Is economic growth good for the environment?

[december]

According to a new book, THE REAL ENVIRONMENTAL CRISIS by Jack M. Hollander, poverty harms the environment. (link requires paid subscription)

“Affluence fosters environmentalism,” Mr. Hollander argues, because wealthy countries can afford the luxury of an environmental ethic, adjusting their habits and technologies for the sake of nature or conservation or exploiting resources more efficiently. Poorer countries must make do with what they have, and what they have is often crude. Think of the pollution-belching cars in Mexico City.

If Mr. Hollander is right, then the Kyoto Agreement would seem to be counter-productive, because of its cost.

The Clinton administration, which lobbied hard for Kyoto, estimated that it would cost the U.S. $300 billion a year in lost GDP. Imagine what it would do to developing countries less able to afford a slowdown. By perpetuating poverty, the Kyoto Protocol would claim many victims, including the environment.

OTOH this theory is exactly the reverse of what most of us have been taught. We are told that high US consumption of natural resources is a major environmental problem. We are told that our wealth is a big part of the problem.

Mr. Hollander argues that poverty is “linked to violence against the environment and that a global transition from poverty to affluence is essential to bringing about an environmentally sustainable world.” In other words, economic growth should be the first goal of the environmentalist. It’s not just good for mankind; it’s good for Mother Earth.

So, should environmentalists put economic growth as their first goal?

[hawthorne]

december
If Mr. Hollander is right, then the Kyoto Agreement would seem to be counter-productive, because of its cost.

That’s not quite right.

The “growth is good for the environment” argument is that demand for environmental services grows faster than income. In economists’ terms it is a luxury good.

But if some services (like environmental services) are unpriced or underpriced in the market then their true value is not properly calculated when we add up wealth or income. If we ignore depreciation of the environment in calculating economic growth, we are not calculating “real” economic growth, just a subset of it.

Of course implementing appropriate pricing of carbon emissions would have a cost on other parts of the economy. And of course, the transition to these new prices will be disruptive. But it’s not right to say that it would be bad for growth.

It is nonetheless important to note, as you do, that: 1. The environmental damage is worst in poor countries; 2. The fact that we can afford to care more should not distract us from 1; and 3. Prosperity for the rest of the world does not mean terribly bad things for the environment, as long as damage is reversible.

[system]

My God, I believe I may have to take myself out back and shoot myself, I almost agree with this. Almost.

*Originally posted by december *
According to a new book, THE REAL ENVIRONMENTAL CRISIS by Jack M. Hollander, ) If Mr. Hollander is right, then the Kyoto Agreement would seem to be counter-productive, because of its cost.

No, not necessarily, all actions have costs, it could be (without getting in the nattering about Global Warming and Kyoto per se) that a Kyoto like agreement could spur efficiency gains, for example. Simply asserting Kyoto is costly ergo bad is nonesense. Typical, but nonsense.

(For the record I am against Kyoto per se, for intelligent, science driven and market friendly efforts to address the underlying issue)

OTOH this theory is exactly the reverse of what most of us have been taught. We are told that high US consumption of natural resources is a major environmental problem. We are told that our wealth is a big part of the problem.So, should environmentalists put economic growth as their first goal?

You’ve fundamentally if rather typical either misunderstood or distorted the argument. Pity for the observation (at least as I have read it in enviro economics literature) is rather more powerful and should not be tarred with this gross distortion.

The argument that can be derived is that environmentalists should be awre of the trade offs and that poverty may be more damaging and less sustainable. Certainly a simplistic conclusion Growth=Good is stupid (as stupid as its inverse Growth=Bad), rather often it is good insofar as more efficient means of production to support any given population means less stress on the environment. Consumption of resources w/o regard to environmental consequences, on the other hand, can damage long term prospects for economic growth if the environment in which economic activity occurs is badly impaired.

Recast the OP as should environmentalists be more attentive to the positives of economic growth while still pushing for respect for the environment and I believe you have, for once, a sustainable position.

[system]

Hawthorne stated this more clearly than I, let me highlight the last:

*Originally posted by hawthorne *
Prosperity for the rest of the world does not mean terribly bad things for the environment, **as long as damage is reversible. **

That’s the key part, so long as it is reversible.

Sitting here in the Middle East I need only drive out of town to see what unsustainable resource extraction does. Dried up wadis, etc. Real cost not only to the environment but future capacity for economic growth.

Resource conservation in the context of paying attention to market forces strikes me as useful for driving the economy towards more efficiency. That’s good all around.

[jshore]

Originally posted by Collounsbury
(For the record I am against Kyoto per se, for intelligent, science driven and market friendly efforts to address the underlying issue)

I think Collounsbury and hawthorne have very nicely stated the objections to the OP. However, Collounsbury , I am puzzled by the above comment that you made. I don’t see how Kyoto is incompatible with “science driven and market friendly efforts”. Kyoto sets some goals on emissions reductions and then how those are achieved is up to the country in question (with even some trading between countries allowed). To my mind, it’s goal is to push nations to provide precisely the market-driven incentives to solve the problem and, indeed, I think that is the way that lots of countries are responding to it.

Finally, in discussing the cost of Kyoto, it is worth noting the words of Sir John Browne, CEO of British Petroleum in an article in the NY Times Magazine (unfortunately no longer available for free). BP adopted emissions reductions company-wide that were a bit stricter than Kyoto and were completed 8 years ahead of schedule:

When Browne stood up at Stanford this past spring, he was there to report hard numbers: BP had not just met its target – to reduce its emissions of greenhouse gases by 10 percent below 1990 levels – it had exceeded it, done so eight years ahead of schedule and with no net economic cost. In fact, because of energy efficiency measures, the emissions reductions amounted to a net gain of $600 million. ‘‘And we are not,’’ he told me later, ‘‘an inefficient company.’’

BP’s achievement complicates matters for Bush, who has pronounced the Kyoto Protocol ‘‘fatally flawed’’ because regulating carbon-dioxide emissions ‘‘does not make economic sense for America.’’

That line of argument does not persuade Browne. ‘‘If you say to people, ‘Do you want to develop the world and have a good living standard, or do you want a safer environment?’ people are terrified by the choice,’’ Browne said to me last spring. ‘‘That is a failure of leadership.’’ Speaking of leadership, I asked, what did he think about Bush’s position on the issue – that caps on emissions would be too costly for American businesses? Browne paused, then answered, careful not to mention any names in particular: ‘‘Well, it’s unfair to the world to say that none of this is possible when it is.’’

So, one of the answers to the OP’s question is that the costs to growth of environmental regulations are usually way over-estimated (even by government agencies like the EPA, as this piece in The American Prospect documents). And, this is even before you start asking fundamental questions like how good a measure GDP is since it systematically ignores or undervalues things like environmental resources.

Of course, there are going to be some real costs accruing to some people with any environmental regulation and if these people are rich and powerful it is easy for them (and certainly in their own best interests) to try to make the case that it is going to have high costs for all of us. This doesn’t mean that we should buy what they say without a great degree of skepticism however.

A final point, some people (like Sam Stone) like to compare some high-end figures on the costs of Kyoto to, say, the costs of eliminating all world hunger. However, this is rather beside-the-point because the problem of eliminating world hunger is not that we don’t have the money to do so. We might as well compare the costs of eliminating world hunger to the cost of the Bush tax cuts or to the additional costs that many Americans spend by buying SUVs instead of passenger cars.

[system]

*Originally posted by jshore *
I think Collounsbury and hawthorne have very nicely stated the objections to the OP. However, Collounsbury , I am puzzled by the above comment that you made. I don’t see how Kyoto is incompatible with “science driven and market friendly efforts”.

Not incompatible but needed much jiggering. Mind you I was also not for our chilidsh fit of pique in junking Kyoto. Negotiating for improvement seemed a reasonable option.

Kyoto sets some goals on emissions reductions and then how those are achieved is up to the country in question (with even some trading between countries allowed). To my mind, it’s goal is to push nations to provide precisely the market-driven incentives to solve the problem and, indeed, I think that is the way that lots of countries are responding to it.

Well, I have not looked at this stuff for a while, but as recollection holds the benchmarks were really set too low and the time frame needed to be jiggered.

I’m not particularly in a debating mood at present so I will let it go that I believe one could fairly say Kyoto needed more work to get it into a proper market driven framework. I think that could have been done, still can actually.

Finally, in discussing the cost of Kyoto, it is worth noting the words of Sir John Browne, CEO of British Petroleum in an article in the NY Times Magazine (unfortunately no longer available for free). BP adopted emissions reductions company-wide that were a bit stricter than Kyoto and were completed 8 years ahead of schedule:

I would guess, on the other hand BP is something of an unusual example. Economy wide achievements might not be quite so obtainable.

Of course, there are going to be some real costs accruing to some people with any environmental regulation and if these people are rich and powerful it is easy for them (and certainly in their own best interests) to try to make the case that it is going to have high costs for all of us. This doesn’t mean that we should buy what they say without a great degree of skepticism however.

A final point, some people (like Sam Stone) like to compare some high-end figures on the costs of Kyoto to, say, the costs of eliminating all world hunger. However, this is rather beside-the-point because the problem of eliminating world hunger is not that we don’t have the money to do so. We might as well compare the costs of eliminating world hunger to the cost of the Bush tax cuts or to the additional costs that many Americans spend by buying SUVs instead of passenger cars.

Well Sam always has an interesting approach to facts.

That aside I believe Kyoto framework efforts could and should have been done as much from an efficiency argument as from a pure environmental argument.

[js_africanus]

*Originally posted by hawthorne *
**…3. Prosperity for the rest of the world does not mean terribly bad things for the environment, as long as damage is reversible. **

Priceless is the same as worthless. Some “irreversible” damage is okay if it means helping LDCs become developed. To put it another way, if Shitholetopia can become a developed nation at the expense of the Red-Crested Goober Snobber, a rare and some say beautiful bird, then our first world options are either to compensate the Shitholetopians with investment and hard currency for saving the bird, or shut the fuck up and take plenty of photos of the Red-Crested Goober Snobber before it goes extinct. It’s the Shitholetopians’ bird and they are the ones who get to decide its fate. I’m sure they value their children more than some bird.

As far as local problems go, I fail to see how environmental quality could not be a good. If it is a good, then increasing incomes will increase demand. I don’t want to live in a pile of garbage, but if I can’t afford garbage pick-up then just call me King Garbage.

Re: Kyoto, there was an article in a recent Economist. It’s a brief review of “Environment and Statecraft: The Strategy of Environmental Treaty-Making”. Oxford University Press, 2003. The link is: www.economist.com/finance/displayStory.cfm?story_id=1715055&CFID=7954554&CFTOKEN=34c964c-76395fbb-38e3-4167-b5a0-0e416350d1a7 .

[jshore]

*Originally posted by Collounsbury *
I would guess, on the other hand BP is something of an unusual example. Economy wide achievements might not be quite so obtainable.

Well, perhaps this is true, although Browne noted that BP was not an inefficient company to start with. I mean, I almost hope it is an unusual example since if it weren’t then Bush, by getting out of Kyoto, would be costing the U.S. economy 10s of billions of dollars (not even counting the environmental costs)!

At any rate, it does give one pause concerning the macroeconomic (“top down”) models that are most often used to come up with these estimates for the costs of complying with Kyoto and so forth! I believe these models always assume that the economy is operating at an efficiency optimum, i.e., they completely ignore the possibility of the sort of market failures that was causing BP to needlessly spend more money on energy than it had to!

This is a fairly big debate right now because the folks who run the macroeconomic models often come up with fairly high estimates of the costs for Kyoto whereas those who take a more “bottom-up” approach of looking at possible technologies that can be put online come up with much more modest estimates and, indeed, sometimes even conclude that it could be around break-even or even some net savings.

The one data point that we have from BP (and perhaps other data from previous environmental regulations) seem to suggest that the macroeconomics models, despite their power, might be overestimating costs from the get-go because of their unrealistic assumptions about optimal initial states.

[Enginerd]

In the article December cites, the point is made that environmentalism is basically a luxury - that the need for survival trumps environmental concerns, and only when a society has reached a certain standard of living does environmentalism become feasible. I agree with this point, but I think that I draw different conclusions from it than the author does.

Hollander takes that point and leads into the last quote in the OP: that “economic growth should be the first goal of the environmentalist.” I disagree with the statement as written, but I think that it requires only minor modifications. Instead, I’d say:

Responsible economic growth should be [a] goal of the environmentalist.

Responsible economic growth (as I see it) has several levels. At the lowest socio-economic level, the goal is only to perpetuate the society - to allow the people to live. At this level, environmentalism is infeasible, maybe even laughable. You can’t deny food to the shitholetopians simply because the red-crested goober snobber is endangered.

There’s a second level at which the basic needs of the society as a whole have been met. At this point, I think environmentalism begins to be a feasible prospect - it becomes incumbent on a society to take into account the net effect of changes to its environment, and to try to mitigate them whenever possible. It won’t always be possible, and sometimes it will be so expensive that it won’t be practical - in some cases the economic and societal good will outweigh the environmental detriment, and that’s that. On the whole, though, a society in this position can afford to take some of the environmentalists’ concerns into account when moving forward.

The third level is essentially a luxury society (like aspects of the US) - a society in which convenience has an ever-increasing value. I think that it should be incumbent on a society in this position to prohibit environmental damage for the sake of luxury. Not all development is subject to this - essential infrastructure services, agriculture, and other core indutries have much greater benefits than luxury projects, and need to go ahead, despite what may be a significant environmental cost. This cost, however, needs to mitigated to the maximum extent practicable (to quote the EPA).

And other projects don’t need to go ahead - this doesn’t necessarily mean that you can’t build the new WalMart; it means that you can’t build the new WalMart wherever you damn well please. It means that you take into account the effects of the development you’re considering, and what it could do to the stream that you’re building near or the lake that’s three miles downstream. And it means that, in some cases, a project proposed for the sake of convenience can (and should, in my opinion) be rejected because the environmental cost outweighs the societal benefit. It means that more stringent environmental practices should be required on what I termed “luxury” development.

I could be wrong, but I’m not sure that this is the same thing as what december and Hollander meant.

[John_Mace]

December:

I can’t tell if you want to this debate to focus on the Kyoto Agreement, but there are plenty of examples of economic growth at the expense of the environment. Just look at what the economies of the USSR and Eastern Europe did to their environments. I’ve been to Eastern Europe (pre-1989) and was able to see it firsthand.

I would argue that democracy and free enterprise are the biggest friends of the environment, and that tyrany and collectivism are the biggest enemies. But maybe that’s the subject of a different thread.

[jshore]

*Originally posted by John Mace *
I would argue that democracy and free enterprise are the biggest friends of the environment, and that tyrany and collectivism are the biggest enemies.

You would argue this on the basis of what? And, what definition of “free enterprise”? The definition of “free enterprise” that is used by those who tend to promote it as a religion in this society amounts to a system under which externalized costs are explicitly not accounted for in the marketplace. Thus, if it is a big friend of the environment, it must be because of some magical force that I don’t understand.

I think a middle road, economically-speaking, is a best course for the environment. Some aspects of it have been discussed by Enginerd. Other aspects are having a regulated market economy, where one of the major goals of the regulations are to account for the externalized costs and other market failures that lead to bad environmental effects.

[december]

*Originally posted by John Mace *
December:

I can’t tell if you want to this debate to focus on the Kyoto Agreement

Not necessarily

…but there are plenty of examples of economic growth at the expense of the environment. Just look at what the economies of the USSR and Eastern Europe did to their environments. I’ve been to Eastern Europe (pre-1989) and was able to see it firsthand.

I would argue that democracy and free enterprise are the biggest friends of the environment, and that tyrany and collectivism are the biggest enemies. But maybe that’s the subject of a different thread.

I agree with you to a point. Basically, I think prosperity, democracy, free enterprise tend to correlate with better environmental policy, but they don’t guarantee it. Regarding Kyoto, my belief is that the minimal and uncertain environmental gains it might produce don’t remotely justify the economic cost.

Actually, I’m a birth control fanatic. I see worldwide population control is the #1 step in helping the environment.

[Apos]

Actually, I’m a birth control fanatic. I see worldwide population control is the #1 step in helping the environment.

Are you familiar with the work of conservative Catholic economist Julian Simon? He might almost the exact opposite argument, and actually put together some pretty convincing documentation on the subject. His “state of humanity” is pretty worthwhile read for its extensive documentation of human progress.

http://www.cato.org/dailys/11-11-96.html

[system]

Apos:

With all due respect, his extrapolations are stupid. I am hardly a “running out of resources, sky is falling in” guy – indeed on a limited basis I agree that natural resources can be extended significantly, and we can assume that if technological advances keep up, effectively indefinately from our lifetime perspective. However, it’s pure “futurism” – if you get my meaning – to simply extrapolate that there is a trend that will extend out forever. That is absurd and stupid thinking, as bad as the opposite.

On the human factor, while I understand where his point derives from, again I find it stupid - precisely the sort of thing an academic asserts. Anyone who lives and deal with the developing world can fairly clearly see that rapid population growth has been impoverishing. Probably not in and of itself, but in the context of the adaptive capacities of the socio-economic environment, something that is not easy to change. Further, you can clearly see in the sub-Continent, Africa and MENA where population pressure via intensive usage of land (intensive and inefficient) have done permanent damage. Loss of topsoil, for example, due to overgrazing and/or overtillage, which is a permanent and very expensive proposition to reverse, permanent exhaustion of fresh water reserves in arid areas – again a highly expensive and in many areas largely irreversible (in human time frames at present tech) issue.

Now, I absolutely agree that development and economic growth are the solutions. However, it is equally clear to me that the social pressures generated by rapid population growth, and the inherent capacities of the societies in question are significant and not easily changed barriers to development. Reducing population pressure on those insititutions strikes me as highly useful for giving the societies in question breathing room to adapt. The pressure to change is clearly there, but I see a number of places at tipping points – e.g. Egypt where it is hard to figure out how the fuck they can resolve creeping ecological disaster given the near term pressures on society and government – pressures that weaken institutions and lead to very high implied future discount rates. Inappropriately so.

So, yes, worries about overpopulation in Europe, the Americas given their resource base and enviro-climactic profile are overdone. Come to the semi-arid regions and … well one begins to feel a whole lot less fucking sanguine. Of course, one can abstract away from this, and simply posit pops will move elsewhere. Always nice to abstract away from the wrinkles.