Copyright © 2013 Jonathan M. Harris Environmental and Natural Resource Economics 3rd ed. Jonathan M. Harris and Brian Roach Chapter 17 – Greening the Economy Copyright © 2013 Jonathan M. Harris

Figure 17.1: Environmental Kuznets Curve for Sulfur Dioxide Emissions The Environmental Kuznets Curve theory suggests that as nations develop, they will tend to experience increased pollution, but after a certain stage in development (here indicated as about $4,000 per capita GDP) pollution levels will decline due to improved technology and better policy measures to control pollution. Evidence suggests that this may be true for certain pollutants, such as sulfur dioxide, but not for others such as carbon emissions. In addition, very large volumes of pollutants, including pollutants with cumulative or irreversible effects, could be emitted before the turning point is reached. Source: Adapted from Panayotou, 1993. Note: GNP = gross national product; kg = kilogram; SO2 = sulfur dioxide.

Figure 17.2: GDP and Carbon Dioxide Emissions (2008 data) It appears that there is no “turning point” for carbon dioxide emissions. As GDP per capita increases, CO2 emissions also increase, with some variance in the data but no observed change in the trend up to $80,000 per capita. Source: World Bank, World Development Indicators database, http://data.worldbank.org/data-catalog/world-development-indicators Note: CO2 = carbon dioxide; GDP = gross domestic product; PPP = purchasing power parity.

Figure 17.3a: Global Real GDP and Carbon Dioxide Emissions, 1961-1978 For 1961 to 1978 global carbon dioxide emissions increased at almost the same rate as global GDP. Source: World Bank, World Development Indicators database, http://data.worldbank.org/data-catalog/world-development-indicators. Note: CO2 = carbon dioxide; GDP = gross domestic product.

Figure 17.3b: Global Real GDP and Carbon Dioxide Emissions, 1979-2008 But from 1979 to 2008, carbon dioxide emissions were “decoupled” from GDP growth to some extent. While CO2 emissions continued to rise, they did so at a significantly slower rate than global GDP. In recent years, there seems to be less of a decoupling effect, probably due to rapid emissions growth in China. Source: World Bank, World Development Indicators database, http://data.worldbank.org/data-catalog/world-development-indicators.

Figure 17.4: Absolute Decoupling – Real GDP and Carbon Dioxide Emissions in the United Kingdom, 1979-2008 An example of absolute decoupling of CO2 emissions is seen in the United Kingdom from 1970 to 2008. Although GDP increased steadily, CO2 emissions actually decreased over this period. This was in part a result of a major shift in energy supply from coal to natural gas. This also does not account for “exported emissions” – emissions in other countries to prodcue goods that are imported into the UK. Source: World Bank, World Development Indicators database, http://data.worldbank.org/data-catalog/world-development-indicators; example taken from Smith et al., 2010. Note: CO2 = carbon dioxide; GDP = gross domestic product.

Unwanted Byproduct (pollution) Figure 17.5: Straight-Line Process of Traditional Manufacturing Unwanted Byproduct (pollution) Production Processes Raw Material Final Product Waste Industrial ecology seeks to replace the “straight-line” perception of industrial processes as transforming raw materials into outputs and wastes with a view of industrial activity as a subset of broader ecosystems, attempting in part to replicate the self-regenerating character of those ecosystems. Waste Heat

Figure 17.6: Cyclical Production Processes of Industrial Ecology Secondary Product Secondary Production Recycling Byproducts Primary Production Captured Heat Raw Material There are many opportunities for introducing closed loops into industrial processes at the materials, manufacturing, consuming, and disposal stages. Materials can be recycled from a later back to an earlier stage of the production process. Recycling Primary Product Space/Water Heating

Figure 17.7: Recycling Rates in the United States, 1960-2010 Recycling rates in the United States have increased over the past five decades, with a generally higher rate of increase since 1990. Across the entire US municipal waste spectrum, about 1/3 of wastes by weight are recycled. Source: U.S. EPA, 2011.

Table 17.1: Pollution Control and Abatement Expenditures, Select Countries (data from mid-1990s) Country Pollution abatement and control expenditures (as a percent of gross domestic product) Austria 2.4 Netherlands 2.0 France 1.6 Germany United States Canada 1.1 United Kingdom 0.7 Pollution control expenditures are generally in the range of 1.0 – 2.0 percent of GDP, with expenditures in the United States in the middle of the spectrum, at 1.6%. Source: OECD, 2003.

Annual benefits (billions) Annual costs (billions) Table 17.2: Costs and Benefits of Major Federal Regulations, 2000–2010 Agency Number of rules Annual benefits (billions) Annual costs (billions) Department of Agriculture 6 0.9–1.3 1.0–1.34 Department of Energy 10 8.0–10.9 4.5–5.1 Department of Health and Human Services 18 18.0–40.5 3.7–5.2 Department of Homeland Security 1 < 0.1 Department of Housing and Urban Development 2.3 0.9 Department of Justice 4 1.8–4.0 0.8–1.0 Department of Labor 0.4–1.5 0.4–0.5 Department of Transportation 26 14.6–25.5 7.5–14.3 Environmental Protection Agency 33 81.7–550.4 23.8–29.0 Joint DOT and EPA 9.5–14.7 1.7–4.7 Total 106 136.2–651.2 44.2–62.2 An analysis of the costs and benefits of environmental regulation by the U.S. Office of Management and the Budget finds that the benefits of environmental regulations exceed the costs by a ratio of between 2.8:1 and 23:1. While EPA regulations impose about half of all Federal regulatory costs, they generate 60-85% of regulatory benefits. Source: U.S. OMB, 2011.

Percent Difference, Green vs. BAU Figure 17.7: Environmental and Economic Projections, Green Economy Scenario Versus Business-as-Usual 30 20 10 -10 -20 -30 -40 -50 -1 3 2 1 8 -3 -4 -8 16 14 21 -22 -13 Real GDP GDP per Capita Energy Demand Water Demand Forest Land Ecological Footprint -48 Percent Difference, Green vs. BAU 2015 2030 2050 A United Nations Environmental Programme (UNEP) model shows a “green” economic development path has slightly negative effects on GDP in the short term, but bring\ns increases in GDP per capita as well as substantial environmental improvements in the medium and longer terms. Investments in a green GDP path are job-intensive and bring particular benefits to the world’s poorest people who often depend on natural resources for their livelihoods. Source: UNEP, 2011a. Note: BAU = Business as Usual; GDP = gross domestic product.