Environmental Kuznets curves—real progress or passing the buck ...

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Environmental Kuznets curves—real progress or passing the buck ...


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Ecological Economics 25 (1998) 177–194


Environmental Kuznets curves—real progress or passing the


A case for consumption-based approaches

Dale S. Rothman *

Enironment Canada’s Enironmental Adaptations Research Group and the Uniersity of British Columbia’s Sustainable Deelopment R

esearch Institute, B5-2202 Main Mall, Vancouer, BC V6T 1Z4, Canada


Recent research has examined the hypothesis of an environmental Kuznets curve (EKC)—the notion that

environmental impact increases in the early stages of development followed by declines in the later stages. These

studies have focused on the relationship between per capita income and a variety of environmental indicators. Results

imply that EKCs may exist for a number of cases. However, the measures of environmental impact used generally

focus on production processes and reflect environmental impacts that are local in nature and for which abatement is

relatively inexpensive in terms of monetary costs and/or lifestyle changes. Significantly, more consumption-based

measures, such CO 2 emissions and municipal waste, for which impacts are relatively easy to externalize or costly to

control, show no tendency to decline with increasing per capita income. By considering consumption and trade

patterns, the author re-examines the concept of the EKC and proposes the use of alternative, consumption-based

measures of environmental impact. The author speculates that what appear to be improvements in environmental

quality may in reality be indicators of increased ability of consumers in wealthy nations to distance themselves from

the environmental degradation associated with their consumption. © 1998 Elsevier Science B.V. All rights reserved.

Keywords: Environmental Kuznets curves; Consumption; Trade; Environmental impact measures

1. Introduction

Will we grow out of our environmental problems?

Is the fastest road to a clean environment

* Tel: +1 604 8221685; fax: +1 604 8229191; e-mail:


along the path of rapid development and increased


These are the underlying questions raised by

research done on what is called the environmental

Kuznets curve (EKC) hypothesis. The basic notion

of this hypothesis is that resource use increases

and environmental degradation worsens

during the early stages of development, to be

0921-8009/98/$19.00 © 1998 Elsevier Science B.V. All rights reserved.

PII S0921-8009(97)00179-1


D.S. Rothman / Ecological Economics 25 (1998) 177–194

1 The name ‘Kuznets’ is from Simon Kuznets, the economist

who postulated that increases in economic inequality in early

stages of development are followed by decreases in later stages

(Kuznets, 1955). The EKC hypothesis is also known as the

inverted-U hypothesis because plotting a measure of resource

use or environmental degradation, which follows this pattern,

against a measure of development, usually per capita GDP,

results in an inverted-U shape.

followed by improvements in the later stages 1 .

The fundamental implication appears to be that

we can simply ‘grow’ out of any limitations related

to natural resources or environmental

degradation. To be fair, most of the researchers

who have examined the EKC hypothesis and

others point out that this will not ‘simply’ happen

(Grossman, 1995; Grossman and Krueger,

1992, 1994, 1996; Shafik, 1994). However,

Panayotou (1993) is confident enough to state

that EKC-type behavior is ‘an inevitable result

of structural change accompanying economic

growth’ and Beckerman (1992) relies on some

of the results of this literature to state that ‘the

strong correlation between incomes and the extent

to which environmental protection measures

are adopted demonstrates that, in the

longer run, the surest way to improve your environment

is to become rich’.

In this paper, it is argued that the work

done to date has actually been quite limited

and, in some ways, counter-productive. Following

on the discussion by Saint-Paul (1995) regarding

Grossman (1995), the author focuses

specifically on the premise that EKCs are attributable

in some measure to changes in the

production structure of economies. The study

begins with a brief review of the literature on

the EKC hypothesis and some of the concerns

which have been raised over this work and the

implications of its conclusions. It is then asserted

that consumption is the principal driving

force behind environmental impact and that

there is much to be learned by taking a consumption-

rather than production-based approach,

as earlier studies have predominantly

done. Because it is trade that allows for a divergence

of production and consumption patterns

within a region, this leads to a discussion

of how to consider the role of trade in the

context of the EKC hypothesis. The author

then proposes possibilities for more appropriate

measures of environmental impacts and considers

the results using one such measure.

2. A brief review of previous analyses of the EKC


Several authors have reviewed the literature

on the EKC in some detail (Forrest, 1995;

Stern et al., 1996; Ekins, 1997). In addition,

there have been three policy forums on this issue

spurred by an article in ‘Science’ authored

by Ken Arrow and other luminaries (Arrow et

al., 1995; Various, 1995, 1996a,b).

The overall conclusion of the first set of

studies on the EKC hypothesis is that some environmental

indicators, e.g. access to clean water,

urban sanitation and urban air quality, do

indeed show improvement with increased income,

with or without an initial period of deterioration.

Other indicators, however, show

continued worsening as incomes rise (e.g. carbon

dioxide emissions and municipal waste per

capita). The turning point at which environmental

improvement begins varies from study

to study, but most often falls in the income

range typical of middle-income countries. Most

environmental conditions that do improve with

economic growth are those that have local impacts

and abatement costs that are relatively inexpensive

in terms of money and changes in

lifestyle. Environmental problems that improve

only at higher income levels or that continue to

worsen as incomes rise generally create impacts

that affect only a few people, e.g. solid waste,

or that are separated by either space and/or

time from those creating the pressures on the

environment, e.g. carbon dioxide emissions. A

number of the results also indicate a possible

N-shaped relationship, whereby the indicator of

resource use or environmental stress begins to

worsen again at higher incomes (Grossman and

Krueger, 1992, 1994; Shafik and Bandyopadhyay,

1992; Grossman, 1995; de Bruyn and Opschoor,


D.S. Rothman / Ecological Economics 25 (1998) 177–194 179

The results and underlying assumptions of these

studies have been subject to a number of concerns.

These include, the statistical relationships

examined (Stern et al., 1996), the focus on pollutant

emissions and concentrations and the associated

lack of work on the depletion of resource

stocks (Arrow et al., 1995), the spatial and/or

temporal separation between many economic activities

and their environmental impacts (Diwan

and Shafik, 1992; Ayres, 1995; Farber, 1995;

Max-Neef, 1995; Mintzer, 1995), the limited scope

of the measures of environmental degradation

(Opschoor, 1995; Karr and Thomas, 1996; O’Neill

et al., 1996; Orians, 1996; Pulliam and O’Malley,

1996; Schindler, 1996) and the emphasis on economic

growth rather than human well-being

(Lash, 1995; Max-Neef, 1995; Pulliam and O’Malley,


Concerns have also been raised about the implications

of the results, often by the researchers

themselves. Many of the analyses consider only

impacts on a per capita or per unit of economic

activity basis, leaving open the question of

changes in the total impact on the environment

(Holtz-Eakin and Selden, 1992; Shafik and

Bandyopadhyay, 1992; Panayotou, 1993; Selden

and Song, 1994). Secondly, if the reductions to

date are primarily due to a composition effect,

whereby countries tend to increase the energy and

pollution intensity of their imports, to what extent

will the currently developing countries be able to

replicate this pattern (Ayres, 1995; Farber, 1995;

Grossman, 1995; Max-Neef, 1995; Saint-Paul,

1995; Stern et al., 1996)? Thirdly, given the many

potential irreversibilities resulting from resource

use and environmental degradation, what will be

the price paid along the way and is the necessary

growth in the developing economies even possible

(Holtz-Eakin and Selden, 1992; Panayotou, 1993;

Selden and Song, 1994; Farber, 1995; Schindler,

1996; Stern et al., 1996; Roberts and Grimes,

1997)? 2 Finally, given that most of the researchers

acknowledge the changes in social and political

institutions required to bring about a decrease in

the impact of economic activity on the environment,

further analysis will be required to provide

useful insights on how to best bring these about

(Lash, 1995; Munasinghe, 1995; Daily et al., 1996;

Fuentes-Quezada, 1996; Karr and Thomas, 1996;

Ludwig, 1996).

3. Production-based versus consumption-based

approaches to examining the EKC hypothesis

It is the second of these concerns, that of the

importance of changing composition, that is addressed

in this paper. Whereas most of the analyses

have focused on the environmental impact

resulting from production within a country, it is

more appropriate to consider the impacts stemming

from consumption activities. It is possible to

draw a parallel between the current discussions of

the EKC, which tend to focus on production and

a longer standing debate about the sources of

human impact on the environment, which emphasizes

consumption. However, the resulting conclusions

and interpretations differ significantly.

3.1. The production-based approach

Grossman and Krueger (1992) speak of the

scale of economic activity, the composition of

economic activity and the techniques of production

in examining the possible reasons behind the

inverted-U shape characteristic of the EKC 3 .Itis

generally argued that the changing composition of

production combined with reductions in the

amount of energy and resources used and pollution

produced per unit of production are the

driving forces behind the EKC relationship

(Grossman and Krueger, 1992, 1994; Radetzki,

1992; Panayotou, 1993; Grossman, 1995). As

Figs. 1 and 2 illustrate with time series and cross-

2 Holtz-Eakin and Selden (1992) and Selden and Song

(1994) uses their results to forecast future emissions of carbon

dioxide, sulfur dioxide, suspended particulates, oxides of nitrogen

and carbon monoxide. Stern et al. (1996) use the results of

Panayotou (1993) to estimate future rates of deforestation

and sulfur dioxide emission. Each of these studies concludes

that emission and forest destruction at a global level will

increase significantly in the near future, with stabilization and

decline occurring only in the long run, if at all.

3 Panayotou (1993) discusses this decomposition.


D.S. Rothman / Ecological Economics 25 (1998) 177–194

Fig. 1. Historical shares of GDP per sector for the US and the UK (Data from Maddison (1989, 1995)).

sectional data, respectively, as economic development

proceeds, i.e. income levels increase, the

dominant sector tends to shift from agriculture to

industry and then to services. The first shift is

likely to result in increased environmental impact,

whereas the latter in reduction.

Adding to this seemingly inevitable change in

the structure of economies are improvements in

technology over time and changing demands from

the people within countries as their incomes rise.

The latter effect presumes that environmental

quality is characterized as a ‘normal’ good, i.e. the

demand for environmental quality rises as consumers’

income rises. This will have an impact on

consumers’ preferences, which can have a direct

effect on the structure of the economy via purchases

in the market. Furthermore, consumer

preferences can have a strong indirect impact via

the policy arena by calling for the implementation

of various taxes, tariffs, subsidies and regulations

(Komen et al. (1996) for an empirical example of

work in this area). Finally, to satisfy this increasing

demand for a cleaner environment from the

populace, it is argued that nations have a greater

capacity to remedy environmental problems as

their economies develop, and also more rapid

growth will mean a more rapid turnover of an

older, dirtier technology stock with a newer,

cleaner one 4 .

Many of these effects are implicit in the empirical

work to date on the EKC. Very little explicit

work has been undertaken to separate out the

importance of the effects of changing composition

and changing technology, however. A time trend

intended to capture technology improvements has

also been incorporated in some of the research

(Grossman and Krueger, 1992, 1994; Shafik and

Bandyopadhyay, 1992; Cropper and Griffiths,

4 See Radetzki (1992) and López (1994) for further discussions

on why growth may actually benefit the environment,

and also Diwan and Shafik (1992) for a discussion on why

poor nations borrow against nature rather than against future

income. Sen (1995) comments on the importance of a binding

constraint—subsistence—in determining choices that may

have environmental repercussions.

D.S. Rothman / Ecological Economics 25 (1998) 177–194 181

Fig. 2. GDP by Sector 1993 (World Resources Institute, 1996).

1994; Grossman, 1995; Suri and Chapman, 1996).

Most of these have concluded that there has been

a decline in environmental degradation over time,

as expected. On the other hand, Grossman and

Krueger (1994) find an increasing trend for urban

particulate matter and a number of water pollutants,

Shafik and Bandyopadhyay (1992) see one

for fecal coliform concentrations in water, and

Cropper and Griffiths (1994) get mixed results

looking at deforestation rates. Grossman and

Krueger (1992) do discuss changing composition,

but look at this principally in a separate discussion

of international trade, arguing that the data

do not support the hypothesis that differences in

environmental regulation are an important determinant

of trade patterns. (A broader review of the

trade literature suggests that this conclusion is not

accepted as a rule, however (Low, 1992; Folke et

al., 1994; OECD, 1994). Due to its importance,

this issue is returned to in more depth later in this


Selden et al. (1996) and (de Bruyn, 1997)

provide notable exceptions in their decomposition

of observed changes in aggregate and per capita

emissions. Using data for a number of air pollutants

in the US, and going beyond Grossman and

Krueger, Selden et al. (1996) further decompose

the technique effect into energy efficiency, energy

mix and other technique effects, i.e. changes in

emissions per unit output. They conclude that the

greatest effects have come from the technique

effect, particularly the other technique effect.

Changes in sectoral composition have also had a

noticeable effect, however, especially for particulate

matter and sulfur oxides. de Bruyn (1997)

examines sulfur dioxide emissions in The Netherlands

and Western Germany. He also concludes

that shifts in technology have been dominant in

explaining changes in these emissions.

3.2. The consumption-based approach

Ehrlich and Holdren (1971), Holdren and

Ehrlich (1974) introduced the I=PAT identity

(commonly referred to as the Ehrlich equation),

more than a quarter of a century ago. This iden-


D.S. Rothman / Ecological Economics 25 (1998) 177–194

tity relates environmental impact to population,

affluence and technology. Ekins and Jacobs

(1995) and Dietz and Rosa (1994), among others,

modify this identity to speak of consumption

specifically rather than affluence, yielding the

equation I=PCT. The latter two terms can be

expressed as GDP per capita and impact per unit

of GDP. The composition of consumption has

been included in some of the more recent formulations

by stating consumption and technology as

vectors rather than scalars (Amalric (1995), Ekins

and Jacobs (1995), Raskin (1995) for other recent

work considering the utility of and potential respecifications

of the IPAT relationship).

Although subject to some criticism and various

revisions over the years, the IPAT relationship

provides a basic reference for considering the

impacts of human activity on the environment.

The parallels between scale, composition and

technique and population, consumption and technology

are fairly obvious and may support the

argument that either a production- or consumption-based

approach to examining the EKC hypothesis

would be equivalent. A fundamental

philosophical problem exists, however, in adopting

a production-based approach in exploring a

hypothesis such as the EKC. As Rees (1995),

Daly (1996) and Duchin (1998) argue, ‘‘most environmental

degradation can be traced to the behavior

of consumers either directly, through

activities like the disposal of garbage or the use of

cars, or indirectly through the production activities

undertaken to satisfy them’’ Duchin (1998).

Goods and services will not be produced, bought,

sold and traded across borders, unless there is a

demand for them 5 .

Ekins (1997) raises specific reservations about

using production-based approaches when a significant

share of the changes in environmental

impact are attributed to changing composition.

‘‘If the shift in production patterns has not been

accompanied by a shift in consumption patterns,

5 This study leaves aside the issues of desired versus effective

demand and the creation of artificial wants at this time. Suffice

it to say that effective demand (be it for ‘true’ or ‘artificial’

wants), i.e. that which can actually result in the production of

goods and services, is what the author is speaking of here.

two conclusions follow: (1) environmental effects

due to the composition effect are being displaced

from one country to another, rather than reduced;

and (2) this means of reducing environmental

impacts will not be available to the latest-developing

countries, because there will be no countries

coming up behind them to which environmentally-intensive

activities can be located.

Of course, levels of resource use and environmental

degradation are mediated by a number of

factors. These include the technology used to

produce and deliver the commodities to the user,

the disposal of by-products generated in their

production and consumption and the ultimate

disposal of the commodities themselves 6 . Thus,

one must consider these in conjunction with the

scale and composition of consumption. The author

will discuss the relationships between these

later in the section on better measures of environmental

impact. For the remainder of this section,

though, the author would like to look at data on

consumption to get a sense of its changing

amounts and composition with income levels.

Fig. 3A and B shows the quantities of per

capita consumption for eight categories of consumer

goods, accounting for all consumer expenditures

for the year 1985 provided by the United

Nations International Comparison Programme

(United Nations 1994). The unit for each commodity

is not a traditional measure such as kg,

but rather the quantity of a commodity which can

be bought for 1 $US at average international

prices 7 . The author shows simple second order

polynomials drawn through these data in order to

6 In an interesting interpretation of the disposal process,

Hawken (1995) notes that what we have is not a consumption

problem, but rather a non-consumption problem, in that

‘‘most of what we make cannot be consumed by anything at

all’’. In a similar vein that clouds our interpretation of particular

terms, Rees (1990) points out that what we consider

economic production is ‘‘actually consumption, at best involving

the conversion of ecological capital into man-made capital’’.

7 The most recent year for which consistent data are available

for a global set of countries is 1985. Data from 1993 will

be available some time in 1997. For more details on the

International Comparison Programme data (United Nations,

1994; Rothman, 1993).

D.S. Rothman / Ecological Economics 25 (1998) 177–194 183

Fig. 3. Consumption by commodity category 1985, Part A (United Nations, 1994). Consumption by commodity category 1985, Part

B (United Nations, 1994).


D.S. Rothman / Ecological Economics 25 (1998) 177–194

Table 1

Quadratic fits to consumption data


Fitted equation a Adjusted r 2

Turning point b

Food, beverages, and 79.36 (1.7)+0.21 (10.8)×(GDP/capita)−7.98×10 −6 (6.1)


(GDP/capita) 2

Clothing and footwear 58.41 (2.6)+0.04 (4.4)×(GDP/capita)−5.61×10 −7 (0.9) (GDP/

0.8893 12 889

0.7890 35 263

0.8158 23 278


Gross rent, fuel and power −44.62 (0.5)+0.20 (5.4)×(GDP/capita)−4.25×10 −6 (1.7)

capita) 2

House furnishings and 0.16 (0.0)+0.04 (5.7)×(GDP/capita)+1.79×10 −7 (0.4) (GDP/

(GDP/capita) 2


capita) 2

Medical care and services −101.81 (1.6)+0.12 (4.6)×(GDP/capita)−1.30×10 −6 (0.7) 0.8270 47 171

Transport and communicacapita)

(GDP/capita) 2

55.29 (1.9)+0.00 (0.1)×(GDP/capita)+4.93×10 −6 (6.1) (GDP/ 0.9236



Recreation, entertainment, 20.03 (0.4)+0.10 (4.5)×(GDP/capita)+1.17×10 −7 (0.1) (GDP/ 0.8684

education, etc. capita) 2

Other −39.08 (0.6)+0.06 (2.2)×(GDP/capita)+2.05×10 −6 (1.1) 0.7652


13 169

Grains and starches 80.99 (2.7)+0.07 (5.4)×(GDP/capita)−3.44×10 −6 (4.0) (GDP/


(GDP/capita) 2

Meat and animal products 3.42 (0.2I)+0.08 (9.2)×(GDP/capita)−3.03×10 −6 (5.1) (GDP/ 0.8591

capita) 2

Other foods, beverages and

capita) 2

14.27 (0.5)+0.06 (5.7)×(GDP/capita)−1.91×10 −6 (2.5) (GDP/ 0.7700 16 357


capita) 2

a Equations fitted to data provided by phase V of the United Nations International Comparison Programme (United Nations, 1994).

Values in italic and parentheses are absolute values of the t-statistics for the coefficients.

b Turning points only calculated for equations with negative coefficients on GDP 2 .

provide an initial indication whether these relationships

show an inverted-U type of behavior

that might support the EKC hypothesis. Table 1

summarizes these relationships. Although composition,

in terms of shares, does change with income,

this is due principally to differences in

relative growth between categories and not actual

declines in consumption of any single commodity.

The only commodity that displays an inverted-U

shape is food, beverages, and tobacco 8 . Breaking

this down into three categories—grains and

starches, meat and animal products and other

foods—shows that this is principally due to a

decline in the consumption of grains and starches,

arguably the least environmentally destructive

food items (Fig. 4 and Table 1).

8 The author defines an inverted-U shape as requiring a

negative coefficient on squared GDP per capita with a t-statistic

greater than 2 in absolute value and a turning point that

falls within the range of the data.

Adriaanse et al. (1997) have estimated the total

material requirements, including hidden flows, for

the economies of the United States, The Netherlands,

Germany and Japan for the past two

decades. Their data show that, although there has

been a pattern of declining material intensity, in

terms of material requirements per unit of GDP,

per capita natural resource requirements have

continued to rise. An important caveat in using

these data, however, is that the materials required

to meet export demands are not currently deducted,

so the measure does not yet provide a

completely balanced picture of the requirements

needed to meet the consumption demands of a

particular country. de Bruyn and Opschoor (1997)

and Suri and Chapman (1998) are the only researchers

to date who have noted the importance

of taking a consumption-based approach to analyzing

the EKC hypothesis. In each case, the

researchers find very little evidence to support a

D.S. Rothman / Ecological Economics 25 (1998) 177–194 185

Fig. 4. Consumption of food commodities 1985 (United Nations, 1994).

conclusion of decreasing environmental impact at

higher levels of income.

4. The issue of trade

International trade provides the means by

which national patterns of production and consumption

can become disassociated within a nation.

This becomes a major issue of consideration

in examining the relationship between economic

growth and environmental impact. This was

hinted at in the earlier quote from Ekins (1997)

and is further emphasized by Pearce and Warford

(1993), Diwan and Shafik (1992) in their analyses

of the relationships between trade and the environment:

‘‘It is perfectly possible for a single

nation to secure sustainable development—in the

sense of not depleting its own stock of capital

assets—at the cost of procuring unsustainable

development in another country’’ (Pearce and

Warford, 1993). ‘‘The availability of technologies

that delink local and global pollution eliminated

many of the automatic benefits for the global

environment from addressing local concerns. The

North can now achieve improvements in local

environmental quality while continuing to impose

negative externalities internationally’’ (Diwan and

Shafik, 1992).

Much has been written in recent years on the

relationship between trade, trade liberalization,

environmental quality, environmental policy and

economic performance 9 . This has been spurred in

large part by negotiations surrounding the GATT

and NAFTA. In the context of this paper, the key

issue is not the economic logic of trade, but

simply to what extent are changes in resource use

and/or environmental degradation with income

level due to shifting pollution and resource intensive

production across borders.

The notion that pollution and resource intensive

production will move from richer to poorer

9 For the interested reader, the author would recommend

the recent collections of essays by Low (1992), Folke et al.

(1994), OECD (1994).


D.S. Rothman / Ecological Economics 25 (1998) 177–194

countries is often referred to as the ‘pollution

haven hypothesis’. Before discussing the logic behind

this hypothesis, the author wants to be careful

to point out that, for this argument, only a

weak version of this argument has to hold. To the

extent that differences in the environmental impact

of production processes between domestic

and imported commodities can be accounted for,

what is important is the changing ratio between

domestic consumption and domestic production.

Even if domestic production stays the same or

increases, if domestic consumption rises faster,

then some of the increase in consumption must be

met by importing goods (ignoring changes in inventories).

This will be missed in a productionbased

measure of environmental degradation,

resulting in a bias toward acceptance of the EKC

hypothesis. If production processes are dirtier in

exporting countries, this further increases the bias.

Of course, this bias can also work the other way

under different circumstances, e.g. cleaner production

processes in exporting countries or faster

growth in production than consumption.

The reasoning behind the pollution haven hypothesis

follows from the same logic that is proposed

to explain, in part, the existence of an

EKC. In this case, however, the demand for environmental

quality, which is assumed to rise with

increased income levels, does not lead to a shift to

a cleaner production process in the country where

the demand is generated, but rather to a movement

of the production process to a location

outside of the country. Because there is a strong

incentive to carry out processing stages as near as

possible to the source of the raw material, as the

best-quality resources are exhausted in the industrialized

countries, there is a further tendency for

many traditionally energy- and pollution-intensive

activities to migrate to poorer countries (Ayres,

1996). It is also often assumed that poorer countries

have cleaner environments because of less

previous development and, therefore, will suffer

less damage from any given reduction in environmental

quality. Finally, the argument has been

made that poorer people suffer fewer economic

costs from the health effects of poorer environmental

quality. This relies on the fact that economic

losses due to health problems are often

calculated as being directly related to income levels.

This is a practice that has been commonly

used by economists, leading at times to severe

criticism, as in the reaction to the leaked memo

written by World Bank economist Lawrence Summers

(The Economist, 1992) and the recent estimates

of the economic costs of global warming

summarized by the IPCC (Pearce et al., 1996).

At the same time, it should be noted that

several authors have hypothesized that, due to

their comparative advantage in labor vis-à-vis

man-made capital, the latter of which is usually

associated with dirtier industries, these industries

should actually migrate away from poorer countries

to wealthier ones. Because the latter tend to

have stricter environmental standards, trade

should lead to lower overall levels of pollution

and resource degradation (Birdsall and Wheeler,

1992; López, 1992). Little empirical work has

been done on this hypothesis and there is very

little evidence supporting it.

To the extent that the pollution haven hypothesis

is true, a city, region, or nation, via trade, can

create an illusion of sustainability (Rees, 1993).

From a thermodynamic perspective, a locale acts

as a dissipative structure, i.e. increasing the order

in the local system at the expense of greater

disorder in the larger system in which it is embedded

(Hornburg, 1992). In order to describe this

expropriation of resources elsewhere in space,

terms such as ‘shadow ecologies’ (MacNeil, 1992)

and ‘appropriated carrying capacity’ (Wackernagel

and Rees, 1995) have begun to be seen in

the literature.

Several studies have explored the existence of

pollution havens, including Birdsall and Wheeler

(1992), Dean (1992), Low and Yeats (1992), Lucas

et al. (1992), Radetzki (1992), Copeland and

Taylor (1994, 1995), Benarroch et al. (1995). The

results of these studies are mixed, but most do

point to some validity in the general hypothesis.

Low and Yeats (1992) point to an expansion in

the share of polluting industries in the exports of

developing countries for the period 1965–88, as

well as a greater overall dispersion of points of

origin for polluting industries than for cleaner

ones (no results were presented for an analysis

using country of destination rather than origin).

D.S. Rothman / Ecological Economics 25 (1998) 177–194 187

Thus, it appears that the developed countries are

less likely to ‘farm out’ cleaner industries. Birdsall

and Wheeler (1992), in examining the toxic intensity

in industry for Latin American countries from

1960–88, report a migration of industries with

higher toxic intensities. They are careful to point

out that this is mostly to countries with relatively

closed economies, as countries with more open

economies are more susceptible to external influences

and, therefore, pay more attention to environmental

regulations. Also of note, their results

indicate that the overall toxic intensity of the

economy rises with income in all countries. Lucas

et al. (1992), in examining scale and composition

effects on toxic intensity using data over the same

period also find support for the displacement

hypothesis. They note also that more open

economies tend to be cleaner. They do find a

weak indication of an EKC for pollution emission

intensity with rising income, but this is principally

a reflection of the decreased importance of the

manufacturing sector as a whole in the economy.

Also, as Ramón López points out in his comments,

the absolute levels of pollution continue to

rise (Lucas et al., 1992). Adriaanse et al. (1997)

present data that the US, Germany, Japan and

The Netherlands rely on imports to meet 5, 35,

over 50 and more than 70% of their total material

requirements, respectively. Again, these may be

somewhat misleading as the materials required to

meet export demands are not currently deducted.

Two recent empirical studies begin to give more

insight into the net balance of trade in environmental

pollution and resource use. Antweiler

(1996) uses sectoral pollution intensities (tons per

unit output) derived from US data (United States

Environmental Protection Agency, 1995) and sectoral

trade data derived from Statistics Canada

(1994) to estimate the net embodied levels of six

air pollutants—sulfur dioxide, carbon monoxide,

nitrogen dioxide, lead, particulate matter under 10

m and volatile organic compounds—for 164

countries in 1987. The data only consider the

composition of trade, as the same sectoral intensities

are applied to each country. Although understandable

due to a lack of data, this results in a

bias ‘favoring’ countries with dirtier technologies

than the US and ‘penalizing’ countries with

cleaner technologies. Secondly, since the pollution

coefficient data are developed from plant-specific

data, the analysis discounts primary resource sectors,

which do not generally have ‘plants’ but

make up a relatively larger share of exports for

developing countries. A plot of per capita data

against GDP per capita, shown in Fig. 5, reveals

a pattern of a few major exporters of embodied

pollution, particularly Ireland, Singapore, West

Germany and Japan, with no clear relationship

between net exports and income 10 .

Atkinson and Hamilton (1996), alternatively,

examine net dollar flows for 95 countries in 1985

related to trade in commercial natural resources—crude

oil, timber, zinc, iron ore, phosphate

rock, bauxite, copper, tin, lead and nickel.

Fig. 6 shows a strong tendency among non major

oil exporters for an increase in net resource imports

per capita as countries become wealthier.

Oil exporting countries show a different pattern,

but this can be explained by the fact that oil

exports significantly determine average income in

these nations.

It is somewhat surprising that little or no empirical

work has been done looking at trade in the

context of the EKC hypothesis. The original analysis

by Grossman and Krueger (1992) was an

exercise to consider the potential impacts of the

NAFTA, but even in their analysis their treatment

of trade was separate from their EKC analysis.

Suri and Chapman (1998) include the shares of

manufactured goods in imports and exports, as

well as an interactive term between manufacturing

imports and income. These are intended to compensate,

in part, for differences between the structure

and production within a country, where the

second term is included to capture the changing

nature of imports as incomes rise. Kaufmann et

al. (1998) includes exports per unit GDP of iron

and steel in their estimation for the same reasons.

Notably, both studies conclude that trade makes a

significant contribution to the shape of curves

relating resource use and environmental quality

10 Data from countries with under 1 million persons were

dropped, as they were considered unrepresentative and resulted

in large outliers. The figures for the other pollutants are

similar, but not shown.


D.S. Rothman / Ecological Economics 25 (1998) 177–194

Fig. 5. Net pollution exports—sulfur dioxide 1987 (Antweiler, 1996).

versus income levels, and neither study finds support

for the EKC hypothesis. de Bruyn and Opschoor

(1997) briefly discuss trade and import

substitution, but do not incorporate it into their


5. Better measures of environmental impact

If one accepts the arguments to this point, the

question then arises—what are appropriate, or at

least better, measures of environmental impact?

Ekins (1997) examines an aggregate indicator developed

by the OECD which includes: (1) CO 2 ,

SO 2 ,NO x emissions per capita; (2) water abstraction

per capita; (3) percentage of population with

sewage treatment; (4) protected areas as a percentage

of total area; (5) imports of tropical timber

and cork; (6) threatened species of mammals

and birds as a percentage of all such species in the

country; (7) generation of municipal solid waste

per capita; (8) energy intensity (primary energy

per unit of GDP); (9) private road transport

(passenger kilometers in private vehicles per capita);

and (10) nitrate fertilizer application per km 2

of arable land and permanent cropland. As might

be expected, examining the relationship between

this indicator and income levels, Ekins finds no

support for the EKC hypothesis.

Is it possible to go further to more explicitly

and completely link a measure of environmental

impact to consumption? The study has presented

various data on consumption and the net trade.

These data lend no support to the EKC hypothesis

when examined as a function of income level.

They make no adjustment, however, for differences

in the ways in which these goods and services

are produced, transported, used and

ultimately disposed of in different countries and

over time. With an increasingly globalized economy,

it could be argued that the inter-country

differences are small enough as to be insignificant.

Even if this were to be accepted, though, there

would still be the question of how the environmental

impacts have changed over time and how

they differ across goods, services and resources, so

D.S. Rothman / Ecological Economics 25 (1998) 177–194 189

Fig. 6. Net resource depletion 1985 (Atkinson and Hamilton, 1996).

as to allow aggregation across different consumption


Determining the environmental impact for a

particular good, service, or resource is an exceedingly

difficult task. Of key importance here is the

inclusion of embodied impacts that arise from

production, transportation and disposal (Adriaanse

et al., 1997). There has been relatively little

work in this area other than on life-cycle energy

use (Robinson, 1990; OECD and IEA, 1992).

Wyckoff and Roop (1994) study of embodied

carbon and Chapman (1991) work on copper in

automobiles provide examples that look beyond

energy use.

Several recent efforts have been, and continue

to be made to conceptually and empirically

broaden this work to develop aggregate measures

of environmental impact and/or resource requirements

of various lifestyles. These include: ecotoxicity

(Ayres and Marinas, 1995); environmental

utilization space (Opschoor, 1992); ecological

footprints/appropriated carrying capacity (EF/

ACC) (Rees and Wackernagel, 1994); material

intensity per unit service (MIPS) (Schmidt-Bleek,

1993); the sustainable process index (Krotscheck

and Narodoslawsky, 1996); and total material

requirements (Adriaanse et al., 1997). Each approach

has its own nuances, but basically all are

attempts to provide a physical measure of environmental

impact from the perspective of achieving

sustainability by not drawing down stocks of

natural capital in order to meet current


The empirical work using these measures is in

its infancy and will undoubtedly require refinement.

However, it should be possible to use these,

even in their present incarnations, to provide

more defensible indications of the relationship

between economic development and environmental

impact. The empirical work to date, although

limited and arguably conservative in its estimates

of human impacts on the Earth, raises a number

of serious concerns. Rees (1996) estimates that to

sustainably support the present world population,


D.S. Rothman / Ecological Economics 25 (1998) 177–194

Fig. 7. Ecological footprints vs. real GDP per capita (Wackernagel et al., 1997).

if everybody were to live at current North American

standards, would require three times the existing

global stock of ecologically productive

cropland, pasture and forest land. Kranendonk

and Bringezu (1993) calculate that annual consumption

of orange juice in western Germany

requires more than three times the total domestic

fruit growing area of the region. McLaren (1996)

estimates that the UK will need to reduce consumption

of timber, cement, pig-iron, aluminum

and chlorine by 64, 69, 83, 84 and 100%, respectively,

to reach sustainable levels.

As an example of how one can use these new

measures to test the EKC hypothesis, Fig. 7

shows data for the ecological footprints of 52

nations estimated by Wackernagel et al. (1997)

plotted against GDP per capita. This measure

estimates the land and water area required to

sustainably provide for the average per capita

consumption in each nation. It includes food consumption,

wood consumption, direct and embodied

energy and built area. Table 2 shows the

results for four alternative specifications relating

the ecological footprints per capita to GDP per

capita. Linear and log-log specifications fit the

data equally well. Adding a quadratic term, following

the EKC hypothesis, does not represent an

improvement in either case. Even if it were accepted,

the estimated turning point of almost

$22000 for the quadratic specification is outside

the range of the empirical data and the logquadratic

specification results in no turning point

at all.

6. Conclusions

Have we been growing out of our environmental

problems? Since it has been argued that we

have yet to appropriately address this question,

the answer would have to be that we really cannot

say. On examination of the evidence, however, the

answer is no. Can we do so? Hopefully. In fact, it

can be argued that we need to work on finding

ways to help richer nations reduce their impact

and poorer nations ‘tunnel’ through or ‘leapfrog’

D.S. Rothman / Ecological Economics 25 (1998) 177–194 191

Table 2

Various fits to ecological footprint data

Functional Fitted equation a Adjusted r 2 Turning point b


Linear 0.896 (5.4)+3.77×10 −4 (12.0) (GDP/capita)


Quadratic 0.626 (2.8)+5.60×10 −4 (5.3) (GDP/capita)−1.30×10 −8 (1.8) (GDP/cap- 0.7496 21 587

Log-linear −4.193 (9.2)+0.619 (11.9) ln(GDP/capita)


ita) 2

Log-quadratic −0.046 (0.0)−0.398 (0.5) ln(GDP/capita)+0.061 (1.3) (ln(GDP/capita)) 2 0.7364

a Equations fitted to data provided by Wackernagel et al. (1997). Values in italic parentheses are absolute values of the t-statistics

for the coefficients. Due to heteroskedasticity, weighted regressions were used for the linear and quadratic forms.

b Turning points only calculated for quadratic equations with negative coefficients on the quadratic term.

past the periods of increasing environmental impact

and resource use, so as to avoid increasing

their impacts in the first place (Goldemberg et al.,

1988; Pearson, 1994; Munasinghe, 1995; Ferguson

et al., 1996; Karr and Thomas, 1996; Schindler,


This leaves us with the question of what needs

to be done to ensure that the answer to the second

question above is yes, which requires, in part, a

better examination of the first question. This task

requires a number of parallel efforts. First, we

must more carefully analyze the relationship between

economic activity and environmental impact.

We must understand that solving

environmental problems means more than handing

them off, i.e., passing the buck to people in

other places or in other times. It must be understood

what we mean by growth, i.e. that we make

a clear distinction between economic growth and

growth in human well-being. For all of these, we

need to link analyses of this issue to other areas of

research that are providing important insights,

particularly that on industrial ecology and dematerialization,

the definition and measurement of

indicators of economic, human and environmental

well-being and the relationships between trade

and the environment.

From a policy perspective, it is imperative to

recognize that the necessary changes are possible,

but not inevitable. This has been expressed explicitly

in almost all of the work on the EKC to date.

As Radetzki (1992) states, even if one does buy

the basics of the EKC hypothesis, the changes

that have occurred and will occur ‘‘will not be the

result of environmental laissez-faire. Many of the

behavioral adaptations, sometimes quite painful,

have been prompted by social mandates overriding

the freedom of unregulated markets’’. However,

the opinion of Beckerman (1992), among

others, that economies react appropriately without

policy intervention and that the surest way to

achieve environmental quality is to get rich are

still around and do carry weight in policy circles.

Thus, it is important that, as researchers, we not

only improve the substance of our analyses, but

that we also improve the communication of our

results and the assumptions behind these.


The author would like to thank Sander de

Bruyn, Thomas Selden and an anonymous reviewer

for their insightful comments on earlier

versions of this paper. The paper is much improved

as a result, with all remaining errors and

opacity being the sole responsibility of the author.

Also, the data underlying the analyses presented

are available from the author upon request.


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