Economic growth and the environment

Everett, Tim and Ishwaran, Mallika and Ansaloni, Gian Paolo and Rubin, Alex (2010): Economic growth and the environment.

Abstract

As the UK economy emerges from the downturn, attention is shifting to how best to return it to sustained and durable economic growth. But what does sustained and durable economic growth mean in the context of the natural environment? The UK and the global economy face significant environmental challenges, from averting dangerous climate change to halting biodiversity loss and protecting our ecosystems. There has been debate over whether it is possible to achieve economic growth whilst also tackling these challenges. This paper does not try to answer the question of what the sustainable level of economic growth might be, but instead examines the link between economic growth and the environment, and the role of environmental policy in managing the provision and use of natural assets. Many question the value of continued growth in GDP, given its limitations – including as a measure of wellbeing – and some evidence of its diminishing benefits within rich countries. However, it remains essential to support continued improvements in factors that affect people’s wellbeing, from health and employment to education and quality of life, and to help the government deliver on a range of policy objectives – economic, social, and environmental.

• Item Type: MPRA Paper
• Language: English
• Keywords: Environmental policy: Natural Environment: Natural Capital: Growth: Sustainable Growth:
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy

References

Albrecht J. (1998), “Environmental costs and competitiveness. A product-specific test of the Porter hypothesis”, working paper, University of Ghent.

Ambec S. and P. Barla, (2005), “Can Environmental Regulations be Good for Business? an Assessment of the Porter Hypothesis”, Cahiers de recherche 0505.

Arrow K. Bolin B., Costanza R., Dasgupta P., Folke C., Holling C.S., Jansson B., Levin S.,Mäler K., Perrings C. and D. Pimentel, (1996), “Economic growth, carrying capacity, and the environment.” Environment and Development Economics, 1, 104-110.

Berman E. and L. Bui (1998), “Environmental Regulation and Labor Demand : Evidence from the South Coast Air Basin”, National Bureau of Economic Research Working Paper No. 6776.

Department for Business, Enterprise and Regulatory Reform, (2008), “Material Security: Ensuring Resource Availability for the UK Economy”, BERR.

Bimonte S., (2009), “Growth and environmental quality: Testing the double convergence hypothesis”, Ecological Economics, 68, 2406–241.

Blazejczak J., Braun F. and D. Edler, (2009), “Global Demand for Environmental Goods and Services on the Rise: Good Growth Opportunities for German Suppliers”, German Institute for Economic Research, 5, 20, 138-145.

Braat L. and P. ten Brink, (eds) (2008), “The Cost of Policy Inaction: the case of not meeting the 2010 biodiversity target”, study for the European Commission, DG Environment.

Department for Business, Innovation and Skills, (2009a). “UK Trade and Investment.”, BIS.

Department for Business, Innovation and Skills, (2009b), “Towards a Low Carbon Economy – economic analysis and evidence for a low carbon industrial strategy”, BIS.

Carraro C., Massetti E. and L. Nicita (2009), “How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model” Fondazione ENI Enrico Mattei, Nota di Lavoro 08-2009, Milan.

Carraro C., De Cian E. and M. Tavoni, (2009), “Human Capital Formation and Global Warming Mitigation: Evidence from an Integrated Assessment Model”, CESIFO WP 2874.

Caviglia-Harris J., Chambers L., Dustin K. and R. James, (2009a), “Taking the “U” out of Kuznets: A comprehensive analysis of the EKC and environmental degradation”, Ecological Economics, Elsevier, 68(4), 1149-1159.

Choudhury K. and L. Jansen, (1997), Terminology for integrated resources planning and management. Rome, FAO, Soils Resources Management and Conservation. 59

Cimato F. and M. Mullan, (2010), “Adapting to Climate

CJC Consulting, (2003). “Economic Analysis of Forestry Policy in England” Report for Defra and HMT.

Davidson C., (2000), “Economic growth and the environment: alternatives to the limits paradigm”, BioScience 50:433–440.

Davis G. A., (1995), “Learning to love the Dutch disease: Evidence from the mineral economies”, World Development, 23(10), 1765–1779.

Department for the Environment, Food and Rural Affairs. (2007a). “An introductory guide to valuing ecosystem services”, Defra.

Department for the Environment, Food and Rural Affairs. (2007b), “Valuing the Benefits of Biodiversity”, Defra.

Department for the Environment, Food and Rural Affairs, (2008), “Sustainable development indicators in your pocket 2008.”, Defra.

Department for the Environment, Food and Rural Affairs (2009), “Government Economics Service: Review of the Economics of Sustainable Development”, Defra.

Department for the Environment, Food and Rural Affairs, (2010), “Recovery, Growth and the Environment”.

Department for the Environment, Food and Rural Affairs and Department for Energy and Climate Change, (2009), “Making the right choices for our future – An economic framework for designing policies to reduce carbon emissions”, Defra and DECC.

Department of Health (2004), “At least 5 a week: Evidence on the impact of physical activity and its relationship to health”, DoH.

Dietz S., (2000), “Does an environmental Kuznets curve exist for biodiversity?” Institut für Wirtschaftsforschung, Eidgenössische Technische Hochschule Zürich.

Dutt K., (2009), “Governance, institutions and the environment-income relationship: a cross-country study”, Environment, Development and Sustainability, 11:4, 705-723.

Easterlin R. A., (1974), “Does economic growth improve the human lot?”, Nations and Households in Economic Growth, Academic Press.

Eatherley D. and S. Slater, (2009), “Competitiveness Improvements Potentially Available from Resource Efficiency Savings”, report for Defra.

Economides G. and A. Philippopoulos, (2008), “Growth enhancing policy is the means to sustain the environment.” Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), 207-219.

Ekins P., (2000), “Economic Growth and Environmental Sustainability: The Prospects for Green Growth”, Routledge, London.

Frohwein T. and B. Hansjürgens, (2005), “Chemicals Regulation and the Porter Hypothesis: A Critical Review of the New European Chemicals Regulation”, Journal of Business Chemistry, 2, 1,19-36.

Frontier Economics, (2009), “Alternative policies for promoting low carbon innovation.” Report for Department of Energy and Climate Change.

Gerlagh R., (2008). “A climate-change policy induced shift from innovations in carbon-energy production to carbon-energy saving,” Energy Economics 30, 425-448.

Goulder L.H. and S. Schneider, (1999), “Induced Technological Change and the Attractiveness of CO2 Abatement Policies,” Resource and Energy Economics 21, 211-253.

Gray W. B. and R. J. Shadbegian, (1998), “Environmental Regulation, Investment Timing, and Technology Choice”, Journal of Industrial Economics 46:235-256.

Greenstone M., (1998), “The Marginal Effects of Environmental Regulations of the Manufacturing Sector: Evidence from the 1970 and 1977 Clean Air Act Amendments”, Princeton University.

Grossman G. M. and A. B. Krueger, (1993), Environmental Impacts of a North American Free Trade Agreement. In The Mexico-U.S. Free Trade Agreement, P. Garber, ed. Cambridge, Mass.: MIT Press.

Grossman G. M. and A. B. Krueger, (1995), “Economic Growth and the Environment”, The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 353-77, May.

Harris J M. and N. R. Goodwin, (2003), “Reconciling Growth and Environment”, GDAE Working Papers 03-03, GDAE, Tufts University.

Hamilton K. and M. Clemens, (1998), “Genuine Savings Rates in Developing Countries”, World Bank Environment Department.

Hamilton K., (2000), “Genuine Saving as a Sustainability Indicator”, World Bank Environment Department Papers No.77.

HM Government, (2009), “New Industry, New Jobs”, HMG.

HM Treasury, (2008), “Developments in the Economics of Wellbeing”, HMT.

HM Treasury, (2009), “The Green Book – Appraisal and Evaluation in Central Government“, HMT. Institute for Fiscal Studies, (2009), “Poverty and Inequality in the UK: 2009”, IFS Commentary 109 (ch 3), May 2009”.

Innovas, (2009). “Low Carbon and Environmental Goods and Services: an industry analysis.” Report for BERR. Interdepartmental Group on Costs and Benefits Air Quality Subject Group (2008).

IPCC, (2007). “Climate Change 2007: Synthesis Report. Contribution of Working Groups I, II and III Team, Pachauri, R.K. and Reisinger, A. (eds)]. IPCC, Geneva, Switzerland, 104 pp.

Jaffe A. B., Newell R. G. and R. N. Stavins, (2000), “Technological Change and the Environment ”, WP7970, National Bureau of Economic Research.

Jaffe A. B. and K. Palmer, (1997), “Environmental Regulation And Innovation: A Panel Data Study,” The Review of Economics and Statistics, MIT Press, 79(4), 610-619.

Jaffe A. B., Peterson S. R., Potney, P.R. and R. N. Stavins, (1995) “Environmental Regulation and the competitiveness of US Manufacturing: What does the evidence tell us?”, Journal of Economic Literature, 23, 132-163.

Jorgenson D. W. and P. J. Wilcoxen, (1990), “Environmental Regulation and U.S. Economic Growth”, The RAND Journal of Economics, 21-2, 314-340.

Kuznets S., (1934), "National Income, 1929-1932". 73rd US Congress, 2nd session, Senate document no. 124, 7.

Kuznets S., (1955), “Economic growth and income inequality,” American Economic Review, 49. l-28.

Layard R., (2005), “Happiness: Lessons from a new science”, Penguin, London.

Lewis W. A., (1954), “Economic Development with Unlimited Supply of Labour”, The Manchester School,. 22, 2:139-91.

Maddison A., (2008), “Historical Statistics for the World Economy: 1-2006 AD.” Groningen Growth and Development Centre.

Magnani E., (2000), “The Environmental Kuznets Curve, environmental protection policy and income distribution”, Ecological Economics 32, 431–443.

Meadows D. H., Meadows D. L., Randers J. and W. W. Behrens, (1972), “The Limits to Growth”, Universe Books.

Meadows D., Randers, J. and D. Meadows, (2004), “A Synopsis: Limits to Growth, The 30 Year Update”.

Meyer S. M., (1992), “Environmentalism and economic prosperity: testing the environmental impact hypothesis, MIT Mimeo.

Meyer S. M., (1993), “Environmentalism and Economic Prosperity: Testing the Environmental Impact Hypothesis.”, Working Paper. Cambridge, MIT.

Millennium Ecosystem Assessment, (2003), “Ecosystems and Human Wellbeing: Current State and Trends Assessment”, Island Press, Washington DC. Millennium Ecosystem Assessment,

Millimet D. L., List J. A. and T. Stengos, (2003), “The Environmental Kuznets Curve: Real Progress or Misspecified Models?,” The Review of Economics and Statistics, MIT Press,. 85(4), 1038-1047.

Natural England, (2009), “No Charge? Valuing the Natural Environment”,

OECD, (1995), “Monitoring the World Economy 1820-1992”, OECD, Paris.

OECD, (2001), “The World Economy: A Millennial Perspective”, OECD, Paris.

OECD, (2007). “OECD Environmental Data Compendium.” OECD, Paris.

Ono T. (2001), “The Effects of Emission Permits on Growth and the Environment” in Environmental and Resource Economics 21, 75-87.

Office for National Statistics, (2009a), “Environmental Accounts 2009.” ONS.

Office for National Statistics, (2009b), “Annual Business Enquiry.” ONS.

Palmer K., W. E. Oates and P.R. Portney, (1995), “Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?” Journal of Economic Perspectives 9:119-132.

Panayotou T., (2000), “Economic Growth and the Environment.” CID Working Papers 56, Center for International Development at Harvard University.

Peterson S., (2003), “The EU Emission Trading Scheme and its Competitiveness Effects for European Business: Results from the CGE Model DART”, Kiel Institute for World Economics.

Porter R. H., (1991), “A Review Essay on Handbook of Industrial Organization,” Journal of Economic Literature, American Economic Association, 29(2), 553-72.

Porter M. E. and C. van der Linde, (1995), “Towards a New Conception of the Environmental- Competitiveness Relationship”, Journal of Economic Perspectives 9, 97-118.

Ranjan R. and J. Shortle, (2007), “The environmental Kuznets curve when the environment exhibits hysteresis.” Ecological Economics, Elsevier, 64(1), 204-215.

Reid A. and M. Miedzinski, (2008), “Sectoral Innovation Watch in Europe-Eco-Innovation – Final Report.” Europe Innova, Brussels.

Selden T. M. and D. Song, (1994), “Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?” Journal of Environmental Economics and Management, Elsevier, 27(2), 147-162.

SQW, (2007), “Exploring the relationship between environmental regulation and competitiveness – Literature Review. Final Report to the Department for Environment Food and Rural Affairs”, Defra.

Stern D., (2004), “The Rise and Fall of the Environmental Kuznets Curve.” World Development, Elsevier, 32(8), 1419-1439.

Stern N., (2006), “Stern Review: The Economics of Climate Change.”, Report for HMT.

Stevenson B., and J. Wolfers, (2008), “Economic growth and subjective wellbeing: Re-assessing the Easterlin Paradox”, NBER Working Paper No.14282.

Stewart R. B., (1993), “Environmental Regulation and International Competitiveness”, The Yale Law Journal,102-8, 2039-2106.

Stiglitz J. E., Sen A. and J.-P. Fitoussi, (2009), "Report on the Measurement of Economic Performance and Social Progress".

Tobey J., (1990), “The effects of domestic environmental policies on patterns of world trade: an empirical test”, Kyklos 43, 2, 191-209.

Turner R. K., Morse-Jones S., and B. Fisher, (2007), “Perspectives on the ‘Environmental Limits’ concept: A report to the Department for the Environment, Food and Rural Affairs”, CSERGE, Norwich.

Tzouvelekas V., Vouvaki D. and A. Xepapadeas, (2007), “Total Factor Productivity Growth and the Environment: A Case for Green Growth Accounting.” FEEM Working Paper Series, 42.

UKCP09, (2009), “UK Climate Projections: Briefing Report”, UKTI.

UKTI, (2009), “Living and Working in the UK.” UKTI.

USDA, (2008), “Real GDP (2005 dollars) Historical.” USDA.

Wagner M., (2003), “The porter hypothesis revisited: a literature review of theoretical Models and empirical tests”, Centre for Sustainability Management, Universitat Luneburg.

WHO, (2009), “Environmental burden of disease: Country profiles.” WHO.

Wiedmann T., Wood R., Lenzen M., Minx J., Guan D. and J. Barrett, (2008), “Development of an Embedded Carbon Emissions Indicator – Producing a Time Series of Input-Output Tables and Embedded Carbon Dioxide Emissions for the UK by Using a MRIO Data Optimisation System”, Report to DEFRA by Stockholm Environment Institute at the University of York and Centre for Integrated Sustainability Analysis at the University of Sydney. Defra, London, UK.

WRAP, (2008), “The Food We Waste”, WRAP.

WRAP, (2009), “Meeting the UK climate change challenge: The contribution of resource efficiency”, WRAP Project EVA128. Report prepared by Stockholm Environment Institute and University of Durham Business School, WRAP.

Xepapadeas A. and A. de Zeeuw, (1999), “Environmental Policy and Competitiveness: The Porter Hypothesis and the