Impact of Economic Growth on Environment

By: Bikal Dhungel

This article is in some way similar to Environment-Poverty Nexus assuming that economic growth as a most important tool to eradicate poverty. But it will focus only on economic growth.

Let me repeat quickly about Environmental Kuznets Curve. EKC is an inverted U shaped curve that says, as countries grow, their level of environmental pollution will also grow. When it reaches a certain level, it comes down again, which means, environment will be better through better protection. For the latter, that growth is good is easy to agree despite evidences showing mixed results.

The basic idea behind this is that, growth results in technological advances and technology will solve all the problems. So, growth in the first stage will solve human problems of poverty and is also good for the environment. Hence, it is assumed that, pollution will be reduced automatically as people or countries grow rich. More money or wealth allows country to employ better technologies to protect environment and the affordability will be higher as well.

What is the condition of poor countries regarding environment today ? Poor countries simply dump the waste in the river or throw it on street. Plastics lie everywhere, there is no real water and sanitation facilities. Used water will be drained on the backyard or on the river directly. Proper waste management system simply lack and environment as well as human health suffer from negative externalities. This is because either the government cannot afford waste management systems, or they lack technology or they have other priorities. The origin of this problem is again poverty. Moreover, poor countries also use poor quality fuels inefficiently. Rich countries have a moral obligation to help through increased aid supply assuming aid will also be used for this purposes but when we look at the aid table, most aid goes to countries that are strategically important for rich countries or to countries where there are useful resources needed for the industries of rich countries. So, most aids are being used to build infrastructures to extract these resources. Least developed countries also get lower amount of aid. If aid is available, such problems mentioned above might be reduced.

So, what is growth ? Growth is the increase in income, increase in consumption of foods or calory intake, increase in physical and human capital, demand for more services etc. When we increase food consumption or calory intake, more production is required. When billions of people demand more food, production facilities should be expanded. Food production is energy consuming. Food itself also require other resources, like water. Upon demand of more Beef for example, large quantity of water is necessary, so, water sources need to be extracted. At last, there will be more CO2 emission and there will be competition for use of natural resources like water. If demand continue to grow and for some reason, production cannot increase, it will raise the prices. To keep the price stable, production should rise with demand. On the other hand, growing population and growing wealth will also lead to the demand of material goods, like Computers, Television, Tables, Beds, Chairs, Carpets, Boxes, Cloths etc which need other resources to be a finished goods. So, the growth will again lead to additional environmental goods demand. For the supply of human capital, people demand more schools, colleges, training centers, buildings etc. They , like other goods also require resources to come into existence. Buildings need bricks, cement, wood, iron and many more. In the same way, we can argue that, as wealth grows, welfare increases but at the cost of more resource use and environmental damage. But is it then good ? Should we forget about growth and protect the environment or we should first ignore the environment and concentrate on growth and take so called ' grow and clean up later ' approach ? Which one is morally good ?

Well, there are both advantages as well as disadvantages of both. When we let the current situation to remain like this, first of all, poor countries will continue dumping wastes in the river and someday the waste will be so huge that it will damage the environment which will affect the whole world. This damage is going to be there very soon because in only next 50 years, we will have 3 billion people additionally in developing countries. Not only their waste will increase, but also their demand of firewood. Forests will be cleared off for building human settlements. Growing population but poor economic condition and environmental vulnerability will cause emigration from poor countries towards rich countries. The story can be extended further but I will stop here. The message is, we cannot let the situation be like this. But as the previous scenario explained, letting poor countries grow will cause negative impact on the environment. Yes, of course, but what evidence shows is, as there is economic growth, population growth will decrease in the future for many reasons. Additionally, though they pollute the environment or demand higher environmental goods, in the long term, this trend will reverse. There will be better environmental protection laws, people will move towards organic foods, reforestation will increase. Better waste management system will be there, use of plastic will decrease, people use other energy for cooking purposes and not firewood and there will be other improvements. Moreover, this will also avoid refugee influx to rich countries and rich countries will profit by expanding their markets to today's poor countries.

But this is only an ideal scenario. If we manage the process of growth better, there will be positive affects on environment but if we dont, environment will suffer. Growth should also reach to a certain level (the turning point of kuznets curve) to be friendly towards the environment. When growth sticks to a point where it doesnt grow further and also wont come down, people will continue polluting the environment without any perspective of reaching the cleaning phase. So, an ideal solution is of course, rich countries transferring technology already now and support more during the process of growth and post growth period. The post growth period should also de-materialize. There should be strict environmental regulations, use of harmful materials should be restricted and other policies should be brought into existence. As the porter hypothesis tells, strict environmental regulations will induce efficiency and encourage innovations. This is true in present cases in some European countries. Strict regulations caused companies to increase their research expenditures for fuel efficient cars or in renewable energy systems. Looking at the financial side, only when economy grows, government receive higher incomes in the form of taxes which they can invest in research and technology. Without growth, funding should come from outside, which might not be sustainable. It is also morally wrong to say that developing countries should not grow. They have a right to human life standards. They should also be able to enjoy universal education and healthcare services.

To conclude, economic growth will cause environmental damage in initial phase. Then there will be environmental protection. When a country becomes technologically advance, there will also be investment in climate friendly technologies which will help to create a better climate and at last, everybody will enjoy a higher life standard and will maintain a clean environment and this will be called sustainable development.