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Better governance: the key to better air quality?

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Dr. Le Thai Ha, Director of Research at Fulbright School of Public Policy and Management, Prof. Chang Youngho (Singapore University of Social Sciences), and Prof. Park Donghyun (Asian Development Bank) recently introduced a study titled “Governance, Environmental Vulnerability, and PM2.5 Concentrations: International Evidence”. The study examines the role of governance quality and environmental vulnerability in PM2.5 concentrations; fine particles, designated PM2.5, is among the most harmful forms of air pollution.

The research paper is published in The Energy Journal, a quarterly peer-reviewed academic journal published by the International Association for Energy Economics, in March 2021. The authors extend the EKC framework to examine the role of governance quality and environmental vulnerability in PM2.5 concentrations using a global panel dataset of 128 countries between 2000 and 2014.

A global issue

According to the environmental Kuznets curve (EKC) hypothesis, at the initial stage of industrialization, countries prioritize economic growth and job creation rather than cleaning up air and water pollution. Furthermore, poor countries often do not have adequate resources for tackling environmental degradation and are saddled with relatively weak environmental regulations. Consequently, the pollution level of poor countries deteriorates rapidly as they industrialize.

However, as a country grows richer, its citizens tend to value the environment more highly, and thus demand stronger regulatory institutions. As a result, it is possible that leading industrial sectors become cleaner and pollution peaks as a country reaches a certain threshold income level and then falls toward pre-industrial levels as income rises even further.

The EKC has been the dominant approach among economists for modeling ambient pollution concentrations and aggregate emissions since Grossman and Krueger (1991) introduced it a quarter of a century ago.

The scenario outlined above suggests that policymakers in many developing countries are explicitly or implicitly pursuing a policy of “grow first, clean up later.” The scenario does not bode well for the environmental prospects of developing countries. Since it could take a long time for many low- to middle-income countries to reach the threshold income level at which their citizens begin to vocally demand a cleaner environment, they may have to suffer worsening pollution and environmental degradation for many decades.

Air pollution has been a serious problem across the world. The cost for countries is enormous. Air pollution affects economies and quality of life, and it causes chronic diseases and even death. The health impact of air pollution is now much larger than the estimates of only a few years ago. Every year, three million people around the world die due to outdoor pollution. The World Health Organization (WHO) estimated that in 2012, there were around 7 million premature deaths linked to air pollution, more than double the previous estimates. Of the 7 million, outdoor air pollution claimed 3.7 million lives and indoor air pollution caused 4.3 million lives.

Based on the WHO Global Urban Ambient Air Pollution Database as of May 2016, which covers 3,000 cities in 103 countries, more than 80 percent of people living in urban areas were breathing air-laden with pollutants far above WHO limits. The reality is even more disturbing since many countries have only random monitoring systems or none at all. As such, air pollution is of interest not only to researchers but also policymakers around the world. Since the world economy is highly diverse and consists of countries at different stages of economic development, the authors of the research analyze and compare countries of different income levels.

This study finds that governance has a significant effect on air quality for the full sample of countries. The other factor is environmental vulnerability, which is not due to climate alone but instead reflects a diverse constellation of underlying factors. These include biophysical perspectives as well as the socio-political environment, economic structure, and institutional and political characteristics.

Better governance is the key?

For the full sample of countries, better governance improves air quality while higher environmental vulnerability causes air quality degradation. This result suggests that better governance and reduced vulnerability benefit air quality.

Furthermore, improved governance is found to reduce the negative impact of vulnerability on air quality. This finding implies that countries with stronger institutional frameworks that facilitate enforcement of environmental regulations tend to experience more innovations which enhance their capability to cope with air pollutants, contributing to cleaner air. As such, policies that improve governance and reduce environmental vulnerability can promote cleaner air.

Overall, the evidence indicates that developed countries are more successful than developing countries in addressing air pollution problems. Some countries specialize in relatively clean industries and production techniques as they become richer. This may lead to the phasing out of obsolete and inefficient technologies and the adoption of cleaner and more efficient technologies. Higher income can also provide more fiscal resources for public investment in environmental protection.

The study shows that there lies a positive correlation between the level of PM2.5 and income in upper-middle, lower-middle, and low-income countries, but a negative correlation in high-income countries. This result is consistent with Suri and Chapman (1998), who contended that developed countries shift the production of pollution-intensive goods to developing countries, thus reducing their own PM2.5 concentrations.

Developed countries have already achieved relatively high general living standards and they can thus afford to make a concerted effort to improve the environment. More specifically, they have the resources, technology, and institutional capacity, including strong and effective governments, to address environmental issues. For developing countries, inclusive growth is vital to achieving environmental goals as well as lifting general living standards and reducing poverty.

Inclusive growth requires a structural transformation from agriculture to manufacturing and services, but industrialization requires intensive use of energy resources which will result in pollution and environmental degradation. Developing countries pursuing growth and development often give much higher priority to industrialization than environmental issues. For instance, China paid little attention to the environment during decades of world-topping economic growth. As a result, their citizens live with average pollutant levels (PM2.5) many times higher than in the U.S., making air quality a major public health issue. Many developing countries are adopting the Chinese model of industrialization and growth which is highly energy intensive.

Thus, this is the dilemma that developing countries are facing: to achieve inclusive growth in order to improve their capacity to solve environmental issues, they must undergo industrialization process which leads to environmental pollution.

In a nutshell, this study suggests more concerted efforts are needed to promote environmental governance and reduce environmental vulnerability, especially in developing countries. These include development initiatives that are in harmony with social and economic needs, as well as environmental sustainability programs such as promoting public awareness of environmental issues, developing environmental democracy, and building climate change resilient transport infrastructure, and managing traffic congestion, among others. Improved governance that facilitates enforcement of environmental regulations also helps firms pursue more innovative activities, reducing a country’s environmental vulnerability.

According to the study, the efforts of developing countries to achieve a cleaner environment, especially reduction in pollutant concentrations, would benefit greatly from substantial economic, technological, and financial support from the international community. The support will improve the environmental institutional capacity of developing countries, augment their scarce environment-protecting resources, and mitigate the costs they incur in fighting pollution.

The study suggests a number of areas to improve governance quality and environmental vulnerability in the developing world, for example, enhanced public environmental awareness and educational programs.

Thuy Hang

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