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How can income inequality and environmental degradation reinforce each other | perspective EKC and IPAT | Soma Dhar

Ph.D. Student, Department of Economics, University of Chittagong

MBA

Figure 1:Environmental Kuznets Curve

 

In 1955, Kuznets was the first to assert that as the economy develops, income inequality initially rises, contacts a peak, and then starts to fall after a specific level of income has been achieved. Subsequently, the concept was developed for the environmental poverty and economic growth nexus, under the designation of the environmental Kuznets curve (EKC). As the income and consumption levels of everyone in the economy rise, there is likely to be a net growth in environmental destruction. Assembling, and promoting consumption, and demand while keeping environmental degradation at a minimum will be no small task. It was widely believed that as per capita income increased, pollution and other forms of environmental degradation would first increase and then drop in an inverted U-pattern. This statement is directed to the EKC (Environmental Kuznets Curve) because of Kuznets’s theory that inequality would first rise and then fall as income increased (as shown in Figure 1). According to the theory as income increases, societies will have both the means and the readiness to pay for environmental protection.

Undoubtedly, there is virtuous proof that this inverted U-relationship carries some local pollutants such as particular matter in the air, Sulphur-di-oxide, and nitrogen oxides. Nevertheless, there is no potent evidence that other environmental damage declines with higher incomes. This is a distinct concern; when it reaches global public goods, such as greenhouse gases. Albeit the environmental Kuznets curve relationship does preserve in the very long term, some deterioration, such as failure of biodiversity, may well confirm to be irreversible.

“Green growth” -partly concerning lower greenhouse gas emissions- is a salient policy endeavor in many nations. For example- South Korea has been mostly establishing its contemporary development process around this approach; most of its impulse budget following the 2008 financial crisis was invested toward acquiring a green economy.

The poor are usually the core targets of environmental degradation. The poor suffer more from environmental decay because they must often live on degraded lands that are less costly. After all, the rich evade them. Moreover, people living in poverty have less political influence to reduce pollution where they live. And living in less effective contaminated lands provides the poor with fewer prospects to work their way out of poverty. But, in some cases, they are also its representatives, typically as a result of the limitations of their poverty. Furthermore, high fertility is condemned for problems that are attributable to poverty itself. For instance, China’s population density per acre of arable land is twice that of India, yet outcomes are also twice as high. Though it is transparent that environmental destruction and high fertility go hand in hand, they are both direct outgrowths of a third factor, absolute poverty. For environmental policies to flourish in developing countries, they must first address the issues of landlessness, poverty, and lack of access to institutional resources. Insurance land assignment rights, lack of credit and inputs, and scarcity of information often discourage the poor from making resource-augmenting investments that would help maintain the environmental assets from which they emanate their livelihood. Consequently, controlling environmental degradation possesses as a key element essential of an institutional asset to the poor, rather than combating an unavoidable process of decay. For this cause, many goals on the international environmental agenda are in harmony with the three objectives of development which are as follows:

*To improve the availability and enlarge the distribution of fundamental life-sustaining goods;

*To increase levels of living;

*To develop a range of economic and social options.

Impact of EKC in Bangladesh

TOO

Source: The author generated the scatterplot using World Bank Data

Figure 2: Scatterplot diagram of GDP per capita and CO₂ per capita in Bangladesh

 

Bangladesh, a small emerging country of 162million, has been registering outstanding rates of economic growth over the past two decades. Regardless, a dense population, developing urbanization, and a fast-growing industrial base have extended the specter of an imminent environmental crisis. Despite the fear of such a possibility in Bangladesh, academic research in the area of environmental economics occurs to have remained less than adequate. For Bangladesh, rapid economic growth is an absolute necessity to feed its people most of whom are poor. The factor alone has dictated the principle of high priority on economic growth at the expenditure of the environment. The nation in the face of the severe shortage of foreign exchange cannot afford to import energy-efficient capital and technology.

Figure 2 shows a scatterplot diagram regarding GDP per capita and CO₂ emission per capita in Bangladesh. The scatterplot shows that there is no clear evidence of a negative relationship between growth and CO₂ emissions. In particular, there is little indication of an EKC-type relationship, which suggests that there is a level of income after emissions are reduced as income continues to grow. There is especially a shortage of proof of a downward slope.

IPAT- Factors of the Human Impact on the environment

IPAT calculates the impact of human-induced economic activities on the environment and prescribes environmental influences as the multiplicative product of three main driving significances: population, affluence, and technology, where I = PAT.

Here, I= Environmental impact

P= Population

A= Affluence

T= Technology

I=PAT is the mathematical memorandum of a procedure put ahead to explain the impact of human activity on the environment.

The variable P symbolizes the population of an area. Since the industrial organizations, the human population has been rising exponentially. The scenario has compelled Thomas Malthus and many others to hypothesize, that this growth would continue until restricted by overall starvation and famine. Increased population increases human’s environmental impact in many ways: a. increased land use; b. increased resource use; c. increased population.

The variable A stands for affluence. It conveys the moderate consumption of each person in the population. As the consumption of each person gains, the total environmental influence increases as well. A common illustration for measuring consumption is GDP per capita. Increased consumption significantly increases human environmental impact. This is because each product depleted has wide-ranging impacts on the environment.

The variable T depicts the technology. It portrays how resource-intensive production of affluence, how much environmental result is concerned in constructing, enchanting, and disposing of the goods, services, and luxuries operated. Expansion’s inefficiency can decrease overall environmental consequences.  Since P has advanced exponentially, and A has also improved drastically, the prevailing environmental impact I has even expanded.

Typically attributed to Ehrlich, it displays that the environmental impact (I) is the consequence of the multiplication of Population(P), Affluence(A), and Technology (T) of the country or region considered. Affluence is calculated in GDP per capita and technology in emissions assertiveness, units per $ of GDP. The dimensions of the population contribute to defining the importance of a state’s environmental impact. A growing population begets a growing influence on the environment. Per capita GDP is also positively linked to the environmental impact. Population and GDP growth are the segments of the IPAT individuality that produce the scale effect, an upward drive-in impact. The speed of improvement in T compared to the scale effects determines whether impact I increase or decrease. This is a pivotal indicator of policy. To lessen emissions in a country, technological improvement has to overpower population and GDP growth.

IPAT clarifies how long-term growth is not available without technological progress. It is the technological improvement that permits producing greater amounts of output with the same level of energy inputs or the same amount of output with lower levels of inputs.

Status of extreme poverty of different regions

Number of Extreme poor (millions) by region,1990-2030

KII

POKEMAN

Sources: Lanker et al. (2020) (updated). PovcalNet, World Bank (2020)

Figure 3: Status and projection of extreme poverty of different regions (1990-2030)

Figure 3 shows the analysis of the global number of poor by region forming in 1990. Recorded numbers are shown up to 2018 and projected numbers later. While East Asia and the Pacific had the highest number of poor in the 1990s, the region’s high growth rates contributed significantly to reducing extreme poverty in the world by 2002, East Asia and Pacific had declined their number of poor to below the level followed in South Asia. South Asia observed a case, and by 2011, the region had decreased its 2002 poverty level by 39%, From then, exploring poverty in South Asia is inquiring due to the lack of current data for India. With our recent extrapolations for South Asia, in the same year, Sub-Saharan Africa evolved as the region with the most extreme poor. By 2030, Sub-Saharan Africa will be none to the lion’s share of the world’s poor, and the global poverty goal can only reach within distance if poverty is decreased in the African continent.

Effect of COVID-19

The COVID -19 pandemic is forced by a zoonotic infection one transmitted from wild animals to humans. The defeat of biodiversity and wildlife habitats due to environmental degradation has created the conditions for the spread of COVID-19. Finally, policymakers must be environmental sustainability as a central objective of eradicating poverty. Climate change is a long-term threat to livelihoods. COVID-19 has pushed millions into extreme poverty and hunger and worsened inequity and injustice.

UN Secretary-General Antonio Guterres noted in December 2020, “Extreme poverty is rising; the threat of famine endangers. We encounter the biggest global recession in eight decades. These inter-generational impacts are not due to COVID-19 alone. They are the consequences of long-term fragilities, inequalities, and unfairness that have been disclosed by the pandemic. Now it is high time to reset. As we produce a strong recuperation, we must grasp the opportunity for transformation.”

A traditional assumption is that poverty is the primary cause of environmental degradation. The Brunt land Commission Report considers that poverty is the core cause of any environmental problems and poverty alleviation should be considered the key determining factor and foremost condition for sufficient implementation of environmental policies.

Population growth is an important mediating factor that exacerbates poverty’s negative impact on environmental degradation. Poverty itself is not the cause of environmental degradation; the large family size associated with poverty generates more negative externalities due to higher dependence on common natural resources. It, in turn, increases environmental degradation. Policymakers need to adopt strong governance protocols and strengthen local institutions that specifically cater to the rural and urban poor needs to grow cleaner and more sustainable.

The World Bank estimates climate change will drive 68 million to 135 million people into poverty by 2030, particularly in Sub-Saharan Africa and South Asia- the regions where most of the global poor are concentrated (World Bank, 2020). If we do not cut greenhouse gas emissions now, the compounded effects will render many parts of the regions uninhabitable.

Regardless, in recent times environmental aspects of development are being carefully evaluated. In certain, the legal framework is being developed and implemented, although more needs to be done. Against such affairs, the above-identified reverse reason is not unique. Over time, as the regulations take full effect; and the public awareness about the need for quality of environment upgrades, such reason should evaporate, although much will hinge on how the laws are enforced.

 

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