Environmental Challenges and Governance

Diverse perspectives from Asia

Sacchidananda Mukherjee, Debashis Chakraborty

• Publisher: Routledge
• Year: 2015
• Print ISBN: 9780415721905
• eBook ISBN: 9781317508922
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

The economies located in East, South and Southeast Asia have witnessed an interesting growth-sustainability trade-off over the last decades. While growth considerations have paved ways for deepened ties with growing trade-investment waves and increasing population pressure necessitated exploitation of hitherto unutilized natural resources, focus on environmental sustainability has been a recent consideration. The growth impetus still playing a key role in these economies, it becomes imperative that the countries effectively address the key sustainability concerns, e.g. air and water pollution, land degradation, loss of biodiversity, climate change issues like CO2 emissions etc. But how prepared is the governance mechanism of these countries, covering not only the legislative and administrative framework but also involvement of the judiciary, presence of spirited civil society and active engagement of stakeholders in policy-framing dialogues, to rise up to these challenges?

The book seeks an answer to this question through the environmental governance mechanism and natural resource conservation policies in three vibrant regions within Asia. A holistic development dimension of sustainable development path emerges, through discussion of policies adopted by developed (Japan, South Korea), upper-middle (China, Malaysia), developing (India, Indonesia, Philippines, Sri Lanka, Thailand) and least developed countries (Bangladesh, Myanmar, Nepal).

1
Editors’ introduction

Environmental challenges in the times of economic growth – an Asian odyssey

Sacchidananda Mukherjee and Debashis Chakraborty

To generate growth or secure sustainability? That is the ‘big’ question

Does economic growth necessarily translate into sustainable development? Although the divergence between the two increasingly received attention of the academicians and policymakers in the aftermath of the UN Conference on Human Development (UNCHD) in 1972 at Stockholm, the potential threats were duly highlighted by Charles Dickens long back in Chapter 5 of his 1854 epic novel, Hard Times, which provides a picturesque description of environmental repercussions in the post-industrial revolution period:

Coketown. … It was a town of red brick, or of brick that would have been red if the smoke and ashes had allowed it; but as matters stood, it was a town of unnatural red and black like the painted face of a savage…. It had a black canal in it, and a river that ran purple with ill-smelling dye….

(Dickens 1854)

While the scale and effect differ, the adverse outcomes of uncontrolled growth in general and industrialization in particular, as narrated by Dickens, are still being witnessed in several parts of the globe. The observed trade-off between growth and sustainability has become increasingly relevant over the last two decades, when in addition to domestic activities, deepening waves of globalization and trade-investment flows are often responsible for environmental disasters (Copeland and Taylor 2004; Chakraborty and Mukherjee 2013a). It is now widely acknowledged in the existing literature that growth and environmental sustainability in a country/region may lead to opposite directions owing to several underlying factors.

First, the growth-sustainability interrelationship in a country can be explained with the help of the Environmental Kuznets Curve (EKC) hypothesis, which argues that growing income levels initially can lead to environmental degradation (e.g. deforestation, water/air pollution, land degradation, exploitation of natural resources) but beyond a threshold level, it will generate demand for better environment from the citizens and consequently lead to the adoption of superior environmental governance mechanisms (e.g. enforcement of environmental standards, adoption of better pollution abatement practices) (Cole et al. 1997; Chakraborty and Mukherjee 2013b). Second, rising trade-investment-degradation nexus may fuel Foreign Direct Investment (FDI) inflows in a country towards the pollution-intensive sectors/regions and thereby degrade its environmental sustainability further (Cole et al. 2011), a phenomenon that is known as Pollution Haven Hypothesis (PHH). In other words, a country characterized by weaker environmental regulations may end up specializing in the production of environmentally sensitive activities with help from foreign investments, resulting in serious sustainability related ramifications. Third, if countries endowed with natural resources (e.g. fossil fuels, minerals, forests) focus too much on the exports from these sectors then the resulting obsession may compromise its overall growth scenario (Dietz et al. 2007). This is known as the Natural Resource Curse Hypothesis (NRCH). On the other hand, overexploitation of these resources is likely to degrade the environment further. Lastly, analyzing the growth-sustainability trade-off from a micro-perspective, Porter Hypothesis (PH) proposes that rise in income and enforcement of stricter environmental regulations are likely to motivate the firms to innovate and enhance their efficiency level to stay locally and globally competitive (Jaffe and Palmer 1997). Clearly if PH and the later stage of EKCH effect dominate the PHH and NRCH effects in a country, environmental sustainability may accompany the growth wave. The above discussion underlines that whether economic growth in a country is going to be green or brown depends heavily on the relative strength of these four effects.

The aforesaid effects are greatly influenced by the state of ‘environmental governance’ pattern in a country. Following UNEP (2009), environmental governance can be defined as smooth functioning of the existing framework covering the legal structure, official policies, implementation mechanisms and key institutions (e.g., inspection, monitoring, judicial), commitment to multilaterally agreed upon decisions etc. However, environmental governance comprises not only the government’s activities, but also the same by all other stakeholders, ranging from private players, Non-Government Organizations (NGOs), marginalized communities etc., are equally important. Good environmental governance exists when the system can devise an effective solution to an environmental challenge working in sync with the non-government players, and is not guided entirely by growth considerations.

After the conclusion of Second World War, since the late forties, several developing countries and least developed countries (LDCs) in Africa and Asia earned their independence. The policymakers in these economies generally relied on growth to emerge as an engine for development and the industrial sector occupied a special role in their plans due to its employment-creating capacity. In the initial phase, most of the developing countries, winning their freedom from colonial powers during this period, preferred an import-substitution based growth model, given the foreign exchange constraints and the popularity of the Prebisch-Singer thesis, which predicted that the developing countries that are generally the exporters of primary products (raw materials/intermediate goods) and importers of capital and consumer goods from the developed countries are expected to suffer from a long-run deterioration in their terms-of-trade (Toye and Toye 2003). From the sixties, the perspective towards export-orientation started slowly changing as the ‘Flying Geese’ model of FDI from Japan fuelled the growth of the industrial sectors in Asian Tigers – i.e. Singapore, Hong Kong, SAR China, Taiwan, ROC and Republic of Korea (here after South Korea) – and the same in other Southeast Asian countries in the subsequent period (Hayter and Edgington 2004). The changing perspective becomes all the more evident from the growing number of developing countries participating in the Kennedy Round (1964–7) and Tokyo Round (1973–9) multilateral negotiations of the General Agreement on Tariffs and Trade (GATT), with the goal of reducing tariff and non-tariff barriers. While only 26 countries participated during the Dillon Round (1960–1) negotiations, the numbers increased to 62 and 102 during the Kennedy Round and Tokyo Round respectively (WTO 2001).

The UNCHD (1972) therefore took place at a crucial juncture of time, as cross-border trade-investment-environment started becoming increasingly intertwined. It was obvious in coming days that in isolation, a country may not always adopt and implement the best environmental decision for the global good, and the role of multilateral forums for securing commitments received particular focus. Guided by increasing concerns, the World Commission on Environment and Development (1987) defined sustainable development as, ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (UN 1987). While the definition was well received, suitable actions from all the countries were not easily forthcoming. Moreover, the pursuit of growth, deepening cross-country trade-investment flows and the associated intensification of economic activities since the early nineties brought to the forefront the climate change concerns, namely global warming, emission of Green House Gases (GHGs), loss of biodiversity etc. (Managi 2004; WTO-UNEP 2009).

How do the climate change concerns relate to the growth dynamics? The growth path fueled by trade-investment flows may influence climate change parameters in a country primarily through three effects (Zhang 2012). First, enhanced production and export-related activities through scale effect may lead to additional energy use and exploitation of natural resources. This in turn may produce greater volumes of pollutants and harmful emissions, resulting in environmental degradation (Cole and Elliott 2003). Second, through direct or indirect influence of PHH phenomenon, industry composition with growing economic openness may move towards emission-intensive sectors (e.g. mining, base metals, chemicals) and result in growing emissions, which is known as composition effect (Honma and Yoshida 2011). However, in line with EKC predictions, rise in income level is likely to improve environmental governance in a country, e.g. through adoption of better pollution abatement technologies, formulation and enforcement of stricter regulatory policies etc., which is known as the technique effect (Dasgupta et al. 2001). In other words, sustainable development is assured only when the technique effect dominates the other two effects, which are more associated with the growing industrial sectors. These chains of possibilities stressed the need for strengthening environmental governance scenario in no uncertain terms.

The regulatory mechanisms proposed under the UN Conference on Environment and Development (UNCED) in 1992 at Rio de Janeiro need to be viewed in the light of this broader context. In particular, Principle 15 of the Rio Declaration underlined the urgency to employ stringent measures to protect the environment in no uncertain terms. The principle is an unmistakable call to the Member countries to strengthen their environmental governance scenario:

… the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.

(UN 1992)

The growing recognition regarding the influence of growth-trade-investment flows on environmental sustainability has resulted in the signing of several United Nations Environment Programme (UNEP) led protocols since the seventies. The key trade-related Multilateral Environmental Agreements (MEAs) under the wings of UNEP are instrumental in controlling the growing concern areas, namely, trans-boundary pollution (e.g. Basel Convention), protection of biodiversity by restricting trade in endangered species (e.g. Convention on International Trade in Endangered Species of Wild Fauna and Flora, CITES), substances depleting ozone layer (e.g. Montreal Protocol), limiting trade in hazardous chemicals and organic pollutants (Rotterdam Convention, Stockholm Convention) etc. While these protocols have contributed significantly in improving the sustainability scenario, several concern areas still do remain.

For instance, it was expected that negotiation under the United Nations Framework Convention on Climate Change (UNFCCC) forums would take a lead role in curbing the GHGs emissions. However, the outcome of the Kyoto Protocol discussions were greatly diminished as several developed countries did not effectively participate in that forum. Conversely, the developing countries were supposed to commit on GHGs emissions once their developed counterparts fulfilled their commitments. For example, the Durban Climate Conference (2011) declaration proposed to reduce the aggregate emissions of GHGs for Annex I countries (including OECD members and industrialized countries as well as some transition economies) by at least 25 to 40 per cent below their corresponding 1990 levels by 2020. However, several developed countries (e.g EU, Switzerland) instead offered to meet their targets only if other developed countries ‘commit for comparable emission reductions and that economically more advanced developing countries contribute adequately according to their responsibilities and respective capabilities’ (UNFCCC 2012). The developing countries on the other hand have so far treaded cautiously on quantifiable emission reductions commitments, fearing adverse growth implications in the future (Grubb 2003). Such inflexibility in negotiating standpoints often comes from the perceived threat to the national growth paradigm, in the aftermath of the multilateral commitment.

In addition to the multilateral negotiations, the environment management system for organizations developed by International Organization for Standardization (ISO) through its 14000 series deserves particular mention. The standards deal with both the traditional issues like environmental performance (ISO 14031), environmental labels and declarations (ISO 14020) etc. on one hand, and focus on the emerging issues such as GHGs accounting and verification (ISO 14064) and calculation of carbon footprint (ISO 14069) on the other (ISO 2009). While implementation of ISO 14000 standards in a country is expected to strengthen the PH effect, their effectiveness in developing countries and LDCs have been functions of country-of-origin effect (Prakash and Potoski 2007) and the manner of implementation (Blackman 2012).

In this background, the growth policy choice of the UN member countries, particularly the developing countries and LDCs, who in the short run might be more concerned with output enhancement and job creation, bears crucial importance. The trade and growth policies they adopt may lead to PHH-led environmental challenges. Conversely, a developed country might be tempted to provide subsidies to their local firms with strategic importance, which may aggravate environmental challenges within their territories. Growing concerns on this front have compelled the Rio+20 Conference declaration to note that, ‘We remain focused on achieving progress in addressing a set of important issues, such as, inter alia, trade-distorting subsidies and trade in environmental goods and services’ (UNCSD 2012). In particular, expressing concerns over the subsidies being provided in the fisheries sector, in 2009 the then WTO director-general Pascal Lamy noted that,

[T]oday, we run the risk that over-fishing will so deplete fish stocks in our oceans that many species will disappear forever…. Governments have contributed to this problem by providing nearly $16 billion annually in subsidies to the fisheries sector. This support keeps more boats on the water and fewer fish in the sea …

(WTO 2009)

The discussion so far underlines the importance of strengthening environmental governance in securing sustainability in no uncertain terms. As noted earlier, environmental governance mechanism in a country can be broadly defined as the formulation of sustainability norms, taking note of the particular challenges and sectoral activities of the economy, and the establishment of regulatory agencies and punitive frameworks to ensure that they are complied with. But, what factors in addition to income facilitate the emergence of a strong environmental governance framework in a country? The urge for environmental governance can either come from within (e.g....

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Contributors
• Foreword
• Acknowledgements
• Abbreviations
• 1 Editors’ introduction: environmental challenges in the times of economic growth – an Asian odyssey
• PART I Environmental perspectives from South Asia
• PART II Environmental perspectives from Southeast Asia
• PART III Environmental perspectives from East Asia
• Index