China's Air Pollution-Becker

It is more or less inevitable that China's economy will spew out a lot of pollution, given its extraordinary rate of growth for over 20 years, and the abundant supplies of coal that fuel its power generation. The important question raised by Posner is what, if anything, will induce China to cut its pollution, including the pollution that spreads internationally to its eastward Asian neighbors and countries in the western hemisphere, especially Canada and the United States. Posner emphasizes the potential for international collaboration because the harm to these affected countries will tend to exceed the cost to China from cutting its pollution. China is imposing a burden on these other nations that it does not fully incorporate into its decisions about which fuels to use, how to invest in scrubbing and sequestering technologies and equipment that reduce the amount of pollutants that its plants use, its taxation of gasoline that discourage driving and more efficient cars, and the many other ways to reduce pollution. Since greater pollution-reduction efforts would lower the growth rate of its output, the harm to other nations would not enter into its policy calculations unless forced to by threats of economic retaliation, or induced to do so by various forms of intercountry compensation and cooperation. The New York Times article referred to by Posner indicates that opposition to pollution is also growing rapidly in China itself for reasons that have little to do with protests of other countries. When countries start developing rapidly, their first concern is greater resources for consumption and investment, for they do not believe they can afford to take extensive measures to control air pollution if that slows down their growth out of poverty. As they get richer, however, concerns about the level and growth of various types of pollutants get magnified. As economies continue to develop, their citizens exert greater pressure on governments to improve air and water quality. Governments generally respond by regulating and taxing more extensively the omission of pollutants. The result typically is that air, water, and other kinds of pollution at first rise sharply with economic development, and then fall about equally sharply as development proceeds still further. This inverted U-shaped relation between a country's level of pollution and its level of GDP per capita is called the "Environmental Kuznets Curve" after the Nobel prize-winning economist, Simon Kuznets. He had established such an inverted U-shaped relation between income inequality within a country and its level of per capita GDP, and researchers discovered about 20 years ago that the same type of inverted U relation holds for environmental damage, such as particulates in the air. In fact, the two Kuznets relations are not independent since one way to reduce inequality in measures of full income that include environmental damage is to reduce the degree of pollution. Prior to the discovery of this U-shaped environmental relation, the general opinion was that environments were inevitably damaged more as industrialization increased and economies developed. That is still a common view among those unfamiliar with the evidence. To be sure, the full evidence indicates that no single relation between environmental effects and economic development fits all pollutants in all countries. For example, theory predicts that domestic opposition would make governments more responsive to local pollutants of air and water, and less responsive to global pollution, such as emission of greenhouse gases. In fact, the U-shaped relation does seem to hold better for local pollutants. These Kuznets-type relations are beginning to take hold in China, as judged from the growing complaints about various types of pollution, and discussions by scientists and government officials about steps to take to respond positively to these complaints. This reaction to internal complaints may not be sufficient to satisfy its neighbors in Asia and in the Western hemisphere since as I mentioned, different types of pollution operate within and between countries. Moreover, China's richer neighbors would be more sensitive to pollution than the poorer Chinese are. However, as China continues to develop, the complaints due to "internal" externalities will begin to interact more with the complaints due to the "external" externalities imposed on other countries. The combination of internal and external complaints should push China even faster along reductions in environmental damage than has been typical in the past when countries responded mainly only to internal complaints about pollution levels.

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