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p. 13 of 57 BACK | NEXT I. The Changing Environment II. Driving Forces of Change Population Explosion Urbanization and Industrialization Income Growth and Inequality Technological Changes Governance Institutions, Policy, and the Market Toward Sustainable Development III. Options and Opportunities IV. Toward Policy Integration V. Call to Action

Asian Environment Outlook 2001 : II. Driving Forces of Change

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Income Growth and Inequality

As development accelerates, so too does the use of energy and materials. Thus income growth among the DMCs will undoubtedly present additional demands on natural resources and ecosystem services. Demand for energy, water, and other resource inputs is likely to increase substantially, as will resulting pollution and GHG emissions. In many developing Asian and Pacific economies, commercial energy use per capita remains relatively low compared to the usage in more industrialized economies. For example, in 1996, commercial energy use (measured in kilogram oil equivalents) was just 820 kilograms per capita in the four Southeast Asian economies of Indonesia, Malaysia, Philippines, and Thailand, compared to 5,123 kilograms per capita in OECD countries (Rock and others 1999). Energy use in the developing Asia and Pacific region is expected to double over the next two decades. On this basis, by 2020, the Asia and Pacific region will surpass OECD countries as the largest source of GHG emissions worldwide.

The scale of natural resource demands associated with increasing income is mediated by a wide variety of factors. How rising income is used (such as consumption or investment) determines in large part the impact income growth will have on the environment. Consumption patterns in the Asia and Pacific region are increasingly modeled after those of more industrialized countries (see Box 2-4). This is reflected in the increasing use of private automobiles and other durable consumer goods such as air conditioners, washing machines, and televisions. The use of wood products, especially paper, is also increasing dramatically.

Globalization of information and consumption patterns has accentuated these tendencies toward the worldwide adoption of a culture of material consumption. Expenditures on advertising grew by several hundred percent across the region in the 1990s (UNDP 1998). Transnational corporations, which face saturated markets for consumer goods within advanced industrial economies, have identified developing Asian and Pacific economies as the major opportunity for market expansion.

The experience of industrialized countries has shown that rising incomes are associated with a structural shift in the economy that favors certain dimensions of local environmental quality, such as urban air quality. This is the basis for the so-called “inverse-Kuznets curve” on environmental quality. Resource-intensive industries give way to more knowledge-intensive industries, and the service sector rises in importance relative to the manufacturing sectors. The assumption is that these sectors of the economy produce output using less energy and materials and generate less waste. In addition, higher incomes result in greater ability and propensity to pay for environmental improvements. These results, however, apply to only a limited set of environmental indicators. Thus, energy use, solid waste generation, and GHG emissions continue to grow rapidly even in countries with high per capita incomes. In addition, the hypothesized relationship between income growth and environmental quality presupposes the emergence of ambitious environmental performance goals, effective environmental regulatory institutions, and strong public pressure for improved environmental quality, all of which are lacking in many countries in the Asia and Pacific region.

The impact of income growth on the environment may depend substantially on the degree to which growth is broad-based. Conversely, income growth is accompanied by deepening income inequality. When growth is not broad-based, opportunities are missed to reduce poverty and the vulnerability of the poor to a host of environmental concerns.

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