Friday 23 December 2016

What are the implications of globalization for the environment?

The general impression I think most people have is that globalization has been bad for the environment, increasing rates of pollution, deforestation, desertification, and so on; but that's a very simplistic view.


Globalization, particularly the rise of multinational corporations that exist between or beyond national boundaries, does raise some significant challenges for environmental policy. Corporations that answer to no particular jurisdiction often have too much free reign to engage in activities that pollute or degrade...

The general impression I think most people have is that globalization has been bad for the environment, increasing rates of pollution, deforestation, desertification, and so on; but that's a very simplistic view.


Globalization, particularly the rise of multinational corporations that exist between or beyond national boundaries, does raise some significant challenges for environmental policy. Corporations that answer to no particular jurisdiction often have too much free reign to engage in activities that pollute or degrade the environment; and they have an economic incentive to do so, because the profits will accrue to them while the damage will be largely in the form of externalities that are shared over most of the world's population.

However, globalization can also create opportunities for improving environmental sustainability.

One example is ecotourism; instead of slashing and burning the Amazon for local production, Brazil now has the opportunity to make revenue from tourists who come from around the world to see the wonders of the Amazon. This can potentially raise as much revenue as slash-and-burn in a much more sustainable way, and it would not be possible without globalization.

Another example is the spread of technology; while some technologies can be more polluting than their obsolete equivalents, many new technologies are actually much more efficient and clean. For example, we think of coal as being very high-polluting (and it is, especially compared to nuclear, solar, or wind power), but in many poor countries burning wood is still a major source of heat, and wood turns out to be even more high-polluting than coal. Thus, switching from burning wood to burning coal can actually improve standard of living while reducing carbon emissions.

Trade policy has a very important role to play in deciding whether globalization will be positive or negative for the environment.

If international trade agreements include strong environmental protections, then as trade becomes more globalized, environmental standards will improve. This is not contrary to promoting economic development, and in fact in the long run economic development will be much more successful if it comes with environmental sustainability.

On the other hand, if trade agreements do not include environmental protections, they can create incentives to move production into the countries that have the lowest environmental standards, a "race to the bottom" that can be very damaging to environmental sustainability worldwide. There might be short-term gains in profits, but in the long run we will all be worse off.

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