Friday, 7 December 2007

“Global warming is a problem caused by the rich and paid for by the poor”

(A recent presentation - some of the ideas are rather new and interesting, but believe me they were the fruits of lack-of-sleep-induced hallucination. I'm really not that smart).

The distribution of the causes and effects of greenhouse gases vary across states and populations within states. China, due to its heavy reliance on coal, recently overtook the U.S. as the world’s largest source of such pollution. The reality of the world is such that some countries pollute more than others. But, the consequences of pollution are not geographically constrained; one nation’s pollution may contribute to a climatological disaster in another. Within states, some individuals are more likely to pollute than others. However, all individuals suffer the resultant negative externality. First, this essay will examine the income variation of the causes and effects of pollution within states. Second, it will explore the distributional inequity of global pollution generation.

The prompting statement acknowledges global warming as a problem and assigns its blame to the rich and its consequences to the poor. This essay will break down the terms “rich” and “poor” into two levels of analysis in a global context. "Rich" and "poor" are adjectives that apply to states themselves and to the populations within individual states. Firstly, this essay finds that it is valid to place the blame for global warming on the rich at the intra-state level, while all suffer the consequences. Secondly, this essay finds that the blame for global warming at the inter-state level can be placed on industrial economies and un-industrial economies with well-endowed natural resources, while poor countries suffer disproportionally.

First, I present some background about global warming. "Global warming" is a term referring to the increase of Earth’s near-surface average air and ocean temperatures. Scientific consensus identifies global warming as a real phenomenon caused by the accumulation of greenhouse gases in the atmosphere, released by human activity. Greenhouse gases, including carbon dioxide, methane, and nitrous oxide, are so named because they trap solar radiation inducing a greenhouse effect, causing the Earth to warm up. Sources of greenhouse gases include the burning of fossil fuels and deforestation, which lead to higher CO2 concentration levels, livestock and rice farming, which generate atmospheric methane, specialized fertilizer use, causing nitrous oxide emission, and the use of CFCs in refrigeration systems (Wikipedia: Greenhouse Gases). Environmental problems caused by global warming include, but are not limited to, melting glaciers, rising sea levels, more intense hurricanes, and disruption of natural habitats, which may result in the extinction of various plant and animal species.

For simplicity’s sake, the outlook examining intra-state pollution distribution will assume an economy without international trade and countries that do not feel the effects of pollution emanating from others. In this simple world, emission of greenhouse gas results in a negative externality within the country. Let us assume that a single product, automobiles, is produced in this economy. First, the production of automobiles relies on heavy industrial machinery that results in a release of considerable pollution into the atmosphere. The social cost of the pollution and its implications for global warming are not accounted for in the private cost of the automobile. The difference between the marginal private and social costs is referred to as the externality. The consumption of automobiles, i.e. driving them, also produces external costs for society in the form of CO2 emissions. Economic agents, not involved in the private market transaction between automobile producers and drivers, involuntarily incur a social cost. Additionally, the polluters themselves suffer reduced air quality as well. Therefore, the externality model shows that the sources of pollution are limited, while the effects are not discriminatory and suffered by all.

The primary sources of greenhouse gas emissions are power stations, industrial processes, transportation fuels and agricultural byproducts. Widespread use of power and transport fuels is mostly concentrated among the affluent in most states. 1.6 billion people in the world did not have access to electricity in 2002, 50% in South Asia and 35% in India alone (IEA World Energy Outlook 2002). The case of rich countries, like the U.S., is no different. Paul, Ballew, chief economist of J.D. Power & Associates stated in 1996, “about 15 million new cars were sold in the U.S. last year. Probably 10 million of them are sold to the top 30 percent households,” (Edmondson and Du 1996). Therefore, the fact that the poor do not have easy access to products that generate high levels of carbon emissions (like electricity or automobiles), largely preclude them from being major forces of global warming.

Similarly, industrial processes and agricultural byproduct usage are concentrated among large, affluent corporate entities. The top five corporate air polluters in the US, according to the University of Massachusetts political economy research institute’s Toxic 100 survey, have an average current market capitalization of 217.4 billion dollars. A company with a market capitalization of 10 billion is generally considered as “large cap” by investors. Agribusiness is another leading source of pollution. A report from the U.N. Food and Agriculture Organization found pollution from industrialized livestock production to be one of the top three contributors to climate change (FAO 2002).

While this evidence points toward a pollution cause-effect distribution where the affluent pollute and all of society collectively suffers the consequences, the poor also engage in polluting activities that lead to negative externalities. Some poor individuals in developing countries, despite having enough to eat and enjoying good health, may still be resource poor. Such individuals may pursue measures to extend their natural resource base as a means to improve their livelihood. A relevant example of this activity is the conversion of forestland into farmland, which has occurred at a rapid pace in the case of the Amazon in recent years (Reardon and Vosti 1995). Deforestation, along with carbon-dioxide emissions is a leading cause of global warming. Therefore, placing all the blame of global warming-causing pollution on the affluent sector within a country is erroneous. However, the combined magnitudes of greenhouse gas emissions emanating from power plants, industrial processes, transportation fuels, agricultural byproducts (incl. livestock) and fossil fuel retrieval outweigh those from land use by approximately seven and a half times (Emission Database for Global Atmospheric Research 3.2 Fast Track Project 2000).

The second issue of concern for this essay is whether rich countries contribute to global warming to a greater extent than poor countries. To successfully address this, prior assumptions that international trade does not exist and that the effects of global warming emanating from one country are not felt by others must be taken as invalid. Now, the existence of international trade and a world where the consequences of global warming-causing environmental degradation are felt by all peoples are assumed. (Sigman (2002) finds that pollution effects can affect non-source nations.)

The world today consists of economies at various degrees of industrialization and per capita income. For the purposes of the essay, the existence of only three categories will be assumed – post-industrial, industrialized/industrializing, and unindustrialized economies. A post-industrial economy is taken to be one that has passed the industrial phase and enjoys a well-educated population and high per capita income and maintains strict regulations on pollution. Industrial/industrializing economies will be taken as having a wide range of per-capita income levels, strong labor force and capital endowments, and weak restrictions on pollution. Un-industrial economies will be taken to have low per capita income levels, weak restrictions on pollution, and can be divided into economies that are resource-rich and resource-poor.

A comparative advantage model of international trade involving these four types of economies will now be observed. The principle of comparative advantage, developed by Ricardo in 1817, states that when countries trade, specialization will occur in the product of lowest opportunity cost. The post-industrial economy will specialize in services, information, and research. The industrial economy will specialize in capital and labor-intensive goods. The resource-endowed un-industrial economy will specialize in the primary sector – agriculture, fishing, forestry, mining etc. Finally, resource-poor un-industrial economies tend to import heavily, with domestic production primarily geared toward subsistence. Given these specialization structures, environmentally intensive forms of production become concentrated in industrial and well-endowed un-industrial economies. Moreover, the fact that these economies generally have less stringent pollution restrictions than pos-industrial economies will encourage the relocation of polluting industries (Copeland and Taylor 2004). This phenomenon has been termed the “pollution haven effect”. Therefore, highly polluting industrial activity along with environmentally intensive primary production is concentrated in these countries. Grossman and Krueger (1993) develop an environmental Kuznets curve (EKC) – an inverse U-shaped relationship between a country’s per capita income and its environment. This means that very poor economies are generally incapable of polluting, while relatively poor, middle-income, and relatively economies disproportionately pollute. Again, very economies characterized by very high incomes tend not to pollute because of stringent regulations and specialization away from polluting industries.

However, these simplistic models make numerous assumptions that cannot be relied on to exist in the real world. Firstly, comparative advantage assumes perfect competition and, full employment, perfect resource mobility and constant opportunity cost of production between goods. Secondly, the EKC assumes also assumes full employment and nonpositive profits in each industry. Moreover the model assumes that firms choose the emissions intensity that minimizes production costs – often times it is impossible to gauge this measure exactly. Moreover, while the EKC may hold for environmental quality in general, effects may be different when studying greenhouse gases specifically.

But, these assumptions are necessary to make analysis more manageable and evidence shows that they do not have a significant effect on the results. Indeed, industrial economies such as the United States, Japan and Russia and the United Kingdom rank among the worst polluters on a per capita basis. Similarly, resource-endowed economies centered on primary production also rank highly on the list – Qatar, Bahrain, Kuwait, and Saudi Arabia (World Resources Institute 2003). As most of these states have neither very low nor very high per capita incomes, the EKC appears to hold empirically.

In a global context, it can be said that poor countries suffer the consequences of greenhouse gas emissions to the greatest extent. This is largely a consequence of the inability of poor countries to effectively deal with catastrophes stemming from global warming. The externality theory demonstrates that pollution from consumption and production results in an undesirable cost to society. The consequences of global warming include, but are not limited to, rising sea levels, increased scarcity of water in dry areas and flooding in wet areas, extreme weather conditions, more forceful hurricanes, disappearance of ecosystems, and the spread of tropical diseases. Rich countries have the infrastructure to deal with these consequences without widespread suffering – levies will be built to mitigate rising sea levels, vaccinations are readily available etc. However, increased incidence of droughts in Africa or flooding in South Asia, disease epidemics in the developing world or another devastating hurricane in the Caribbean will lead to an immeasurable amount of suffering. Therefore, poor countries suffer the consequences of global warming to the greatest extent, simply by virtue of the fact that they are not adequately equipped to deal with them.

In conclusion, this essay identifies affluent economic agents as the primary sources of global warming within individual countries. Secondly, this essay finds that worldwide contributions to global warming come most from industrial economies and un-industrial economies with well-endowed natural resources. Finally, this essay stipulates that poor countries will suffer the most due to global warming because of their inability to deal with the resulting climatological consequences.