Is China Beginning to Slide Down the Environmental Kuznets Curve?


No longer smells like money

More than two decades ago economics scholars noted that when incomes begin to rise pollution gets worse – until it doesn't. Income and pollution data from around the world have revealed that there are various per capita income thresholds at which air and water pollutants begin to decline. This discovery has been dubbed the Environmental Kuznets Curve. See stylized example below.

What goes up must come down?

In other words, economic growth correlates with a cleaner natural environment, i.e., richer becomes cleaner. The folks who put together the doomsaying The Limits to Growth back in 1972 concluded that if humans were somehow able to overcome all other "limits" finally pollution would do us all in. It turns out that they were making this exponentialist prediction just as a wealthier United States was reaching the per capita income thresholds at which citizens begin to demand better environmental quality.

In today's New York Times there is an interesting article reporting the growing success of China's environmental movement against increased pollution. Massive local protests managed to stop a copper smelter from being built. This is not an isolated incident:

In a country infamous for its polluted air and water, the protests were only the latest in a series of large, sometimes violent demonstrations that appear to be having some success in pushing China to impose more stringent safeguards on new manufacturing and mining projects.

"The standards for environmental protection are higher and higher, from the public and also from the government," said Zhao Zhangyuan, a retired environmental protection official who has successfully campaigned for the last several years to block the construction of a large trash incinerator in a prosperous Beijing neighborhood.

Even as Chinese people demonstrate an increasing willingness to challenge local authorities, financial penalties are on the rise for Chinese companies and their owners who plan projects perceived as hazardous.

The reductions in pollution are not automatic, but result from a public that demands that the trade-offs between income growth and environmental quality be shifted. As University of California, San Diego economist Richard Carson observes the explanations for the relationship between higher incomes producing lower levels of pollution…

…revolve around good government, effective regulation, and diffusion of technological change. These factors tend to be related in a diffuse manner with higher income and suggest it is likely, but not inevitable, that a society will choose to reduce pollution levels as it becomes wealthier.

Likely, but not inevitable? Whether or not China slides down the EKC toward less pollution will depend in large measure on the government becoming more transparent and responsive.