Is Growth Enough?
A scenario analysis
prepared for the World Bank
by
World Resources InstituteandStockholm Environment Institute — Boston

1. Introduction
1.1. Examining key hypotheses
Eliminating poverty is an over-riding objective of Bank policy. Closely associated with itis the goal of achieving environmentally-sustainable growth. This study considers
whether these goals can be achieved with current policy approaches. In particular, thestudy examines a key hypothesis implicit in the Bank's present strategy: Is economic
growth alone enough to reduce poverty and is this strategy consistent with environmental
goals, or are other strategies likely to be required?
To explore this question, this study analyses three scenarios over the period 1995 (thebase year) to 2050. The first is a reference scenario that implicitly incorporates current
policy approaches. It assumes current Bank projections for economic growth. The
second is a high growth scenario that explores the implications of more rapid economic
growth, assuming growth rates 50% higher than in the first scenario but holding all otherassumptions constant. These scenarios are analyzed for their ability to meet poverty andenvironmental targets. The third policy reform scenario takes a radically different
approach: it constrains the scenario results to meet certain poverty and environmental
targets and explores the types of alternative strategies and policies necessary to achieve
such results.
The analysis provides both a global picture as well as detailed results for 11 regions. It
also yields insights into the implications for trade of different scenarios, and it explores
the sensitivity of the poverty results to different assumptions about distributional patterns.
The analysis includes case studies that could easily be performed at a national level for agiven country but here focus on small groups of countries with comparable
characteristics.
1.2. Scenario approach and key assumptions
Scenario analysis offers structured accounts of possible long-term futures. The value of
this approach is not its capacity to predict the future but rather its ability to provide
insight into the present. By helping to identify drivers of change as well as theimplications of alternative trajectories and the comparative benefits of different strategies,
scenarios bring the future to bear in today's decisions. Quantitative scenarios such as
those considered in this study can also illuminate inconsistencies and unintended
consequences of different strategies, such as exceeding plausible physical limits of wateror land availability.
The scenarios considered here are derived from the work of the Global Scenario Group,
adapted to Bank data, goals, and hypotheses. (Raskin et.al, 1998) The scenarios aggregate
national data into 11 regions that become the basis of analysis. They use UN (1997) midrange population projections (with slight downward modifications in the policy reform
scenario) and incorporate a range of economic growth rates applied to per capita GDPadjusted for purchasing power parity (PPP). They treat poverty explicitly by incorporating
an analytic representation of income distribution as measured by Gini coefficients. Usinga sectoral decomposition of regional GDP, the scenarios explicitly calculate energy use
based on the demographic, economic and technical trends of each scenario. Food
production is estimated from the land and water available, the yields that can be achieved,
and the mix of crops, livestock and production practices that are adopted; requirements
for food are calculated, taking into account historical trends as well as expected
departures from those trends. Trade is assumed to balance demand that cannot be met
through domestic production. Deforestation rates are determined as a result of land-use
conversions for urban areas, cropland, and rangeland. Renewable water resources are
assumed to remain at 1995 levels, but water use is calculated by economic sector.
Pollution estimates are calculated based on fuel use, type, and sulfur content, and on theextent of manufacturing activities that use toxic or hazardous materials (based on an
adaptation of the World Bank Industrial Pollution Projection System that gives lowerbound emission factors for many industries). A more detailed discussion of the scenario
methodology and assumptions is given in the Appendix and in an earlier GSG
publication. (Heaps et.al, 1998)
A central assumption in this analysis is the gradual convergence of regional consumption
patterns and technology levels. The convergence algorithm adopted expresses the idea
that, in the course of economic development, the structure of economies, certain activity
levels such as travel patterns, and intensities or other measures of technological levels in
non-OECD regions converge toward those of the highly industrialized societies as
GDP/capita increases. Rather than exactly recapitulating the history of OECD regions,however, developing and transitional economies are assumed to adopt improved
technologies and practices more rapidly, as a result of globalization, so that their activity
or intensity levels approach OECD levels in a given scenario year as their GDP/capita
approaches 1995 OECD levels. This assumption has the result that industrial andhousehold efficiencies in non-OECD countries, for example, improve even more rapidly
than historical patterns would suggest, especially in high-growth scenarios. In addition,
this analysis imposes a number of consistency checks to prevent double counting,insuring that use of land, water, and other finite natural resources by different sectors does
not exceed realistic levels.
1.3. Goals, indicators and targets
To measure progress toward eliminating poverty and achieving environmentallysustainable growth requires adoption of specific indicators. Those used in this study
constitute a minimum set and thus may not be fully adequate to ensure that the goals areachieved. Nonetheless, they constitute a necessary set of conditions associated with thegoals and thus suffice for comparing the effectiveness of alternative strategies over half acentury.
In this study, we use hunger (undernutrition) as a proxy or indicator for poverty, since a
reduction in hunger is closely correlated with alleviation of the entire nexus of unfulfilledbasic needs associated with absolute poverty. Indeed, since people who can afford topurchase an adequate supply of food will normally do so and since reported per capita
income may understate actual income from barter or informal activities, the extent of
hunger may be a better measure of absolute poverty. The targets adopted here, which thepolicy reform scenario is constrained to meet and which provide a gauge against which tocompare other scenarios, are a 50% reduction of hunger by 2025, compared to 1995
levels, and a further 50% reduction by 2050.
This study uses several indicators to measure local environmental sustainability,
including the availability of an adequate supply of freshwater, local pollution, anddegradation of local ecosystems in ways that hinder their ability to provide food, fiber,
timber, and ecosystem services including biodiversity. For freshwater, the indicator usedis the ratio of water use to the available renewable resource. The target adopted is that thisratio not exceed 0.4 -- a level of use judged unsustainable by the U.N. Comprehensive
Freshwater Assessment -- for any country by 2050; and for those countries that alreadyexceed this value in 1995, that the 2050 value show some reduction. For local air andtoxic pollution, the indicators are sulfur emissions (calculated from energy use levels, fueltypes, and sulfur content) and releases of persistent organic pollutants and heavy metals(that track closely to industrial sector GDP adjusted for technology convergence). The
target adopted is that per capita levels of these emissions and releases converge to 10% of
1995 OECD levels by 2050. Deforestation, land degradation, and marine over-fishing are
all important measures of ecosystem degradation, but for ease of analysis only
deforestation is used in this study as an admittedly imperfect proxy. The target adopted isthat deforestation will cease by 2025 and net reforestation will begin by 2050. In all
instances the targets were used to constrain the policy reform scenario and as a basis for
gauging the results of other scenarios. The analysis also produces estimates ofgreenhouse gas emissions, as a proxy for global sustainability issues such as climate, butdoes not constrain the policy reform scenario to meet specific targets.

2. Is Growth Enough?
We first consider poverty questions, analyzing the reference, high-growth, and policy
reform scenarios to explore whether economic growth by itself is enough to meet thegoals for poverty (measured as hunger) reduction put forth in the introduction. We also
consider a sensitivity analysis that explores the impact of differing assumptions about
income distribution. The results suggest that if poverty is to decline significantly, growth
is not enough but must be accompanied by a decrease in income disparity within somecountries.
2.1. Global patterns
In the reference scenario, economic growth rates in each country are based on estimatesof the World Bank for GDP growth evaluated at market exchange rates (MER). These
growth rates between 1995 and 2025 reflect reasonable expectations for economic growth
given the current situation; between 2025 and 2050, growth rates show more

convergence, generally accelerating in regions where growth is slow in the first period
and declining slightly in regions where initially growth is more rapid. In the highgrowth scenario, GDP growth rates in developing and transitional regions are 1.5 times
those in the reference scenario. The policy reform scenario is constrained to meetpoverty and environmental targets, with growth rates determined in large part by those
constraints. In all scenarios GDP evaluated at purchasing power parity (PPP) is used as ameasure of economic activity. The growth rates used in the scenarios for both MER and
PPP are shown in Table 1.
Table 1. GDP Growth rates (average annual) in the reference, high-growth, andpolicy reform scenarios
Reference
Reference-High
Policy Reform
MER
PPP
MER
PPP
MER
PPP
1995-2025 2025-2050 1995-2025 2025-2050 1995-2025 2025-2050 1995-2025 2025-2050 1995-2025 2025-2050 1995-2025 2025-2050
Africa
3.8
3.1
3.9
3.4
5.8
4.6
5.2
4.6
6.9
4.7
5.8
3.9
China+
5.2
3.0
4.0
2.6
7.8
4.4
5.3
3.5
7.0
4.2
4.3
2.5
Latin America
3.4
2.6
3.3
2.7
5.2
3.8
4.4
3.7
4.4
3.5
3.5
2.6
Middle East
3.0
2.4
3.6
2.8
4.7
3.5
4.6
3.9
5.2
3.8
4.5
3.0
South Asia
5.1
3.6
4.4
3.4
7.7
5.3
5.9
4.6
6.9
4.6
5.0
3.1
Southeast Asia
3.6
4.5
3.1
2.5
5.5
3.5
4.3
3.6
6.0
4.1
4.4
3.0
East Europe
2.1
1.3
2.0
1.3
3.2
1.9
2.5
1.6
3.4
2.1
2.2
1.2
FSU
1.8
1.1
1.8
1.1
2.7
1.6
2.3
1.5
3.5
2.2
2.5
1.5
West Europe
2.6
1.5
2.7
1.6
2.6
1.5
2.7
1.6
2.6
1.5
2.7
1.6
North America
2.7
1.3
2.3
1.4
2.7
1.3
2.3
1.4
2.7
1.3
2.3
1.4
Pacific OECD
1.2
1.1
2.7
1.9
1.2
1.1
2.7
1.9
1.2
1.1
2.7
1.9
Developing
4.0
3.3
3.7
2.9
6.1
4.2
5.0
3.9
5.9
4.1
4.5
2.9
Transitional
1.9
1.2
1.8
1.2
2.9
1.7
2.3
1.5
3.5
2.2
2.4
1.4
OECD
2.3
1.4
2.6
1.7
2.3
1.4
2.6
1.7
2.3
1.4
2.6
1.7
World
2.7
2.0
3.1
2.3
3.4
2.7
3.7
3.1
3.4
2.7
3.5
2.4

A global overview of the resulting scenarios is given in Figure 1. Values for key variables
are shown for 2025 and 2050, relative to the 1995 values. Populations increase by close to
65% in all scenarios between 1995 and 2050. World GDP in the reference and policy
reform scenarios are similar, with GDP in the reference scenario increasing by a factorof 4.3, and by a factor of 5.0 in the policy reform scenario. In the high-growth scenario
total GDP grows by 6.4 times between 1995 and 2050. Incomes, represented by GDP per
capita, rise by a factor of 2.6 between 1995 and 2050 in the reference scenario, and by afactor of 4.1 in the high-growth scenario. In the policy reform scenario incomes riseslightly slower than in the high-growth scenario, by 3.2 times. Food demand is similarin all scenarios, reflecting similar populations, while primary energy use varies widely,reflecting differences in growth rates and policy mixes.

Figure 1. Scenario
Overview

7.0

Reference
Ref. High
6.0

Policy Reform

Relative to 1995

5.0

4.0

3.0

2.0

1.0

2025

Primary Energy

Food Demand

World GDP

GDP per Capita

Population

Primary Energy

Food Demand

World GDP

GDP per Capita

Population

0.0

2050

2.2. Hunger in the reference and high-growth scenarios
Population increases and diet changes drive a near doubling of world food demand in thereference scenario. Dietary patterns adjust with rising incomes, with an increasing shareof calories derived from animal products. Agricultural production also increases, morethan tripling. Yields are assumed to increase gradually in all regions. Utilization of landfor crops and grazing livestock also increases.
Yet despite increased food production, hunger persists. The reason is that income
distributions in the reference scenario gradually become more unequal in most countries,
based on the assumption of general convergence toward industrial country patterns. For
thirty years inequality has been increasing in the United States. In the scenario, income
inequality, as measured by the Gini coefficient, continues to increase in the United States,
but at half the recent historic rate. Other countries gradually converge toward this pattern,
resulting in a general trend of increasing inequality, with the greatest increases occurringin the “transitional” regions of Eastern Europe and the Former Soviet Union.

As income distributions become more unequal, more people fall below the "hunger line",
the income at which a family or individual is just barely able to meet minimum dietaryrequirements for a normally active life. The hunger line is thus analogous to the poverty
line used in Bank analyses. In effect, the population below the hunger line represents real
food requirements that are not translated into effective or market demand because ofpoverty. Moreover, the hunger line cut-off tends to rise as countries develop, just as
poverty lines do. It takes a larger income to acquire non-food items such as clothing,energy, and transport and just to barely survive as traditional sources of materials supportand resources that sustain informal food gathering are eroded by the process ofmodernization.
The result is that despite generally vigorous economic growth in the reference scenario,
hunger increases worldwide by 11% between 1995 and 2025 and by a further 9% between
2025 and 2050. In every region, the growth in hunger is lower than population growth, so
the incidence of hunger as a percentage of the population declines in every region.
Nevertheless, the goal of reducing hunger by one-half between 1995 and 2025 and by afurther one-half between 2025 and 2050 is far from being met. This scenario projects that
1 billion people remain undernourished and in absolute poverty in the year 2050, withlarge concentrations in Africa, South Asia, and China.
To explore how increased economic growth might change this picture, the high-growthscenario adopts national economic growth rates in all non-OECD regions that are 1.5
times those in the reference scenario (Table 1). Income distributions evolve exactly as in
the reference scenario. Perhaps surprisingly, even with these very robust growth rates,
the hunger reduction target is not met in this scenario, either. World hunger drops by 19%
between 1995 and 2050. In all, the scenario projects 713 million people remain
undernourished and in absolute poverty in 2050. The greatest absolute increase in hunger(over 80 million) occurs in African countries, while the greatest decrease (over 100
million) occurs in South Asia.
What level of growth would be sufficient to meet the hunger reduction target, under theseincome distribution assumptions (convergence to industrial patterns)? If we constructvariations on the high-growth scenario, growth rates in non-OECD regions must be
between 2.5 and 3 times that of the reference case to reduce hunger to 25% of 1995
levels by 2050, implying extraordinary and almost certainly unachievable rates of
economic growth for many regions. Evidently, plausible rates of accelerated economic
growth by itself are not enough.
2.3. Sensitivity to Distributional Assumptions.
In the reference and high-growth scenarios, income distributions in all countries are
assumed to gradually converge toward the pattern in the United States, where, as
discussed above, income inequality has been steadily increasing. To assess the sensitivityof the results to this assumption, we examine two variations. In the first, the Constant
U.S. Distribution variation, income distributions in all countries converge toward U.S.

patterns, but the U.S. Gini coefficient itself remains at its 1995 value throughout the
scenario. In the second, the Constant Distributions variation, Gini coefficients in all
countries remain at base-year levels. Regional patterns of changing income inequality are
shown in Table 2, where the figures reported are population-weighted average Gini
coefficients for each region.
Table 2. Population-Weighted Average Gini Coefficients

AfricaChina+
Latin America
Middle East
South Asia
Southeast Asia
East Europe
FSU
North America
Pacific OECDWest Europe

1995
0.42
0.38
0.51
0.45
0.33
0.38
0.29
0.30
0.43
0.36
0.34

Reference
2025
2050
0.46
0.50
0.44
0.47
0.52
0.52
0.49
0.51
0.41
0.45
0.44
0.48
0.37
0.42
0.38
0.43
0.47
0.51
0.43
0.47
0.41
0.45

Const. U.S. Dist.
Const. Distributions
2025
2050
2025
2050
0.43
0.43
0.42
0.42
0.40
0.41
0.38
0.38
0.48
0.46
0.51
0.51
0.45
0.45
0.46
0.46
0.37
0.38
0.33
0.33
0.41
0.41
0.38
0.38
0.34
0.36
0.29
0.29
0.35
0.37
0.31
0.31
0.44
0.44
0.43
0.43
0.39
0.40
0.36
0.36
0.37
0.38
0.34
0.35

Changes in hunger levels for these variations are shown in Table 3. In none of thevariations are the hunger-reduction goals met throughout the scenario period, despite thehigh levels of economic growth in the high-growth scenario. The goal for reducing
hunger by 50% in 2025 is met in the Constant Distributions variation of the high growthscenario, but the subsequent decline in the hungry population is insufficient to meet thegoal of reducing hunger by another 50% between 2025 and 2050. The regional picture
shows a similar pattern. Under reference growth assumptions, in all variations, hunger
continues to increase in Africa and generally worsens in the Middle East, but declines
significantly in China and South Asia under most variations. Thus the results of the
scenario analysis seem robust: even with significantly different (e.g., slowly increasing or
constant) Gini coefficients, plausible increases in economic growth rates alone are notsufficient to achieve hunger and poverty targets.
Table 3. Hunger relative to 1995 in the distributional variations

Distribution Variations
Reference
Constant U.S. Dist.
Constant Distributions

Scenarios
referencehigh-growth
2025
2050
2025
2050
1.10
1.19
0.81
0.80
0.86
0.72
0.60
0.43
0.75
0.63
0.53
0.39

2.4 Summary of Poverty Reduction Across Scenarios
Figure 2 displays the hunger patterns for the reference, high-growth, and policy reform
scenarios. The reference and high-growth scenarios do not meet poverty reduction

targets, although they do show significant reductions. In contrast, the policy reform
scenario assumes focused policy attention on social and environmental issues. It does
meet (is constrained to meet) the hunger targets through a combination of economic
growth and, in most regions, declining inequality. This scenario and its implications will
be discussed further in the final section of this study. Evidently, however, economic
growth must be combined with an absolute reduction in income inequality if poverty
reduction goals are to be achieved.
Figure 2.
scenarios

Poverty reduction in the reference, high-growth, and policy reform

1,200

W. Europe
Pacific OECD
N. America

1,000

FSU
E. Europe
SE Asia

800

millions

S AsiaMiddle East
Latin America

600

China +
Africa
400

200

0

1995

2025

2050

Reference

2025

2050

Reference-High

2025

2050

Policy Reform

3. Environmentally Sustainable Growth?
A strategy that seeks to achieve poverty reduction primarily through high rates of
economic growth faces a dilemma. Not only are poverty targets difficult to achieve, as
the results above suggest, but high rates of economic growth along conventional lines
may be incompatible with environmental goals. More significantly, environmental
impacts if severe enough have the potential to exact a high human and economic cost in
the form of health burdens, to create or exacerbate shortages of critical renewable
resources such a freshwater, and to degrade forests, fisheries, soils and other resources on
which improved incomes for the poorest segments of society often depend. In thissection we investigate the impact of the reference, high-growth, and policy reform
scenarios on a range of developmentally-relevant environmental conditions.

3.1. Environmental Impacts: Local and global pollution
The reference scenario is associated with rapid increases in primary energy use,
including higher use of sulfur-containing fuels, as well as expanded industrial activities
that use chemicals, heavy metals, and other toxic materials. As a result, local air
pollution (measured by sulfur emissions) and toxic pollution (measured by releases of
toxic materials) increase very substantially, in the absence of focused policies to mitigate
these impacts. Compared to 1995, sulfur emissions in 2050 increase 2 times and toxic
releases 3 times, primarily in non-OECD regions. In these regions, most of the polluting
activities occur in urban areas, which are projected to grow rapidly, thus increasing the
population at risk from pollution. The health impact from polluted air and water depends
on many factors, including geography and income levels, so that the additional healthburden cannot be reliably estimated; likewise estimates of the negative economic impactof ill-health or of loss of tourism or foreign investment due to persistent, severe pollution
vary widely. But qualitatively, these human and economic impacts can be expected toincrease significantly in this scenario.
In the high-growth scenario, pollution levels increase still further, but not in direct
proportion to accelerated economic growth. The potential increase is mitigated by
improvements in efficiency of resource use, some changes in consumption habits, andsaturation effects. Food consumption, in particular, eventually levels off with increasing
incomes. Nevertheless, energy use increases considerably more in the high-growthscenario than in either of the other scenarios, 1.2 times more than the reference scenario
in 2025 and 1.3 times more in 2050, despite efficiency increases and sectoral shifts awayfrom energy intensive activities. As a result, sulfur emissions in 2050 compared to thereference scenario are 1.4 times higher; toxic releases are also 1.4 times higher. In
contrast, local pollution under the policy reform scenario rises more slowly, converging
to (reduced) OECD per capita levels.
Global pollution is not a focus of this study. Nonetheless, we note that in the absence offocused policy attention on environmental issues, carbon dioxide levels rise with energy
consumption in both the reference and high-growth scenarios. In the policy reform
scenario carbon dioxide emissions decline between 2025 and 2050, despite an increase inenergy consumption, as regions move toward using less carbon-intensive energy sources.
The increase in energy consumption is also lower in the policy reform scenario than inother scenarios, due to relatively higher penetration of energy-efficient technologies, aswell as changes in consumption patterns.

Figure 3 summarizes local and global pollution under all three scenarios.
Figure 3. Local and global pollution
4.5

Reference
Ref. High

4.0

Policy Reform
3.5

Relative to 1995

3.0

2.5

2.0

1.5

1.0

0.5

2025

CO2

ToxicsSox

CO2

Toxics

Sox

0.0

2050

3.2. Environmental Impacts: Freshwater scarcity
Freshwater is a finite resource that is critical for meeting human needs, supporting
economic activities, and ecosystem preservation. Yet water withdrawals from rivers andlakes for human activities have increased by nearly threefold since 1950, placing a
number of watersheds under a condition of moderate water stress (water use-to-resource
ratio between 0.1 and 0.4) or high water stress (use-to-resource ratio greater than 0.4). In
1995, nearly 440 million people lived in areas of high water stress, with an additional 1.4
billion facing unreliable supplies, despite sufficient water on average. In the reference
scenario, water use increases 62% by 2050 and the population living under high water
stress conditions rises to 3 billion, over a sixfold increase. These impacts are especiallyacute in the Middle East, in parts of South Asia, and in parts of Africa. Under conditionsof high water stress, competition for scarce freshwater supplies is likely to hamper
attempts to increase access to safe drinking water, limit expansion of irrigated agriculture,and pose increased security risks in shared water basins. Thus the expected human andeconomic impacts of growing freshwater scarcity in this scenario are substantial.

These impacts are exacerbated by still higher water withdrawals in the high-growthscenario. Compared with 1995, water use in 2050 nearly doubles under this scenario andthe number of people experiencing high water stress reaches 3.1 billion, close to theReference scenario value. However, the population in moderate stress increases
significantly over the Reference scenario value, to 5.2 billion, compared to 4.8 billion by
2050. Under this scenario, freshwater scarcity is likely to become a major local andregional issue and a significant constraint on economic development. Under the policy
reform scenario, in contrast, water withdrawals increase only 6.5% between 1995 and
2050, much less than in other scenarios, as a result of measures taken to restrain demandand encourage greater efficiency in water use. The number of people subject to water
stress under this scenario peaks and then begins to decline. Water withdrawals in waterscarce regions, such as the Middle East, are sharply curtailed relative to the reference andhigh-growth scenarios. Figure 4 summarizes water withdrawals and the populations
subject to high water stress for all three scenarios.
Figure 4. Freshwater Withdrawals and Water Stress

8.0

Reference
Ref. High
7.0

Policy Reform
6.0

4.0

3.0

2.0

1.0

High StressHigh Stress2025

Withdrawals

0.0
Withdrawals

Relative to 1995

5.0

2050

3.3. Environmental Impacts: Land Resources and Ecosystem Degradation
In the course of development, human activity alters landscapes. In particular, increasing
demand for food, fiber, and timber are increasing the pressure on natural ecosystems.
Expanding human settlements and built environments to satisfy the housing, commercial
and transportation needs of growing populations and economies compound thesepressures. To avoid serious damage and loss of valuable ecosystem services, fragile
ecosystems need to be protected, deforestation and destructive logging practices halted,
agricultural practices modified to avoid erosion or other forms of land degradation, andfisheries and other marine resources sustainably managed.
In the reference and high-growth scenarios, land under the built environment expands as
populations increase and incomes rise, with the area affected more than doubling between
1995 and 2050. Agricultural land also expands, driven by increased demand for food anddietary shifts. Cropland degradation proceeds at close to historical rates, requiring thatstill more land be converted to agricultural uses. Much of the expansion is at the expenseof forests, with most of the deforestation and destructive logging occurring in developing
regions. In the reference scenario, forest areas decline by over 600 million hectares in the
1995 to 2050 period, a loss of about 16%. In the high-growth scenario, the comparable
figures are 901 million hectares, a loss of about 23%. The fastest rate of forest loss
occurs in Africa, where forest area declines at an average of 6 million hectares per year
between 1995 and 2050 in the high-growth scenario.
In contrast, under the policy reform scenario, the decline in forest area in all developing
regions is halted and then reversed, although forest areas do not return to their 1995
levels. This is achieved in part by increased agricultural imports in developing regions.
Deforestation and destructive logging eliminates or degrades forest ecosystems, makes
watersheds more vulnerable to erosion and rapid run-off, and deprives forest-dependent
populations of livelihoods and sometimes firewood. These impacts fall most heavily on
low-income or subsistence communities and make it more difficult to achieve poverty
reduction goals.
Measures of land degradation and marine over-fishing would also be important gauges of
ecosystem degradation, but are not dealt with explicitly in the scenario. Qualitatively,
however, rising demand for fish and hence escalating pressure on marine ecosystems is afeature of both the reference and high-growth scenarios. Growing use of nitrogen-based
fertilizers to meet food demand in both these scenarios adds to the potential for run-off
and estuarine eutrophication, which add to degradative pressures on the fisheries. Just as
with deforestation, rising prices for fish or the outright collapse of fisheries has thegreatest impact on dependent populations and conflict with poverty reduction goals.
3.4. Summary of Environmental Impacts
Neither the reference nor the high-growth scenario are consistent with the goal ofenvironmentally sustainable growth. Local pollution, freshwater scarcity, and ecosystemdegradation escalate in both scenarios, with the impacts greater under the high-growthscenario. Moreover, these environmental impacts have potentially significant human andeconomic impacts that could undercut economic growth and the poverty reduction goal.
However, environmental degradation is not an inevitable outcome of poverty reduction
efforts, as the policy reform scenario illustrates. With some narrowing of income
distributions the hunger reduction targets can be met at lower average income growth
rates, although in the absence of other factors higher overall living standards can be
expected to increase total consumption to some degree. With an assumption of focusedpolicy attention on social and environmental issues, relatively high economic growth rates
can be accompanied by a reduction in environmental impacts, as resource use efficiencies
increase and consumption patterns shift in response to the policies introduced. Figure 5
summarizes the environmental impacts analyzed here for all scenarios.
Figure 5. Environmental Impacts

4.5

Reference
Ref. High

4.0

Policy Reform
3.5

Relative to 1995

3.0

2.5

2.0

1.5

1.0

0.5

2025

Devel Forest

Fertilizer

Water Withdrawals

CO2

ToxicsSOXDevel Forest

Fertilizer

Water Withdrawals

CO2

Toxics

SOX

0.0

2050

4. Regional Trade Patterns
The reference and high growth scenarios imply a number of changes in trade patterns,
with some regions becoming larger importers. In this section we analyze these patterns
for energy and agricultural commodities.

Energy consumption in the high-growth scenario increases substantially faster than in thereference scenario, consistent with higher income levels. The volume of trade increases
correspondingly. In both scenarios North America is the most significant importer of
crude oil, increasing from around 3 billion barrels of oil in 1995 to around 12 billion
barrels of oil by 2050. The most significant change between these scenarios, however, isin the energy import requirements for the South and Southeast Asian regions, where thesubstantially higher demand for crude oil leads to a doubling of crude oil importrequirements. Reserves of conventional sources of crude oil—including both proved
reserves and the estimated additional reserves available—become depleted over thecourse of the scenarios to meet the rising demand. Import demands are met by the Middle
East, Latin America, China+ and Africa. Exports from China+ and Africa growconsiderably over the course of the scenarios.
Coal import requirements are met primarily from the Pacific OECD region. Over thecourse of the scenario the Pacific OECD region outstrips North America as the mostsignificant coal exporter. The most significant importer is South Asia, where importrequirements deepen significantly over the course of both scenarios, but at a much higher
rate in the high growth case. The increase is due both to increased coal consumption forelectricity generation and, to a lesser extent, growth in the industrial sector and an
associated rise in industrial coal demand.
Patterns of trade in natural gas are similar in both scenarios, but the total volume of tradeis much larger in the high-growth case as energy requirements in importing countries risewith increasing incomes. The Former Soviet Union and the Middle East remain the mostimportant exporters throughout the scenarios. In the reference scenario North America is
the most important importer, and remains the dominant importer in the high-growthscenario. However, requirements for natural gas in Western Europe, China+, South Asia
and Southeast Asia rival those of North America by 2050.
In 1995, the major crop exporting regions were Latin America and North America. In
North America grains are the main export, amounting to nearly 100 million tonnes, while
in Latin America other crop commodities dominate, with total exports exceeding 100
million tonnes. The most significant importer in the base year is the Former Soviet Union,
which imports around 100 million tonnes of crop commodities, mostly grains. In both thereference and the high-growth scenarios, North America and Latin America remain themost important exporters. Eastern Europe and the Former Soviet Union also become
important exporters as these regions rebound from the collapse during the 1990s. Western
Europe and Southeast Asia also become important exporters as these regions expand
grain production and other crop production respectively to meet the rising global demand.
Agricultural trade patterns are substantially the same in both scenarios, but the total
volume of trade is larger in the high-growth case, consistent with the higher income
levels. Grain import requirements grow substantially in developing regions in bothscenarios to supply increasing demands for both food and feed, as populations grow anddiets improve. The increase in caloric intake is accompanied by a shift toward animal
products in diets, with the result that feed requirements for grains increase more quickly
than requirements for food. In the reference scenario, worldwide feed demand for grains
increases from 38% of total requirements in 1995 to 43% in 2050. In the high-growthscenario the increase is slightly greater, with feed requirements in 2050 amounting to
51% of total grain requirements. The most substantial increases in imports occur inAfrica, South Asia and the Middle East, with more modest changes in Pacific OECD. In
China+ and both South and Southeast Asia, the regions remain net exporters of rice, themost important food grain. However, increasing use of other grains in diets and demand
for feedgrain leads to increasing net grain imports in these regions.
Global demand for fish and other seafood increases from around 110 million tonnes in1995 to around 160million tonnes in 2050 in the reference scenario. In the high-growthscenario demand increases to over 180 million tonnes in 2050. Considering the current
yield from marine resources, which are already overtaxed, of about 85 million tonnes, andassuming this yield to continue in the scenario, the level of demand implies substantial
expansion of aquaculture, which adds either to the agricultural requirements for feed or toincreased exploitation of pelagic fish for fishmeal.

5. An Alternative to Growth
Economic growth is an essential element of any strategy to reduce poverty, but as theprevious sections have shown, rapid growth id unlikely by itself meet the Bank’s social
goals. Moreover, the analysis suggests, rapid growth by itself is likely to sharply increase
environmental pressures in ways that create significant threats to human health while alsodegrading the natural resource base (water, soils, forests) on which economic
development – especially in the poorer parts of agrarian societies – in large part depends.
The policy reform scenario elucidates the requirements for simultaneously meeting socialand environmental goals – for achieving significant poverty reduction andenvironmentally sustainable growth. As a normative scenario, it explores not theforecaster’s question – “where are we going?” – but rather that of the navigator – “how do
we get there?” The strategies required to bend the curve of development in the direction
mandated by the policy reform scenario include distributional policies aimed at
improving social equity and sectoral policies – for energy, food, land, water, and wastes -aimed at meeting environmental goals.
5.1. Meeting Social Goals
Average incomes will rise in developing countries, as long as GDP growth outpaces
population growth. But because the economic pie is distributed unequally, poverty does
not decline in proportion to GDP growth. In the policy reform scenario, despite vigorous
economic growth, substantial improvements in equity within each country are required tolift the incomes of sufficient numbers of the very poor above the “hunger line.” Only inthis way can Bank poverty reduction goals be met. The scenario suggests that a strategy

of improving equity, through reforms in the policies governing distributional systems, arenecessary if poverty eradication is a priority goal.
A wide range of distributional factors can be considered: the poor need more equitable
access to education and health care, to credit, to employment and micro-enterprise
opportunities, to legal protection, to improved land tenure. The rural poor who aredependent on natural resources such as subsistence farmers, fishermen, and shifting
cultivators especially need more equal access to property rights and to participation indecisions affecting those resources. Specific policy instruments to influence distributional
systems might include direct income transfers through tax or subsidy measures; targetedanti-poverty programs such as human capital investments in education, health care, andtraining of the very poor; social empowerment measures that reinforce the rights ofwomen, minorities, and children; strengthening of new social actors by encouragement ofcommunity organizations and NGOs; legal measures to guarantee access of the poor to
productive assets and opportunities through land tenure, technology transfer, targeted
infrastructure investments, and broadened micro-credit access.
In an effective poverty reduction strategy, such measures cannot be afterthoughts but
must become as central to national development strategy as the traditional macroeconomic measures for fostering growth.

5.2. Meeting Environmental Goals
Even with equity improvements, however, poverty reduction goals are unlikely to beachieved if declining public health, shortages of freshwater, widespread land degradation,and similar environmental problems impoverish large segments of the population anew. It
makes little sense, for example, to improve access to health care services while at thesame time pursuing growth policies that dramatically worsen air and water pollution andexposure to toxic substances. Nor does land tenure help the rural poor if water supplies
run so short that farmers cannot irrigate their fields. Unattended environmental concerns,
in short, can undercut the benefits and even the sources of economic growth, especiallyfor the most vulnerable segments of populations. A strategy of environmentally
sustainable growth is thus likely to be necessary to meet both social and environmental
goals. Such a strategy requires sector-specific policies in a wide range of sectors if
countries are to head off serious long-term problems.
5.2.1 Pollution and Health. In the reference and high-growth scenarios, increases inenergy demand lead to sharp increases in combustion of fossil fuels and hence toworsening air pollution. Similarly, overall growth of industrial activity significantly
increases use of chemicals, metals, and other toxic materials, leading to increased toxic
pollution. Such pollution problems are already sources of ill-health—and accompanying
social and economic burdens--in the urban areas of virtually all rapidly-industrializing
countries. The prospect of significant increases in pollution would pose even more healthrisk.

The policy reform scenario incorporates policies to improve energy intensity and reduce
final demand through greater energy efficiency in both energy production and end-use
applications, as well as policies to encourage fuel switching to cleaner and less carbonintensive fuels. One lever for change is fiscal mechanisms such as eliminating perverse
subsidies, carbon or pollution taxes, and emissions-trading schemes. Regulatory
approaches include setting progressively more stringent energy efficiency standards.
Other levers include increased research, economic incentives to spur investment inenergy-efficient and renewable energy technologies, and efforts to lower market barriers
through better information and stronger institutional frameworks. The policy reform
scenario also incorporates regulatory controls on toxics (such as phasing out leaded
gasoline), incentives for investment in cleaner industrial process equipment and forrecycling of wastes into resource streams, and disclosure or rating laws (such as thoseadopted in Indonesia) that provide other kinds of incentives for better private sector
stewardship.
These policies are not easy to implement in developing countries, but they pay highdividends, not only in lowered health risk but also in more efficient economies and betteruse of scarce capital resources.
5.2.2 Water and Food Security. In the reference and high-growth scenarios, water
withdrawals increase dramatically, exceeding sustainable limits in many countries andwater basins. By 2050, in the reference scenario, more than 50 % of the world’s
population live in areas experiencing some form of water stress. The resulting heightenedcompetition for water is likely to threaten valuable ecosystems and habitats that dependon an adequate supply of clean water; it may also limit the availability of water for
irrigation, since urban and industrial users usually can pay more and have greater politicalclout. Increasing pollution of both surface and groundwater supplies increases thepotential for serious water scarcity. The result could be serious environmental and social
problems, undercutting efforts to reduce poverty and increase food security.
In the policy reform scenario, demand for water is moderated through efficiency
improvements, resource enhancement, and increases in agricultural trade. Opportunities
for increasing irrigation efficiency are numerous: spray irrigation can be replaced bytrickle and drip systems; open canals can be covered; and perverse subsidies for water use(or for the energy to pump water) can be eliminated. Tighter plumbing codes and morewater-efficient appliances in the domestic sector, and water recycling in the industrial
sector, can also help. In some regions, these measures will not be enough: desalinizationin coastal areas and capture and reuse of treated wastewater can amplify resources.
Ultimately, water will have to be priced to reflect its full economic and environmental
value. In some regions, reducing demand by increasing food imports may be anadvantageous strategy.
5.2.3 Land Use and Ecosystem Services. These scenarios model land use changes, but do
not explicitly treat land degradation and the potential impact on ecosystem services. Butthe qualitative picture is fairly clear. Current trends toward widespread land degradation,
increasing clearing and over-harvesting of forests, over-grazing of pasture and rangeland,
and unsustainable agricultural practices are likely to be continued or exacerbated under
the reference and high-growth scenarios. The result could undercut poverty reduction
efforts, because many of the very poor are directly dependent for their food supply andlivelihoods on the productivity of farmlands, forests, and fisheries. But the true cost is
likely to be greater, because degraded ecosystems can no longer provide many vital
services, ranging from the water storage and flood control capacities of forested
watersheds to nutrient recycling and detoxification of wastes to the generation andrenewal of soil fertility to the control of pest species. Without these services, society will
have to bear increased costs for erosion damage to downstream dams and fisheries, forwater storage and purification, and for flood damage and pest control. Thus a strategy ofenvironmentally sustainable growth will need to institute policies that can manage landsustainably and protect the ability of ecosystems to provide a wide range of goods andservices.
5.3. Strategic Implications for the Bank
This analysis argues that focused policy efforts to improve equity and ensure
environmentally sustainable growth are both essential to achieve Bank poverty goals,
because of the close interlinkage of environmental conditions and poverty. A host of
sector-specific policies are also likely to be required to achieve environmental goals. The
implication is that distributional and environmental policies need to be at the center ofcountry assistance strategies—that macroeconomic policies aimed at fostering economic
growth, while important, are not sufficient to achieve Bank goals.