Pollution Patterns during the Industrial Transition Author(s): Richard M.

Auty Reviewed work(s): Source: The Geographical Journal, Vol. 163, No. 2, Environmental Transformations in Developing Countries (Jul., 1997), pp. 206-215 Published by: Blackwell Publishing on behalf of The Royal Geographical Society (with the Institute of British Geographers) Stable URL: http://www.jstor.org/stable/3060184 . Accessed: 01/11/2011 15:55
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Vol. 163, No. 2,July 1997, pp. 206-215 77he Geographical Journal,

Pollution Patterns during the Industrial Transition

RICHARD M. AUTY LA1 4YB Lancaster Lancaster Department Geography, Universiy, of 1997 in Thispaperwas acceptedfor publication February Historically, during the transition from a traditional economy to a developed economy, the pollution intensity of GDP has first intensified and then eased. The total volume of emissions traced an S-shaped curve. Within the overall pattern, the evolving composition of manufacturing altered the pollution shadow as the industrial structure diversified from agro-processing into capital-intensive intermediates and skill-intensive goods, and finally into research-intensive products. This implies that emissions were initially likely to be widely dispersed and dominated by water-borne organic pollutants: rapid growth would then have occurred in urban-centred airborne pollution and solid waste, followed by high growth of hazardous materials. These trends are consistent with South East Asian examples. But sizeable deviations from the aggregate pattern resulted from the differences between countries in natural resource endowment, industry and environment policies, and institutionalcapacity. These differenceswill continue to modify the pollution intensity curve as economic development proceeds.
KEYWORDS: development,per capita income, industrialstructure,pollution.

HIS PAPER EXAMINES the literature for evidence of systematic pollution patterns during the industrial transition from a traditional economy (which is predominantly subsistent, low productivity and rural-based) to a developed economy (in which high productivity manufacturing first attains dominance, and then steadily loses it to service activity). The paper concentrates on the manufacturing sub-sector of the industrial sector which has historically been the driving force behind the transition. The pollution patterns include: * * changes in the overall level of pollution as the share of manufacturing in GDP waxes and wanes; as well as changes in the make-up of the pollution signature (between water-borne, airborne and solid matter) in response to changes in the commodity composition of manufacturing.

* the aggregate pollution curve; * the likely effects on the pollution shadow of differences in the natural resource endowment of the developing countries; * the impact of two policy variables, namely trade policy and environmental policy. The latter section also examines institutional factors, including the roles of regulation, government and the community. Aggregate pollution patterns and Percapitaincome thestructure manufacturing of Chenery and Syrquin (1975) made a comprehensive study of structural change during the industrial transition which provides a framework within which to analyse the relationship between per capita income, industrial structure and pollution. In their later work (Syrquin and Chenery, 1989), they use data derived from more than 100 countries over three decades to trace not only how the structure of the economy has changed with rising per capita income, but also how the composition of manufacturing has changed. Their research suggests that the transition may typically take five generations (Chenery et al., 1986), but some East Asian countries have taken barely two generations.
? 1997 The Royal GeographicalSociety

The aggregate patterns are further differentiated by variations between countries in such characteristics as their natural resource endowments, their trade and environmental policies and their institutional capacity. This paper is structured in three main parts which deal with:
0016-7398/97/0002-0206/$00.20/0

POLLUTION PATTERNS DURING THE INDUSTRIAL TRANSITION TABLE I = variation industrial in structure level development with Average of (population 20 million) ISIC Code 3 31 32 33 34 35 36 37 38 39 31-34, 39 35-38 31, 32, 39 33, 35, 36 34, 37, 38 Mean under $300 .119 .028 .034 .002 .005 .018 .005 .006 .018 .003 .072 .047 .066 .024 .029 Income capita (1980 US$) per 500 ov300500 1000 2000 .151 .045 .030 .005 .004 .030 .008 .009 .019 .001 .085 .066 .076 .043 .032 .188 .047 .033 .006 .007 .036 .011 .013 .032 .003 .096 .092 .083 .053 .052 .219 .046 .034 .008 .011 .040 .012 .017 .048 .003 .102 .117 .083 .060 .076 Mean 4000 .244 .042 .032 .010 .016 .042 .013 .019 .006 .004 .104 .140 .078 .065 .101 $5000 .269 .040 .029 .014 .025 .034 .014 .020 .087 .006 .114 .155 .074 .062 .132

207

Sector Manufacturing Food, beverages and tobacco Textiles and clothing Wood and products Paper and printing Chemicalsand rubber Non-metallic minerals Basic metals Metal productsand machinery Other Light industry Heavy industry Early Middle Late

300 .120 .042 .026 .004 .003 .024 .005 .005 .010 .001 .076 .044 .069 .033 .018

Total y at midpoint change .150 .012 .012 .020 .016 .009 .014 .069 .042 .108 .038 .103 1200 2000 3000 400 700 1000 2500 900 1500 500 2500

Source: Syrquinand Chenery (1989)

Table I summarizes the Chenery and Syrquin figures for the aggregate pattern of a 'large' country, meaning one with a population of 20 million or more. This shows that the historical pattern for such countries has been one in which manufacturing raised its share of GDP from just under 12 per cent at $300 (in constant 1980 US$) per capita income to more than 24 per cent at $4000, with the mid-point in the transition (i.e. when manufacturing reaches 18% of GDP) occurring at $1000. Heavy industry (defined as ISIC sectors 35-38) overtook light industry (31-34 and 39) in importance at just over $1200. Chenery and Syrquin do not investigate trends at income levels above $5000, but the evidence points to a relative decline in the manufacturing sector's share of GDP, with some lag in the case of the more successful industrial exporters. Wolf (1991) shows that the share of manufacturing in the GDP of the largest industrial economies has been declining and that by 1987 it ranged downwards from 31 per cent in Germany through 29 per cent in Japan, 23 per cent in Italy, 21 per cent in France and Britain, to just over 19 per cent in the USA. Brown and Julius data to predict a further long(1994) use employment term contraction in manufacturing's relative importance at higher income levels (halving to 10% between 1990 and 2020). Some caution is required in interpreting the figures. For example, the Chenery and Syrquin trends

are based on historical data; but consumption patterns, manufacturing technology and policy stances are constantly changing. Moreover, the aggregate data necessarily mask significant variations among countries, which are attributable to differences in their natural resource endowment (Lal, 1995) and also their development strategy (discussed further below and also elaborated in Auty [forthcoming]). These limitations should be borne in mind when making both projections of the aggregate data into the future and inferences about specific countries. These issues are addressed in later sections of the paper, but first the links between per capita income, the composition of manufacturing and pollution are explored in more depth. Bernstam (1991) provides evidence to suggest that as market economies pass through the industrial transition, the intensity with which they use energy and materials, and the rate at which they emit pollutants, first increases and then declines. This 'inverted U-shape' reflects not only, as discussed above, the changing structure of the economy (as countries first build up the infrastructureof a moder economy and then spend an increasing fraction of their income on services), but also technological change and a growing preference for a cleaner environment. The intensity of pollution has tended to be higher in the middle of the industrial transition than in early industry. This is because the growth in the size of the

208

POLLUTION PATTERNS DURING THE INDUSTRIAL TRANSITION TABLE II

Trendsin emissionof airpollutantsin market selected 1970 to 1985 (000 metrictons) economies, source: countries, by

Country

1970 S 12068 96700 12858 7889 11435 5552 n.a. 1397 1822

T 22146 190300 24047 13340 15830 12142 n.a. 3394 3918

1975 S

1980 S

1985 S

Ratio(%):1985/1970
T A S T

Canada 10078 USA 93 600 Germany 11189 France 5451 UK 4395 6590 Italy n.a. Norway 1997 Sweden Netherlands 2096

10619 11089 21708 83100 76400 159500 12802 9427 22229 5805 8184 13889 4942 9547 14489 6680 4633 11313 671 1073 402 1853 1339 2992 3439 2097 1342

9975 10552 20527 72200 79600 151800 11822 9190 21012 6472 7976 14448 5722 8908 14630 6666 4699 11365 436 1148 712 1690 960 2650 1673 1447 3120

9340 10260 19600 63000 70000 133000 9379 7641 17020 6882* 4830* 11712* 5636 7574 13210 6674 3511 10185 736 1118 382 1921 1021 2942 1417 1280 2697

92.7 67.3 83.8 126.3* 128.2 101.3

n.a.

85.0 72.4 59.4 61.2* 66.2 63.2

n.a.

88.5 69.9 70.8 87.3* 83.4 83.9

n.a.

96.2 67.6

73.1 70.3

86.7 68.8

Notes: A= emissionsfrom transportation; = emissionsfrom stationarysources;and T = total emissions. S *1987 In some cases, the data are missingon emissionsfrom one of the five major emissionsourcesin a given year. The data for a previousor subsequentyear were then added assumingno change for a given source of emissionsover a five-yearperiod. The sourcesof dischargesare drawnfrom the OECDEnvironmental Compendium Paris:OECD, and use a broad definition Data 1989, of stationarysourcesinclusiveof solid wastes and miscellaneoussources. Source: Bernstam(1991)

manufacturing sector relative to GDP, and also in aggregate terms, has boosted the total volume of pollution. For example, the Indonesian manufacturing sector expanded eight-fold between 1970 and 1980 and is projected to increase a further 13-fold by 2020, when the country will still be in the middle of the industrial transition (World Bank, 1994a). But at higher income levels there has been a decline not only in the emissions-intensity of GDP but also in the absolute volume of most, but not all, pollutants. Several recent studies corroborate the downward trend. Bernstam (1991) measured pollution trends in the industrial countries for the period 1970-85 and found a declining trend in the absolute volume of most pollutants (Table II), especially from stationary sources (down by one-quarter to onethird with the exception of Canada). These results are broadly confirmed by the World Bank (1992) based on data for the industrial countries over a slightly longer period spanning the years 1970-88 (Fig. 1). A recent study by Grossman (1995) also records the downturn of the inverted U-shape for the pollution intensity of GDP. For example, the downturn in suspended particulate and sulphur dioxide emissions occurred around the per capita income level of $5000 (measured in this case in 1985 US$ purchasing power parity). This approximates to the average per capita income of countries such as Malaysia and Mexico in the early 1990s. Other atmospheric pollutants, such as carbon monoxide, carbon dioxide and nitrogen oxides have peaked at somewhat higher per capita income levels. The turning point for water pollution also appears to have occurred later, at between $8500 and $11 500 per capita income. Over

that range the levels of faecal coliform counts, dissolved oxygen, BOD (Biochemical Oxygen Demand) and nitrate all begin to improve. The inverted Ushaped pattern is not universal, however: for example, the levels of toxic metals in rivers fell steeply to around $5000 per capita income before levelling out or rising slightly and then falling again at $14 000. Overall, the inverted U-shape may be explained by the combination of changing demand (linked to changes in the structure of GDP and the composition of manufacturing outlined above) and a higher preference for pollution abatement as incomes rise (Dasgupta et al., 1995). A recent World Bank (1992) study speculates that it may be possible to de-link GDP from natural resource use. It notes that, historically, reductions in the use intensity in market economies (but not socialist economies) have preceded the increase in government concern for the environment. The subsequent adoption of policies to correct the market failure (which had previously undervalued natural resources) consequently served to accelerate this process (Fig. 1). There is evidence that cost pressures have systematically encouraged technological innovation to curb resource use (and, therefore, emissions), even before the trend was intensified by post-1960s efforts to internalize the cost of using natural capital (Hochgraf, 1983). Reddy and Goldenberg (1990) show that the scale of such a long-term technological improvement, with reference to the energy-intensity of GDP (Fig. 2), might be used as a proxy for the pollution intensity of GDP (since fuel combustion is a major element in pollution). They plot the energy intensity trend of the five largest industrial economies and show a progressive fall in the energy intensity of

POLLUTION PATTERNS DURINGTHEINDUSTRIAL TRANSITION

209

The theory

GDP
(1) -0z c,

aa

r=r

Pollution

.Time .t Incentives to protect the environment introduced Cleaner and more efficient technologies adopted in response

The practice: GDP and emissions in OECD countries 200

150 o II
0 o

<>
x

100

C: 50

0 1970 1975 1980 1985 1990

the in Fig. 1. Breaking linkbetween growth GDPandpollution Source: World Bank (1992)

GDP: Japan peaked in 1940 at two-fifths of the level of the UK, the first industrial nation. Reddy and Goldenberg go on to suggest that the developing countries may expect at least to match the Japanese level if not improve on it and thereby

flatten the curve even more. There are, however, factors which work to deflect individual countries from the standard 'best practice' pattern. Moreover, it should be noted that the net effect of vastly greater numbers of people participating in industrial society

210

POLLUTION PATTERNS DURING THE INDUSTRIAL TRANSITION

1.2 is Intensity expressed Energy as the amountof energy metric tons of (inequivalent consumedto yield petroleum) $1,000 of GrossDomestic Product (GDP).

. ......
1.0 -

UK

* * 0.8 -

.
.*7 C

OJ J

+
C>
Lc LU

0.6 -

0.4 -

0.2 -

0 i

1840

I 1860

I 1880

I 1900

I 1920

I 1940

I 1960

I 1980

I 2000

I 2020

I 2040

in trends theenergy Fig.2. Historical efficiency GDP of Source: Reddy and Goldenberg(1990)

may boost global pollution, irrespective of trends at the national level (Stern et al., 1996).

chemicals and rubber. Its share of GDP almost doubled as per capita income rose from $300 to $2000 (Table I). From the outset, chemicals and rubber Pollution and theinternal structure manufacturing between them dominated output in the middle group of patterns (accounting for two-thirds). The The late group of industries comprises paper and Trends in the internal structureof manufacturing changes in the ratio of manufacturing to services printing, basic metals, and metal products and described above have been accompanied by changes machinery. Broadly, it combines capital-intensive in the commodity composition of manufacturing sub-sectors with skill-intensive ones. The late subwhich also have significance for pollution. For group outstripped the middle group in size by $1100 example, Chenery and Syrquin identify 'early', per capita income and overtook the early group at around $2600. It almost equalled the size of the early 'middle' and 'late' manufacturing sub-sectors. The early group comprises agro-processing (food, and middle groups combined above the $5000 beverages and tobacco) and textiles and clothing. In income level. the 'large country' model, it has accounted for more and structure pollutionOrganic waste than half of all manufacturing value added below Evolvingindustrial $300 per capita income and remained dominant up has proved to be the prime industrial emission to an income level of $500. The rate of growth in its problem in the early stage of the industrial transition, share of GDP ceased above $1000 and declined rather than gaseous discharges or toxic wastes (World slightly above the $2000 income level. Within the Bank, 1994b). As noted above, this reflects the early cluster of manufacturing, agro-processing dominance of the agro-processing sub-sector of RBI became the dominant sub-component (Table I). (resource-based industry) in the early industry group. The middle group of industries is more capital- Although locally, high concentrations of such effluent intensive in nature: it comprises wood products, non- may be severe, such early industrial pollutants are not metallic minerals (mainly cement and ceramics), usually health-threatening and their total BOD is

POLLUTION PATTERNS DURING THE INDUSTRIAL TRANSITION

211

likely to be significantly less (below one-third) than that made by household sewage, for example. Data for Thailand in 1991, when the country was entering the middle stage of the industrial transition, provide some quantitative evidence. Thailand then had a per capita income of $1600 (in current US$), and its pre-treated industrial BOD totalled 852 000 tonnes, or about 19 kg/$1000 of GDP. Just over half of this discharge emanated from the food-processing sector (with sugar milling prominent) and slightly more than two-fifths from beverage production. This left textiles and pulp and paper with around 2.5 per cent of the share each (World Bank, 1994b). The dominance of food and beverages in early industry is confirmed in Indonesia, with a per capita income barely half that of Thailand (World Bank, 1994a). Although the early industries have continued to expand through the mid-transition phase both absolutely and in terms of their share of GDP (albeit modestly), the middle industries have grown faster. The middle set comprises chemicals, ceramics, cement and wood processing (Table I). Such sub-sectors not only exhibit high BOD demand, as noted above, but they also accelerate the build-up of solid and hazardous wastes. However, their most significant environmental effect is to boost airborne pollution. Data for Malaysia, a country already in the middle of the industrial transition, show that early industry continues to dominate industrial water pollution (World Bank, 1993). RBI such as food and beverages, palm oil, raw rubber and textiles and leather still accounted for 70 per cent of such emissions. But Malaysia also shows that while in the aggregate the early industries may continue to dominate water pollution, the middle industries tend to have a much higher pollution intensity (expressed in pounds of BOD per day per million dollars of value added). For example, whereas early industries such as beverages and food products display BOD demands of 26 lbs and 79 lbs per million dollars of value added respectively, middle industries such as pulp and paper and 'other chemicals' create a BOD demand of 114 lbs and 360 lbs respectively. This implies that the middle industries have had the potential to intensify water pollution rapidly and may account for the observed lag (discussed below) in reducing water-borne pollution compared with airborne pollution (Grossman, 1995). Among the airborne emissions, suspended particulates are a major problem. For example, in the late 1980s such emissions exceeded recommended levels by more than 50 per cent in Kuala Lumpur, by 250 per cent in Bangkok and almost 300 per cent in Jakarta (World Bank, 1993). But this inverse correlation with per capita income is not consistent with the projection based on the changing industrial structure. This is because the data are for the leading

cities rather than the national economy so that other factors become important, notably the contribution of motor vehicles and city size (with Kuala Lumpur much the smaller city). For example, Thai industry's share of suspended particulate emissions expanded from 26 to 36 per cent between 1983 and 1992 (World Bank, 1994b). For other important airborne pollutants, the contribution of the industrial sector has fallen as per capita income rises: in the case of sulphur dioxide easing from 36 to 28 per cent between 1983 and 1992 and for nitrogen oxides from 13 to 11 per cent. Malaysia also experienced similar declines (World Bank, 1993). As the industrial transition nears its conclusion, hazardous waste is likely to become the major pollution problem. Although hazardous wastes may be vented into the waterways and the atmosphere, they are most likely to be disposed of on land and therefore to have localized and potentially severe adverse health effects. UN data for the late 1980s show solid waste, measured in kg/head/day rising from 0.75 in Manila to 0.88 in Bangkok, 1.29 in Kuala Lumpur and 2.8 in Seoul (World Bank, 1993). According to estimates made for Thailand in the early 1990s, as the country entered the middle stage of the industrial transition, toxic solid waste displayed strong potential for rapid expansion and manufacturing was responsible for most of it (around 80% of the annual total of 1 million tonnes). The scale of increase in toxic solid waste in Thailand was projected to be threefold within a decade, owing to the rapid expansion of base metals, chemicals and machinery. Much of the material emitted (heavy metals, acid waste and infectious waste) has a high health risk. The South East Asian case studies cited here do suggest that systematic changes occur in emission problems as per capita incomes rise. Such changes have an important spatial dimension because with rising per capita income the relative importance of rural activity declines in relation to urban activity. At low-income levels the predominantly rural and resource-based nature of industrial activity is geographically dispersed and its main impact is on water bodies. As per capita incomes rise and industrial activity becomes more localized in cities, so the problem of industrial pollution is compounded by other emissions. The concentration of population and vehicles renders human waste an increasing source of water pollution, and vehicle exhausts become a major source of atmospheric pollution. Consequently, the changing composition of industrial pollution takes place against such 'background noise' and is only a part, albeit a major one, of the broader picture. Deviations trajectory practice'pollution from the 'best The main causes of country deviations from a 'best practice' pollution trajectory are associated with

212

POLLUTION PATTERNS DURING THE INDUSTRIAL TRANSITION

differences in their natural resource endowment; in their industrial and environmental policies; and in their institutional capability. on endowment pollutionTwo Impactof the naturalresource important dimensions of the interaction between natural resources and pollution are resource-related pollution patterns and variations in the environment's absorptive capacity for emissions. Syrquin and Chenery (1989) provide empirical evidence of the relationship between the natural resource endowment and industrial structure, which has important implications for divergence in pollution patterns. Figures 3a-d identify four variations in industrial structure associated with different types of economy which Syrquin and Chenery identify on the basis of two criteria: country size (it may be recalled that 'small' implies a population below 20 million), and the relative importance of the primary and the manufacturing sectors. These differences broadly correspond with differences in the natural resource endowment (i.e. large [primary] resource-rich; large [manufacturing] resource-deficient; small resourcerich and small resource-deficient). The main historical deviations from the industrial transition traced by the Chenery and Syrquin aggregated norm shown in Table I may be summarized as follows. The large (manufacturing)resource-deficient country has commenced the transition with all three sub-sectors (early, middle and late) somewhat larger than the aggregate norms, but the late group of industries has expanded much faster (compare Tables I and III and Fig. 3a). Perkins and Syrquin (1989) attribute this to the greater ability of large countries to capture economies of scale. Large countries are likely to be more self-sufficient (autarkic) than small and medium-sized countries (Auty, 1994). Somewhat surprisingly, the large (primary) resource-rich countries have had significantly less reliance on the early group of industries throughout the industrial transition (suggesting, for example, that textiles may be less significant). For them, the middle group of industries began with a share of GDP twothirds that of the early group, but they increased that share very little. The late group of industries, however, expanded somewhat later than in the case of the large resource-deficient countries and acquired less importance. In the small resource-rich countries, the agro-processing group retained its dominance of the early group of industries throughout the industrial transition. Finally, in the small resource-deficient countries, the early industries have had less initial dominance. More surprisingly, both the middle and late categories achieved less importance than in the aggregate pattern (presumably reflecting an earlier switch into service activities). Turning to the second environmental dimension, namely pollution absorptive capacity, the range spans

from sparsely-settled and resource-rich Argentina to densely-settled and resource-deficientBangladesh and coastal China. Argentina benefits from the fact that it is a resource-processingeconomy with relatively lowpolluting RBI and also that its dominant city, Buenos Aires, is both well-ventilated and adjacent to a large water body, the Rio Plata (World Bank, 1995). Across the Andes, the Chilean capital city (which straddles a rather small river) has outstripped the growth expectations of its founders and become mismatched with the absorptive capacity of its environment: it experiences a high frequency of temperature inversions which trap airborne pollutants and create severe pollution problems (World Bank, 1994c). Elsewhere, Chile also has more pollution-intensive RBI than Argentina in the form of pulp processing and copper smelting. At the other extreme, low-income Bangladesh experiences water pollution from foodprocessing, pulping, chemicals and fertilizer. Although the severity of the situation is eased somewhat by the large volume of water flowing through the delta system, the country suffers from weak institutional capability to cope with pollution. Tradeand environmental policy efects There is evidence that with increasing dependence on primary product exports (a surrogate measure for a resource-rich endowment), governments intervene more ambitiously in the economy and cause a greater deviation from their optimum development strategy (which is defined as a strategy that is in line with the country's basic factor endowment (Auty, forthcoming). For example, Sachs and Warner (1995) find that the degree of inward-orientation (a proxy for the level of state intervention in the economy and for the level of autarky, or attempted industrial self-sufficiency)rises as the share of primary products in GDP rises. Such economies are likely to experience slower investment and a consequent lag in upgrading their industrial technology. The largest countries have favoured very high levels of autarky and many have sought to develop their own technology (Auty, 1994). Berstam (1991) has analysed the implications of high industrialautarkyfor the intensity of resource use. He finds that the combination of inaccurate signals concerning resource scarcity and insulation from market-sensitivetechnology are likely to arrest, and even reverse, the historical trend to declining resource-intensity and pollutionintensity of GDP. Berstam (1991) shows that steel and energy are used far more efficiently in the developed market economies compared to the centrallyplanned economies. Birdsall and Wheeler (1992) also link weak performance in pollution abatement with protected slow-growth economies. However, Hettige et al. (1995) report that some developing countries' plants achieve OECD levels of abatement, irrespective of mean per capita income level, trade policy and

POLLUTION PATTERNS DURING THE INDUSTRIAL TRANSITION a Large, Manufacturing 0.14 0.13 0.12. 0.11. 0.10. 0.09 0.08 ? 0.07 o 0.06 0.05 s o.oS 0.04. 0.030.020.01 0.00-0.01 ,./,../* /* .. .....o""
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b Small, Primary 0.14 ./

/./

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0.13 0.12 0.11 0.10 0.09 -

Earlyindustry ........... Middle industry - .-. Late Industry

.."**"*"

.............*-

0.08 t 0.07 ' 0.060.

/.'. .'.'

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...............

0.03 0.02 0.01 0.00-0.01 *

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c Large, Primary 0.140.13 0.12 0.11 0.10 0.090.

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1000doo 500 70 GNPPerCapita (1980 USDollars)

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d Small,Manufacturing
0.14 0.13 0.12 0.11 0.10 0.09/ ./
0.

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o 0.06X 0.050.040.030.02 0.01 0.00-0.01 250

*-*""*"

..~,-?'?' .....
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/' ....... ..... ....,.. -.

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-0.011000 750 560 250 1250 1000 750 500 GNP Capita Per (1980 USDollars) USDollars) GNPPerCapita (1980 in Added manufacturing, of Fig.3. Structure Value bycountry type Source: Syrquinand Chenery (1989)

1250

environmental policy, three variables hitherto considered to be critically important. The above findings suggest that a development strategy which is in line with a country's natural resource endowment and implemented within a market-sensitive economic policy is an important, if not essential, prerequisite for improving the efficiency of

resource use and lowering pollution. But there is still scope for deviation from expected practice in pollution abatement as a consequence of institutional constraints. Institutional constraints Even well-managed developing economies their environmental may mismanage

214

POLLUTION PATTERNS DURING THE INDUSTRIAL TRANSITION

policy, often by establishing over-elaborate environmental requirements which they lack the financial and/or technical resources to implement (World Bank, 1994b). However, ways are being identified of improving environmental policy in a constrained institutional environment. At the most basic level, there is scope for governments to take advantage of the fact that where the larger privatelyowned firms are highly visible, especially outside the main cities, their pollution emissions draw attention from adjacent communities. Such communities are more likely to exert pressure to abate pollution, the higher their per capita income and the more numerous the alternative sources of employment from the targeted polluting firm, i.e. the greater their political strength (Afsah et al., 1996). Indonesia shows how the threat of public exposure can provide larger firms with a strong spur to improve compliance with environmental standards. Plants in that country were graded in terms of their compliance with emission standards according to a five colour code. The code ranges down from gold for world class practice to green for significantly above compliance, to blue for satisfactory compliance. Inadequate performance earned the colour red for firms with modest failure to comply, and black for those which made no attempt at curbing emissions. Almost one-fifth of companies moved up into the blue category in the last six months of 1995, after being warned that such ratings would be published. But despite such sanctions, poorer local communities are likely to be less effective than richer ones in securing abatement, partly because a clean environment warrants lower priority than the alleviation of absolute poverty and partly because of limited power with which to enforce abatement. In line with such findings, the remoter and poorer rural areas of China enforce green requirements considerably less rigorously than the far richer coastal cities do. Such delay may be imprudent, however. Retaining Indonesia as an example, although BOD intensity per $1000 output is expected to decline by 20 per cent between 1980 and 2020, the volume of total emissions will grow 20-fold with no policy change (World Bank, 1994a). Sanctioning such expansions in emissions by postponing abatement measures is short-sighted. Rather, the late industrializers can turn their late start to advantage by providing incentives to adopt the cleanest technology now. For Indonesia, historical growth rates indicate that by 2010 some 85 per cent of manufacturing capacity will be of post-present vintage and therefore pollution-abating - if appropriate incentives are given. Moreover, abatement can be improved with modest administrative inputs by, for example, switching from command and control systems for industrial water pollution to presumptive charges (World Bank, 1994a). The latter are levied on emissions under the

assumption of a given technology, and therefore of an expected ratio between the volume of production and the level of emissions. Firms achieving cleaner production become eligible for a rebate. Unlike regulation, a presumptive charge facilitates the reduction of pollution at a low cost. This is because the individual firm is left to decide whether it is cheapest for it to pay the charge, to invest in equipment to curb emissions or to sub-contract waste water treatment to specialist firms. The benefits of market-driven environmental policies are maximized in relation to the administrative input required, if such charges are initially applied to the largest firms only, using data collected concerning the output volumes and treatment levels of such firms. For example, research from the Philippines suggests that around 100 large plants account for 60 per cent of pollution. In Thailand a charge of $500 per tonne of BOD has been proposed for large firms with rebates paid if they can demonstrate superior performance. The adoption of such a scheme was expected to halve total BOD demand. The targeting of larger firms can be expected to induce some trickle-down of improved practice. For example, where large firms assemble supplies from small plants, they can be made responsible for the presumed aggregate pollution and so be given an incentive to encourage improved practice among their suppliers. Such a system appears to be especially suitable for dealing with hazardous waste in the metal-finishing and the electronics sectors. Other measures to curb emissions from small firms include making local authorities responsible for the emission levels and subsidizing technical assistance for abatement reduction (World Bank, 1993). Conclusions In aggregate terms, the build-up of important pollutants has historically traced an inverted U-shape with rising per capita income. This trend reflects both the changing composition of demand at higher per capita incomes (as expenditure on services expands vis-a-vis expenditure on food and manufactured goods) and also the tightening of environmental policies. There is also evidence of a long-term historical trend towards lower levels of materials use, energy use and pollution per unit of production as per capita incomes rise. During the industrial transition, the structure of manufacturing has diversified from resource processing to capital-intensive intermediates and then skillintensive engineering and hi-tech products. This broad pattern of structural change means that emissions were initially dominated by organic waterborne pollutants but then rapid growth occurred, first in airborne emissions and then in solid waste pollutants, followed later by the rapid build-up in hazardous materials.

POLLUTION PATTERNS DURING THE INDUSTRIAL TRANSITION

215

Deviations from the general pattern have been caused by differences in the natural resource endowments of countries, with larger countries tending to be more self-sufficient and therefore to move earlier through the industrial transition. The choice of industrial and environmental policies has also caused significant deviations from the general pattern. Historically, the most significant adverse deviations have occurred under the autarkic policies of the more centrally-planned economies. If the post-1970s' consensus on macro and industrial policy holds (Williamson, 1996) and welfaremaximizing environmental policies are effectively deployed, then the late-starting industrializers may trace a less pollution-intensive trajectory than the historical trend. (The late-startersare also more likely to specialize in line with their resource-driven comparative advantage than was the case during the heyday of the protectionist import substitution policies covered by the Chenery and Syrquin data.) Sensitivity

to pollution is indeed emerging at ever lower per capita incomes: whereas concern for abatement was triggered in the industrial countries in the 1960s at a per capita income level around $10 000, it emerged in South Korea and Taiwan from the mid-1980s at around $5000 and in the early 1990s at $3000 in Malaysia and the more developed parts of China, notably the coastal cities. But reductions in the intensity and total volume of all pollutants is not occurring and those trends which are favourable may not come about automatically (Arrow et al., 1995). Emissions with longer-term impacts, such as carbon dioxide, continue to rise (Grossman, 1995). Moreover, even where favourable trends do occur, the combined effects of global population increase, rising per capita income and initially increased emission intensities in the developing countries might still boost aggregate pollution levels substantially (WRI, 1996).

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