Kyushu University Global COE Program
Journal of Novel Carbon Resource Sciences, Vol. 1, pp. 6-13, Mar. 2010

Creation of a World Environmental Market andthe Latecomer’s Advantage
Michihiro Hino

Research and Education Center of Carbon Resources, Kyushu University(Received October 30, 2009; accepted January 26, 2010)
This paper analyses the complex function of the ‘world environmental market’ created by public intervention
for dealing with global warming. And it looks at how a developing country, as an environmental latecomer, cantake advantage of a world environmental market—an institution that did not exist during the industrialization of theforerunner countries.

1. Introduction

Human development can be considered as a processof overcoming economic activities’ constraints imposedby resource limitation. As a measure to overcome these
constraints, the spatial expansion of activity areas is
one way of seeking to do this. Environmental problems,
another constraint of economic activities, are no
exception.
The purposes of this paper are the following. First,
complex function of the world environmental market isclarified from the historical perspective of internationalsourcing. The world environmental market was createdby public intervention as a measure to address resource
problems. Second, different impacts on developing
countries by measures to alleviate a third resource
problem in the current global economy are examined andcompared with other measures to address past resource
problems.
Currently, global environmental problems are drawing
global attention. Particularly, global warming issues andthe reduction of greenhouse gas (GHG) emissions are
regarded as serious and urgent matters(*1). From the late
1990s, an unprecedented global environmental policy
has been implemented. This is an environmental policy
using global market mechanisms known as market-based
instruments. Specifically, the mechanisms comprise threechannels of the Kyoto mechanisms under the Kyoto
protocol (“Emissions Trading”, “Clean Development
Mechanism (CDM)”, and “Joint Implementation(JI)”) and negotiation of trade liberalization of the“Environmental Goods and Services (EG&S)” at theWTO(*2). Such market measures are the only effective
global environmental policies to address global warming
issues (Hino, 2009).
This paper specifically examines CDM, which is amarket-based instrument. Research on the actual status
and institutional issues of CDM has been undertaken(e.g. Ellis, 2006; Hino, 2007b), although its relations
with the development of developing countries havebeen discussed. Arquit Niederberger and Saner (2005)
reviewed differences in the determinants between direct
investment and CDM investment, and argued that CDM
supports the expansion of investment into developing
countries. This paper reviews the potential role of CDM
as an institutional tool to realize latecomer’s advantage inthe historical development of international sourcing.

Specifically addressing the problems related toresources as a part of the environmental problems, thispaper presents a discussion of the origin of internationalsourcing in terms of cost and institutional factors. The
issues related to resources are associated with increased
costs of obtaining resources resulting from changes
in the demand and supply balance of resources. As
described herein, these problems are designated asresource problems. This analytical perspective enables
us to examine developing countries specifically, which
are primary resource suppliers. It clarifies the historical
position of developing countries in the world economy
and provides some political implications surrounding
issues related to their development and environment in
the modern world economy.
It is noteworthy that issues associated with thedevelopment of developing countries and environment
must be understood in the context of historical changesof the world economy. Economic policies in developing
countries have not always been determined based on
their own political parameters. Rather, their policies wereheavily influenced by global economic management thatwas led primarily by developed countries; recently, thattrend is changing.
This paper is structured as follows. Section II examines
countermeasures against resource problems and theirdevelopment history. In Section III, the relations between
latecomers’ advantages and the world environmental
market are discussed. Section IV concludes this paper andpresents future issues.

2. Three resource problem types and theircountermeasures
2.1 Resource problems and international sourcing

The expansion of economic activities produces
constraints on economic activities. The quantitative
expansion of economic activities after the industrial
revolution is well known to have caused the accumulationof CO2 in the atmosphere, which creates today’s global
warming phenomena. Furthermore, the expansion of
economic activities has created issues of output as well
as issues of input.
Ricardo (1819) addressed resource problems in termsof economic development. He explained that foreign
trade functioned as a measure to avert extraction of theJournal of Novel Carbon Resource Sciences, Vol.1, Mar. 2010

capitalists’ reward, their profit, from increases in foodprices.
These days, the importance of agriculture in economic
activities is declining, whereas productivity growthachieved through industry is becoming the source ofwealth. In this society, the unlimited expansion of economic
activities compelled us to recognize again the importanceof resource problems. In other words, the expansion of
economic activities causes rapid consumption or supply
shortages of resources, engenders change in the demandand supply balance, and increases in resource prices. For
that reason, it cuts corporate profits.
As Ricardo (1819) argued, when nation-states served as
the basis for economic activities, resources were sought
within a country. However, the increased utilization of
resources brought forth resource problems of three types
in the past; the international economic activities wereadopted to solve them(*3). The international sourcing ofresources required formation of resource production sites
and resource trade. Furthermore, institutions came to be
associated with these activities.
The resource problems of three types include classic
resource problems, pollutant emission problems, and
GHG emission problems. These issues are examined indetail below.

2.2 Historic development of international sourcing
2.2.1 Classic resource problems
Great Britain after the Napoleonic wars, when
Ricardo was living, experienced shortages of food andcotton because of the rapid increase of productivity andexpansion of production. They experienced shortages ofnatural resources and land with which to produce food.
They confronted the urgent necessity for a continuous
supply of bulk resources. For convenience, resource
problems of this type, which arose from the rapid increasein productivity after the Industrial Revolution, aredesignated as “classic resource problems” in this paper.
Measures to address classic resource problems were
not taken solely through market mechanisms. The
theory of comparative advantage proved the economic
rationality of production activities as the essence of trade.
Trade could not be established without foreign countries,
which can constantly supply large amounts of resources.
However, the production of resources is susceptible
to natural conditions, and it is not easy to provide anadequate supply constantly. It should not be overlookedthat the supply side was created by public intervention,
which is the opposite of a market mechanism, to realize
trade that enables a stable supply of resources. In otherwords, the tighter the country was closed, or the harder
it was to organize productivity action and entrench it ata local level, the more imperialism forming the world
system at that time forced the country to supply resources(Cain and Hopkins, 2002).
The countries that supplied resources were mainly
latecomers that had expanded from Europe to North
America, Latin America, South Africa, and Asia.
Particularly, renewable resources such as agriculture andforestry were produced at low cost on plantations owned
by foreigners in various colonies(*4).

2.2.2 Pollutant emission problems
The second resource problem is related to sourcingof resources as a place for pollutant emissions amongdeveloped countries, which experienced rapid economic
growth from the late 1960s. The developed countries
in those days were gradually tightening environmental
regulations as a countermeasure to address damage
caused by pollution. Consequently, the cost for obtaining
resources as a place of pollutant emission, which werepreviously free goods, had increased. The resources here
meant free goods for which market trading had not been
established. These free goods were necessary for humanactivities. However, as pollutant emissions increased
from corporate activities, the consumption of these free
goods increased to the degree that destroyed a certain
arrangement that provided utility to human beings(*5).
Consequently, the quantity of the free goods supply
decreased, and these decreased free goods were consumed
along with economic activities. In this sense, they could
be considered as necessary inputs for economic activities,
just as natural resources had been. The cost to obtainnormal goods would naturally rise along with the changes
in demand and supply based on the market mechanism.
However, this mechanism does not work for free goods.
The free goods, which had been costless before, suddenly
became costly as a result of public intervention. To
avoid strict domestic environmental regulations andenvironmental expenditures and to avoid changing
existing production activities, corporations in developed
countries undertook direct investment and transferred
their polluting industries or pollution-intensive processes
overseas. This is the so-called export of pollution.
Many studies have been conducted to examine
pollution export phenomena. Particularly, the “Pollution
Haven Hypothesis” has been examined intensively fromtheoretical and empirical perspectives. Variations of
the Pollution Haven Hypothesis(*6) do exist, of which,the key interest for this paper is the issue related to the“option to choose trade”. That is, the option to deliver
goods (pollution intensive goods) to consumers whether
by producing them within the country or by producing
them in countries with low environmental regulations andbringing them back to the home country.
It is noteworthy that the Pollution Haven Hypothesis
tends not to be supported by empirical analyses––as
exemplified by the study of Eskeland and Harrison(1997)––because multinational corporations often havebetter environmental technologies than corporations indeveloping countries do. The multinational corporations
also tend to regard the quality of environment andsafety at work more highly. Indeed, these days,
multinational corporations are more likely to be proactive on environmental problems from a corporate social
responsibility (CSR) perspective. Society is also devoting
attention to such corporations as major actors leading
innovation in environmental fields (OECD, 2007). For
multinational corporations, environmental expenditures
among total production costs are miniscule: they do
not constitute a determinant of production-site transfer
decisions(*7).
However, the Pollution Haven Hypothesis is supported

A Creation of the World Environmental Market and the Latecomer’s Advantage

by case studies of individual incidents. A famous example
is the “Bhopal disaster”. The Bhopal disaster was the1984 incident in which a large amount of toxic gas was
released from a pesticide plant operated by a subsidiaryof the US’ Union Carbide Corp. in Bhopal, India. Other
examples include the “Malaysia ARE case” which took
place in Malaysia during the 1970s(*8), construction of
an iron ore sintering plant in Mindanao Island in thePhilippines, and transfer of a hexavalent chromium
plant to Ulsan in Korea. Furthermore, according to
Levinson and Taylor (2008), in the 1970s and 1980s in
the US, the industry whose costs were increased most byenvironmental regulation had the largest increases in net
imports, indicating that some corporations in developed
countries “exported pollution” during the 1970s to the
1980s to avoid profit cuts incurred by pollution abatement
costs, no matter how small the pollution abatement costs
were among overall entire production costs. This canbe considered true in spite of the situation prevailingthese days, when CSRs are increasingly active as global
environmental concerns rise(*9).
As described above, host countries were used as thedestination for pollution exports. However, this expression“used” might be inappropriate: the host countries often took
advantage of the regulatory gap by intentionally lowering
their environmental standards or loosening regulations to
attract multinational corporations (Miyamoto, 1995). The
destination for the export of pollutants needed minimum
industrial infrastructure to operate the plants. As in thecase with the construction of the PASAR copper smelter
on Leyte Island in the Philippines, Official Development
Assistance (ODA) funds were used to build a plant forthe operation of modern industry. The destination for theexport of pollutants can be any country that can obtain
resources as a place of pollutant emission at a lower costthan in their own. Consequently, few cases exist in whichdeveloped countries became the destination(*10).

became a corporate social responsibility. Along with it,
the Kyoto mechanisms were established to enable thepurchase of resources as a place for GHG emissions froma global market. This global market, which was created bypublic intervention to address the third resource problem,
is called a “world environmental market” in this paper(*11).
In the Kyoto mechanisms, the Joint Implementation (JI)
corresponds to the Annex I countries, and the Clean
Development Mechanism (CDM) corresponds to the
Non Annex I countries. In other words, this is the global
market to address environmental problems. It is aninternational place in which countries can trade rights
to pollutant emissions that can not be traded in a usual
market. It adds economic value to resources as a place for
GHG emissions, which does not exist in the usual market.
If a corporation can produce resources as a place for GHG
emission at less cost than purchasing such resources, they
are motivated to produce those resources independently.
In other words, they have an opportunity to reform theircurrent production activities. They can choose whether
they will obtain the resources or use overseas production
activities with the Kyoto mechanisms if the corporations
decide not to do so. Therefore, this institution enables
corporation to maintain existing production activities in
one way or another. In this sense, the Kyoto mechanisms
are an important means to reduce production costs ofresources as a place for GHG emissions and to avoid
squeezing corporate profits. The necessity of obtaining
resources through overseas production activities depends
on each corporation’s productivity of the resources as aplace for GHG emission and the market-trading price.
Consequently, such necessity is not determined by the
supply and demand balance of resources as a placefor GHG emission. It should not be overlooked that
economic value was added to the resources as a place for
GHG emission because of the changes in the supply anddemand balance of the free goods.

2.2.3 GHG emission problems
a. The third resource problem and creation of theworld environmental market
The third resource problem is that of obtaining resources
as a place for GHG emission. As with the second resource
problem, the third problem arises in relation to obtaining
the resources as the place of pollutant emissions.
However, they differ in terms of the pollutant type. The
second resource problem is about hazardous pollutants.
The GHG, the third resource problem, is not hazardous
on its own but its concentrated existence in the air isharmful to the environment. The process of consuming
free goods is more indirect than with other pollutants.
For this reason, obtaining the resources internationally
was less controversial than the other pollutant problems;
therefore, it was the more adequate resources to obtain
internationally. Meanwhile, because GHGs themselves
are not hazardous, no need arose to obtain the resourcesinternationally unless society focused serious attention onit.
However, based on negotiations among governments,
the Kyoto protocol was developed in response to the GHG
emission. Consequently, the reduction in GHG emissionsb. Actual situation of the world environmental market
After establishment of the Kyoto Protocol, several
markets to address GHG emission problems were createdthrough regional initiatives, in addition to the world
environmental market. Those markets, which include theworld environmental market for various actors in world
size, and the regional markets for the regional actors, arecalled carbon markets.
Following is a review of the actual situation of the world
environmental market and the carbon markets. Table 1
presents transaction values and the volume of trade inthese markets. As of 2008, the total transaction value was
US$126.3 billion and the volume of trade was 4.8 billion
MtCO2eq. Table 1 shows that EU-ETS occupies morethan half of the transaction value and the volume of trade.
Its growth rate is also rapid. It is noteworthy, however,that the world environmental market––which comprises
Certified Emission Reduction (CER) certified by CDM,
Emission Reduction Units (ERU) certified by JI, andAssigned Amount Unit (AAU)––also has large transaction
values and trading volume. Its growth rate is actuallylarger than those of EU-ETS. In terms of the breakdownof the world environmental market, the trading of CER

Journal of Novel Carbon Resource Sciences, Vol.1, Mar. 2010

Table 1

Trading scale of carbon market (MUS dollars, MtCO2eq)
Transaction value

EU-ETS

2007
Transaction amountTransaction value

2008
Transaction amount

49065

2060

91910

3093

13383

833

33301

1499

CER
(Primary CDM)
(Secondary CDM)
ERU
AAU

12884
（7433）（5451）
499
n.a.

792
（552）
（240）
41
n.a.

32796
（6519）（26277）
294
211

1461
（389）
（1072）
20
18

Voluntary market

263

43

397

54

NSW

224

25

183

31

CCX

72

23

309

69

RGGI

n.a.

n.a.

246

65

World environmental market

Total

63007

2984

1263454811

Note) CER means certified emission reduction, ERU means Emission Reduction Unit, AAU means Assigned Amount Unit、NSW means North South
Wales, CCX means Chicago Climate Exchange, and RGGI means Regional Greenhouse Gas Initiative.
Source) World Bank (2009).

occupies the largest percentage. Particularly, secondary
CDM trading is the driving power of recent growth.
Figure 1 shows the share of CER issuance by country.
The issuance of CER is related to funds transfer. Figure 1
shows that China, India, Brazil, and South Korea occupy
most of the share. Figure 2 shows the number of CDM
projects, which is related to the frequency of technology
transfer. Figure 2 shows that China, India, Brazil, andMexico have numerous projects, indicating that CDM ismainly used by China, India, Brazil, South Korea, andMexico.
The number of unilateral CDM projects is also highamong some of these countries. The unilateral CDM
project refers to those CDM projects without technology
transfer and prior funds provision from the Annex I
countries. The main purpose of CDM is to achieve“sustainable development” of developing countries
through technology and funds transfer from the Annex I
countries. The large number of unilateral CDM projects
indicates that some countries are using the CDM in waysthat exceed initial expectations. Figure 2 shows that India
has the most projects, followed by Brazil and Mexico.
South Korea is a unique case: its total number of projects
is not so large, but more than half are unilateral CDM
projects. Unilateral CDM projects require the use ofdomestic technology and funds, and countries that havethe capacity to meet these requirements are increasing
their numbers of CDM projects.
As described above, the resources in the world
environmental market are also supplied by developing
countries, as are cases with classic resource problems
and the pollutant emission problems. However, unlike
the classic resource and pollutant emission problems, theresources in the world environmental market are suppliedby the countries that are already industrialized to somedegree or which have a certain industrial infrastructure.

Mexico2.04
Others
5.16

Viet Nam
1.57

Brazil
10.52

China
44.35

Korea
13.28
India
23.08

Fig. 1

Share of CER issuance by country (%).

Note) As of May 20, 2009.
Source) UNFCCC web-site (http://cdm.unfcc.int/)

ArgentineSouth Africa
Thailand
Peru
Indonesia
Philippines
South Korea
Chile
Malaysia
MexicoBrazilIndia
China

Original CDM
Unilateral CDM

0Fig. 2200

400

Number of CDM projects by country.

Note) As of May 20, 2009
Source）UNFCCC website (http://cdm.unfccc.int/)

600

A Creation of the World Environmental Market and the Latecomer’s Advantage

These countries have multiple and inexpensive businesses
as well as conducive institutional capacity and businessenvironment for CDM projects(*12). With internationalsourcing of the resources, the environmental technology
and funds for producing resources will be transferred tothese countries.

3. Latecomer’s advantage and the world
environmental market
3.1 Double aspect of the latecomer’s advantages

This section addresses the relations between
environmental problems and the “latecomer’s advantages(and disadvantages)”. It is noteworthy that several
studies of “latecomer’s advantages” have already been
conducted, for example, by O’Connor (1994) and Fujisaki(1994). This paper does not discuss details of thesestudies. The purpose is rather to arrange the significanceof the latecomers’ advantages suggested by Gerschenkron(1962) and to clarify their double aspect that is useful forthe field of environmental problems.
Gerschenkron (1962) postulated latecomers’ advantages
as overcoming the shortcomings of the precedentconditions of industrialization. According to him, thebackwardness of the latecomers was compensated by
the shortcomings of the conditions. He argued that thegreater the shortcomings were, the more rapidly theindustrialization can be achieved by latecomers. Borrowed
technology from developed countries is a good example
for helping them to achieve industrialization rapidly(*13).
However, from an actual global economic perspective,
it seems that the accumulation of backwardness is notnecessarily a latecomer’s advantage. In fact, it might beto their disadvantage. For example, the more backward
the country’s economy is, the larger is the amount ofinvestment required for industrialization. Gerschenkron(1962) also suggested application of institutional
instruments as a factor to realize the latecomers’
advantages. According to him, to realize the latecomers’
advantages, it was necessary to create and apply new
institutional instruments that were not established in theindustrialization process in developed countries(*14).
The latecomer’s advantage is a concept associatedwith industrialization, as described above. Therefore,
questioning the “realization of alternatives” is beyond thediscussion of latecomers’ advantages (Miyamoto, 1995).
Nevertheless, the fact that the terminology, “latecomers’
advantages”, is still used in today’s discussion reflectsthat industrialization remains high priority for developing
countries.
Gerschenkron (1962) postulated that the conditions
for industrialization in the 19th century were uniform.
However, these days, the environment surrounding thelatecomers is changing concomitantly with the changesof the global economy structure. As such, the conditionof the modern industrialization can be expected to bechanging as well. For example, environmental measures
for sustainable development have been added as a
new condition to the preceding conditions. Therefore,
when examining the latecomers’ advantages basedon the condition of industrialization, the “latecomer’s

disadvantage”, which was created using a newly added
condition of mandatory environmental consideration,
should be the premise of the discussion. This aspectof the latecomer’s advantage is applicable in the fieldof environmental problems. The typical example ofthis would be environmental measures that developing
countries need to take to respond to “diversity ofenvironmental problems” (Hino, 2009)(*15), namely
multiple environmental problems that exist in the modern
global economy. It is noteworthy, however, that if the
innate nature of measures against environmental concerns
are undertaken to assure sustainable development, theymight not necessarily be disadvantages to developing
countries in the middle and long run.
Gerschenkron’s latecomer’s advantage is a concept
explaining differences in the economic performance
during the industrialization process of latecomer countries
and that of advanced countries. Gerschenkron (1962)
called this discontinuous improvement of economic
performance a “big spurt” and distinguished it fromthe concept of “take off”, as conceptualized by Rostow(1960). In the environment field, his concept is used to
explain intermittent and discontinuous improvement ofenvironmental performance. This is the second aspect of
the application of the latecomer’s advantage in the fieldof environmental problems. The environmental burden
resulting from industrialization in latecomer countries
differs from the advanced countries, and the degree of theburden is less in the latecomer countries than in advanced
countries. A representative factor to realize this trend is
the transfer of environmental technology and funds to be
used for measures to protect environment from developed
countries to developing countries.

3.2 Integration into the world environmental
market and latecomer’s advantage

In this section, the changes in the environmental burden
between China and India and more developed countries
will be analyzed to illustrate the effect of integration into
the world environmental market(*16). China and India areused for this analysis because their integration into themarket was confirmed in the previous section. Becauseof limitations of space, only preliminary analyses aredescribed here.
Many indicators are useful to measure the environmental
burden, but the growth rate of GHG emissions is used as
an indicator in this paper. Usually, GHG emissions per
capita are used for analyses. However, the cause of the
global warming is not the GHG emission itself but its
concentration level in the air. Therefore, the total GHG
emission level by country, instead of the GHG emission
per capita, should be used in this analysis. The growthrate of GHG emissions is also adequate for this analysis
because this paper is not analyzing the absolute value of
the GHG emissions, but its changing rates. The level of
CO2 emissions is another good indicator to measure theenvironmental burden. Many countries have good CO2
data, which makes it possible to grasp the long-term
trend. However, the level of contribution of CO2 to the
reduction performance among the CDM project is notJournal of Novel Carbon Resource Sciences, Vol.1, Mar. 2010very high (Hino, 2007b). Therefore, the level of GHG
emissions is used as an indicator in this paper to measure
the environmental burden.
Comparable data of GHG emissions are only available
for 1990, 1995, 2000, and 2005. This paper therefore
presents a comparison of growth rates of environmental
burdens in India and China between 2000 and 2005, during
which their integration into the world environmental
market was confirmed, and those of the countries thatwere at the similar economic level with India and China
at that time, between 1990 and 1995. It is noteworthy that
the CDM project became active only after 2005, when
the Kyoto protocol was issued. Therefore, the robustnessof this analysis is limited. For convenience, 2000 for
latecomer countries and 1990 for advanced countries arecalled the first term, and 2005 for the former and 1995 forthe latter are called the second term.
The classification of advanced and latecomer countries
is based on the timing of industrialization (Industrial
Revolution). In this paper, industrialization is considered
as leading to improved income level per capita; thus, thecountries where improved income level per capita wasachieved earlier are considered advanced countries. Basedon the income level per capita and growth rate of theincome level per capita of China and India during 2000–
2005, those figures of Thailand and Indonesia during
1990–1995 were projected. Thailand and Indonesia werechosen for comparison as countries with similar economic
development levels with those of China and India during
Table 2

1990–1995 (Table 2).
Thailand and Indonesia were known as the “East Asian
miracle” for their rapid economic growth since the late1980s. They were the key countries for global economic
growth in the late 1980s. On the other hand, China andIndia, as is widely known, have been the key players inglobal economic growth since the late 1990s.
Figure 3 presents trends of environmental burdens ofadvanced countries and latecomers. The environmental
burden of the first phase is set at 100. In India, thedifferences in the growth rates of environmental burden
from the advanced countries were observed, but in China,
they were not observed for several reasons. First, theprojects in China at the initial stage of CDM were very
few. The average annual reduction amount of China asof December 2005 was only 1/4 that of India and 1/3
that of Brazil(*17). The second reason is associated withthe measurement of the level of economic development.
This issue is also applicable to India; but particularly to
China, where the economic disparity between coastal andrural areas is large. Therefore, the income level per capita
inadequately reflects the economic development level ofthe coastal areas, which are the main areas creating theenvironmental burden.
If China, which is strongly influenced by the country’s
special factor, is excluded from analyses, the sample size
is extremely limited. Despite this limitation, the analysis
revealed a difference in the trends of the environmental
burden between the advanced and the latecomer countries.

Economic status of advanced countries and latecomer countries from the first phase to the second phase(US dollars, %)Average income level
per capita

Average growth rate of income level
per capita

China
Thailand

3114
3847.5

8.67
7.83

India
Indonesia

1812.3
1878.85
6.33Note) The income level per capita is converted by purchase power parity.
Source）World Bank, developed from World Development Indicator

160
150
140
130
120
110
100
90

140
130

China

120
Thailand110

Indonesia
India

100
90

First term Second termFirst term

Second term

Fig. 3 Trends of environmental burden of advanced countries and latecomer countries (%).
Source) World Resources Institute, developed using Climate Analysis Indicators Tool (ver.6.0)

A Creation of the World Environmental Market and the Latecomer’s Advantage

4. Conclusion

This section summarizes the analyses described in thispaper and presents a discussion of future issues.
The essence of the world environmental market for
dealing with global warming issues––which was createdthrough public intervention––is to enable sourcing andproduction of resources as a place for GHG emissions.
The sourcing of resources as a place for GHG emissions
maintains existing production activities. This is similar to
the export of pollution, except for some spatial differences.
However, the world environmental market also provides
incentives to produce resources as a place for GHG
emissions. In this sense, the market provides an effect ofchanging existing production activities. Consequently, themultiple effects of the world environmental market are to
maintain production activities of corporations aspiring toobtain resources as a place for GHG as well as to change
the production activities of developing countries in whichsuch production occurs.
International sourcing of resources in the past in manycases was targeted at developing countries, forcing them
to bear the burden. With the classic resource problems,
which comprised resource consumption and resource
production activities, the world structure specific to thattime period imposed a disadvantageous exchange on
developing countries. With these issues, the key products
were primary products. With the export of pollution, thespatial exchange of the existing production sites madeit possible to obtain resources. However, the production
activities of the targeted resources did not take place inthis international sourcing. With the world environmental
market, the developing countries, using the institutionof assuring free economic activities, take a role ofproducing resources as a place for GHG emission. In
return, developing countries can receive environment
technology as well as funds to take measures to protect
the environment. Therefore, they obtain an opportunity
to achieve discontinuous improvement of environmental
performance as well as achieving sustainable
development. Having said so, few developing countries
can be integrated into the world environmental market asof now. A new institution should be developed for least
developed countries (LDC), and a supporting system tofacilitate integration of LDC should be explored. The
additional investment costs to transfer all developing
countries to low carbon economies are estimated as 25–50
billion dollars (Watson, 2007). The CDM dealing amountis 32.4 billion dollars, as described above. Furthermore,
not all are used in developing countries.
Two points are noteworthy as future issues. First,
factors that contribute to difference in environmental
performance between the latecomers and advanced
countries should be examined further. The advantage ofthe latecomers was confirmed from the trend of the GHG
emission levels. There were implications that this wasachieved through the effect of integration into the world
environmental market. However, no rigorous verificationof it has been conducted yet. The possibility remainsthat the change in the trend resulted from the transfer ofenvironment technology or funds that are unrelated toCDM. The “latecomer’s advantage” was achieved throughinstitutional factors that were not suggested by this paper
if that is the case. Second, policy recommendations should
be made with respect to the specific institutional design of
the world environmental market. It is an important task to
explore the system to facilitate integration of developing
countries, including LDCs, into the world environmental
market.
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(Endnotes)
(*1)
(*2)
(*3)

As UNDP (2007) suggests, not only mitigation issues but also adaptation issues are serious and important.
See Hino (2005, 2007a) for the details of EG&S negotiation.
International economic activities were aspired not only to solve resource issues but as ways to promote sales of surplus
products. To clarify the discussion points, this point is not included in the discussion of this paper.
(*4) See for example, Jones (2005, chapter 3).
(*5) Marshall (1920) argued that consumption is “the destruction of the basic elements that provide utility to the consumers”.
(*6) See Taylor (2006) for the characteristics and arrangement of the various models of “Pollution Haven Hypothesis”.
(*7) See for example, Tobey (1990).
(*8) In the Malaysia ARE case, the company did not adequately process thorium in the facility and left it out in open spaces.
(*9) Taylor (2006) argues that the “pollution haven effect” cannot be denied, even if the pollution haven hypothesis cannot
be supported. The pollution haven effect is a prerequisite for the pollution haven hypothesis. The hypothesis can beestablished if the effect is strong.
(*10) For example, in the 1970s, a mercury poisoning case took place in Canada. This was caused by Lead International, aBritish multinational corporation.
(*11) Other markets related to environmental include 1) the market of goods needed for environmental measures, and 2) themarkets of goods and services that embody the comparatively superior environmental technology. These markets aredifferent from the “world environmental market” created by public intervention. They emerge naturally from economic
activities in the private sector. They can be called the “environmental business market”.
(*12) See Hino (2007b) for the utilization requirement of the CDM project for the Annex I countries.
(*13) According to Gerschenkron (1962), the importance of the borrowed technology was repeatedly and accurately
emphasized by Veblen.
(*14) Hayami (2001) valued this point as an important contribution by Gerschenkron (1962).
(*15) “Diversity of environmental problems” captures the fact that pollution problems, pollution export problems, crossborder pollution problems, global environmental problem, and universal environmental problem are emerging in themodern global economy.
(*16) Brazil performed well as a country to accept CDM. However, during 2000–2005, it showed high income per capita,
although its growth rate was low. Because of this special character, no country exists that was applicable to compare theeconomic condition. Therefore, Brazil was not included in these analyses.
(*17) It was computed based on the CDM Project data analysis by the Institute for Global Environmental Strategies (IGES)（http://www.iges.or.jp/jp/cdm/report_cdm.html).