Globalization and Environment

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Globalization and Environment

• Steve Colt
• UAA Institute of Social and Economic Research
• Version Fall 2003

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Two Perceived Problems

• Growth, itself
• Running out of resources
• Ruining the Environment
• Trade
• Trade promotes growth (see above)
• Pollution Havens / exporting pollution
• Race to the Bottom
• WTO etc. ignore environmental costs

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Two REAL problems

• Poverty
• 1.2 Billion people live on less than 1/day
• Human-Dominated Ecosystems
• 42 of Earths annual production of plant
  material is used by people
• (Pimm 2001)
• Climate is changing faster than ever before

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Growth has Three Effects

• How Much is Produced?
• World CO2 emissions continue to rise with world
  economy
• What is Produced?
• Massages vs. Steel
• How are things produced?
• Carbon Monoxide down due to catalytic converters

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Growth Are we running out of resources

• Prices signal scarcity
• Prices motivate consumers to substitute
• Prices motivate producers to find more
• Prices justify innovation and use of alternatives
  (PVC pipe, )

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Declining Intensity of Jet Engines
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(No Transcript)
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Growth

• 2) Growth wrecks the planet

Source World Bank, Greening Industry
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Growth Example China
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Growth Example China

• Economic output doubling every decade,
  concentrated in urban areas
• (how much / scale)
• People switching from bicycles to cars and from
  rice to meat
• (what / composition)
• Slow switch from coal to natural gas, controls on
  particulates
• (how / technique)

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Switching from Coal to Gas has other Implications
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Growth in China Effects
Source World Bank, Greening Industry
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World Growth How Much
Source World Bank, Globalization Growth and
Poverty
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World Growth What?
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World Growth How?
Source World Bank, Greening Industry
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World Growth Mixed News
Examples of estimated changes in pollution as
income increases. (Panatayou 2000)
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Trade Exporting Pollution?

• Easier trade certainly allows rich countries to
  export pollution in theory
• Should countries be allowed to trade off more
  pollution for more income?
• In practice, little evidence that they do.As
  income grows, pollution declines (frankel rose
  2003)

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Exporting Pollution or Technology?
Compliance with standards in Indonesia
manufacturing (green / blue / red / black scale)
Source Wheeler and Afsah 1996
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Adoption of Clean Technologyin Rich Countries,
Open LDCs, and Closed LDCs
Source World Bank, Greening of Industry
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Two Real Problems

• Poverty, itself
• Global Commons
• Oceans
• Climate System

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Poverty and Environment

• 1.2 billion people live on less than 1/day
• In Ghana
• 60 of urban people have no sewers
• 70 of energy from open wood burning
• 40 of people drink contaminated water
• Worldwide, waterborne diseases annually cause 11
  million childhood deaths
• 700 million people breathe smoke from open indoor
  fires (Todaro 2000)

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International Externalities (Global Spillovers)

• Particulates from China drift to Alaska in four
  days (ADN 12/7/98)
• US Demand for Shrimp kills Sea Turtles in
  Malaysia
• Russian Fleet takes half the Pollock in the
  Bering Sea
• Carbon Dioxide emitted anywhere warms the Arctic

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The Global Commons

• Owned by everyone
• Owned by No One
• Crucial part of our Human-Dominated Ecosystem
• Threatened by All
• Currently Lacks Effective Governance

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Growth Without Ruin

• Resource Use (including climate)
• Population x Affluence x Technology
• R L x y x I
• Growth rates (in ) add (as before!)
• gR gL gy gI

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Declining Intensity of Jet Engines
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Answers End Perverse Subsides

• UNEP estimates perverse subsidies at 500
  billion 1.5 trillion per yr
• Fisheries, forestry, agriculture
• Promotes too many boats chasing too few fish,
  mining the rainforest
• Puts huge pressure on the planet
• WTO allows exceptions for green subsidies

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Sustainable Growth Example

• gL 0 (stable population)
• gy 2 per yr
• gI -2 per yr
• Then, overall resource use R is constant
• gR 0 2 (-2) 0

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Answers Health-Led Development

• Conventional wisdom wealth causes health
• New wisdom Health causes wealth
• (Bloom, Science 18 Feb 2000)
• Productivity is the key link its hard to work
  when youre sick

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Answers Invest in High Payoffs

• UN Global Environment Facility (GEF) and Clean
  Development Mechanism
• Protect the planet wherever its cheapest to do
  so, through prevention
• 36 Rich countries funding 3 billion of GEF
  projects in poor countries (1998)

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Answers Informed Investors and Consumers

• Know what you own -- Peter Lynch, Fidelity
  Investments
• AK Permanent Fund top 10 stocks???
• Microsoft, GE, Citigroup, Pfizer, American Intl,
  JohnsonJohnson, ExxonMobil, Intel, Walmart, IBM
• Shade-grown coffee it sells
• Home Depot now buys only certified lumber

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Answers Tradable Greenhouse Gas Permits

• CO2 is not the only problem
• Methane is 25 times more potent
• Choose a target level of GHG emissions for entire
  planet
• Distribute permits to all (how?)
• Free trade in GHG permits

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Tradable Permits, cont.

• Follows Pay-to-Play (Polluter Pays) Principle
• Cheapest reductions (leaky gas pipelines) will
  occur first
• Stimulates technical innovation
• Start with equal numbers of permits per person?
  (Global Commons Institute)
• Carbon is already being traded

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References and Resources

• Frankel, Jeffrey A. and Rose, Andrew K., "Is
  Trade Good or Bad for the Environment? Sorting
  Out the Causality" (September 2003). Harvard
  University KSG Working Paper No. RWP03-038.
  http//ssrn.com/abstract456840
• Globalization, Growth and Poverty Building an
  
  Inclusive World Economy
• World Bank Policy Research Reports (2001)
• http//econ.worldbank.org/prr/subpage.php?sp2477
  
• Environment and Trade A Handbook
• UN Environment Program, et al. (2000)
• http//iisd.ca/trade/handbook.
• Global Environment and Trade Study (GETS)
• Tufts University
• http//www.gets.org/

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References and Resources

• Going Public On Polluters In Indonesia
• Bapedals PROPER PROKASIH PROGRAM
• David Wheeler and Shakeb Afsah
• World Bank Policy Research Dept (1996)
• http//www.worldbank.org/nipr/work_paper/proper/
• Greening Industry
• World Bank Development Research Group (2000)
• http//www.worldbank.org/research/greening/
• World Wildlife Fund (certification and
  ecolabeling programs)
• http//www.wwf.org
• Global Commons Institute
• http//www.gci.org.uk/main.html

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References and Resources

• United Nations Global Environmental Facility
  (GEF)
• http//www.gefweb.org/index.html
• Vanishing Borders Protecting the Planet in the
  Age of Globalization.
• Hilary French, Worldwatch Institute. (2000)
• http//www.worldwatch.org/