Economic Globalisation and the Environment electronic resource

88 Pages·1997·2.7 MB·English

by  Organisation for Economic Co-operation and Development

ECONOMIC
GLOBALISATION
AND
THE ENVIRONMENT
Economic Globalisation
and the Environment
ORGANISATIONFORECONOMICCO-OPERATIONANDDEVELOPMENT
ORGANISATIONFORECONOMICCO-OPERATION
ANDDEVELOPMENT
PursuanttoArticle1oftheConventionsignedinParison14thDecember1960,
andwhichcameintoforceon30thSeptember1961,theOrganisationforEconomic
Co-operationandDevelopment(OECD)shallpromotepoliciesdesigned:
-toachievethehighestsustainableeconomicgrowthandemploymentandarising
standardoflivinginMembercountries,whilemaintainingfinancialstability,and
thustocontributetothedevelopmentoftheworldeconomy;
-tocontributetosoundeconomicexpansioninMemberaswellasnon-member
countriesintheprocessofeconomicdevelopment;and
-tocontributetotheexpansionofworldtradeonamultilateral,non-discriminatory
basisinaccordancewithinternationalobligations.
TheoriginalMembercountriesoftheOECD are Austria,Belgium,Canada,
Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the
UnitedKingdomandtheUnitedStates.ThefollowingcountriesbecameMembers
subsequentlythroughaccessionatthedatesindicatedhereafter:Japan(28thApril1964),
Finland(28thJanuary1969),Australia(7thJune1971),NewZealand(29thMay1973),
Mexico (18th May 1994), the Czech Republic (21stDecember 1995), Hungary
(7th May 1996), Poland (22nd November 1996) and the Republic of Korea
(12thDecember1996).TheCommissionoftheEuropeanCommunitiestakespartinthe
workoftheOECD(Article13oftheOECDConvention).
Publieenfran5aissousletitre:
MONDIALISATIONfiCONOMIQUEETENVIRONNEMENT
Reprinted1998
©OECD1997
Permissiontoreproduceaportionofthisworkfornon-commercialpurposesorclassroomuse
shouldbe obtainedthroughCentreFranjaisd'Exploitationdu DroitdeCopie (CFC),
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FOREWORD
OECDEnvironmentMinistersrecogniseboththechallengesandtheopportu-
nitiesthateconomicglobalisationrepresentsfortheenvironment.Thisiswhy,
meetinginParisinFebruary1996,theyaskedtheOECDSecretariattoundertake...
“athoroughassessmentoftherelationshipsbetweenglobalisationandenviron-
mentalpolicies,includingpollutionpreventionandcontrolandthesustainableuse
ofnaturalresources,drawingonthefullrangeoftheOrganisation’scapabilitiesand
on-goingwork.Theaimistodeepenunderstandingofthelinkagesbetweenenvi-
ronmentalpoliciesandstructuralissues,includingcompetitiveness,employment,
investment,tradeandtechnology,andoftheextenttowhichpolicydevelopments
intheseareaspromotetheinternalisationofenvironmentalcosts.Areportshould
bepresentedtotheOECDCouncilMinisterialin1997.”
Thispublicationrespondstothatmandate.Itbeginsbyintroducingthemain
elementsoftheeconomicglobalisationprocess,includingaframeworkforlinking
theseelementstochangesinenvironmentalconditions.Itthenexaminesrecent
trendsineachoftheseelements,andhoweachmaybeactuallyaffectingthe
environment.TheCounciloftheOECDagreedtothederestrictionofthisreporton
May26,1997.
TABLEOFCONTENTS
Executivesummary 7
Introduction 2
Governance &
Competitiveness
‘Pollutionhavens”
Foreigninvestment
Hade
Sectoraleconomicactivities
Technology
Corporateenvironmentalstrategies
FuturedirectionsfortheOECD
Economicglobalisationandtheenvironment
1. Introductionandmainissues
Economicglobalisation:keycharacteristics
Equityissues
Globalisationandenvironment:mainissues
2. Governance
Market-basedpolicyconvergenceintheglobaleconomy
Internationalco-operation
3. Competitiveness
Perspectiveofthefirm
Perspectiveofindustry
Nationalcompetitiveness
Internationalcompetitiveness
4. Foreigninvestment
EnvironmentandFDI:themacro-economicperspective
EnvironmentandFDI:themicro-economicperspective
5. Trade
Environmentalimpactsoftradeliberalisation
Tradeeffectsofenvironmentalmeasures
Integrationofinternationalenvironmentalandtradeagreements
ECONOMICGLOBALISATIONANDTHEENVIRONMENT
6. Sectoraleconomicactivities 50
Deregulationandprivatisationinelectricitygeneration 50
Tradeinelectricity 51
EmergenceofIndependentPowerProducers 52
Energy-intensiveindustries 53
Deregulationoffreighttransport 53
Effectsoftradeliberalisationonfreighttransport 56
RegulatoryreformoftransportinCentralandEasternEurope 57
Effectsofagriculturaltradeliberalisation 58
Effectsofreformingagriculturalsupportprogrammes 60
7. Technologychange 63
Economicglobalisationandtechnologicalchange 63
Technologicalchangeandtheenvironment-intensityofproduction .... 64
Economicglobalisationandtheenvironment-intensityoftechnological
change 67
8. Corporateenvironmentalstrategies 69
Keystakeholdersincorporateenvironmentalperformance 69
Corporateenvironmentalresponses 72
9. FuturedirectionsfortheOECD 75
Notes 77
References 81
EXECUTIVESUMMARY
INTRODUCTION
Itisgenerallyagreedthateconomicactivityisbecomingmore“globalised”,
butthereislessagreementaboutwhatthiswillactuallymeanfortheaverage
citizen.Opinionsarethereforedividedaboutwhetherglobalisationwillultimately
begoodorbadoverallforsociety.
Thoseinfavourofglobalisationseethebenefitsmostlyineconomicterms
(especiallytheincreasedvolumeofworldoutput,incomesandemployment).Those
opposed seethe costsprimarilyin socialequityterms (especiallythealtered
distributionofworldoutput,incomesandemployment).Asalways,thepolicy
challengewillbetofindwaysofrealisingmostofthebenefits,whileavoidingmost
ofthecosts.
Economicglobalisationisdefinedhereasaprocessinwhichthestructuresof
seicvoenlyommiocremairnkteertnsa,titoencahlnoolvoegrietsi,mea.nIdngceonmemrualn,icgaltobiaolnisaptaitotnersnhsoubledcocmonetrpirbougtreesto-
theexpansionofworldeconomicoutput(scaleeffects).Itwillalsogenerateshiftsin
thecompositionandlocationofproductionandconsumptionactivities(structural
effects).Morespecifically,differenttechnologypathswillbepromoted(technology
effects),anddifferentproductmixeswillbeproducedandconsumed(product
effects).
Giventhatsignificantmarketfailuresalreadyoccurwithindomesticeconomies,
thesefailureswillbeevenhardertodealwithinamoreglobalisedeconomic
context,unlessadequategovernancestructuresareinplacetodealwiththem.
Thisbookexploreseconomicglobalisationfromtheparticularperspectiveof
theenvironment.Itspremiseisthatglobalisationisalteringthecontextofenviron-
mentalproblemsatthelocal,national,regional,andgloballevels.Thisisgenerat-
ingnewconcernsaboutthedevelopmentandimplementationofenvironmental
policy.Itisalsoopeningupnewopportunitiestopromoteenvironmentalobjectives
viathere-orientationofbotheconomicandenvironmentalpolicies.
Eachofthescale,structural,technology,andproducteffectsgeneratedbythe
globalisation process willalso generate environmentaleffects. Some ofthese
ECONOMICGLOBALISATIONANDTHEENVIRONMENT
effectsmaybeharmfulfortheenvironment;othersmaybebeneficial.Itisthenet
environmentaleffectthatisultimatelyofmostinterest.
Economicglobalisationisadifferentconceptfromthatofeconomicgrowth.
Globalisationcontributestoeconomicgrowth,butisonlyonecontributor.Popula-
tiongrowth,naturalresourceendowments,culturalheritage,etc.alsoplayimpor-
tantroles.However,itisdifficulttoquantifypreciselywhatproportionoftotal
economicgrowthcanbeattributedspecificallytotheglobalisationprocess.Simi-
larly,globalisationwillhaveimpactsonthebroadergoalofsustainabledevelop-
ment,butwillagainbeonlyoneofthedeterminantsofprogresstowardthisgoal.
Analysingtheenvironmentalconsequencesofglobalisationmustbedoneover
alongertimeframethanisrequiredformanyeconomicissues.Thisisessentially
becausetheeconomicbenefitsofpolicychangestypicallyappearmuchsoonerthan
theenvironmentalbenefitsdo.Adynamicandlong-termapproachtoanalysing
theseenvironmentaleffectsisthereforerequired.
Thereisconsiderableuncertaintyaboutthelong-termabilityoftheenviron-
menttowithstandthepressuresofeventhecurrentlevelofeconomicactivity,let
alonethelevelthatmightexistinacontinuouslyglobalisingeconomy.Ontheother
hand,globalisationmayalsoopenupopportunitiesforstructuraland/ortechnolog-
icalchangesthatcouldhelpinthesearchforsolutionsoverthelonger-term.
However,relyingonlong-termpayoffsfromstructural/technologicalimprove-
mentswouldbeariskystrategyfromtheenvironmentalperspective.Themain
sourceofthisriskisthatthelong-termenvironmentalconsequencesoftoday’s
economicbehaviourarepoorlyunderstood.Thisimpliesthattheenvironmental
effectsofglobalisationcannotbeviewedstrictlythroughthelensoftoday’seco-
nomicinterests.A“precautionaryapproach”isthereforerequired,totakeaccount
forthepossibilitythatcurrentperceptionsaboutfutureenvironmentalconditions
mayturnouttobewrong(andperhaps,verywrong).Ontheotherhand,theactual
levelof“precaution”tobeapplied,aswellastheparticularinstrumentstobeused
inimplementingthisapproach,bothneedtobeclearlythoughtout.
GOVERNANCE
Globalisationwillreducetheabilityofnationalgovernmentstoactunilaterally.
Notonlywillthedecisionsofindividualgovernmentshavelessimpactonglobal-
isedmarkets,therewillalsobeincreasedpressureongovernmentsnottoimperil
thecompetitivepositionoftheirownconstituentsbytakingunilateralaction.
Globalisationintensifiespressuresforbotheconomicperformanceandeco-
ngeonmciec).pTolhiecideesepinerdiafnfderebnrtoacdoeurnttrhieesletvoelboefcomamrekemtorineteaglriakteio(ne,.gt.hemagrrkeeattercotnhveesre-
tendencieswillbe.Inaddition,thelargertheshareofagivencountryinglobal
ECONOMICGLOBALISATIONANDTHEENVIRONMENT
tradeandcapitalflows,thegreatertheforcesofconvergencewillbetowardthe
economicpoliciesofthatnation.
OECDcountriesaresimultaneouslythe‘large-market”countries,andthemost
highlyintegratedones.Convergenceisthereforelikelytooccurbothwithinthe
OECDgroup,aswellasfromthedevelopingcountriestowardtheOECD.
The sameforcesleadingto economicpolicyconvergencealsoworkinthe
directionofenvironmentalpolicyconvergence.Someenvironmentalproductand
productionstandardsarethereforelikelytoconvergearoundan“OECDaverage”,as
wellas around industry-wide averages (inthe case ofinternationally-exposed
industries).
ThisimpliesthatwhattheOECDgroupdoestoaddresstheenvironmental
problemsassociatedwithglobalisationwillmatteralot.Inthisregard,OECD
“leadership"milbecritical.Italsosuggeststhatthepolicyreactionofanindividual
OECDcountrytotheenvironmentalconsequencesofglobalisationislikelytobe
“conditioned”mostlybypoliciesadoptedbyitsmajortradingpartners(generally,
theotherOECDcountries),ratherthanbypoliciesadoptedintheevelopingones.
OECDenvironmentalpolicyinnovationsmaythereforebeconstrainedbythe
needtoobtainagreementamongitsmajortradingpartners.Intheabsenceofsuch
agreement,environmentalpolicyinnovationsmaytendtoconvergearoundthe
statusquo. Unfortunately,maintainingthe status quomaynot be enough to
addressthefullrangeofenvironmentalproblemsthatcouldbeassociatedwith
globalisation.
Market-drivenpolicyconvergencewillreducecompetitivenessproblems,but
willnoteliminatethem.Competitivenessissueswillstill“condition”therequired
environmentalpolicyresponse.Inaddition,market-basedpolicyresponsesmight
notevenbesufficienttoaddresstheecologicalbasesofglobalisation/environment
problems.Thisisbecause:i)marketsoftendonotcaptureenvironmentalexternali-
tiesatall;ii)evenwheretheydocapturesomeoftheseexternalities,marketsare
typicallynotsensitivetolocalecologicalconditions;andHi)countrieshaveeven
lessreasontousemarketsasavehicleforinternalisingtransfrontier/globalexter-
nalitiesthantheydoforinternalisingdomesticones.
Forallthesereasons,someformofgovernmentinterventionwillcontinueto
benecessaryinamoreglobalisedeconomy.Thepreciseformthatthisintervention
shouldtakewilldependontheparticularcircumstancesathand.Fromtheperspec-
tiveofeconomicefficiency,anysuchinterventionshouldbemadeatthesamelevel
astheexternalityitself-thus,localexternalitiesshouldgenerallybeaddressedby
localresponses;globalonesshouldgenerallybeaddressedatthegloballevel.(Of
course,otherpolicygoals besides economicefficiency,such as environmental
effectivenessordistributiveissues,areoftenatstake,andcouldalterthisprinciple
incertainsituations).
.
ECONOMICGLOBALISATIONANDTHEENVIRONMENT
Inamoreglobalisedeconomy,theboundariesbetweenenvironmentaleffects
(externalities)and economiceffects (especiallycompetitiveness problems) will
becomelessdistinct.Inaddition,localenvironmentaleffectswillincreasinglyhave
internationaleconomicconsequences,andglobalenvironmentalproblemswillgen-
eratelocaleconomicimpacts.Thisimpliesthattheremaybenosuchthingasa
truly“national”environmentalexternality.
Ifthisisso,atleastthreetypesofgovernmentinterventionmaybewarranted:
i)nationalpoliciestointernalisetheenvironmentalcostsofthosedomesticexter-
nalitieswhichhavenointernationalcompetitivenessimplications;ii)co-operative
arrangements with othergovernments on common policies to address those
domesticenvironmentalexternalitieswhichdohaveinternationalcompetitiveness
implications;andHi)co-operativearrangementswithothergovernmentsoncom-
monpoliciesforaddressingtranslfontier/globalenvironmentalexternalities.
Thefirstcaseinvolvesonlynationalpolicies,andisnotdealtwithfurtherhere.
Thelattertwocasesimplysomeformofmultilateralco-operationaimedatresolv-
ingenvironmentalproblems.Thisco-operationwouldhaveseveraldefiningcharac-
teristics:i)itwouldnotnecessarilytargetinternationalenvironmentalexternalities;
itcouldalsocoverdomesticexternalitieswheresignificantinternationalcompeti-
tiveness concerns exist;ii)it would not onlyinvolve environmentalinterests;
indeed,thereasonsfortheco-operationinthefirstplacewouldoftenberelatedto
competitiveness(i.e.economic)problems,morethantoenvironmentalones;iii)it
wouldnotnecessarilyinvolveallcountries.Manyenvironmental(andcompetitive-
ness)problemshavemorerelevanceattheregionalscalethantheydoattheglobal
level.Evenintheparticularcaseofglobalenvironmentalissues,internationalco-
operationmightbemoreefficientifitwereorganisedatthesub-globallevel,given
thesignificanttransactioncoststhatcanbeassociatedwithinvolvingalarger
numberofcountries.
Internationalco-operationofthetypesuggestedherecouldtakevariousforms
(e.gvoluntaryactions,codesofconduct,guidelines,formalagreements,etc.).Afew
areasinwhichanyorallofthesedifferentformsmightbeconsideredforfuture
initiativesbytheOECDinclude:
• Newopportunitiesmayexistforreducingglobalisation-inducedenvironmen-
talproblemsinthecontextofregionaleconomicgroupings,suchasAPEC,
EU,NAFTAtheOECDitself,etc.Thesearrangementswouldbuildonthe
strengthofthe consensus-buildingapproach,andwould explicitlywork
towardtheintegrationofcompetitivenessandenvironmentalissues.
Opportunitiesprobablyexistforimprovedintegrationofthecompetitive-
ness/financialandenvironmentalobjectivesofkeyinternationalorganisa-
10 tions(UNEP,WorldBank,EBRD,etc.).