Hemamala Hettige

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.

Informal financial markets under liberalization in four African countries

Abstract This paper presents survey evidence from four countries on how informal financial agents serve market niches that banks cannot readily reach. Their methodologies are effective in keeping down transaction costs and default risk relative to banks, although informal agents exercise monopoly power in dualistic markets. Liberalization of repressive financial policies has had little effect on formal financial deepening, while informal finance has continued to grow. The paper concludes that informal financial institutions are an important vehicle for mobilizing household savings and financing small businesses, and it recommends that informal finance be better integrated into financial development strategies.