First, and most importantly, both articles emphasized the need for legislative regulations to be put in place by various governing bodies, including national governments and international trade organizations, such as NAFTA. “International Trade and Air Pollutions” emphasized the far-reaching effects of negative externalities. Sulfur dioxide and nitrous oxide, two pollutants of waterborne commerce (shipping), are wreaking havoc on port cities, many of which are already “environmental hot spots.” Although there are tradable permits, the cost of such a permit does not take into account the full social costs (or negative externalities) of such pollutants, and are moreover effectual because the social costs are not borne equally by society, or the world community as it were, at large.
The NAFTA article, in addition to acknowledging that Mexico’s pollution causes negative externalities for its citizens, argues that such environmental degradation, including but not limited to air pollution, soil erosion, and water contamination, actually decreases growth rates. Ironically, environmental degradation was allowed to persist in the name of growth, wherein experts argued that the rate environmental degradation resembled a Kuznet’s curve, in that pollution will increase until development achieves a threshold of $5,000 GDP/capita. (Tangentially, I found this a somewhat randomly chosen amount of money). Thereafter, theoretically, pollution will decrease due to “composition effects,” in which pollution-intense industry will shift to service or other less-polluting industries (though how this sector transformation occurred was never articulated). Another effect, called the “technique effect,” held that as income rose, people would become more aware of environmental issues, and would want to take measures to minimize any further environmental degradation. This theory turned out to be unequivocally false in the case of Mexico, whose environmental degradation is positively correlated with income, especially in the years since they achieved the supposed magical “threshold.”
This debunked “theory” highlights the fact that much of environmental legislation (or the lack thereof) has been based in a complacent mindset that refuses, until recently, to consider any scenarios other than best-case. It seems as if there as been an either-or mentality concerning the trade-off between development and environmental preservation, when in fact economic development and the environmental concerns are not at all mutually exclusive. Economic development, especially in urban areas and regions endowed with natural resources, is contingent upon environmental preservation. Therefore, the economic and legislative ways in which the global community views environmental issues need to shift from a second-seat position to development issues to a principal concern determining future development.
I thought it was interesting in the article on NAFTA and pollution in Mexico that the abatement costs for most companies in the United States to abide by emission regulations is very low compared to other factors of production. This makes it seem as if there could be more room to enforce stricter regulations without dramatically increasing production costs.
Gormaner11 recognizes that both articles call for government regulations to limit pollution. The problem especially with our government today regarding environmental regulations is that there is no certainty about what will be regulated in the future and to what extent. As the CEO of a company, I would not have a problem with increased regulations so long as I was notified far enough in advance where I could plan out and take the necessary steps to prepare for that regulation. Companies are playing a guessing game right now regarding how much they should spend now to limit pollution or research alternative, cleaner methods of production without knowing whether they are not spending enough on abatement research or whether they are wasting their resources. The government should clearly lay out transparent regulations that will increase over time and give companies a chance to adjust and even take advantage of the regulations by developing cheaper methods of abatement than their compeitiors.
It was definitely very interesting to read these two articles because of the conflicts that can occur as we head in both directions: a more environmentally sustainable world and a highly globalized world. Making the world smaller might not be a good idea. The paper that examined the sulfur dioxide and nitric oxide emissions from cargo ships raised several important facts. Despite of the environmental concerns, there are also human health concerns. Pollution is detrimental for those with asthma or heart disease. Also, areas with poorer people who rely on agriculture are harmed with by these negative externalities: water unsuitable for fishing, damaged forests, bad soil composition.
Both papers brought up the need for policies and strong government intervention. Countries with more "lax" policies for environmental regulation were most at risk. Obviously, the shipping transporation sector is not the only industry causing problems. One area that should be studied more in depth is the aviation sector. I read recently that Asia, mainly India and China, have shown rapid development in this sector. The emission of carbon dioxide is exorbitantly high with each flight. And every year the amount of flights and people flying across the world is increasing.
What kind of policies are needed to help reduce such development?
In the "Mexico, NAFTA, and Beyond" article, one of the first things that came to mind when it stated the estimated cost of damages to the environment was how they measured this cost. Were they looking only at cleanup costs or were they also including lost production (agriculture), estimates on increased health care costs, etc...? If they were only looking at cleanup costs, then the actual cost of pollution could be much higher.
Another thing that immediately came to mind with relation to the unique relationship Mexico and the U.S. share. The article did not delve into the details too much, however, I would be interested to know they author was controlling for the notoriously bad traffic in northern Mexico (near the border) as well as the traffic in cities such as Mexico City (another particularly bad area). It seems that pollution from sources other than direct emission from firms would also play a rather large role in a country such as Mexico. As the author states that "the amount of dirty industry decreased more in Mexico than in the United States," it seems that the rather large amounts of pollution increases must be coming from some area has been overlooked.
It was interesting to read about pollution caused by the trade via the shipping sector – an area the media (and apparently government regulation) has overlooked. Looking at Tables 3 and 5, the data consistently showed both the pollution (measured by tradeable permits) and external costs of foreign emissions increasing by 10% from 1993 to 2001. It’s startling to see that kind of data, and I wonder if that increase has to do not only with an increase in ships leaving the US but perhaps also lower pollution standards in foreign ships bringing cargo back to the US?
Also, comparing this to the NAFTA paper, drastic increases in pollution have also been a problem in Mexico. INEGI statistics post-NAFTA signing showed that GDP growth was minimal compared to soil erosion, municipal solid waste, and urban air and water pollution. However, he found that post NAFTA dirty industries decreased more in Mexico than in the US. Instead, what caused most of the increase in pollution was that real spending on environmental protection declined by 45%. Back to the issue of shipping and air pollution – is it possible that the decrease in spending on environmental protection could have led shipping companies (both domestic and foreign, since foreign firms were no more likely to comply with Mexican environmental law) to relax their standards thus contributing to greater NOx and SO2 emissions in the US?
I was also wondering about the non-attainment areas such as California and Texas. Naturally they have larger amounts of emissions. But an interesting point in the NAFTA paper argued that environmental regulations and enforcement are not a primary reason for a firm relocating. In regards to managing seaports, the government could perhaps afford to have firmer policies.
Initially, I had two problems with the EKC hypothesis and the idea that economic growth alone will bring with it a long-term tendency toward environmental improvement. I believe this hypothesis is rather unpractical.
Firstly, the classical issue of HOW long is long-term? If it was the $5000 income per capita margin and policymakers realize after the “target” is met (as in the case of Mexico) that no such tendency occurred, there is no “back-up” plan to fix the problem of present institutional weaknesses and the lack of means to enforce effective environmental regulation. Hence, it is not enough to put in place effective institutional mechanisms, AFTER one realizes that the environmental cost of waiting is too high, because then it might already be too late. Governments of developing countries who anticipate rapid growth and industrialization need to aim at providing a MATURE system of environmental policies when the country is in the first “steps” of growing.
Secondly, the technique effects (which are supposed to partly offset the scale effects) are only meaningful, if we are dealing with a functioning democracy, in which public opinion plays a big enough role in influencing policy decisions. Moreover, this concept also relies on the fact that the growing middle class does not itself benefit from less stringent environmental regulations and is not concerned with other, more pressing short-term political issues of the country.
Finally, I don’t see why these environmental concerns have to be intimately linked with trade-led growth in particular? Especially since the “pollution haven hypothesis” does not seem to hold? Is it simply because we don’t seem to have faced any other kind of non-trade-led rapid economic growth in the last decades?
After reading these two articles, it seems to me that the only way we will truly see environmental changes is if a) as Siwan pointed out, as a democracy the public pushes for an improved environmental policy or b) we are faced with a crisis that forces us to change the way we do things. Despite the arguments of Gallagher and Taylor regarding the importance of immediate change, and the need for some sort of self-sustaining environmental improvement policy, the environment has yet to become a hot political topic nationally or internationally. There have been a few debates, Al Gore certainly gave it his best shot... and every now and again when there's an oil spill people are outraged at the dependency on oil, which is made by very bad bad people who kill innocent sea creatures. And then they become overjoyed that they found a place to fill up their car at $2.64/gallon and go on their merry way. I believe that until public opinion pushes for some kind of environmental reform, good or bad, (like education - maybe a No Fossil Fuels Left Behind policy?) we will not see the changes Gallagher and Taylor want us to see.
I found the EKC analysis particularly interesting. While seriously flawed, there seems to be ample evidence that environmental protection IS INDEED linked to incomes. That is no surprise really, because as peoples incomes rise they are both more able, and likely more willing to pay certain premiums for greener products. This is both due to income, but also because green movement are much stronger in higher income countries, which affects consumers. That is not to say that I believe LDC to not care about "green", but merely that we should be aware that they can't really afford to be very concerned with it until they are past a certain income.
Now, the actual benchmark is not of much value. It is likely the outcome of a sophisticated equation which account for a number of variables - even if not mathematically, the conceptually. Like with econometrics, estimation and prediction can only go so far. For some countries we should expect their benchmark to be lower, for others we should expect higher. The validity of the article's conclusions is based on an observation, but we do not get the EKC explained in detail. A question arises: Even disregarding the benchmark, should we see a trend early on that environmental awareness and intervention is starting, or should we not expect to see much at all till past the benchmark? If the former, then we can reasonably say that the EKC is far from accurate in the Mexican case. If the latter, then it is possible that the Mexican benchmark is greater than the EKC average - causing inaccuracy, but not a failure to explain.
The other article is a step in the right direction. In a world where things are measured quantitatively - on the policy side at least - we can begin to compare the costs with the benefits, the latter of which can be measured in income from the transportation. Much like Ms. Gorman above,I am concerned that the number the authors find is inadequate. The calculation relies on the prices for permits, which would have to be an accurate depiction of all negative externality costs. That is hardly the case! I have faith though, that as our measurements get more sophisticated we will more accurately value costs of environmental degradation. Clearly the authors are not here concerned (and how could they have been?) with the greater scope of the effect of their measurements. The costs take place in and around the US, a country which has both infrastructure and income to combat many of the negative externalities. I would like to see products which reflect the price along its entire journey. That is, it should include all transportation, from producer to consumer. If we consider the environmental impact of the production of our goods, from beginning till end, perhaps we wouldn't be importing as much!
Gallagher's ideas about Mexico's relaxed commercial pollution policies parallel my own ideas. Without clearly defined regulations about how much pollution a company can produce and how much they should spend on researching alternative ways to lower their consumption of fossil fuels and improve their environmental policy, companies are left in the dark on how to act. If there aren't negative side effects that bring the issue to light, there will continue to be no environmental policy change.
With the continuing increase of pollution despite the growth of GDP in Mexico, the EKC predicted that wages would go up and pollution would go down. However, this has not been the case and the level of pollution has actually stayed relatively stable with only a little drop in Mexico. This lack of improvement with the increase in trade and production in North America would suggest that trade is not welfare enhancing and that the only thing that will improve welfare will be increased regulation of production pollution with strict guidelines that are easy for the corporations to follow.
The Gallagher and Taylor article pretty convincingly argues the need for regulation in order to protect the environment. The externalities created by pollution are extremely costly, as the authors show. However, the social cost is much greater than the private cost to the firms, even with the market for pollutants, so there exists a market failure. An interesting fear that the authors brought up is this "race to the bottom" in environmental policies. The idea is that increased regulation will cause firms to relocate to a country with less regulation and thus countries will deregulate in order to attract industry. This is plausible but unlikely since a lot of factors go into where an industry is located. Additionally, in the case of shipping, there is a finite number of places to have a port, so increased regulation would have the desired effect.
One issue that came to mind upon reading the two articles for this week was the issue of the Mexican trucking industry. One of the conditions of NAFTA was to eventually allow Mexican shipping trucks to deliver goods from Mexico into the US, rather than having to unpack them at the border and load them onto American shipping company trucks to be hauled across the US. Among other issues, concerns have been raised about the effect of older, less fuel efficient (and higher pollution-producing) Mexican trucks moving en masse across the US and the effects that this movement would have on US air and environmental standards. A description of the issue/debate can be found here http://www.arb.ca.gov/enf/hdvip/bip/naftamextrk.pdf. The debate has also become an issue about tariffs and unionization, but I thought it was germane to our discussion regardless. In the calculations of emissions due to seagoing vessels and their economic cost, I was wondering if there was a way to control (or if it was controlled for) for any possible benefits of increased shipping. For example, numerous ship that deliver goods from China return to China with shipping containers of garbage and tech trash (old cell phones, computer monitors etc) for reprocessing and recycling. Would there be any way to calculate the benefits these services provide and count them against the harm done by shipping in general?
I thought Gallagher’s conclusion in the NAFTA article that, “environmental regulations and enforcement are not generally decisive in most firms’ location decisions” was extremely interesting. I do wonder if this conclusion is true to a greater or lesser extent depending on the type of industry that individual firms are pursuing. It would be interesting to look at firms’ location decisions in relation to the specific type of industry, manufacturing, etc that each is involved with. I would think that different industries would be associated with varying levels of pollution and other environmental effects that, in turn, would increase or decrease the effect of environmental regulations on their location decisions.
Additionally, as many others before me have commented on, I think the externalities that Gallagher and Taylor touch on in the International Trade and Air Pollution article are an extremely important and often underestimated consideration. The gap between the costs of trade permits and the social costs in the form of healthcare costs, ecosystem damages, and potential long range global climate change effects may exemplify this underestimation. Also, it is important to consider that these detrimental social effects do not fall uniformly across society as a whole but are concentrated in major port areas such as Texas and California and are, in reality, “local, national, and global in nature” (3).
I will focus primarily on the Gallagher and Taylor article, as Mexico/NAFTA article is a study using a flawed hypothesis (the EKC), and I did not think there was much to take from the article. While the international trade and shipping article brings up an interesting point (free trade has led to pollution from the trade-carrying vessels), it misses the larger picture. Yes, there are environmental costs to shipping, but what the article fails to realize is that if we did not trade for goods, we would be producing the goods at home, causing increased levels of pollution at home. It is incorrect to look at these numbers as absolute costs. What should be done is a comparison of what kind of pollution levels we would see if there was no free trade (i.e. is the level of pollution greater from producing the goods at home or from importing them via trade). Only then would we be able to conclude something about the costs associated with trade, and we could conclude that it would be better for the environment to have free trade agreements or to dissolve any trade agreements.
I agree with many of y'all's points, but one that I would like to address is that I think the government needs to be more decisive about what its energy policies are. If the government would simply enforce stricter environmental pollution policies, the firms (shipping industry) will adapt and innovate. If there is any sector that has the capacity to innovate, it is the energy sector and all they need is the incentive to do so.
I agree with Levi's concerns about the accuracy of measuring the costs of pollution. Throughout the trade article, I kept thinking that environmental policies would be difficult to change without concrete numbers, but these numbers are very difficult to predict. It is the reality of our world that politics is fueled by money and without figures that can tell us the "dollar amount" that pollution from transportation will cost, it is unlikely that serious efforts to decrease pollution from trade will be accepted. As I am not very familiar with environmental policy, I would guess that some environmentalists have been successful at producing figures in the past, or no regulation would have occured. Improvements in calculating pollution damage would greatly improve chances for change.
Gallagher and Taylor raised the particularly unnerving point that the shipping industry is largely unregulated. Many industries in the US which have been regulated for some time have already created irreversible environmental damage. So after shipping industry regulation begins, there will still be some time before its environmental effects (in the form of emissions) begin to diminish--the negative impacts on biodiversity will never be erased. The NAFTA article piggybacks off of Gallagher and Taylor, showing that environmental regulation does not happen on its own and firms do not self-regulate. The environmental Kuznets curve, in effect, is not yet realized by empirical evidence. Laws and regulations must be in effect to guide firms in the right direction.
One of the things that the articles made me think about is how often times the decisions made by government normally look good on paper but are always made by politicians that don't fully understand the results of their decisions. In thins case NAFTA was established because we thought it would be positive legislation for all the countries involved. It was at the time a mostly economically fueled decsision as well as good foreign policy. The thing is while politicians are normally intelligent people they aren't always educated in the areas in which they make decisions. In this case the politicians likely saw the economic benefits of NAFTA but failed to recognize the pollution costs associated which when taken into account make it a much less appealing proposal.
Another thing that interests me is what Chas brought up about the article saying the costs of pollution weren't very high for companies even in the US. This is another case where policy only takes into account part of the problem. Sure it seems good for the economy to keep pollution laws lenient to encourage economic growth but as is shown by the articles there are unforseen costs to not considering the entire problem when making policy. The future costs of pollution could have a serious impact on the economy.
It was interesting to read these articles about a world culture that is becoming increasingly "green" out of concern for the environment, yet still facing more and more problems because of increased emissions of domestic and foreign cargo. With growing emissions and large economic costs, it is clear that economic effective economic policies are needed worldwide to prevent significant future costs. Gallagher and Taylor site foreign commerce as the bulk of economic and emissions costs which makes sense when you consider the increased imports, because of outsourcing to countries with lower labor costs, and exports from the U.S. In order to decrease emissions, policies could make it harder or more expensive to obtain permits and impose emission taxes on the pollution that domestic companies produce. Though trade liberalization and lax laws pertaining to emissions standards encourages more trade and ideally economic development, the environmental and social costs of pollution can negatively affect the future economy, as Max said. Because it is difficult to calculate the external costs of gas emissions from SO2 and NOx from ships, it will be difficult for countries to come up with policies that can accurately address them. It will be even more difficult to get countries to agree on a policy if we were to consider a global policy because of the EPA and other countries' respective environmental organizations that uphold regulations.
The environment is a major issue to consider when thinking about the impact of trade, yet it is one that is likely to slip out of mind or be placed on the back burner in favor of economic issues like increasing GDP. However, there are certainly economic benefits to being more environmentally conscious—for instance, it is important for companies and other polluters to think about the social benefit of their actions as well as their own private benefit. Lowering the environmental standards in a developing country might raise GDP in the short run, but it could easily have negative health benefits, rapidly lowering human capital and severely harming the nation in the long run. Companies and governments need to consider this and determine whether or not the short-term benefits are worth the long-term prices they would have to pay.
Furthermore, I think that countries should take into account the ethics of moving plants to developing nations such as Mexico and polluting their environment. While Mexico is responsible for a portion of the pollution in their country, many corporations are taking advantage of the vulnerable economic position that Mexico is currently in—for instance, Mexico will be thrilled to have the increased resources that these companies bring, but they put themselves in more environmental peril while the companies save their own countries from the additional environmental damage. Companies in general should just be more aware of their pollution and try to curtail it as opposed to simply burdening others with it, which simply is not ethical.
I found the refute of common hypothesis in the NAFTA article intriguing. I always viewed NAFTA as encouraging firms that had high pollutant costs being encouraged to bring their business to developing nations to evade the regulations in the US. I thought that the trade agreement encouraged the tragedy of the commons principal for foreign nations. However, the opposite seemed to occur with "the amount of dirty industry decreasing more in Mexico than the US." Why is this? Is it because that we rely upon more machinery vs. labor? Is there a time lag that eventually we will see this hurting us in the future. I feel like this principal needs to be further investigated in order to successfully reconstruct trade policy in the future.
The answer to both questions depends on the time-span being considered. In the short-run I would say that trade is welfare enhancing as it creates synergies between economies helping to increase output per capita. In the long-run the answer is much more ambiguous depending on the policies taken to cover both the economic and social costs of industrial growth, in the case an increase in shipping vessels. In Gallagher and Taylor's paper on commerce vessels, the ~$2.7 bn in social costs that are not covered is essentially $2.7 bn of environmental debt and in this case when the climate collects there can be no bailout. Depending on the maturity of an economy it would make sense that peoples preferences between standard of living vs. pollution do change as income per capita reaches its highest levels.
Like the Blackman, Osakwe, and Alpizar's paper on the effects of fuel taxes in Costa Rica, I think the crux of today's two pieces also lies in the tradeoff between industrial growth and pollution. Perhaps even more telling is the relationship between policy decisions made over the tradeoff and the political cycle; assuming politicians act rationally (at least partly) to the incentive of choosing policy that will gain reelection, maintain power, or wealth. As noted in the NAFTA paper, the economic benefits are short-term and economic costs are long-term. A political conflict of interest arises as changes in economic conditions or standard of living are realized immediately, whereas the full effects of pollution are long-term. Generally speaking, society (the median voter) seems to be focused on short-term conditions and politicians act accordingly which results in pollution levels higher than the ideal level. In general, both sides of the political spectrum would agree pollution is an awful externality that nobody prefers yet clearly there must be reasons why it exists at levels it does.
It is a very interesting point that there is little evidence of pollution havens in developing countries because the economic cost of regulation is so low relative to comparative advantage and other factors. Furthermore, the industries that enjoy a developing world comparative advantage are less pollutant industries such as base material production. I feel that this concept is worth noting because it allows one to conceptualize the economic size effects that determine where items are produced. As we read in the Gallagher and Taylor article, these environmental negative externalities are very real and no small figure. However, with little visible effect especially in the short run and the massive relative size of global trade these issues are unfortunately swept under the carpet. In addition to this, who is able to accurately quantify what the actual environmental costs of pollution and emissions are. We still have policy makers in Washington who don’t believe in global warming, and would thus account for a global warming cost of 0. I am apprehensive of the day that we have a better idea of these costs, but in the meantime the articles show us that we can start by enacting policy that takes responsibility for the costs we know for a fact we are incurring.
First, and most importantly, both articles emphasized the need for legislative regulations to be put in place by various governing bodies, including national governments and international trade organizations, such as NAFTA. “International Trade and Air Pollutions” emphasized the far-reaching effects of negative externalities. Sulfur dioxide and nitrous oxide, two pollutants of waterborne commerce (shipping), are wreaking havoc on port cities, many of which are already “environmental hot spots.” Although there are tradable permits, the cost of such a permit does not take into account the full social costs (or negative externalities) of such pollutants, and are moreover effectual because the social costs are not borne equally by society, or the world community as it were, at large.
ReplyDeleteThe NAFTA article, in addition to acknowledging that Mexico’s pollution causes negative externalities for its citizens, argues that such environmental degradation, including but not limited to air pollution, soil erosion, and water contamination, actually decreases growth rates. Ironically, environmental degradation was allowed to persist in the name of growth, wherein experts argued that the rate environmental degradation resembled a Kuznet’s curve, in that pollution will increase until development achieves a threshold of $5,000 GDP/capita. (Tangentially, I found this a somewhat randomly chosen amount of money). Thereafter, theoretically, pollution will decrease due to “composition effects,” in which pollution-intense industry will shift to service or other less-polluting industries (though how this sector transformation occurred was never articulated). Another effect, called the “technique effect,” held that as income rose, people would become more aware of environmental issues, and would want to take measures to minimize any further environmental degradation. This theory turned out to be unequivocally false in the case of Mexico, whose environmental degradation is positively correlated with income, especially in the years since they achieved the supposed magical “threshold.”
This debunked “theory” highlights the fact that much of environmental legislation (or the lack thereof) has been based in a complacent mindset that refuses, until recently, to consider any scenarios other than best-case. It seems as if there as been an either-or mentality concerning the trade-off between development and environmental preservation, when in fact economic development and the environmental concerns are not at all mutually exclusive. Economic development, especially in urban areas and regions endowed with natural resources, is contingent upon environmental preservation. Therefore, the economic and legislative ways in which the global community views environmental issues need to shift from a second-seat position to development issues to a principal concern determining future development.
I thought it was interesting in the article on NAFTA and pollution in Mexico that the abatement costs for most companies in the United States to abide by emission regulations is very low compared to other factors of production. This makes it seem as if there could be more room to enforce stricter regulations without dramatically increasing production costs.
ReplyDeleteGormaner11 recognizes that both articles call for government regulations to limit pollution. The problem especially with our government today regarding environmental regulations is that there is no certainty about what will be regulated in the future and to what extent. As the CEO of a company, I would not have a problem with increased regulations so long as I was notified far enough in advance where I could plan out and take the necessary steps to prepare for that regulation. Companies are playing a guessing game right now regarding how much they should spend now to limit pollution or research alternative, cleaner methods of production without knowing whether they are not spending enough on abatement research or whether they are wasting their resources. The government should clearly lay out transparent regulations that will increase over time and give companies a chance to adjust and even take advantage of the regulations by developing cheaper methods of abatement than their compeitiors.
It was definitely very interesting to read these two articles because of the conflicts that can occur as we head in both directions: a more environmentally sustainable world and a highly globalized world. Making the world smaller might not be a good idea. The paper that examined the sulfur dioxide and nitric oxide emissions from cargo ships raised several important facts. Despite of the environmental concerns, there are also human health concerns. Pollution is detrimental for those with asthma or heart disease. Also, areas with poorer people who rely on agriculture are harmed with by these negative externalities: water unsuitable for fishing, damaged forests, bad soil composition.
ReplyDeleteBoth papers brought up the need for policies and strong government intervention. Countries with more "lax" policies for environmental regulation were most at risk. Obviously, the shipping transporation sector is not the only industry causing problems. One area that should be studied more in depth is the aviation sector. I read recently that Asia, mainly India and China, have shown rapid development in this sector. The emission of carbon dioxide is exorbitantly high with each flight. And every year the amount of flights and people flying across the world is increasing.
What kind of policies are needed to help reduce such development?
In the "Mexico, NAFTA, and Beyond" article, one of the first things that came to mind when it stated the estimated cost of damages to the environment was how they measured this cost. Were they looking only at cleanup costs or were they also including lost production (agriculture), estimates on increased health care costs, etc...? If they were only looking at cleanup costs, then the actual cost of pollution could be much higher.
ReplyDeleteAnother thing that immediately came to mind with relation to the unique relationship Mexico and the U.S. share. The article did not delve into the details too much, however, I would be interested to know they author was controlling for the notoriously bad traffic in northern Mexico (near the border) as well as the traffic in cities such as Mexico City (another particularly bad area). It seems that pollution from sources other than direct emission from firms would also play a rather large role in a country such as Mexico. As the author states that "the amount of dirty industry decreased more in Mexico than in the United States," it seems that the rather large amounts of pollution increases must be coming from some area has been overlooked.
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ReplyDeleteIt was interesting to read about pollution caused by the trade via the shipping sector – an area the media (and apparently government regulation) has overlooked. Looking at Tables 3 and 5, the data consistently showed both the pollution (measured by tradeable permits) and external costs of foreign emissions increasing by 10% from 1993 to 2001. It’s startling to see that kind of data, and I wonder if that increase has to do not only with an increase in ships leaving the US but perhaps also lower pollution standards in foreign ships bringing cargo back to the US?
ReplyDeleteAlso, comparing this to the NAFTA paper, drastic increases in pollution have also been a problem in Mexico. INEGI statistics post-NAFTA signing showed that GDP growth was minimal compared to soil erosion, municipal solid waste, and urban air and water pollution. However, he found that post NAFTA dirty industries decreased more in Mexico than in the US. Instead, what caused most of the increase in pollution was that real spending on environmental protection declined by 45%. Back to the issue of shipping and air pollution – is it possible that the decrease in spending on environmental protection could have led shipping companies (both domestic and foreign, since foreign firms were no more likely to comply with Mexican environmental law) to relax their standards thus contributing to greater NOx and SO2 emissions in the US?
I was also wondering about the non-attainment areas such as California and Texas. Naturally they have larger amounts of emissions. But an interesting point in the NAFTA paper argued that environmental regulations and enforcement are not a primary reason for a firm relocating. In regards to managing seaports, the government could perhaps afford to have firmer policies.
Initially, I had two problems with the EKC hypothesis and the idea that economic growth alone will bring with it a long-term tendency toward environmental improvement. I believe this hypothesis is rather unpractical.
ReplyDeleteFirstly, the classical issue of HOW long is long-term? If it was the $5000 income per capita margin and policymakers realize after the “target” is met (as in the case of Mexico) that no such tendency occurred, there is no “back-up” plan to fix the problem of present institutional weaknesses and the lack of means to enforce effective environmental regulation. Hence, it is not enough to put in place effective institutional mechanisms, AFTER one realizes that the environmental cost of waiting is too high, because then it might already be too late. Governments of developing countries who anticipate rapid growth and industrialization need to aim at providing a MATURE system of environmental policies when the country is in the first “steps” of growing.
Secondly, the technique effects (which are supposed to partly offset the scale effects) are only meaningful, if we are dealing with a functioning democracy, in which public opinion plays a big enough role in influencing policy decisions. Moreover, this concept also relies on the fact that the growing middle class does not itself benefit from less stringent environmental regulations and is not concerned with other, more pressing short-term political issues of the country.
Finally, I don’t see why these environmental concerns have to be intimately linked with trade-led growth in particular? Especially since the “pollution haven hypothesis” does not seem to hold? Is it simply because we don’t seem to have faced any other kind of non-trade-led rapid economic growth in the last decades?
After reading these two articles, it seems to me that the only way we will truly see environmental changes is if a) as Siwan pointed out, as a democracy the public pushes for an improved environmental policy or b) we are faced with a crisis that forces us to change the way we do things. Despite the arguments of Gallagher and Taylor regarding the importance of immediate change, and the need for some sort of self-sustaining environmental improvement policy, the environment has yet to become a hot political topic nationally or internationally. There have been a few debates, Al Gore certainly gave it his best shot... and every now and again when there's an oil spill people are outraged at the dependency on oil, which is made by very bad bad people who kill innocent sea creatures. And then they become overjoyed that they found a place to fill up their car at $2.64/gallon and go on their merry way. I believe that until public opinion pushes for some kind of environmental reform, good or bad, (like education - maybe a No Fossil Fuels Left Behind policy?) we will not see the changes Gallagher and Taylor want us to see.
ReplyDeleteI found the EKC analysis particularly interesting. While seriously flawed, there seems to be ample evidence that environmental protection IS INDEED linked to incomes. That is no surprise really, because as peoples incomes rise they are both more able, and likely more willing to pay certain premiums for greener products. This is both due to income, but also because green movement are much stronger in higher income countries, which affects consumers. That is not to say that I believe LDC to not care about "green", but merely that we should be aware that they can't really afford to be very concerned with it until they are past a certain income.
ReplyDeleteNow, the actual benchmark is not of much value. It is likely the outcome of a sophisticated equation which account for a number of variables - even if not mathematically, the conceptually. Like with econometrics, estimation and prediction can only go so far. For some countries we should expect their benchmark to be lower, for others we should expect higher. The validity of the article's conclusions is based on an observation, but we do not get the EKC explained in detail. A question arises: Even disregarding the benchmark, should we see a trend early on that environmental awareness and intervention is starting, or should we not expect to see much at all till past the benchmark? If the former, then we can reasonably say that the EKC is far from accurate in the Mexican case. If the latter, then it is possible that the Mexican benchmark is greater than the EKC average - causing inaccuracy, but not a failure to explain.
The other article is a step in the right direction. In a world where things are measured quantitatively - on the policy side at least - we can begin to compare the costs with the benefits, the latter of which can be measured in income from the transportation. Much like Ms. Gorman above,I am concerned that the number the authors find is inadequate. The calculation relies on the prices for permits, which would have to be an accurate depiction of all negative externality costs. That is hardly the case! I have faith though, that as our measurements get more sophisticated we will more accurately value costs of environmental degradation. Clearly the authors are not here concerned (and how could they have been?) with the greater scope of the effect of their measurements. The costs take place in and around the US, a country which has both infrastructure and income to combat many of the negative externalities. I would like to see products which reflect the price along its entire journey. That is, it should include all transportation, from producer to consumer. If we consider the environmental impact of the production of our goods, from beginning till end, perhaps we wouldn't be importing as much!
Gallagher's ideas about Mexico's relaxed commercial pollution policies parallel my own ideas. Without clearly defined regulations about how much pollution a company can produce and how much they should spend on researching alternative ways to lower their consumption of fossil fuels and improve their environmental policy, companies are left in the dark on how to act. If there aren't negative side effects that bring the issue to light, there will continue to be no environmental policy change.
ReplyDeleteWith the continuing increase of pollution despite the growth of GDP in Mexico, the EKC predicted that wages would go up and pollution would go down. However, this has not been the case and the level of pollution has actually stayed relatively stable with only a little drop in Mexico. This lack of improvement with the increase in trade and production in North America would suggest that trade is not welfare enhancing and that the only thing that will improve welfare will be increased regulation of production pollution with strict guidelines that are easy for the corporations to follow.
The Gallagher and Taylor article pretty convincingly argues the need for regulation in order to protect the environment. The externalities created by pollution are extremely costly, as the authors show. However, the social cost is much greater than the private cost to the firms, even with the market for pollutants, so there exists a market failure. An interesting fear that the authors brought up is this "race to the bottom" in environmental policies. The idea is that increased regulation will cause firms to relocate to a country with less regulation and thus countries will deregulate in order to attract industry. This is plausible but unlikely since a lot of factors go into where an industry is located. Additionally, in the case of shipping, there is a finite number of places to have a port, so increased regulation would have the desired effect.
ReplyDeleteOne issue that came to mind upon reading the two articles for this week was the issue of the Mexican trucking industry. One of the conditions of NAFTA was to eventually allow Mexican shipping trucks to deliver goods from Mexico into the US, rather than having to unpack them at the border and load them onto American shipping company trucks to be hauled across the US. Among other issues, concerns have been raised about the effect of older, less fuel efficient (and higher pollution-producing) Mexican trucks moving en masse across the US and the effects that this movement would have on US air and environmental standards. A description of the issue/debate can be found here http://www.arb.ca.gov/enf/hdvip/bip/naftamextrk.pdf. The debate has also become an issue about tariffs and unionization, but I thought it was germane to our discussion regardless.
ReplyDeleteIn the calculations of emissions due to seagoing vessels and their economic cost, I was wondering if there was a way to control (or if it was controlled for) for any possible benefits of increased shipping. For example, numerous ship that deliver goods from China return to China with shipping containers of garbage and tech trash (old cell phones, computer monitors etc) for reprocessing and recycling. Would there be any way to calculate the benefits these services provide and count them against the harm done by shipping in general?
I thought Gallagher’s conclusion in the NAFTA article that, “environmental regulations and enforcement are not generally decisive in most firms’ location decisions” was extremely interesting. I do wonder if this conclusion is true to a greater or lesser extent depending on the type of industry that individual firms are pursuing. It would be interesting to look at firms’ location decisions in relation to the specific type of industry, manufacturing, etc that each is involved with. I would think that different industries would be associated with varying levels of pollution and other environmental effects that, in turn, would increase or decrease the effect of environmental regulations on their location decisions.
ReplyDeleteAdditionally, as many others before me have commented on, I think the externalities that Gallagher and Taylor touch on in the International Trade and Air Pollution article are an extremely important and often underestimated consideration. The gap between the costs of trade permits and the social costs in the form of healthcare costs, ecosystem damages, and potential long range global climate change effects may exemplify this underestimation. Also, it is important to consider that these detrimental social effects do not fall uniformly across society as a whole but are concentrated in major port areas such as Texas and California and are, in reality, “local, national, and global in nature” (3).
I will focus primarily on the Gallagher and Taylor article, as Mexico/NAFTA article is a study using a flawed hypothesis (the EKC), and I did not think there was much to take from the article. While the international trade and shipping article brings up an interesting point (free trade has led to pollution from the trade-carrying vessels), it misses the larger picture. Yes, there are environmental costs to shipping, but what the article fails to realize is that if we did not trade for goods, we would be producing the goods at home, causing increased levels of pollution at home. It is incorrect to look at these numbers as absolute costs. What should be done is a comparison of what kind of pollution levels we would see if there was no free trade (i.e. is the level of pollution greater from producing the goods at home or from importing them via trade). Only then would we be able to conclude something about the costs associated with trade, and we could conclude that it would be better for the environment to have free trade agreements or to dissolve any trade agreements.
ReplyDeleteI agree with many of y'all's points, but one that I would like to address is that I think the government needs to be more decisive about what its energy policies are. If the government would simply enforce stricter environmental pollution policies, the firms (shipping industry) will adapt and innovate. If there is any sector that has the capacity to innovate, it is the energy sector and all they need is the incentive to do so.
ReplyDeleteI agree with Levi's concerns about the accuracy of measuring the costs of pollution. Throughout the trade article, I kept thinking that environmental policies would be difficult to change without concrete numbers, but these numbers are very difficult to predict. It is the reality of our world that politics is fueled by money and without figures that can tell us the "dollar amount" that pollution from transportation will cost, it is unlikely that serious efforts to decrease pollution from trade will be accepted. As I am not very familiar with environmental policy, I would guess that some environmentalists have been successful at producing figures in the past, or no regulation would have occured. Improvements in calculating pollution damage would greatly improve chances for change.
ReplyDeleteGallagher and Taylor raised the particularly unnerving point that the shipping industry is largely unregulated. Many industries in the US which have been regulated for some time have already created irreversible environmental damage. So after shipping industry regulation begins, there will still be some time before its environmental effects (in the form of emissions) begin to diminish--the negative impacts on biodiversity will never be erased.
ReplyDeleteThe NAFTA article piggybacks off of Gallagher and Taylor, showing that environmental regulation does not happen on its own and firms do not self-regulate. The environmental Kuznets curve, in effect, is not yet realized by empirical evidence. Laws and regulations must be in effect to guide firms in the right direction.
One of the things that the articles made me think about is how often times the decisions made by government normally look good on paper but are always made by politicians that don't fully understand the results of their decisions. In thins case NAFTA was established because we thought it would be positive legislation for all the countries involved. It was at the time a mostly economically fueled decsision as well as good foreign policy. The thing is while politicians are normally intelligent people they aren't always educated in the areas in which they make decisions. In this case the politicians likely saw the economic benefits of NAFTA but failed to recognize the pollution costs associated which when taken into account make it a much less appealing proposal.
ReplyDeleteAnother thing that interests me is what Chas brought up about the article saying the costs of pollution weren't very high for companies even in the US. This is another case where policy only takes into account part of the problem. Sure it seems good for the economy to keep pollution laws lenient to encourage economic growth but as is shown by the articles there are unforseen costs to not considering the entire problem when making policy. The future costs of pollution could have a serious impact on the economy.
It was interesting to read these articles about a world culture that is becoming increasingly "green" out of concern for the environment, yet still facing more and more problems because of increased emissions of domestic and foreign cargo. With growing emissions and large economic costs, it is clear that economic effective economic policies are needed worldwide to prevent significant future costs. Gallagher and Taylor site foreign commerce as the bulk of economic and emissions costs which makes sense when you consider the increased imports, because of outsourcing to countries with lower labor costs, and exports from the U.S. In order to decrease emissions, policies could make it harder or more expensive to obtain permits and impose emission taxes on the pollution that domestic companies produce. Though trade liberalization and lax laws pertaining to emissions standards encourages more trade and ideally economic development, the environmental and social costs of pollution can negatively affect the future economy, as Max said. Because it is difficult to calculate the external costs of gas emissions from SO2 and NOx from ships, it will be difficult for countries to come up with policies that can accurately address them. It will be even more difficult to get countries to agree on a policy if we were to consider a global policy because of the EPA and other countries' respective environmental organizations that uphold regulations.
ReplyDeleteThe environment is a major issue to consider when thinking about the impact of trade, yet it is one that is likely to slip out of mind or be placed on the back burner in favor of economic issues like increasing GDP. However, there are certainly economic benefits to being more environmentally conscious—for instance, it is important for companies and other polluters to think about the social benefit of their actions as well as their own private benefit. Lowering the environmental standards in a developing country might raise GDP in the short run, but it could easily have negative health benefits, rapidly lowering human capital and severely harming the nation in the long run. Companies and governments need to consider this and determine whether or not the short-term benefits are worth the long-term prices they would have to pay.
ReplyDeleteFurthermore, I think that countries should take into account the ethics of moving plants to developing nations such as Mexico and polluting their environment. While Mexico is responsible for a portion of the pollution in their country, many corporations are taking advantage of the vulnerable economic position that Mexico is currently in—for instance, Mexico will be thrilled to have the increased resources that these companies bring, but they put themselves in more environmental peril while the companies save their own countries from the additional environmental damage. Companies in general should just be more aware of their pollution and try to curtail it as opposed to simply burdening others with it, which simply is not ethical.
I found the refute of common hypothesis in the NAFTA article intriguing. I always viewed NAFTA as encouraging firms that had high pollutant costs being encouraged to bring their business to developing nations to evade the regulations in the US. I thought that the trade agreement encouraged the tragedy of the commons principal for foreign nations. However, the opposite seemed to occur with "the amount of dirty industry decreasing more in Mexico than the US." Why is this? Is it because that we rely upon more machinery vs. labor? Is there a time lag that eventually we will see this hurting us in the future. I feel like this principal needs to be further investigated in order to successfully reconstruct trade policy in the future.
ReplyDeleteThe answer to both questions depends on the time-span being considered. In the short-run I would say that trade is welfare enhancing as it creates synergies between economies helping to increase output per capita. In the long-run the answer is much more ambiguous depending on the policies taken to cover both the economic and social costs of industrial growth, in the case an increase in shipping vessels. In Gallagher and Taylor's paper on commerce vessels, the ~$2.7 bn in social costs that are not covered is essentially $2.7 bn of environmental debt and in this case when the climate collects there can be no bailout. Depending on the maturity of an economy it would make sense that peoples preferences between standard of living vs. pollution do change as income per capita reaches its highest levels.
ReplyDeleteLike the Blackman, Osakwe, and Alpizar's paper on the effects of fuel taxes in Costa Rica, I think the crux of today's two pieces also lies in the tradeoff between industrial growth and pollution. Perhaps even more telling is the relationship between policy decisions made over the tradeoff and the political cycle; assuming politicians act rationally (at least partly) to the incentive of choosing policy that will gain reelection, maintain power, or wealth. As noted in the NAFTA paper, the economic benefits are short-term and economic costs are long-term. A political conflict of interest arises as changes in economic conditions or standard of living are realized immediately, whereas the full effects of pollution are long-term. Generally speaking, society (the median voter) seems to be focused on short-term conditions and politicians act accordingly which results in pollution levels higher than the ideal level. In general, both sides of the political spectrum would agree pollution is an awful externality that nobody prefers yet clearly there must be reasons why it exists at levels it does.
It is a very interesting point that there is little evidence of pollution havens in developing countries because the economic cost of regulation is so low relative to comparative advantage and other factors. Furthermore, the industries that enjoy a developing world comparative advantage are less pollutant industries such as base material production. I feel that this concept is worth noting because it allows one to conceptualize the economic size effects that determine where items are produced. As we read in the Gallagher and Taylor article, these environmental negative externalities are very real and no small figure. However, with little visible effect especially in the short run and the massive relative size of global trade these issues are unfortunately swept under the carpet. In addition to this, who is able to accurately quantify what the actual environmental costs of pollution and emissions are. We still have policy makers in Washington who don’t believe in global warming, and would thus account for a global warming cost of 0. I am apprehensive of the day that we have a better idea of these costs, but in the meantime the articles show us that we can start by enacting policy that takes responsibility for the costs we know for a fact we are incurring.
ReplyDelete-Kyle