Managing the conflict between Economic Growth and Environmental Impact
By: Maissoun Tabet
Tags: Environmental Impact, Climate Action, Sustainable Development, Economic Growth, Climate Change

The conflict between economic growth and the environment is not new and has existed ever since the Industrial Revolution, but events in recent years have brought it more sharply into focus as managing the conflict has become more complex.

This is discussed extensively the Environmental Kuznets Curve (EKC) :

The theory that a country must become wealthy first before it can deal with environmental problems.

However, this theory is a little controversial because economic growth need not be a prerequisite for improvements in environmental quality. A coherent, and effective environmental policy that improves ecological quality that supports well-being can also enable long-term economic development.

For much of the 19th and 20th centuries, rapid industrialization and the growth of cities worldwide has facilitated economic development immensely, but it also resulted in a commensurate amount of environmental degradation. The breadth and depth of these environmental impacts now presents a significant challenge to establish a balance between economic growth and environment quality, but not an insurmountable challenge.

Environmental economists have argued that consistent economic growth is possible if we maintain a stable environment through benefit-cost analysis. However, during the industrialization era, the pace of economic development has led to a decline in natural resources like forests and fossil fuels, the extinction of species due to overhunting and destruction of their habitats, and the collapse of fishing stocks due to overfishing. In the early 21st century this can no longer continue because the trade-off between growth and the environment has become too fragile. This means implementing the following initiatives on a strict basis:

• Shifting from non-renewable to renewable energy: Studies now show that renewable energy alternatives are way cheaper than the non-renewables. Beyond the construction phase green energy has no negative impact on the environment, unlike other forms of energy production like coal. • Pricing externalities: Economists state that if the economic growth is causing external costs, and then it is socially efficient to include the external cost in the price. This means taxing production that pollutes, to subsidize production that does not. • Treating the environment as a public good: Economic growth can be enabled based on the protection of the environmental resources. Environmental policies, regulations, and government ownership can help improve the environment if there is a certain proportion that is strictly off-limits to business. • Technological innovation: Incentives to speed up the transformation to an ‘eco-economy’, like replacing a vehicle that runs on petrol by another that runs on electricity from a renewable source can be cost-effective and contributes to preserving of the environment. • Including quality of life and environmental indicators in economic statistics: The quality of life needs to be targeted instead of GDP. Many social commentators (not just environmentalists) argue that should be made a priority.

The point is that economic growth need not cause damage to the environment. With human ingenuity and supportive government policy, individuals can protect the environment and minimise the harmful effects of pollution while experiencing rising real incomes. Economic development which results from the improvement in technology, can enable higher output with zero pollution.