David Wheeler

Determinants of pollution abatement in developing countries: Evidence from South and Southeast Asia

Abstract Developing countries, paŕticularly those in Asia, are fast adopting industrial pollution control standards similar to those in developed countries. Formal regulation has been greatly hampered, however, by the absence of clear and legally binding regulations; limited institutional capacity; lack of appropriate equipment and trained personnel; and inadequate information on emissions. One would predict highly pollution-intensive production under such conditions. Our research, however, has uncovered strongly contradictory evidence. Despite weak or nonexistent formal regulation, there are many clean plants in the developing countries of South and Southeast Asia. Of course, there are also many plants which are among the worlds most serious polluters. What explains such extreme interplant variation? This paper reviews evidence drawn from three empirical studies of plant-level abatement practices conducted 1992–1994. The analyses test the importance of plant characteristics, economic considerations and external pressure in determining environmental performance. The results consistently show that pollution intensity is negatively associated with scale, productive efficiency, and the use of new process technology. It is strongly and positively associated with public ownership, but foreign ownership has no significant effect once other plant characteristics are taken into account. Among external sources of pressure, community action, or informal regulation, emerges as a clear source of interplant differences in all three studies. The results suggest that local income and education are powerful predictors of the effectiveness of informal regulation. They also show that existing formal regulation has measurably beneficial effects, even when it is quite weakly developed.

Industrial pollution in economic development: the environmental Kuznets curve revisited

Abstract Using new international data, this paper tests the environmental Kuznets curve (EKC) hypothesis for industrial water pollution. We measure the effect of income growth on three determinants of pollution: the share of industry in national output, the share of polluting sectors in industrial output, and “end-of-pipe” (EOP) pollution intensities (per unit of output) in the polluting sectors. We find that the industry share of national output follows a Kuznets-type trajectory, but the other two determinants do not. When combined, our results imply rejection of the EKC hypothesis for industrial water pollution: it rises rapidly through middle-income status and remains roughly constant thereafter.

The Industrial Pollution Projection System

The World Banks technical assistance work with new environmental protection institutions stresses cost-effective regulation, with market-based pollution control instruments implemented wherever feasible. But few environmental protection institutions can do the benefit-cost analysis needed because they lack data on industrial emissions and abatement costs. For the time being, they must use appropriate estimates. The industrial pollution projection system (IPPS) is being developed as a comprehensive response to this need for estimates. The estimation of IPPS parameters is providing a much clearer, more detailed view of the sources of industrial pollution. The IPPS has been developed to exploit the fact that industrial pollution is heavily affected by the scale of industrial activity, by its sectoral composition, and by the type of process technology used in production. Most developing countries have little or no data on industrial pollution, but many of them have relatively detailed industry-survey information on employment, value added, or output. The IPPS is designed to convert this information to a profile of associated pollutant output for countries, regions, urban areas, or proposed new projects. It operates through sectoral estimates of pollution intensity, or pollution per unit of activity. The IPPS is being developed in two phases. The first prototype has been estimated from a massive U.S. data base developed by the Banks Policy Research Department, Environment, Infrastructure, and Agriculture Division, in collaboration with the Center for Economic Studies of the U.S. Census Bureau and the U.S. Environmental Protection Agency. This database was created by merging manufacturing census data with Environment Protection Agency data on air, water, and solid waste emissions. It draws on environmental, economic, and geographic information from about 200,000 U.S. factories. The IPPS covers about 1,500 product categories, all operating technologies, and hundreds of pollutants. It can project air, water, or solid waste emissions, and it incorporates a range of risk factors for human toxins and ecotoxic effects. The more ambitious second phase of IPPS development will take into account cross-country and cross-regional variations in relative prices, economic and sectoral policies, and strictness of regulation.

The cost of air pollution abatement

Using data from the U.S. Census Bureau, the authors have developed comprehensive estimates of pollution abatement costs by industry sector for several major air pollutants. Their results provide conservative benchmarks for benefit-cost analysis of pollution control strategies in developing countries. They also provide striking evidence of inefficiency in U.S. command-and-control regulation. The cost estimates reflect the experience of about 100,000 U.S. manufacturing facilities under actual operating conditions. They are based on a complete accounting of costs - including capital, labor energy, materials, and services. So, they should be more useful for benefit-cost analysis than idealized engineering estimates. But they also reflect strict pollution control regulation and input prices which are probably somewhat higher, on average, than those in developing countries. They should be interpreted as conservative estimates for environmental planning in developing countries. Regulatory options that are judged to have high net benefits using these numbers would probably look even better if local abatement cost data were available. The estimates in this paper can provide useful information for pollution charges. They can also help make targeted regulation more cost-effective. With scarce resources for monitoring and enforcement, new regulatory institutions in developing countries will want to focus initially on industry sectors that are the main sources of locally-dangerous pollutants. After those sectors are identified, targeted regulation should be informed by sectoral differences in abatement cost. The estimates suggest, for example, that cost-effective control of suspended particulate emissions will focus on wood pulping rather than steelmaking when both are major sources of suspended particulates. The reason: average particulate abatement costs are four times higher in steelmaking.

Policy Reform, Economic Growth and the Digital Divide

Rapid growth of internet use in high-income economies has raised the spectre of a “digital divide” that will marginalize developing countries because they can neither afford internet access nor use it effectively when it is available. Using a new cross-country data set, this paper investigates two proximate determinants of the digital divide: internet intensity (internet subscriptions per telephone mainline); and access to telecom services. Surprisingly, no gap in internet intensity was found. When differences in urbanization and competition policy are controlled for, low-income countries have intensities as high as those of industrial countries. While income does not seem to matter in this context, competition policy matters a great deal. Low-income countries with high World Bank ratings for competition policy have significantly higher internet intensities. The papers finding on internet intensity implies that the digital divide is not really new, but reflects a persistent gap in the availability of mainline telephone services. After identifying mobile telephones as a promising new platform for internet access, the paper uses panel data to study the determinants of mobile telephone diffusion during the past decade. The results show that income explains part of the diffusion lag for the poor countries, but they also highlight the critical role of policy. Developing countries whose policies promote economic growth and private sector competition have experienced much more rapid diffusion of mobile phone service. Simulations based on the econometric results suggest that feasible reforms could sharply narrow the digital divide during the next decade for many countries in Africa, Asia and Latin America.

Surviving success : policy reform and the future of industrial pollution in China

Chinas recent industrial growth, a remarkable success story, has been clouded by hundreds of thousands of premature deaths and incidents of serious respiratory illness caused by exposure to industrial air pollution. Seriously contaminated by industrial discharges, many of Chinas waterways are largely unfit for direct human use. This damage could be substantially reduced at modest cost. Industrial reform combined with stricter environmental regulation has reduced organic water pollution in many areas and has curbed the growth of air pollution. But much higher levels of emissions controls (of particulates and sulfur dioxide) are warranted in Chinas polluted cities. For the cost-benefit analysis that led to this conclusion, the authors developed three scenarios projecting pollution damage under varying assumptions about future policies. Their findings are: Even if regulation is not tightened further, continued economic reform should have a powerful effect on pollution intensity. Organic water pollution will stabilize in many areas and actually decline in some. Air pollution will continue growing in most areas but at a much slower pace than industrial output. The cost of inaction would be high--most of Chinas waterways will remain heavily polluted, and many thousands of people will die or suffer serious respiratory damage. Continuing current trends in tightened regulation for water pollution will lead to sharp improvements; adopting an economically feasible policy of much stricter regulation will restore the health of many waterways. The stakes are even higher for air pollution because regulatory enforcement has weakened in many areas in the past five years. Reversing that trend will save many lives at extremely modest cost. Chinas National Environmental Protection Agency (NEPA) has recommended a tenfold increase in the air pollution levy; adopting NEPAs very conservative recommendation would produce a major turnaround in most cities. For representative Chinese cities, a fiftyfold increase in the levy is probably warranted economically. To be cost-effective, heavy sources of particulate and sulfur dioxide emissions should be targeted for abatement. Reducing emissions from large private plants is so cheap that only significant abatement makes sense -- at least 70 percent abatement of sulfur dioxide particulates and even greater abatement of particulates in large urban industrial facilities.

Sea-Level Rise and Storm Surges : A Comparative Analysis of Impacts in Developing Countries

An increase in sea surface temperature is evident at all latitudes and in all oceans. The current understanding is that ocean warming plays a major role in intensified cyclone activity and heightened storm surges. The vulnerability of coastlines to intensified storm surges can be ascertained by overlaying Geographic Information System information with data on land, population density, agriculture, urban extent, major cities, wetlands, and gross domestic product for inundation zones likely to experience more intense storms and a 1 meter sea-level rise. The results show severe impacts are likely to be limited to a relatively small number of countries and a cluster of large cities at the low end of the international income distribution.

Equilibrium pollution and economic development in China

This paper develops and estimates a structural equilibrium pollution model, in which the price and quantity of industrial pollution are jointly determined by the intersection of environmental demand and supply functions. The industrial environmental demand function relates industrial pollution intensity to the local price of pollution, while controlling for characteristics such as sector, scale, and ownership. The local environmental supply function specifies the pollution price imposed by the host community as pollution rises. The model provides a good fit to available data on provincial variations in Chinas pollution levy, or industrial emissions charge. Our results also suggest that Chinese industry has reduced emissions significantly in response to the levy.

Endogenous enforcement and effectiveness of China's pollution levy system

The authors investigate two aspects of Chinas pollution levy system, which was first implemented about 20 years ago. First, they analyze what determines differences in enforcement of the pollution levy in various urban areas. They find that collection of the otherwise uniform pollution levy is sensitive to differences in economic development and environmental quality. Air and water pollution levies are higher in areas that are heavily polluted. Second, they analyze the impact of pollution charges on industrys environmental performance, in terms of the pollution intensity of process production and the degree of end-of-pipe abatement for both water pollution and air pollution. Econometric analysis shows that plants respond strongly to the levy by either abating air pollution in the production process or providing end-of-pipe treatment for water pollution.

Bending the Rules: Discretionary Pollution Control in China

Industry compliance with pollution regulations is far from universal, even in North America. In developing countries, compliance rates are often quite low, particularly where budgets for regulation are low or inspectors are corrupt. And strictness of enforcement varies. Regulators are reluctant to impose stiff penalties on financially strapped plants that are major employers, and in many developing countries state-owned plants are treated more leniently than their private-sector counterparts. But research on determinants of compliance and enforcement is rare, even in industrial societies. The authors use new plant-level data for China to analyze variations in both compliance and enforcement, with a focus on regulation of water pollution. They look at the mechanics of official regulation, the economics of compliance, and regulatory discretion. They find: Cost-sensitive plants will try to adjust emissions to the point where the marginal levy equals the marginal cost of abatement. In practice, local regulators have considerable discretion in judging both compliance and appropriate penalties for noncompliance. Chinas regulators play by the rules, but often bend them. Underreporting and underassessment are common in China. But variable regulation is systematic, not random, and seems to reflect important environmental and social concerns. Old factories pay more, state-owned factories pay higher rates, and big employers get a discount. And regulators give little or no slack to heavy dischargers.