You Have to Admit It's Getting Better: From Economic Prosperity to Environmental Quality by Terry L. Anderson

Author:Terry L. Anderson [Anderson, Terry L.]
Language: eng
Format: epub, pdf
Tags: Public Policy, Environmental Policy, Political Science
ISBN: 9780817944834
Google: weuoAAAAQBAJ
Goodreads: 18507960
Publisher: Hoover Press/Stanford Univ.
Published: 2004-01-01T00:00:00+00:00

Final Thoughts

Property rights matter, but there is no single EKC that fits all pollutants for all places and times. There are families of relationships and, in many cases, the inverted U–shaped EKC best approximates the link between environmental change and income growth. The indicators for which the EKC relationship seems most plausible are local air pollutants, such as oxides of nitrogen, sulfur dioxide, and particulate matter.

By way of contrast, there is mixed or little evidence to test the EKC hypothesis for water pollution or for gases, such as carbon dioxide. Robert E. McCormick (see Chapter 6 of this book) provides some initial data that carbon emissions follow the EKC pattern, albeit at much higher income levels. The EKC evidence for water pollution is mixed. There is evidence of an inverted U–shaped curve for biological oxygen demand, chemical oxygen demand, nitrates, and some heavy metals (arsenic and cadmium). In most cases, the income threshold for improving water quality is much lower than that for improving air pollution.

The acceptance of the EKC hypothesis for select pollutants has important policy implications. First, the relationship implies a certain inevitability of environmental degradation along a country's development path, especially during the take-off process of industrialization. Second, the EKC hypothesis suggests that as the development process picks up, when a certain level of per-capita income is reached, economic growth helps to undo the damage done in earlier years. If economic growth is good for the environment, policies that stimulate growth (trade liberalization, economic restructuring, and price reform) ought to be good for the environment. However, income growth without institutional reform is not enough. As we have seen, the improvement of the environment with income growth is not automatic, but depends on policies and institutions. GDP growth creates the conditions for environmental improvement by raising the demand for improved environmental quality and makes the resources available for supplying it. Whether, when, and how environmental quality improvements materialize depends critically on government policies, social institutions, and the completeness and functioning of markets. It is for this reason, among others, that Arrow et al. (1995) emphasize the importance of getting the institutions right in rich and poor countries. Along these lines, Torras and Boyce (1998) argue and show empirically that, all else equal, when ordinary people have political power and civil as well as economic rights, air and water quality improve in richer and poorer countries.

Better policies, such as the removal of distorting subsidies, introduction of more secure property rights over resources, and imposition of pollution taxes, will flatten the underlying EKC and perhaps achieve an earlier turning point. Because market forces will ultimately determine the price of environmental quality, policies that allow market forces to operate are expected to be unambiguously positive. Therefore, the search for meaningful environmental protection is a search for ways to enhance property rights and markets.

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