Developing Economies, the Environment, and Economic Growth

The economically developed countries have spent the past century laying waste to the environment in their quest for wealth. They now confront a number of highly-populated, developing countries that wish to accumulate the same level of wealth, and wish to have available the same freedom of action that had been possessed by the advanced countries. The wealthy proclaim that the environment is too fragile—global warming, water shortages, pollution, and health concerns preclude the same development path. Those on the way up respond by declaring that the wealthy are the ones who desecrated the environment; let them pay the price for correcting the problem. Why should they have to suffer? This type of back and forth arises in any discussion of international agreements to limit greenhouse gases. It is posed as a question of fairness.

An interesting article in The Economist addresses the question of developing economies and "green" economic development and provides a different perspective. It opens with this lede:

"Rich countries prospered without worrying much about the environment. Poor and middle-income countries do not have that luxury."

The article’s author argues that the past century is past and the ground rules have changed. The question of fairness is essentially irrelevant because the developing countries face situations in which the costs of neglecting the environment have become too great.

"But the costs of waiting for a clean-up are rising, undermining the argument that poor countries cannot afford to go green. The Chinese Academy of Social Sciences reckons the total annual damage to China’s economy from environment degradation is the equivalent of 9% of GDP....The World Bank says bad sanitation and water pollution cost India 6% of national income."

This chart, based on World Bank data, is provided.

Each country will have its own issues to address, but, perhaps, China faces just about all of them. We have addressed China’s problems in China’s Environmental Burden. The abuse of land, water, and air has led to pollution on a horrific scale, with concerns so grave that social unrest has become a critical focus for the government. The problems are severe and they cannot be ignored.

The article in the Economist points out another reason why addressing environmental issues cannot be delayed: many growth decisions made now are essentially irreversible and it is not easy to counter the environmental impacts. The claim is made that cities account for 80% of all pollution. Increasing urbanization of populations demands that care be taken in the design and evolution of these cities. A comparison between Atlanta and Barcelona is provided as an example of the importance of urban planning.

"Atlanta and Barcelona have roughly the same population. But in 1990 Atlanta sprawled over an area 26 times larger, and has expanded since. As a result, it produces far more pollution."

This chart is provided to illustrate the extreme inverse correlation between population density and transport-related pollution.

"The difference between a sprawling city and a compact one is fixed early in a city’s development; once sprawl begins, it is hard to reverse. Choices about urban design last centuries (or for many decades in the case of roads and power stations....Countries can no longer afford to wait until they get rich before worrying about urban design, or their energy mix. By then, it will be too late."

There is some good news in that developing countries are beginning to look to green solutions when they are economically feasible. China’s efforts as a creator of carbon emissions due to its size and rapid growth are well known. Less appreciated are its massive investments in emissions-limiting technologies and applications. And China is not alone in recognizing the need.

"Development has to be green from the start. In recognition of that, "green growth" plans are proliferating in poor and middle-income countries. Ethiopia hopes to double GDP by 2025, while keeping its greenhouse-gas emissions at 2015 levels."

Unfortunately, good intentions can be overwhelmed by bad policies.

"The World Bank reckons governments subsidise environmentally and economically harmful activities to the tune of about $1.2 trillion a year: $500 billion on cheap fossil fuels; $300 billion on cheap or free water; $400 billion on fishing and farm subsidies (though not all of these are environmentally harmful)."

If there is a positive thought to take away from this discussion, it is that although both developed and developing countries are reluctant to commit to firm environmental constraints, they all may be moving to the same position with regard to recognizing the need for action. Independent action is better than no action.