Environmental Kuznets Curves: A Study on the Economic Theory and Political Economy of Environmental Quality Improvements in the Course of Economic Growth

209 Pages·1999·7.319 MB·English

by  Michael P. Vogel (auth.)

Lecture Notes in Economics
and Mathematical Systems 469
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Springer-V erlag Berlin Heidelberg GmbH
Michael P. Vogel
Environmental
Kuznets Curves
A Study on the Economic Theory
and Political Economy of
Environmental Quality Improvements
in the Course of Economic Growth
Springer
AuLhor
Michael P. Vogel
Institute of Theoretical Economics
University of Kiel
Wilhelm-Seelig-Platz 1
D-24098 Kiel, Germany
Llbrary of Congress Cataloglng-ln-Publlcatlon Data
Vogel. Michael P .• 1967-
Envlronmental Kuznets Curves : a study on the economic theory and
polltlcal economy of envlronmental quallty lmprovements In the
course of economic growth I Mlchael P. Vogel.
p. cm. -- (Lecture notes In economlcs and mathematlcal
systems. ISSN 0075-8442 ; 469>
Includes blbllographlcal references.
ISBN 978-3-540-65672-2 ISBN 978-3-642-58517-3 (eBook)
DOI 10.1007/978-3-642-58517-3
1. Pollutlon--Economlc aspects--Mathematlcal models.
2. Envlronmental economlcs--Mathematlcal models. 3. Economic
development--Mathematlcal models. 1. Tltle. II. Serles.
HC79.P55V64 1999
333.7--dc21 99-19796
CIP
ISBN 978-3-540-65672-2
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This book is dedicated
to my parents,
who still don't know what Environmental Kuznets Curves are,
and to Tina,
the most wonderful determinant of the quality of my environment.
Acknowledgements
Environment to each must be
all there is) that isn't me.
The universe) in tum) must be
all that isn(t me AND ME.
R. Buckminster Fullerl
The text of this book has been accepted by the Faculty of Economic and
Social Sciences of the University of Kiel, Germany, as a doctoral thesis in
Theoretical Economics. It won the Faculty's 1998 Erich Schneider Memorial
Award.
In the course of the three years which it took me to complete this piece of
research, many people have contributed to it, or supported me in one way or
another. I want to take this opportunity to express them my gratitude and
appreciation.
First of all, I wish to thank my supervisor, Professor Horst Herberg, for
many fruitful discussions, his constructive criticism, and his general support
of my project. I also benefitted a lot from his courses in Advanced
Mathematics and Microeconomics, and from the work environment he
provided me with. As well, I would like to thank my co-supervisor, Professor
Rolf Langhammer (Kiel Institute of World Economics), for many useful
tips, reading recommendations, and his interesting course in Development
Economics.
Deeply indebted I am to Klaus WaIde (now World Bank) for coaching and
mentoring me at the earlier stages of my thesis. I also greatly enjoyed our
continuous intensive exchange and discussion of ideas. For their critical
remarks and suggestions, as well as for their helpfulness, I am further grateful
to Frank Bulthaupt, Uwe Rentmeister, Frank Stahler, Feng Wei, Gerald
Wogatzki, and the other participants of the Seminar in Theoretical
Economics.
A number of academic teachers contributed to this book in more indirect
ways: Professor David Pearce (University College London) made me familiar
with the concept of Environmental Kuznets Curves; Malcolm Pemberton
(University College London) and Professor Michael Rauscher (now
1 From the poem "Cosmic Plurality" in: Fuller (1983), p. 37.
VIII Acknowledgements
University of Rostock) introduced me to the world of dynamic optimisation;
to Professor Wilfed Beckerman (Balliol College, Cambridge/U.K.) lowe my
first insights into environmental ethics; and Professor Wolfgang Deppert
(University of Kiel) inspired me with his courses in Theory of Science and
Systems Theory.
For their help and the good co-operation I thank Gaby Biinz, Anita Hartz,
and the library staff of the Kiel Institute of World Economics.
A very special mention deserve Ariane, Jan, Kirsten, Ole, Tim, Tini and of
course Tina for their invaluable moral support and the great time they gave
me in Kiel.
Finally, the people to whom lowe the most are my parents. In order to
avoid a long "Without them ... " enumeration at this point, I simply wish to
thank them for all they have done for me.
Hamburg, September 1998
Contents
Acknowledgements .......................................................................... Vll
1 Introduction. .................................................................................. 1
1.1 Why Does the Environment Matter? ........................................... 2
1.2 Patterns of Environmental Change ............................................. 5
1.2.1 Data and Techniques ..................................................... 5
1.2.2 Continued Environmental Deterioration ........................ 7
1.2.3 Continued Environmental Improvements .................... 10
1.2.4 Environmental Kuznets Curves .................................... 11
1.3 Objectives and Methodology .................................................... 14
1.4 Overview of this Study ............................................................. 16
2 Economic Determinants of Environmental Quality
Changes ......................................................................................... 21
2.1 Emission Accounting ............................................................... 22
2.2 Unintentional Emission Reductions ......................................... 26
2.2.1 Structural Change ........................................................ 26
2.2.2 Price Shocks ................................................................ 27
2.3 Intentional Emission Reductions .............................................. 30
2.3.1 Opportunity Cost ........................................................ 30
2.3.2 Materialism Versus Post-Materialism ........................... 31
2.4 Valuing Environmental Quality Improvements ......................... 33
2.4.1 Assumptions of the Model ........................................... 33
2.4.2 Shadow Prices as Opportunity Costs ............................ 35
2.4.3 Shadow Prices as Net Present Benefits ......................... 36
2.4.4 "Green" Net National Product ...................................... 38
2.4.5 Environmental Quality as a Flow ................................. 41
2.5 The Emergence of Demand for Pollution Reductions ............... 43
2.5.1 Corner Solutions of Abatement .................................. .43
2.5.2 Abatement Spending in the Course of Growth ............ .45
2.5.3 Emissions and Pollution in the Course of Growth ....... .47
2.5.4 Explaining the N-Curve of Fecal Coliform ................... 50
2.6 Concluding Remarks ............................................................... 51
x Contents
Appendix ........................................................................................ 52
A: The Pollution Stock ............................................................. 52
B: The Implicit Abatement Function (Stock Model) ................. 52
C: The Implicit Abatement Function (Flow Model) .................. 53
D: The Implicit Emission Function .......................................... 54
3 Environmental Preferences, Socially Optimal Growth,
and Pollution ............................................................................... 55
3.1 The General Model and its Dynamics ........................................ 56
3.1.1 Assumptions of the General Model .............................. 56
3.1.2 The Social Optimum ................................................... 58
3.1.3 Environmental Quality and Growth in the
Development Phase ..................................................... 59
3.1.4 The Environment Phase ............................................... 62
3.2 Extension to n Dimensions of Environmental Quality .............. 65
3.3 Functional Forms for Utility and Environmental Quality .......... 68
3.3.1 Assumptions and Optimum Conditions ....................... 68
3.3.2 The Development Phase ............................................... 70
3.3.3 The Environment Phase ............................................... 71
3.3.4 The Post-Environment Phase ....................................... 74
3.4 Is Environmental Quality a Luxury? ......................................... 76
3.4.1 Essential and Necessary Goods ..................................... 76
3.4.2 Engel Curves ............................................................... 77
3.4.3 Preferences, Prices and Technology .............................. 78
3.4.4 Why Environmental Quality Is Not An
Ordinary Good ............................................................ 80
3.5 Concluding Remarks ................................................................ 81
Appendix ......................................................................................... 83
A: Concavity of the Generalised Hamiltonian ........................... 83
B: Global Saddle-Point Stability in the Development Phase ....... 84
C: Boundedness of Intertemporal Utility .................................. 85
D: Capital Growth in the Environment Phase ........................... 85
E: Abatement in the Environment Phase .................................. 88
Contents XI
4 Income Distribution, Desired Environmental Policy,
and Green Middle-Class Elitism. ............................................ 89
4.1 Environmental Policy and Environmental Quality. .................... 90
4.1.1 Public Goods and their Provision by the Government .. 90
4.1.2 Abatement and the Pollution Tax ................................. 91
4.2 Distributional Inequality and Pollution ..................................... 93
4.2.1 Assumptions about the Consumer Side ........................ 93
4.2.2 The Households' Environmental Policy Choice ............ 95
4.2.3 Does Distributional Inequality Matter for Desired
Policy? ......................................................................... 96
4.3 The Middle Class and Environmental Protection Issues ............. 98
4.3.1 The Middle Class as Environmental Elite ..................... 99
4.3.2 Distribution and Public Support of Environmental
Policy ........................................................................ 100
4.4 Sensitivity of Income to Environmental Policy Changes .......... 101
4.4.1 Assumptions about Income Level and Composition ... 101
4.4.2 The Households' Environmental Policy Choice .......... 102
4.4.3 The Income Level Effect ............................................ 103
4.4.4 The Income Composition Effect ................................ 104
4.4.5 The Middle Class as Environmental Elite (1) .............. 105
4.4.6 A More General Interpretation of Assumptions and
Results ...................................................................... 105
4.5 A Private Supplement to Public Environmental Quality .......... 106
4.5.1 Private Defensive Expenditure ................................... 108
4.5.2 Policy Choice when Defensive Expenditure is Fixed ... 110
4.5.3 The Middle Class as Environmental Elite (2) .............. 112
4.6 Concluding Remarks .............................................................. 112
Appendix ....................................................................................... 113
A: Sufficiency of First-Order Condition. ................................. 113
B: The Income Level Effect .................................................... 114
C: The Income Composition Effect ........................................ 115
D: Defensive Expenditure and Its Opportunity COst.. ............. 116
E: Desired Tax Rate and Fixed Defensive Expenditure ........... 116