David I. Stern

Economic growth and environmental degradation: The Environmental Kuznets Curve and sustainable development

Abstract In this paper we critically examine the concept of the environmental Kuznets curve (EKC). It proposes that there is an inverted U-shape relation between environmental degradation and income per capita, so that, eventually, growth reduces the environmental impact of economic activity. The concept is dependent on a model of the economy in which there is no feedback from the quality of the environment to production possibilities, and in which trade has a neutral effect on environmental degradation. The actual violation of these assumptions gives rise to fundamental problems in estimating the parameters of an EKC. The paper identifies other econometric problems with estimates of the EKC, and reviews a number of empirical studies. The inference from some such EKC estimates that further development will reduce environmental degradation is dependent on the assumption that world per capita income is normally distributed when in fact median income is far below mean income. We carry out simulations combining EKC estimates from the literature with World Bank forecasts for economic growth for individual countries, aggregating over countries to derive the global impact. Within the horizon of the Banks forecast (2025) global emissions of SO 2 continue to increase. Forest loss stabilizes before the end of the period but tropical deforestation continues at a constant rate throughout the period.

A multivariate cointegration analysis of the role of energy in the US macroeconomy

This paper extends my previous analysis of the causal relationship of GDP and energy use in the USA in the post-war period to a cointegration analysis of that relationship. It is found that the majority of the relevant variables are integrated justifying a cointegration analysis. The results show that cointegration does occur and that energy input cannot be excluded from the cointegration space. The results are plausible in terms of macroeconomic dynamics. The results are similar to my previous Granger Causality results and contradict claims in the literature (based on bivariate models) that there is no cointegration between energy and output.

Energy and economic growth in the USA: A multivariate approach

Abstract This paper examines the causal relationship between GDP and energy use for the period 1947-90 in the USA. The relationship between energy use and economic growth has been examined by both biophysical and neoclassical economists. In particular, several studies have tested for the presence of a causal relationship (in the Granger sense) between energy use and economic growth. However, these tests do not allow a direct test of the relative explanatory powers of the neoclassical and biophysical models. A multivariate adaptation of the test-vector autoregression (VAR) does allow such a test. A VAR of GDP, energy use, capital stock and employment is estimated and Granger tests for causal relationships between the variables are carried out. Although there is no evidence that gross energy use Granger causes GDP, a measure of final energy use adjusted for changing fuel composition does Granger cause GDP.

Climate change and the resurgence of malaria in the East African highlands.

The public health and economic consequences of Plasmodium falciparum malaria are once again regarded as priorities for global development. There has been much speculation on whether anthropogenic climate change is exacerbating the malaria problem, especially in areas of high altitude where P. falciparum transmission is limited by low temperature. The International Panel on Climate Change has concluded that there is likely to be a net extension in the distribution of malaria and an increase in incidence within this range. We investigated long-term meteorological trends in four high-altitude sites in East Africa, where increases in malaria have been reported in the past two decades. Here we show that temperature, rainfall, vapour pressure and the number of months suitable for P. falciparum transmission have not changed significantly during the past century or during the period of reported malaria resurgence. A high degree of temporal and spatial variation in the climate of East Africa suggests further that claimed associations between local malaria resurgences and regional changes in climate are overly simplistic.

Progress on the environmental Kuznets curve

The environmental Kuznets curve (EKC) hypothesis proposes that there is an inverted U-shape relation between environmental degradation and income per capita. This has been taken to imply that economic growth will eventually redress the environmental impacts of the early stages of economic development. The literature on this issue has developed rapidly over the last few years. This paper examines whether progress has been made on both understanding the EKC phenomenon and on addressing the various criticisms raised against some of the empirical studies and their interpretation in the policy literature. Though basic EKC studies continue to be carried out, recent work has focused on the effect of a variety of conditioning variables on the environmental impact-GDP relationship. Some attempts have also been made to examine the history of the relationship in individual countries. The econometric techniques used have improved. However, empirical decompositions of the EKC into proximate or underlying causes are either limited in scope or non-systematic, and explicit testing of the various theoretical models has not yet been attempted.

Aggregation and the role of energy in the economy

Methods for investigating the role of energy in the economy involve aggregating different energy flows. A variety of methods have been proposed, but none has received universal acceptance. This paper shows that the method of aggregation has crucial effects on the results of the analysis. We review the principal assumptions and methods for aggregating energy flows: the basic heat equivalents approach, economic approaches using prices or marginal product for aggregation, emergy analysis, and thermodynamic approaches such as exergy. We argue that economic approaches such as the index or marginal product method are superior because they account for differences in quality among fuels. We apply various economic approaches in three case studies in the US economy. In the first, we account for energy quality to assess changes in the energy surplus delivered by the extraction of fossil fuels from 1954 to 1992. The second and third case studies examine the importance of energy quality in evaluating the relation between energy use and GDP. First, a quality-adjusted index of energy consumption is used in an econometric analysis of the causal relation between energy use and GDP from 1947 to 1996. Second, we account for energy quality in an econometric analysis of the factors that determine changes in the energy:GDP ratio from 1947 to 1996. Without adjusting for energy quality, the results imply that the energy surplus from petroleum extraction is increasing, that changes in GDP drive changes in energy use, and that GDP has been decoupled from between aggregate energy use. All of these conclusions are reversed when we account for changes in energy quality.

The Role of Energy in Economic Growth

This paper reviews the mainstream, resource economics, and ecological economics models of growth. A possible synthesis of energy‐based and mainstream models is presented. This shows that when energy is scarce it imposes a strong constraint on the growth of the economy; however, when energy is abundant, its effect on economic growth is much reduced. The industrial revolution released the constraints on economic growth by the development of new methods of using coal and the discovery of new fossil fuel resources. Time‐series analysis shows that energy and GDP cointegrate, and energy use Granger causes GDP when capital and other production inputs are included in the vector autoregression model. However, various mechanisms can weaken the links between energy and growth. Energy used per unit of economic output has declined in developed and some developing countries, owing to both technological change and a shift from poorer quality fuels, such as coal, to the use of higher quality fuels, especially electricity. Substitution of other inputs for energy and sectoral shifts in economic activity play smaller roles.

Explaining changes in global sulfur emissions: an econometric decomposition approach

Abstract Changes in the emission of anthropogenic pollutants can be attributed to changes in input mix, output mix, scale, and the state of technical progress. I develop a non-linear emissions decomposition model and apply it to a panel data set for sulfur emissions in 64 countries from 1973 to 1990. The results show that though input and output mix are statistically significant and important in explaining emissions in individual countries, they make only a small contribution to changes in global emissions. Increasing scale and countervailing technical change explain most of the observed global change. I also estimate an environmental Kuznets curve model for the same dataset, which yields a monotonic emissions-income relation at the global level. This model does not explain as much variance as the decomposition model and has poorer statistical properties. A nested test of the two models shows that the EKC imposes significant restrictions on the general model, while the decomposition model does not.

Evidence for human influence on climate from hemispheric temperature relations

Analysis of observational temperature records for the Northern and Southern hemispheres indicates a statistical relationship in which Northern Hemisphere temperature depends on temperature in the Southern Hemisphere. This pattern, which has strengthened over time, can be explained by the climatic effects of anthropogenic trace gases and tropospheric sulphate aerosols. A similar statistical patternis produced by model simulations of the historical atmosphere.

Hot topic or hot air? Climate change and malaria resurgence in East African highlands

Climate has a significant impact on malaria incidence and we have predicted that forecast climate changes might cause some modifications to the present global distribution of malaria close to its present boundaries. However, it is quite another matter to attribute recent resurgences of malaria in the highlands of East Africa to climate change. Analyses of malaria time-series at such sites have shown that malaria incidence has increased in the absence of co-varying changes in climate. We find the widespread increase in resistance of the malaria parasite to drugs and the decrease in vector control activities to be more likely driving forces behind the malaria resurgence.