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

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,
1996).
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.