Globalization affects the environment in several ways. It changes the structure and pace of economic growth and, hence, the scale and nature of resource consumption and waste emission. It also fosters the creation of regulatory frameworks and institutions for promoting trade, the flow of capital, and the diffusion of technology, in ways that can exacerbate or mitigate environmental impacts. Environmental impacts may be felt locally, affecting those who earn their livelihood by exploiting resources such as land, water, and biodiversity. Or they may be felt further afield, through broader effects on natural ecosystems, the freshwater cycle, the ozone layer, nutrient flows, the climate, and so on. There are thus sound economic as well as humanitarian and ethical reasons to map the impacts of globalization on the environment.
Evidence supports the notion that open and transparent economies are more likely to be prosperous. Yet measures of prosperity rarely account for environmental costs of production. Some argue that depletion of natural resources, pollution of air, water, and soil, loss of biodiversity, and global warming significantly reduce and in some circumstances outweigh the growth-related benefits of globalization. Furthermore, economic and environmental costs and benefits may not be equitably distributed if the lion’s share of economic benefits from globalization accrues to developed countries, while the developing world shoulders the environmental burdens.
Trade generates economic benefits because, given free and efficient markets, it encourages trading partners to specialize in goods or services they have some comparative advantage in. Since developing countries often have abundant natural resources and cheap, plentiful labor, trade liberalization has fostered shifts toward labor- and resource-intensive sectors such as mining, logging, garment manufacturing, and export crop production. Most of these sectors, however, generate significant environmental “externalities.” These are environmental costs not reflected in the production costs of individual enterprises, be they farm households or multinational companies. The results of ignoring the true social costs of production are excessive production, resource consumption, and waste emission.
Proponents of globalization argue that many environmental problems can be countered by stimulating economic growth. A portion of the overall economic gain can be transferred to individuals and communities affected by environmental degradation. Investments can be made to strengthen environmental institutions, and cleaner, more resource-efficient technologies can be developed and adopted. Based on studies of developed countries, proponents also point to the so-called “inverted-U” phenomenon. That is, although natural resource consumption and degradation increase as economies grow, an income threshold is attained above which demand for a better environment stimulates investment in environmental protection and rehabilitation. Degradation is thus reduced. Many developing countries, however, are so poor, population growth so high, and natural resources already so stressed, that catastrophic, perhaps irreversible, environmental damage may well occur long before any such threshold is reached.
Although environmental damage can be a by-product of globalization and trade liberalization, incentives for addressing its underlying causes are mixed. While developing countries suffer the greatest damage, they are also under the greatest pressure to accelerate economic growth to increase incomes and combat poverty. And since environmental policies and institutions are likely to be weak in developing countries, producers there (be they domestic or foreign) have little incentive to care about the environmental externalities of their actions. Rampant logging of the world’s biodiversity- and carbon-rich tropical forests, for example, testifies to this. This raises concerns that globalization might create “pollution havens” in developing countries, where foreign investors operate to escape stricter environmental laws and enforcement in their own countries. There are also fears that governments might progressively push environmental standards lower as they compete to attract scarce foreign investment (the “race to the bottom” hypothesis). Available evidence suggests that such fears might be overstated. Foreign investors are generally much more concerned with factors such as wage rates, available infrastructure, and the repatriation of earnings.
Some governments’ adoption of lenient environmental standards raises concerns that these countries are, in effect, subsidizing exports and reducing the competitiveness of producers in countries with stricter standards. Attempts to raise environmental standards bring protests from domestic producers who are concerned about potentially higher production costs and loss of international competitiveness. Politicians express concern too about increasing domestic prices in the face of widespread poverty. Furthermore, developing countries maintain that differences in resource endowment, pollution assimilation capacities, and social preferences with regard to environmental standards are legitimate sources of their comparative advantage. Attempting to reconcile such conflicting interests poses enormous challenges to environmental policymakers.
Despite the political and technical difficulties involved, the international community has proven willing to take collective action to address environmental issues of global concern. International initiatives have been mounted on climate change (United Nations Framework Convention on Climate Change), movements of hazardous waste (the Basel Convention), biodiversity loss (Convention on Biological Diversity), trade in endangered species (Convention on International Trade in Endangered Species of Wild Fauna and Flora [CITES]), ozone layer depletion (the Montreal Protocol), desertification (United Nations Convention to Combat Desertification), and loss of wetlands (the Ramsar Convention on Wetlands). While it is not clear that globalization per se has been a dominant factor in creating the problems these initiatives address, some do relate to trade and some are likely exacerbated by trade liberalization. There is thus a growing sentiment that formal linkages should be strengthened between the World Trade Organization (WTO) process and global environmental regulation. But obstacles remain, such as resentment toward rich countries seeking to impose standards that are at odds with economic conditions and social preferences in poor countries. Moves to strengthen environmental regulation as a pre-condition for trade are perceived largely as a guise by which rich countries legitimize nontariff trade barriers.
Climate change is one of the most controversial global issues. Although there are many uncertainties, studies suggest that much of the world will be impacted increasingly by climate change linked to human-induced emission of greenhouse gases. Not only are mean temperatures likely to rise, but also the incidence and severity of extreme events such as heat spells, droughts, and floods are expected to increase. Projected climate change will not affect all countries equally however. Global agricultural production appears to be sustainable in the aggregate, but impacts on crop and livestock productivity will vary considerably across regions. Successive studies suggest that temperate areas (largely richer countries) stand to increase their agricultural potential while that of many tropical and subtropical areas will decline. The poorest countries in Sub-Saharan Africa (already a hot region with large tracts of arid or semiarid land) appear to be the most vulnerable to temperature increases and changing rainfall patterns. Countries in South and Southeast Asia could be affected by increasing irregularity and intensity of tropical storms. The Pacific Island nations could suffer losses of coastal land due to rising sea level, saltwater intrusion into water supplies, and increased damage from tropical storms. The anticipated disproportionate impact of climate change on the poorest countries means the number of people at risk of hunger is also projected to rise, compared to a baseline without climate change.
Asymmetries exist not only in the likely environmental impacts of globalization on developed versus developing countries, but also in the capacity of countries to mitigate or adapt to change or to seek compensation. Most developing countries have only limited mechanisms by which communities can seek redress when confronted with environmental externalities like water pollution and increased flooding caused by activities upstream, or the loss of food and fuelwood due to forest conversion. But externalities may also have consequences far beyond the location of production. When externalities “spill” across borders, such as greenhouse gas emissions, ozone layer depletion, and biodiversity loss—particularly extinction of species—the full force of international environmental advocacy is often mobilized. Global grassroots activism now has a significant influence on international trade dialogues, including their environmental aspects.
Recent developments in information and communication technology are also shaping the debate on globalization and the environment. The Internet and email are powerful tools for sharing information among global communities, including scientists, the private sector, policy analysts, community leaders, and environmental activists. Information on best practices, technology, institutional innovations, and specific environmental incidents can be relayed rapidly the world over in photos, text, web links, and sound bites. The enhanced flow of information is proving particularly valuable to environmental advocacy and action groups in developing countries. Access to information hitherto unavailable nationally strengthens the capability of such organizations, often nongovernmental organizations (NGOs), to raise awareness and promote national debate on the plight of the environment and the people whose livelihoods depend on it.
Mobilization of informal collective action in developing countries is also proving effective. While studies of firm behavior in developed countries cite regulatory pressure as the most potent driver of environmentally preferred technical change, similar studies in developing countries find community pressure to be the predominant force. Increasingly too, the policies and practices of multinational enterprises in developing countries are shaped by (fear of) adverse media campaigns mounted by international NGOs aimed at developed-country consumers and investors.
Global environmental issues, ranging from depletion of natural resources and biodiversity to climate change, are complex. Analyses of future trends are cloaked in uncertainties, given our limited understanding of earth systems and their interactions with changing economic and social conditions. Population growth, shifting consumption patterns, and institutional innovation will undoubtedly continue to affect the environment, as will the pace and nature of technical change. There is reason to believe that these changes will hasten the deterioration of environmental conditions faced by already vulnerable populations in developing countries. Such deterioration would likely reinforce vicious cycles of humanitarian crises, conflict over resources, and lack of development. To confront these pressing environmental challenges, a concerted global effort is needed with rich countries taking the lead and prepared to adopt a truly global vision.
For further reading see T. Panayotou, Globalization and Environment, Working Paper No. 53, Center for International Development (Cambridge, Mass., USA: Harvard University, 2000) http://ideas.uqam.ca/ideas/data/Papers/wopcidhav53.html; O. Solbrig, R. Paarlberg, and F. di Castri, eds., Globalization and the Rural Environment (Harvard University Press, 2001); and S. Retallack, “Economic Globalization and the Environment,” Transnational Associations 4 (2000) (http://www.uia.org/uiata/retallack004.htm).
Stanley Wood (s.wood@cgiar.org) is a senior scientist in the Environment and Production Technology Division at IFPRI.