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World Development, Vol. 25, No. 2, pp. 191-198.1997
Copyright 0 1997 Elsevier Science Ltd
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SO305750X(96)00104-0
Carbon Intensity and Economic Development
1962-9 1: A Brief Exploration of the Environmental
Kuznets Curve
J. TIMMONS ROBERTS
Tulane University, New Orleans, Louisiana, USA.
and
PETER E. GRIMES *
Johns Hopkins University, Baltimore, Maryland,
USA.
Summary. - The relationship between national carbon dioxide emissions intensity (CO, emitted per
unit of Gross Domestic Product) and level of economic development has changed from essentially linear
in 1962 to strongly curvilinear in 1991. The inverted-U curve reached statistical significance briefly in
the early 1970s and increasingly since 1982. This is the result not of groups of countries passing through
stages of development,
but of efficiency
improvements
in a small number of wealthy countries
combined with worse performance in poor and middle-income
countries. The curvilinear relation is
deepening and is likely to persist due to constraints on poorer countries in the world economy. 0 1997
Elsevier Science Ltd. All rights reserved
Key words - carbon dioxide, development,
environment,
1. INTRODUCTION
greenhouse
effect, cross-national
This
phenomenon
has
been
dubbed
the
“Environmental
Kuznets Curve,” after a similar
upside-down “U’‘-curve observed by Simon Kuznets
when comparing level of income inequality in countries by the size of their economy in GDP per capita.
The issue of whether pollutants increase and then
decrease as countries develop economically
has
critical policy implications. If the “Kuznets” curve is
supported by the evidence, it suggests that current
development policies are capable of being environmentally benign over the long term (see e.g.,
Beckerman, 1992). The problem would then be how
best to accelerate those processes and policies so that
all countries could experience production and living
conditions found now only in the wealthy countries. If
The decades-old
debate over the relationship
between economic development and environmental
conditions has assumed renewed urgency in the wake
of growing concern about global warming. A central
question in the debate has been whether effluents produced by industrial processes increase monotonically
with economic development, or if countries reach a
“turning point” at which emissions begin to drop
because they can afford more efficient infrastructure
and more stringent pollution controls. Some crossnational, cross-sectional
studies have found such an
inverted U-curve in the relation between level of
development and certain pollutants such as particulates, sulphur dioxide, toxic chemicals and a series of
water pollutants (Beckerman, 1992; Hettife, Lucas
and Wheeler, 1992; Reed, 1992; World Bank, 1992;
UNEPIWHO, 1992, 1994; Grossman and Krueger,
1993, 1995; Holtz-Eakin and Selden, 1995; Selden
and Song, 1995). One study recently claimed that this
turning point for several pollutants tended to occur
before countries reach a gross domestic product of
US$8,000
per capita (Grossman and Krueger, 1995).’
*The authors wish to thank Charlie Brody, Christopher
Chase-Dunn, Tammy Greer, Jodie Manale, and anonymous
reviewers for comments and assistance. This research was
supported by the National Science Foundation Sociology
Program and Human Dimensions of Global Change #SES9223304 and by the Sociology Department of Tulane
University. Neither organization bears any responsibility for
the work herein. Final revision accepted: September 9,1996.
191
192
WORLD DEVELOPMEN’I
the curve trend is in error or misinterpreted and the
most polluting technologies cannot be expected to
disappear without explicit intervention, then policies
promoting only accelerated economic growth might
be a course for disaster (see Arrow et al., 1995).
In this report we examine for the 30 years during
1962-91 how many kilos of carbon dioxide countries
emitted per unit of their gross domestic product (what
we call National Carbon Intensity NCI). We test
whether there has been an inverted U-curve relationship for CO, emissions per unit of Gross Domestic
Product across these 30 years, and track the changes in
NC1 of low, middle and high-income countries over
the period.
Carbon dioxide emissions intensity provides an
important test of the “turning point” or environmental
Kuznets curve hypothesis for four reasons. First, carbon dioxide is now understood to account for over half
of the effect of greenhouse warming (Houghton,
Jenkins and Ephraums, 1990; Stern, Young and
Drackman, 1992). Second,until very recently CO, was
considered a harmless by-product of clean and efficient combustion (Houghton and Skole, 1990; Arrow
et al., 1995). Therefore unlike pollutants which irritate
humans directly (such as urban smog-producing compounds and water pollutants), efforts to control CO,
emissions have come only in the last few years and
have been limited to a few European countries. The
existence of an inverted U-curve for CO, emissions
intensity would suggest that pollution reduction might
be expected to occur as a natural by-product of economic development improving efficiency, especially
in the use of energy. Third, there is apparently no thermodynamically necessary level for the amount of CO,
a country must emit to have an economy or population
of a certain size. Across the world’s countries in 1990,
national carbon intensity varied by nearly one hundred
fold, while emissions of carbon dioxide per capita varied by over two thousandfold
(World Resources
Institute, 1992; CDIAC, 1991, 1993). Fourth, estimates of CO, emissions are available for far more
countries and years than are measures of other types of
pollution. This simple problem of data availability has
kept many analysts from understanding how the relation has evolved over time. For all these reasons, the
results may help us assess the relative causal importance of abatement policies, improvements in technical
production efficiency, and the relocation of energyand pollution-intensive
industries to poorer countries
in reconfiguring emissions around the world.
2. DATA
Data for the current analysis come from the World
Bank and from the Carbon Dioxide Information and
Analysis Center (CDIAC) at the Oak Ridge National
Laboratory. World Bank gross domestic product
values were adjusted for inflation using the World
Bank’s GDP deflator and 1987 exchange rates to
calculate constant 1987 US dollars (World Bank,
1993). CDIAC’s estimates of CO, emissions from fossil fuel combustion and other industrial activities by
country were converted to kilos of carbon. These fossil fuel CO, emissions figures (what CDIAC calls
“Industrial CO,“) are calculated as the sum of emissions from burning fuels in solid, liquid, and gas
forms, from waste gas flaring, and from cement manufacturing (Marland and Rotty, 1984; Marland et al.,
1989; CDIAC, 1991). The latter two categories
account for only about 3% of what they call “industrial CO2 emissions” (Marland and Rotty, 1984;
Marland et&., 1989; CDIAC, 1991; Stem,Young and
1992). Commercial
and residential
Druckman,
sources are included, but emissions from changes in
land-use [mostly deforestation, which accounts for
about an additional 25% of carbon releases (WRI,
1992; Stem, Young and Druckman, 1992)] are not
included, since time-series data are lacking (WRI,
1992; Houghton et al., 1987; Houghton, Jenkins and
Ephraums , 1990; Rude1 and Roper, 1996) .2
In raw volume, both carbon dioxide emissions and
energy consumption are closely correlated with the
size of a country’s economy (Cook, 197 1; Humphrey
and Buttel,
1984; Bollen and Appold,
1993;
Goldemberg, 1995; Goldemberg et al., 1985). This
relation has been weakening somewhat since 1960,
but carbon emissions are still essentially linearly
related to national product per capita (1960: r-squared
= 0.914, n = 105; 1991: r-squared = 0.734, n = 134).
To examine the socially determined aspect of this
relationship, we calculated a quotient of CO2 emitted
(in kilos of carbon) divided by gross domestic product
(GDP, in constant US dollars). This index was logarithmically transformed because of skewness.3 Setting
aside a very few countries which have developed noncarbon-based
energy sources,“ we believe that
In(CO,/GDP) is a valuable indicator of national carbon intensity (Grimes, Roberts and Manale, 1993).
For the time-series we compare NC1 with GDP per
capita, a commonly used proxy measure for level of
economic development. While we believe that several
indicators of “development” deserve exploration and
comparison, we opt for GDP per capita based on
exchange rates here rather than purchasing-powerparity (Summers and Heston 1984, 1988), partly
because of their availability over cases and years. It
can also be argued that exchange rate GDP better
captures a country’s control over the world product
and its power in trade networks (Arrighi and Drangel,
1986; Korzeniewicz and Martin, 1994).5
3. FINDINGS
Figure
1 shows that the relationship
between
CARBON
INTENSITY
AND ECONOMIC
DEVELOPMENT
193
.
.
.
.
.
..
.
.
.
.
.
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.-& .
4 .
..
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:&*- -y-. :.-?z
:
.y
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-0
‘8 s-8
. 2... .
?
1965
1970
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1
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0t
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-0
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.
mm-.
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0%.
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r...‘•
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Z!--C--X
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4, %
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Njg--
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5’
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1985
11
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“A . . .
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. “8 .z.. . ..H
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:
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-8
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N
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mm.4
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7
9
1990
11
w
7
9
11
Natural Log GDP per Capita
Figure 1. National carbon intensi@ (in@ciency)
[in(COJGDP)]
1965-90.
by natural log Gross Domestic Product per capita,
WORLD DEVELOPMENT
194
Table
1. OLS
curvilinear
regression
results (standardized coefficients) examining linear (natural log of GDP per capita) and
(GDPper capita squared) effects of level of economic development on carbon dioxide emissions intensity (natural
log of CO, emissions per unit of GDP)
Overall adj
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
0.3 19*
0.311*
O-318*
0.326*
0.299*
0.355*
0.327*
0.336*
0.343*
O-297*
0.345*
0.322*
0.329*
0.263*
0.284*
0.218*
0.201*
0.154*
0.148%
0.117*
0.142*
0.160*
0.168*
0.186*
0.191*
0.138*
0.167*
0.172*
0.140*
0.115*
r*
In(GDP/cap)
(GDP/cap)*
N
0.660*
0.631*
0.561*
0.596*
0.613*
0.785*
0.733*
0.721*
0.656*
0.694*
0.802*
0.808’
0.839*
0.648*
0.614*
0.562*
0.568*
o-505*
0.482*
0.432*
0.494*
0.546*
0.567*
0.612*
0.649*
0.555*
0.556*
0.547*
0.464*
0.418*
-0.122
4.088
0.014
a.20
AI.077
4).304*
-0.226
a.194
4.089
4.205
4.3251_
JX362t
x).417*
4.2141.
4.166
a.185
4.212$
a.207
4.188
a.179
Xl.2847
x).327?
4.360*
X).387*
Al.418*
4).463*
4.544*
Al.556*
4.529*
X).488*
98
100
103
107
108
111
111
115
116
115
121
121
122
123
125
126
126
126
126
125
134
135
135
139
140
142
142
144
140
135
*p < 0.001
tp<o.o1
& < 0.05
National
Carbon
Intensity
development
has changed
and level of economic
from essentially
linear in
1965 to strongly curvilinear in 1990. This is confirmed by the rise to statistical significance and finally
parity of the quadratic (GDP/cap)Z term (which
expresses the downward sloping side of the curve) to
the log term ln(GDP/cap)
(which expresses the
upward slope, see Table 1). The quadratic term
reached statistical significance briefly in the early
1970s and then again since 1982.
Why did the inverted U-curve in national carbon
intensity emerge? Are countries reaching and surpassing the “turning point” in income and therefore
reversing direction toward improved carbon efficiency? While individual countries may differ,
Figure 2 shows average carbon intensity (NCI) in
groups of countries categorized in 1970 as low,
medium, and high-income by the World Bank. The
only group showing a net improvement in CO, inten-
sity over the period were the high-income countries.
The figure shows also that downturns for NC1 in the
high-income countries’ averages began just before
the oil crises of 1973 and 1979 (Moomaw and Tullis,
1994; Grubler, 1994). As a group, low-income countries have become steadily less efficient in carbon
terms over the period (apparently crossing paths with
the rich nations in 1990). The middle-income countries have worsened in carbon intensity over the
period but less severely than the poor nations, with
periods of increasing and decreasing efficiency.
Overall, Figure 2 confirms that the appearance of the
significant
curvilinear
relationship
in CO,/GDP
since 1982 is due to both efficiency improvements in
the rich countries and worse performance in poor and
middle-income nations. Apart from these trends, all
three series reflect the results of global cycles of
recession
and recovery
(see Chase-Dunn
and
Grimes, 1995).
CARBON INTENSITY
AVERAGE
CARBON
AND ECONOMIC
DEVELOPMENT
195
PER GDP [In(C02/GDP)I
-03
-1
-I,5
-2
-2,5
I
-3
I
I
1985
I
I
I
I
I
1970
I
I
I
I
I
I
I
1975
I
I
I
1980
I
I
I
I
I
I
1985
I
I
I
I
1990
YEAR
-
LOW-INCOME
--&-
MIDDLE-INCOME
Figure 2. National carbon intensity [ln(CO,lGDP)] 1962-91 f or constant groups of countries which in 1970 had income
classed by the World Bank as high, middle and low levels of Gross Domestic Productper capita.
196
WORLD DEVELOPMEN’I
4. DISCUSSION/CONCLUSION
These findings strongly suggest that the emergence of an inverted U-curve (the “Environmental
Kuznets Curve,” Figure I) for carbon dioxide emissions intensity is the result not of individual countries
passing through stages of development, but of a relatively small number of wealthy ones becoming more
efficient since 1970 while the average for the rest of
the world worsens (Figure 2). Second, the steady
decrease in the r-squared term (Table I) shows that
scatter is increasing in these regressions. This suggests that other social and political factors are increasingly important in determining which countries institute efficiency measures, an important area for
research (Goldemberg,
1995; Goldemberg
et al.,
1985; Grimes, Roberts and Manale, 1993; KrebillPrather and Rosa, 1994; Mazur and Rosa. 1974; Rosa
and Krebill-Prather, 1993).
All of the above indicates that the relationship
between economic growth and environmental protection should not be seen as necessary or stage-based.
Rather than countries passing through stages and
eventually reducing their pollution through economic
development (Beckerman, 1992; World Bank, 1992;
Grossman and Krueger, 1995), we would argue that
the history of the world economy suggests that only a
few countries have ever successfully moved up substantially in the global hierarchy of income stratification (see,e.g., Wallerstein, 1979; Chase-Dunn, 1989).
Empirical world-system analyses have supported the
observation that most countries are structurally limited from ever ascending due to their colonial history
as hinterlands for exploitation, the continuing low
prices of their exports, a history of unfavorable links
with foreign corporations and banks, and their lack of
geopolitical power (e.g., Smith and White, 1992;
Korzeniewicz
and Martin,
1994; Gereffi
and
Korzeniewicz,
1994; Gereffi and Wyman, 1990;
Grimes, 1996). Most poorer countries will not repeat
the history of European and North American development, partly because those world powers already
exist. Conventional
theories involving stages of
national development remain unfalsifiable and inconsistent with the historical record.
The current study confirms for the case of CO,
emissions intensity that to deduce stages from present
cross-sectional snapshots could be disastrous. There is
no reason to believe that most countries will ever reach
the hypothesized “turning point” of carbon intensity,
whether it be US$8,000 GDP per capita or especially if
it is higher. Rather, the curvilinear relation of national
carbon intensity established over the last decade is
deepening and probably will persist, as wealthy countries increasingly specialize in services while energyintensive industries such as the production of intermediate semi-processed
goods tend to concentrate in
some middle-income countries (Frobel. Heinrichs and
Kreye, 1981; Hettige, Lucas and Wheeler, 1992;
Dicken, 1992: Moomaw and Tullis, 1994). Further,
industrial relocations even of relatively clean “assembly plants” do not necessarily mean upward economic
mobility toward the hypothesized turning point for
nonwealthy countries. Many industries move production facilities out of the wealthy countries only in later
stages of the product cycle, and therefore competition
between producers is much greater and profit margins
are low (Dicken, 1992; Gereffi and Korzeniewicz,
1994). Industries in developing countries also often
remain limited by subcontracting links to marketing
and design firms in the wealthy countries, who in turn
gamer most of the profits.
The future worsening of an inverted U-curve is
also supported by some observations that higher-polluting industries are moving to the Third World to
avoid tougher regulations in the wealthy countries.
This “pollution-haven hypothesis” (see, e.g., Covello
and Frey, 1990), is supported by anecdotal evidence,
however, macroeconomic
tests of the phenomenon
have been equivocal and some contrary evidence can
be cited (e.g., Leonard, 1988; Low and Yeats, 1992;
Pearson,
1987; Tobey,
1990; Roberts,
1996a).
Regardless of the evidence on the pollution-haven
hypothesis, middle and lower income countries are
usually less able to enforce environmental regulations
effectively, and may even see good reasons not to
(Grimes, Roberts and Manale, 1993; Roberts, 1996b).
Further, even identical industries operating in nonwealthy countries face obstacles making them less
efficient in energy and carbon terms. such as poor
roads, inefficient energy sources, and local shortages
of well-educated high-tech workers, suppliers and
contractors (Grimes, Roberts and Manale. 1993).
Extending tax holidays to attract firms, and garnering
only low wages from those that do relocate, make it
difficult for developing countries to substantially
upgrade infrastructure and human resources.
The overall picture over the past 30 years that
emerges from this analysis is that some wealthy countries are improving their carbon dioxide intensity
while most of the rest of the world’s are worsening.
This suggests that if massive increases in carbon emissions in rapidly growing nations are to be avoided, a
proactive and explicit approach to environmental
quality is needed. This need not occur at the expense
of solid economic growth, but sustainability must be
earnestly addressed at all “levels” of development.
Firms and countries around the world are discovering
that it is far easier and cheaper to avoid environmental
devastation than it is to clean it up later (see, e.g.,
Sayre, 1996). These firms and countries need a level
playing field however, so that short-term advantages
will not accrue to noncompliers. Therefore we believe
that consensually arranged and effective international
environmental
standards and enforcement mechanisms are indicated.
CARBON INTENSITY
AND ECONOMIC
197
DEVELOPMENT
NOTES
1.
Using
other
outcomes
and techniques,
other
researchers have found turning points only at much higher
economic levels (Hettige, Lucas and Wheeler, 1992; HoltzEakin and Selden, 1995).
In both 1979 and 1989,47 countries (mostly in Africa
2.
and Asia) met over half of their total fuel requirements with
what the World Resources Institute calls “traditional fuels,”
i.e., nonfossil sources such as firewood and dung (World
Resources Institute, 1992, pp. 316317). Virtually no timeseries data are available for fuelwood CO, emissions; the
only estimates available are for land-use change, and those
again only for a few, recent years (See also Grimes, Roberts
and Manale, 1993).
3.
Countries are given equal weight in the analysis, since
we are attempting to explain national patterns of carbon
intensity.
4.
Notably
note 2.
France,
Iceland
and those
mentioned
5.
We acknowledge
that GDP per capita
necessarily
reflect a country’s political power
conditions,
and are currently
developing
nuanced index for the position of countries in
stratification
system (Grimes, 1996, see also
1992).
in
does not
or social
a more
the global
Terlouw.
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