[Market Economy in Your Pocket] Economic Development Improves the Environment

The Hudson River in the United States is cleaner than the Ganges River in India. The air in Tokyo is cleaner than in Beijing, China. If economic development only worsened environmental pollution, then the rivers and air of advanced countries should be more polluted than those of developing countries. In reality, however, the opposite has occurred.

This phenomenon is known as the Environmental Kuznets Curve. It means that economic development initially causes environmental pollution, but once development passes a certain level, environmental quality improves.

Economic development causes environmental pollution because the environment—such as rivers and the atmosphere—is a common resource. Because it belongs to no one, everyone overuses it, and the result is environmental pollution.

However, as income levels rise, investment in the environment increases. Representative examples include investment in sewage systems and waste treatment facilities, and the replacement of conventional fuels with clean fuels such as natural gas. As a result, environmental quality also improves.

Korea, too, has passed that turning point in many respects. Since the Olympics, the share of clean fuel use has been increasing, and investment in urban tributaries such as Yangjaecheon has also been rising. Over the long run, environmental quality rises along with income levels.

Environmental regulation is ultimately a mechanism to induce investment in pollution reduction. Developing countries lack the capacity to invest, so no matter how much environmental regulation is imposed, it has little effect. It is true that a certain degree of environmental regulation is necessary, but it must not be allowed to hinder economic growth itself. When income levels are low, the costs of treating pollutants cannot be borne.

Original title: [주머니 속의 시장경제] 경제발전이 환경을 개선시킨다

Author: Center for Free Enterprise (CFE)

Date: 2005-08-01

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=22&idx=10655