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The Environment and Economic Growth

By: Lexi Prochniak and Julia Jane Duggan

Though a growing economy is usually a sign of productivity and prosperity, it does come with a  cost. As the economy has grown and evolved, the use of greenhouse gases has increased significantly as well. There is undoubtedly a positive correlation between economic growth and greenhouse gas emissions. One of the biggest concerns regarding today’s global climate is the impact of fossil-fuel consumption on the environment. The byproduct of utilizing coal and oil is the release of carbon dioxide into the atmosphere, which has polluted the Earth and increased the greenhouse effect. As a result, the planet’s temperature has been rising at a constant rate, affecting many things from rising sea levels to agricultural disruptions. These issues have created speculation about whether or not long-run economic growth can continue while decreasing the use of greenhouse gases. Most economists think this is possible, but not without government intervention and protection on the environment.

Developing countries play a large role in the issue of climate change. As underdeveloped countries become more advanced, their use of greenhouse gasses will inevitably increase. However, if a commitment to environmentally friendly policies is made as these countries develop, detrimental effects to the environment could be greatly lessened. Not only could emissions and energy use be reduced, but jobs could be created in environmental fields, boosting the economy. Though this sounds like an ideal step towards reducing greenhouse gas emissions, there is a great lack of funding needed for these types of projects, as seen in the figure below. Due to the potential benefits of implementing these, a concerted effort should be made to finance the implementation of environmentally friendly technologies and policies.

Global Economic Symposium, FRED, and EPA

18 thoughts on “The Environment and Economic Growth

  1. ingramk20

    While I fully agree about government intervention, I think it goes beyond that. Climate change mitigation is a public good, meaning that every country benefits from mitigation even if they do nothing. Countries will free-ride to avoid the costs of mitigation. Therefore, less mitigation will occur than is efficient. Climate change will require more multilateral action facilitated by international institutions like the UN. The point you guys raised about developing countries is really great. I wonder how sustainable development can be used so long-run economic growth (which will literally raise the standard of living of millions of people) doesn't have to be compromised for developing nations like China and India. They have historically contributed little to the problem (until recent years) and so while obviously they still have to curb emissions, members of advanced economies can't remove ourselves from the issue which we have primarily created.

  2. bernsteinl20

    Where do you think the initial drive to make this change should come from? Does it need to start with government intervention or with more grass root movements and new businesses expanding the environmental field? I am also wondering about the balance of whether this should come from big businesses or do smaller changes from everyday people (like taking shorter showers and carpooling to work) makes a better difference?

  3. Mariam Samuel

    With the Trump administration's end on EPA's Clean Air Act, this data is even more concerning. Not only are we as a developed country a source of the most environmental destruction, we are now pushing away from a commitment to environmental cautiousness. Instead of leading a movement, the end of this policy will now making it easier for fossil fuel companies to reclassify power plants in order to dodge the regulation standards. I can only see this data trend to continue with the current political agenda.

  4. riversc20

    I agree government intervention is vital, and I found the comment Katherine made about climate mitigation being a public good, therefore countries are tempted to free-ride rather than pay to do it themselves. Despite how expensive it is, I think if a multitude of companies step up and make even small strides towards more environmentally-friendly means of production, a small effort by many could combine to make a huge difference. Yes, companies will have to spend money now, but it will pay for itself later. Not to mention many companies can and would use their new earth-friendly methods and products as a marketing tactic, causing them to sell more as well.

    1. the prof

      Natural gas is displacing coal, and that shift is keeping prices low and helping the environment. But a carbon tax would be even better, because it would discourage energy use without mandating a particular technology. However, energy isn't the only CO2 source, agriculture is a big contributor, and forestry as well. When we in the US import tropical hardwoods to make into (beautiful) flooring and cabinets, that's often through clearcutting which eliminates swathes of natural carbon sinks.
      By the way, cap-and-trade was originally a Republican policy. After years of fighting they managed to get various modest pieces through Congress against Democratic opposition. It's thus odd to hear Republicans labeling such policies as "extreme liberal" measures.

  5. bullr20

    Do you think the sort of change you are advocating for should be spearheaded by the government or by private market forces? Currently, governments have very little incentive to reduce their own CO2 emissions, and Trump's administration renders the likelihood of federal intervention in the US slim. Perhaps consumers could demand low carbon goods and attempt to reduce their own carbon footprint without the aid of the government... What sort of marketing campaign would incentivize this?

  6. skinnerf20

    I don't think we can expect developing nations to curb economic growth to better the environment because ultimately, the view is that economic growth is a problem of the present and environmental implications is a problem of the future. The only way these countries will allow for environmental regulations is if their growth is not hindered, a very complicated issue to manage. It will take the prioritization of environmental concerns from a coalition of developed nations to properly aid developing nations' industrialization in an environmentally friendly manner.

    1. the prof

      Developing countries face horrendous air pollution and also the side effects of deforestation. Fossil fuels are also expensive and in many countries imported. So it turns out that much of the world is moving towards better environmental protection. However, if their GDPs are growing quickly, growth will dominate policies to lower the carbon burden per unit of GDP and the total greenhouse gas impact won't improve.

  7. minsong20

    There is hope that developing nations can make a big contribution to climate health because they tend to jump to the newest technology (few landlines in developing nations). If the established economies like the US can make advances in climate friendly tech, then maybe the developing world will not make the same environmentally unfriendly growth.

  8. croughanm20

    It worries me that the only countries that will really attempt to mitigate our effect on the environment are those that are already heavily developed. As we can see from U.S. economic growth over the years, the importance of mitigating greenhouse gas emissions pales in comparison to the immediate financial benefit that lies ahead. As other countries begin to develop, they will be inherently attracted towards advancing their industries more than limiting their carbon footprint. The United States needs to see this as our responsibility to guide these developing nations to develop their economy while simultaneously respecting the world around them.

  9. scottm20

    The data between growing economies and environmental pollution is a bit of a shock every time I look at a new research study or press release. I believe we must begin to seek out sustainable alternatives and implement policies that take our environment into deeper consideration. However, playing devil’s advocate, association does not necessarily imply causation. While the data shows similar positive, linear curves of increasing growth, net domestic product and global carbon emissions from fossil fuels are not necessarily interdependent. I would argue that economic growth can be sustained while reversing the carbon emission trend. With proper technological advancements/installments, developed nations have the resources to enact wide-range implementation. If properly taken advantage of, as alluded to in the blog post, economies should be able to reap the rewards of a plethora of job openings and new revenue sources. -Griffin Scott

  10. calihanj20

    Developing countries causing a lot of pollution is a perplexing issue. Ideally, you would want countries to be producing at a sweet spot where they produce as much as possible or economically viable until the environmental cost of producing something exceeds the economic gain from producing it. However, there are both national and international reasons why this isn't the case. On a national level, unless regulations are in place, companies will produce more product even if the environmental costs exceed the economic gain because the environmental externality affects everyone so they only have to bear a small portion of that externality. So a company's sweet spot is different than a country's sweet spot. So the seemingly obvious answer is for the country to implement regulations to insure that the environmental cost doesn't exceed the economic gain. However, environmental externalities affect the whole world, so a country is only going to bear certain portion of their environmental externalities. Therefore, the international sweet spot is different than the national sweet spot, so developing countries will not put in place regulations that ensure global environmental costs of producing don't exceed economic gain. Therefore, there would have to be some kind of international regulations to solve this problem, but it is unclear how these would be put in place and what the consequences of implementing them would be.

  11. Faith E. Pinho

    Sure, "developing countries" will impact the environment, but they are hardly the greatest offenders. The U.S., China and other large, populated, highly industrial countries are making the largest negative effects on the environment. In fact, many developing countries have better environmental practices than we do in the U.S., simply because they do not have the damaging industries and factories that we have had for years. Putting too much emphasis on the environmental impact of developing countries takes away necessary focus on countries such as the U.S.

  12. dodsonm20

    What is the rate at which the temperatures are increasing? Also I don't know if it is appropriate to allocate serious funding to environmentally friendly policies since the period in which the temperature change has only occurred for a small portion of the entire earth's life span. The Earth is much older than a hundred years so change that has taken place for less of a time period might not be significant to make substantial policy changes.

    1. the prof

      Aye, but while we know there's a lot of variability in global climate, we also have a good understanding of thermodynamics: if you keep the sun's energy from radiating back into space, the earth will warm. That was already known in the 1930s, before greenhouse gas levels skyrocketed to those today. Today we have a rapidly improving ability to model the more complex interactions of cloud cover, ocean temperature and so on to link the fundamental 1930s insight to how and where and when that will lead to measurable climate change.
      There are cost-benefit issues (how much are long-term benefits) and equity issues (should the rich world, which generated most of the incremental CO2 during our "industrialization" be asked to pay more). None of these are simple issues.

  13. the prof

    To all: take an environmental studies course!
    These issues are complex, as are the policy tradeoffs. To give another example: deforestation has a large impact on the carbon cycle, and we love our beautiful hardwood floors and cabinets. And our beef – that's another part of the carbon cycle. Some of this means that while we're the cause, the change isn't in the US, or comes as a decrease in absorption of CO2 rather than an increase in emissions.

  14. pollarde

    While developing countries do begin to use more greenhouse gases as they grow, there is no doubt that global superpowers like the United States and China are the largest environmental offenders. However, the US and China are countries with enough economic stability to create many jobs in environmental fields, its just a matter of the government shifting their funding to these areas. Think of all the jobs and environmental benefits that could come from making the production of solar panels, windmills, etc. a major US industry.

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