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

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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).