Air Pollution Case Analysis
RESEARCH PAPER NUMBER: X4
RESEARCH PAPER MNEMONIC: XAIRPOLL
RESEARCH PAPER NAME: Air Pollution and Trade
DRAFT AUTHOR: Jennifer Corney (Summer, 1996)
I. Abstract II. Issue
Background
Air. A colorless, odorless gas essential to life and a commodity
usually not thought of in terms of economics. In reality the air
we breath is often not colorless at all, rather it covers cities in
a dense greyish-brown blanket better known as smog. It is a public
good that has the misfortune of being adversely affected by the
industries that foster economic development and by the technology
of the twentieth century. Pollution allowances are bought and sold
among companies, thereby demonstrating the fact that air, or at
least air pollution, has been commodified. Regardless of how it is
categorized economically, much of the Earth's air is unsafe to
breath. According to the World Bank, 70% of the world's urban
population breathes unsafe air, and more than 1 billion people live
in cities with unhealthy levels of suspended particulate matter.(1)
As we approach the twenty-first century, however, efforts are being
taken to reverse some of the damage. Governments around the world
are implementing legislation and undertaking projects to clean up
the air. Some of these efforts will later be examined, but first it
is necessary to highlight the scope of the issue itself.
Air pollution originates from a variety of natural sources such as
forest fires, volcanoes, and windblown dust as well as the more
deleterious anthropongenic (man made) sources such as auto
emissions (dominated by the use of fossil fuels), power plants,
heating units, and primary metal smelters. Unlike natural
pollution, anthropogenic pollution can be mitigated or controlled
and thereby limit pollution damages and costs.
The six major or "traditional" air pollutants are carbon monoxide,
ozone, particulate matter, sulfur dioxide, nitrogen dioxide, and
lead. A second category of pollutants is referred to as toxic, or
hazardous, air pollutants. This category includes asbestos,
benzene, vinyl chloride, beryllium, mercury, radio nuclides, and
arsenic. The "traditional" air pollutants are known to be causes
and/or facilitators of respiratory tract problems, eye and throat
irritation, asthma, impairment of some cardiovascular functions,
and lung damage, to name a few. Toxic air pollution also has
serious impacts on health. They have been found to contribute to
lung disease, Leukemia, liver, spleen, kidney, and lymph damage and
a variety of cancers. Overall it is estimated that between 300,000
and 700,000 people die each year as a result of such afflictions
brought about by air pollution.(2) (See CLEAN case. For a
complete discussion of the health effects of pollution see Thad
Godish, Air Quality and TED case .)
There are economic consequences as well. Air pollution damages
crops, forests, ecosystems, man made monuments and materials. As
a result industries such as agriculture and tourism suffer.
Additionally, poor air quality is linked with reduced worker
productivity.(3) As the CHILEAIR case discusses, "The costs of air
pollution include the costs of cleaning, reduced vegetation and
agricultural productivity, and vision impairment resulting in lost
amenity value and lost revenue from tourism. An additional cost
category is productivity loss incurred due to emergency measures
imposed during periods of intense air pollution." The emergency
measures include the closing of schools, restricting the operation
of polluting industries, and limiting the operation of vehicles.
Clearly, air pollution is a transnational problem. Borders are
meaningless in such terms, as pollution created in one country can
affect a country thousands of miles away. A good example of these
far-reaching effects can be found in the SULFUR case which
discusses acid rain (directly related to air pollution). The
affects of acid rain, of course, are much the same regardless of
location. Many historic buildings, including The Acropolis, the
Tower of London and Cologne Cathedral are victims of acid rain,
demonstrated by their decimating surfaces. Lakes and waterways are
also being damaged. Approximately 18,000 lakes in Sweden were
acidified by 1982, and Norway's fish populations have
declined in 2,600 lakes and in many rivers. No European nation
seems to have been left unaffected by this chemical problem, as
Switzerland, Denmark, France, Austria, Greece and Holland all are
reporting damage.
It is important to realize that these affects are not brought about
solely by domestic actions. As stated in the SULFUR case, "...
acid rain is not restricted to the domestic territory of the
polluting region. In the United Kingdom, about 80 percent of the
sulfur deposition originates from home emissions. Norwegian
domestic sources, however, contribute only 10 percent of the
domestic total sulfur deposition there. Foreign sources add 40
percent, and 50 percent of the sources are of an undetermined
origin. This undecided deposition represents the background sulfur
found in precipitation from air masses that have not passed over
sulfur emission sources within a few days." The international
quality of air pollution makes the problem that much more difficult
to resolve. Sovereign states all have their self-interests in
mind, and what is good for one country may not be accepted by
another. The development-environment trade-off has been a topic of
dispute for decades. Industrialized nations argue for tighter
pollution controls (which is perhaps a means of securing their
economic position in the world) and developing nations are not
willing to relinquish the benefits of quick development. There is
also the, "you already did it, why
shouldn't we?" attitude among many of the developing countries.
Faced with these conflicting mentalities, policy-makers must figure
out a balance adequate for sustainable development. The utopian
solution would involve total agreement to protect the environment
at all costs; developing countries would accept this and adopt
cleaner means of economic advancement -- no doubt under the aid of
the developed world -- and the developed world would overhaul the
current system and curtail its polluting industries to the highest
possible degree. Since this will not happen, give and take
measures are necessary. However, once solutions are proposed there
is no guarantee that all countries will sign on, and if they do
there is no international means of enforcement. Essentially, no
international environmental regime exists.
In spite of this, strides have been made to improve the quality of
air. International conventions have taken place and
individual countries have passed legislation regulating
pollutants and polluting industries. The following sections
compare some of the factors involved in a handful of these cases.
III. Relevant TED
Cases
The underwater tunnel connecting England and France is the largest joint venture infrastructure project in European history. After describing the tunnel and its trains, this case touches on the environmental concerns raised by construction as well as the predicted benefits, mainly in reduced air pollution and increased trade, that the chunnel may provide. The tunnel itself is part of a modern transportation network that will, eventually, link high speed trains across the European continent.
This case examines the history behind efforts in the United States to clean up pollution. The Environmental Protection Agency, the 1970 Clean Air Act, and the 1990 Clean Air Act Amendments (CAAA) are all examined. It discusses the potential benefits of the CAAA as well as the enforcement problems that have been encountered.
Air pollution is the most significant environmental problem in Santiago, Chile. This case outlines the causes of this pollution, both natural and man-made, and its affects on the economy as well as the environment. Many of the measures that have been undertaken since the 1990 democratic elections are examined. As the various programs illustrate, the Chilean government has been committed to solving the problem of air pollution since that time.
In 1985, twenty-one countries (all European and Canada) signed the "Protocol to the 1979 Convention on Long-Range Transboundry Air Pollution on the Reduction of Sulphur Emissions or Their Transboundry Fluxes by at Least 30 Per Cent." This case discusses the implications of the treaty and a successor treaty which opened for negotiations in September 1993. It explains how the original treaty has extended its scope beyond acid rain, now providing a legal and institutional framework for multilateral cooperation on the entire range of Transboundry air quality issues in Western Europe, North America, and in the current deliberation, Eastern Europe.
This case focuses on efforts within the European Community to reduce auto emissions since 1987. The umbrella group of environmental organizations in the EC, the European Environmental Bureau, has argued for emissions standards similar to those in the United States. Many of the European countries, however, are against such strong regulations. The economic and environmental implications of the debate are significant and are outlined here. In addition to looking at proposals from several individual countries, the affects of the Single Market on harmonization and regulatory measures are examined.
The German government is considering regulations requiring manufacturers to reclaim their automobiles for final disposal. Because the lack of landfill space makes the cost of waste disposal extremely expensive, German automobile manufacturers have tried to develop new ways to reduce the waste that results from the disposal of automobiles. This has resulted in a proposal to require recycling of automobile parts. Some of Germany's trade partners, particularly the United States and Japan, regard such a requirement as a barrier to trade. The details of these arguments are outlined in this paper.
The European Community contends that three U.S. taxes imposed on large automobiles for environmental reasons are discriminatory against imported cars, particularly European ones. Although imposed as a means to reduce air-polluting emissions, the burden of these taxes have primarily been on imported European automobiles. This case examines the dispute between the EC and the United States over these taxes, a dispute which reflects the increasing tensions between trade liberalization and environmental protection and the blurring division between environmental policies and trade protection.
While the above cases deal with a variety of topics from around the world, they are all linked on the theme of air pollution --at least on the surface. The well-being of the environment is often cited, at least in the United States, as a political platform of politicians. Policy-makers claim that the environment must be protected and endangered species must be saved, but the "green" measures suggested are sometimes a politically correct means to an economic end. In other words, in a day and age where everyone is told to "think globally and act locally," politicians need to appease their environmentally conscious constituents. They must also appease their corporate sponsors who endow them with monetary support. When examined more closely, these cases help reveal just how closely trade and the environment, or perhaps politics and the environment, are intertwined.
Both similarities and disparities can be found among the seven cases referenced above. Of the 28 TED Case categories identified in these papers, four have been cross-compared: the legal standing of the case, its discourse and status, the type of measure taken and the effect of that measure on the environment. The breakdown is as follows:
Legal Standing:
Treaty = 4
Law = 3
Discourse and Status:
Agreement and Complete = 3
Agreement and In Progress = 3
Disagreement and In Progress = 1
Type of Measure:
Regulatory Standard = 5
Import Tax = 1
Investment in infrastructure = 1
Effect on Environment:
Directly Related = 1
Indirectly Related =4
Both = 2
To see how each of the seven cases breaks down, Click Here
Judging from these figures the environment is not the sole victor in this game. With only three cases showing a direct relation to the environment, the CLEAN case having direct effects and the CHILEAIR and SULFUR cases having both direct and indirect relations, it is obvious that ulterior motives are at work. Created in the name of the environment, regulations put forth in the European Community (officially referred to as the European Union [EU] since 1991), Germany (acting unilaterally) and the United States (in the form of an import tax) are only said to effect it indirectly. More often, it appears that such measures are used as barriers to trade. For example, in order for EU vehicles to meet U.S. gas emissions standards, catalytic converters would need to be installed or still-in-development "lean-burn" engine technology would need to be used to achieve the requirements (see USCARTAX case). (Catalytic converters reduce pollutant emissions by filtering a car's exhaust gases). The auto industries in France, Italy and the United Kingdom were against the stringent requirements (see GERMANAUTO case). Small vehicle auto makers, like Peugeot, argued that the requirement could prohibitively increase the costs of automobiles for the less- affluent consumers in the small car market. Challenging such requirements under the GATT, Europe claims that the U.S. luxury tax, the CAFE (corporate average fuel economy) standard tax, and the gas guzzler tax are all discriminatory measures. The U.S., however, claims that these measures are necessary to help reduce emissions levels. Again, the environment may benefit from this arrangement, but the U.S. automobile industry is certainly a winner as well. At the time that the USCARTAX case was written, an agreement on this issue had not been reached, although a GATT panel sided with the U.S. in September 1994. It is interesting to note that this is the only case examined in this analysis that involves the GATT trade regime.
The CHUNNEL case is another example of how governmental action indirectly affects the environment. This case provides a totally different measure than any of the other cases, as the tunnel is one part of a major infrastructure project. The decision to undertake the venture was signed into treaty, but it does not involve the type of environmental regulations found in CLEAN, CHILE, SULFUR, ECCAR, and GERMANAUTO. Despite this, claims have been made that air pollution will be reduced by the creation of the fixed link. Supposedly, traffic will be alleviated as the transport of both people and goods shifts from the roads to rail. If projections are correct and the tunnel handles an ever-increasing amount of Cross- Channel traffic air pollution may, indeed, be reduced. However, there is no guarantee. What is guaranteed is the British and French commitment to extending the high-speed rail network across both countries. This could be beneficial for labor as many jobs will be created with such an undertaking, but the environment itself may not be so lucky. Track must be laid which means that land must be cleared. What will be the environmental affects of this massive project ? As pointed out in the case, the British government is seeking a balance between transport development and environmental protection. The actual results will not be known for years.
This may be the situation with the measures that directly affect the environment as well. Reductions in air pollution levels will not be monumental over night, but the policies described in the CHILEAIR, CLEAN and SULFUR cases are definitely aimed toward the environment. In all of these cases regulatory measures which will in some way have a beneficial impact on the environment have been implemented. The economy of Chile, the U.S., etc. may also benefit, but only indirectly. In Chile, for instance, increased worker productivity may result as the air becomes cleaner and fewer days are lost to pollution-related shutdowns. However, unlike the GERMAUTO case where mandatory recycling of automobile parts is viewed by many as a barrier to trade, the CLEAN case and the CHILE case offer domestic approaches to pollution abatement techniques. These specific measures are not seen as barriers to trade or competition. The 1990 Clean Air Amendment Act, set forth in the U.S. to build upon the 1970 Clean Air Act, can be used to demonstrate this fact. The CAAA regulates industries and firms, seeks to reduce emissions and allows for a market approach to cleaner air through an emissions trading program for sulfur dioxide (S02), the primary precursor to acid deposition. It also enhances the Montreal Protocol on Substances That Deplete the Ozone Layer (see TED cases) by requiring a phaseout of specific ozone depleting chemicals by the year 2000. Such regulations affect both U.S. and foreign companies operating in this country. No one receives preferential treatment.
The Chilean government has adopted a strategy based on the "polluter pays" principle that combines the use of both economic incentives and direct regulations to promote efficient and sustainable development, which explicitly considers environmental factors. They are working to strengthen the institutional and regulatory framework that neglected the environment for years on end. For example, the Special Commission for Pollution Prevention and Reduction in the Metropolitan Region (CEDRM) was established in 1990, and in 1994 the parliament passed the Basic Law, establishing a framework for environmental management and specifying the details of the constitutional guarantee to an environment free of contamination. These actions are part of an on-going process which reflect an environmental objective and do not represent camouflaged protectionism.
The SULFUR case is a bit different in that it represents an international treaty. The "Convention on Long-Range Transboundry Air Pollution," signed on November 13, 1979 and effective as of March 1983, directly benefits the environment. The convention was set to limit and, as far as possible, gradually reduce and prevent air pollution, including long-range Transboundry air pollution. The second major step in implementing the Convention is the "Protocol on the Reduction of Sulphur Emissions or Their Transboundry Fluxes by At Least Thirty Percent." Adopted in Helsinki on July 8, 1985, it immediately obtained 21 signatories. (Conspicuously absent was the signature of the United States). Sixteen countries ratified the Protocol and it entered into force on September 2, 1987. Similar to the afore mentioned cases, the type of measure involved is a regulatory standard in which each signatory country agrees to reduce sulphur emissions by a flat 30 percent based on 1980 rates in a limited time period. The environmental effects are predicted to be direct, as the implementation of pollution control devices are specified for this purpose. This measure, too, is in progress, as a successor treaty was launched in September 1993.
There are other implications to be made based on the breakdown of these cases. Only three of the seven are completely resolved: the CHUNNEL case, the CLEAN case, and the ECCAR case. Not that "Agreement and Complete" is equivalent to static. Obviously finished products such as the Channel Tunnel are not subject to further negotiations, but as the 1990 CAAA demonstrates, laws can be amended as needed. The cases still in progress may endure several structural changes before a final agreement is reached. Again, it is important to remember that in cases such as GERMANAUTO and USCARTAX, it is not technicalities over environmental issues that are the problem. Trade -- or protectionism -- is the major issue at hand.
IV. Policy
Implications
Clearly air pollution is not easily remedied. As the above comparison illustrates, pollution abatement is often a sound governmental objective but not always a direct reality. If the air becomes cleaner as a result of an import tax or a regulatory measure, good for the environment. If not, oh well, but the economy may benefit.
What is important to understand is that environmental politics is still politics. Trying to find solutions to such complex and transnational problems is made even more complicated by the sheer number of actors involved. Individual countries are attempting to work together, but within each country lie difficulties of another sort. The government, representing their country, must first formulate an environmental strategy of its own. This means finding a compromise between the parties in government, usually lobbied by various environmental action groups. As a recent article in The Washington Post illustrates, this is not an easy task. Its coverage of the arguments in the U.S. Congress between the GOP and the Democrats over environmental cuts, expenditures and bills epitomizes the difficulty involved in reaching compromises on environmental concerns. Carol Browner, EPA Administrator in the Clinton administration, said that they [Democrats] are willing to negotiate, but it is a slow process because the issues are difficult and divisive. In all actuality, it is the politics of the debate that are divisive. Rep. Sherwood L. Boehlert (N.Y.), co-chair of the House GOP environmental task force, would agree: "...as we get deeper into the political campaign season, some administration officials seem to feel that it's more in their interest to depict Republicans as anti-environmental than to work with us to get some bills passed."
Once such domestic differences are overcome the problem of formulating international environmental agreements emerges. The inherent difficulties of this process have already been discussed. With factors such as employment and economic progress at stake, protecting the environment is often placed on the back burner. It is for this reason that regulatory measures, etc. should not looked at through rose colored glasses. Policy makers need to make more conscious efforts to implement direct environmental legislation and regulations. The environment, be it the air, water or land, cannot be cleaned up with round-about measures. Implementing quasi-environmental regulations and hoping for indirect results is not the solution.
V. Further
InformationA. Notes
1. Hall, Jane Vise. "Air Quality Policy in Developing Countries," Contemporary Economic Policy (April 1995), p. 77.
2. Ibid.
3. Lee, Gary. "GOP Buffs Environmental Image," The Washington Post. 17 June 1996, A4.
B. Bibliography
C. Web Sites