Does Economic Growth Increase Air Pollution?
Must the environment suffer for the economy to grow? It may seem so in the short run. But contrary to the myth that “capitalism destroys the environment,” wealth creation improves both the environment and the economy through technological and scientific progress.
The economist Simon Kuznets first drew an inverted U-shaped curve to describe the relationship between economic development and income inequality, pointing out that, as societies develop, inequality gets more severe at first, but as they continue developing, inequality becomes less severe. Since then, economists have noticed that this “Kuznets Curve” applies to the environment as well. Societies increase their environmental impact as development gets started, but as they continue to grow their economies the environmental downsides of growth actually begin to decline, in large part because of technological innovations made possible by that economic development.
Consider air pollution and GDP since the Industrial Revolution. Pollution initially rose as humanity became more productive, but in recent decades, as country after country has become wealthy enough to invest in cleaner fuel sources, more efficient production methods, and other technological advancements, several key forms of pollution, such as nitrogen oxide (NOx) emissions, sulfur dioxide (SO2) emissions, and carbon monoxide (CO) emissions, which are all included in the chart above, have declined while the economy has continued to grow.
How Economic Development Eventually Leads to a Cleaner Environment
Humans operate according to value hierarchies. Some aims are more urgent than others. Any human endeavor can be sought and realized, given the investment of enough resources. Most people have some environmentalist instincts, such as a desire for ecological stability and cleanliness, but understandably don’t prioritize those values as highly as more pressing needs like having enough food to eat.
Poorer societies often must compromise on some environmental values in the short term in order to stave off death by starvation and other immediate threats. Then, once they’ve grown their economies by “picking the low-hanging fruit,” they can get wealthier still by investing in less urgent priorities such as air cleanliness. This is the process of resource allocation and economic development that results in the environmental Kuznets Curve.
The transition from coal to oil and gas as energy sources is a good example of this. During the Industrial Revolution, so much coal was burned in England that the peppered moths in the forests around Manchester evolved from being light-colored to soot-colored in order to camouflage with the newly sooty environment. But coal production in the UK peaked in 1913, and has since become 150 times lower as coal has been overtaken by oil and gas as the dominant energy sources. Since coal is much dirtier than oil and gas, this transition has resulted in emissions declining relative to the amount of energy produced, meaning that the economy has been able to continue growing while air quality has improved at the same time.
Many poorer countries are on a similar trajectory, but with a later timeline. Coal production in China has continued to rise as economic development has brought over three quarters of the Chinese population out of extreme poverty since 1980. But China is expected to hit peak coal in 2025, as their investments in cleaner energy production pay off and allow them to transition to cleaner fuel sources while continuing economic growth.
Some air pollution has been a necessary environmental cost of global economic development since the Industrial Revolution. But by powering the modern economy, coal and other pollutant-emitting energy sources have allowed investment in human flourishing, technological growth, and scientific progress that have facilitated new and improved ways of satisfying humanity’s wants and needs. Continued research and development into better energy production methods, geo-engineering technology, and climate resilience infrastructure can advance this process into the future.
Many people assume that the environmental downsides of industrial progress aren’t worth the economic gains associated with them. But this is like assuming that buying stocks in a company is a bad idea because it requires an initial capital investment, or that working out at the gym is a bad idea because the loss of time and comfort come now while the gains in health and happiness only come later. Yes, capital investment is inherently risky and should be done with careful discernment, but it is worth the risks because it’s necessary for continuing to improve and make progress at an individual or societal level.
Economic growth will always transform the environment in complex ways, bringing many environmental costs as well as benefits. But due to the gains in technological and scientific knowledge that are possible in a growing economy, the downsides tend to be less permanent than the upsides, as the environmental Kuznets Curve illustrates.
Key Events in the Chart:
1975: The first generation of catalytic converters are created, drastically reducing vehicle emissions including carbon monoxide and nitrogen oxide.
1992: Petrol cars with three-way catalysts are introduced, significantly reducing nitrogen oxide emissions.
2022: Remote work has become normal and is rapidly increasing. Only 20 percent of the 70 million remote-capable US workers were still working on-site in 2022 according to a 2022 Gallup estimate, down from 60 percent in 2019. This is reducing emissions by reducing the need for transportation and other infrastructure across the economy.
Editor’s note: This piece originally was published by the Foundation for Economic Education.