturing industries across the Taiwan Straits to China. ...

It would be nice to hope that new technologies could help China and other nations leapfrog the mistakes that their predecessors made, but such solutions are expensive. The troubling truth may be that ultimately it will be harder for the poorer nations to follow the same trajectory as the developed world, because with nowhere left to export their pollution, they'll have to fix it themselves. And the price won't be cheap.

    Posted by on Wednesday, August 23, 2006 at 12:33 AM in Academic Papers, Economics, Environment | Permalink  TrackBack (0)  Comments (7)

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