Economic Development and Environmental Degradation

If growth is pursued without regard to its environmental cost, the very process of development can degrade the resource base and life-support systems described in the previous section. This section studies why that happens and what shape it typically takes.

Externalities: why the market alone does not protect the environment

Much environmental damage is a case of negative externality — a cost imposed on third parties, or on society at large, that is not reflected in the market price paid by the producer or consumer causing it. A factory that discharges untreated effluent into a river bears none of the cost of the resulting harm to fisheries, drinking-water treatment or public health downstream; that cost falls on people who were no party to the transaction. Because the polluter's private cost of production is lower than the true social cost (private cost plus the external damage), a market left to itself tends to produce polluting goods at a level greater than the socially optimal level — the central reason environmental protection cannot be left to market forces alone and requires deliberate policy, a theme this chapter returns to in its final section.

Forms of environmental degradation associated with growth

• Air pollution — emissions from thermal power stations, industrial units and growing vehicular traffic release particulate matter, sulphur and nitrogen oxides, and carbon dioxide, degrading air quality in industrial and urban centres.
• Water pollution — untreated industrial effluent, urban sewage and agro-chemical (fertiliser and pesticide) runoff entering rivers, tanks and groundwater reduce the water available for drinking, irrigation and fisheries.
• Land degradation and soil erosion — over-cultivation, unregulated mining and the clearing of vegetation on slopes reduce soil fertility and increase vulnerability to erosion and flash flooding.
• Deforestation and biodiversity loss — clearing forest cover for agriculture, settlement or industry not only removes a resource base and a carbon sink but also destroys habitats, reducing the diversity of plant and animal species an ecosystem can support.
• Solid and hazardous waste accumulation — rising consumption generates growing volumes of municipal solid waste, plastic waste and, increasingly, electronic waste, much of which is not safely collected or processed.
• Climate change — the cumulative, global build-up of greenhouse gases (principally carbon dioxide and methane) from fossil-fuel combustion and land-use change is altering weather patterns, raising average temperatures, and increasing the frequency of extreme events such as cyclones and droughts — a form of degradation that is planetary in scale rather than local.

The Environmental Kuznets Curve …