Previous studies of the association between pollution and income have tended to analyse cross-sectional or panel data for a sample of developing and developed countries. This paper presents an analysis for a single country, Malaysia. This south-east Asian country has more, and probably better, data on environmental quality than perhaps any other developing country. I find that pollution–income relationships from the cross-country studies fail to predict accurately trends in air and water pollution in Malaysia. In particular, none of six pollution-income relationships estimated using a panel data set for Malaysian states has the hypothesized 'environmental Kuznets curve' form. Although these results are inconsistent with the predictions of the cross-country relationships, they make sense in the Malaysian context. Perhaps most important, their interpretation confirms the importance of policy decisions in determining environmental outcomes.

The environmental Kuznets curve (EKC) is an empirical regularity showing how some pollutants increase and then decrease with rising per capita incomes. Popular discussions and models of the EKC emphasize the role of the income elasticity of demand for environmental quality as a driving force for the inverted U-shaped relationship between income and pollutants. This paper explores the role of the income elasticity of demand for environmental quality by decomposing the reduced-form effect of income on pollution, showing that preferences consistent with a positive income elasticity of demand for environmental quality are neither necessary nor sufficient for the EKC. Increasing pollution may occur with increasing income but preferences that would imply a high income elasticity of demand for environmental quality, and decreasing pollution may occur simultaneous with preferences that put lower values on pollution reduction as incomes rise.

This paper applies an ordered discrete choice framework to model fuel choices and patterns of cooking fuel use in urban Indian households. The choices considered are for three main cooking fuels: firewood, kerosene, and LPG (liquid petroleum gas). The models, estimated using a large microeconomic dataset, show a reasonably good performance in the prediction of households’ primary and secondary fuel choices. This suggests that ordered models can be used to analyze multiple fuel use patterns in the Indian context. The results show that lack of sufficient income is one of the main factors that retard households from using cleaner fuels, which usually also require the purchase of relatively expensive equipments. The results also indicate that households are sensitive to LPG prices. In addition to income and price, several socio-demographic factors such as education and sex of the head of the household are also found to be important in determining household fuel choice.

We, as a society, find ourselves confronted with a spectrum of potentially catastrophic and irreversible environmental problems, for which conventional approaches will not suffice in providing solutions. These problems are characterized, above all, by their unpredictability. This means that surprise is to be expected, and that sudden qualitative shifts in dynamics present serious problems for management. In general, it is difficult to detect strong signals of change early enough to motivate effective solutions, or even to develop scientific consensus on a time scale rapid enough to allow effective solution. Furthermore, such signals, even when detected, are likely to be displaced in space or sector from the source, so that the motivation for action is small. Conventional market mechanisms thus will be inadequate to address these challenges.

This paper investigates the contribution of agricultural output prices and policies to the reduction in Amazon deforestation in the 2000s. Based on a panel of Amazon municipalities from 2002 through 2009, we first show that deforestation responded to agricultural output prices. After controlling for price effects, we find that conservation policies implemented beginning in 2004 and 2008 significantly contributed to the curbing of deforestation. Counterfactual simulations suggest that conservation policies avoided approximately 73,000 km2 of deforestation, or 56 per cent of total forest clearings that would have occurred from 2005 through 2009 had the policies adopted beginning in 2004 and 2008 not been introduced. This is equivalent to an avoided loss of 2.7 billion tonnes of stored carbon dioxide.

Considerable interest has focused on the possible existence of an environmental Kuznets curve, whereby pollution first increases but later falls with increasing income. Empirical studies have concentrated on a wide spectrum of countries and run into inevitable problems of data comparability and quality. We avoid these problems by looking at seven types of air emissions across the 50 US states and find all seven pollutants decrease with increasing per capita income. We also find strong evidence of heteroscedasticity with respect to the income–emissions relationship: lower-income states display much greater variability in per capita emission levels than higher-income states. Additionally, we look at the best measured of these emissions, air toxics, for the period 1988–94. Using a simple sign test, we find support for the notion that an increase in income is associated with a decrease in per capita emissions. However, the change in emissions appears to be unrelated to the magnitude of the change in income. We do find, though, that the reduction in per capita emissions is increasing both in terms of the 1988 level of per capita emissions and income. Possible implications of these results for the development process are discussed.

This paper studies the impact of the largest conservation set-aside program in the developing world: China's Grain for Green program, on poverty alleviation in rural areas. Based on a large-scale survey, we find that the program was implemented mostly in the areas of China that are fairly poor. In addition, we show that income from livestock activities and some types of asset holdings of participants have increased significantly more than those of non-participants (due to program effects). Only weak evidence is provided demonstrating that participating households have begun to shift their labor into the off-farm sectors. Overall, the results suggest that the program has been moderately successful in achieving its poverty alleviation objectives.

Environmental Kuznets curves have been estimated using a simple reduced-form model that gives no information on the mechanisms underlying the estimated inverted U-shaped relationship between some pollutants and income. Various intuitive appealing explanations for the observed patterns have been offered, such as structural changes and environmental policy, but these have rarely been empirically investigated. Expanding the reduced-form model with explanatory variables may introduce serious multicollinearity problems, a reason why decomposition analysis is a preferable alternative for investigating the origins of change in emissions. Applying decomposition analysis fails to find evidence for structural changes as an important determinant of the impressive reductions in SO2 emissions of developed economies during the 1980s. Environmental policy, fostered by international agreements, gives a better explanation why pollution curbs downward at high income levels. Besides the level of income, the present state of the environment seems an important, but often neglected, variable that explains the ambition of environmental policy.

This study examines, in a developing-country context, the contribution of community forestry to household income with particular emphasis on group heterogeneity and equity in benefit distribution. The economic analysis of household-level benefits reveals that poorer households are currently benefiting less in absolute terms from community forestry than less poor households. In terms of the contribution of forests to total household income, the study results suggest that the poor are actually less dependent on forests than the rich, a finding that is somewhat contradictory to results from other similar studies. The average ‘poor’ household obtains Nepalese rupees (Nrs) 7,756 gross income from community forest annually, while the more ‘rich’ households obtain on average Nrs 24,466 per year. In terms of the contribution of forests to net household income, the study results seem to suggest an inverted U-shaped relationship – as income increases dependency on forest resources may decline. Econometric analysis suggests that income from the community forests is related to socio-economic attributes and private endowments of households. Households with land and livestock assets and upper caste households gain more from the commons, while better-educated households depend less on forest resources. Female-headed households benefit less from community forests, further aggravating the inequity in distribution of benefits. The study makes a number of recommendations to improve community forestry in Nepal.

Paying for the provision of environmental services is a recent policy innovation attracting much attention in both developed and developing countries. This innovation, referred to as ‘payments for ecosystem services’ (when the emphasis is on enhancing ‘nature’ services) or ‘payments for environmental services’ (when amenities provided by the built environment are also included) is referred to here as PES. PES programs aim to harness market forces to obtain more efficient environmental outcomes. Since so many opportunities for PES programs could involve farmers in poor regions, international aid agencies and private donors, looking for a double dividend, increasingly consider using PES programs as a potential way of meeting both social and environmental objectives.

A structural model for green bonds is developed to explain the formation and dynamics of green bond prices and to address the issue of the so-called ‘greenium’, that is, the difference between the yields on a conventional bond and a green bond with the same characteristics. We provide answers to the following questions: What are the determinants of the green bond value? Do green bonds enhance the credit quality of the issuer? Are green bonds a relatively cheap tool to fund sustainable investments? We also study the effect of investors' environmental concern on portfolio allocation. Our results have direct policy implications and suggest that an improvement in credit quality could ultimately lead to a lower cost of capital for green bond issuers and that governmental tax-based incentives and an increase in investors' green awareness play a significant role in scaling up the green bonds market.

Rates of time preference (RTPs) of rural households in Indonesia, Zambia and Ethiopia have been measured using hypothetical questions about preferences for current versus future consumption. In general, the rates were found to be very high. Factors influencing or correlated with the personal rates of time preference were investigated through regression methods. OLS was the technique used in the estimation. Market imperfections, particularly in credit and insurance markets lead to variation in RTPs. Poverty in assets, or cash liquidity constraints, was leading to or correlated with higher rates of time preference. The poor are, therefore, less likely to invest in environmental conservation. In Zambia, independent estimates of risk preferences were made. More risk-averse people tended to have lower RTPs. The results support the hypothesis that poverty and/or liquidity scarcity lead to high RTPs. Poverty reduction may thus reduce the RTPs of the poor and reduce the 'intertemporal externality' due to high RTPs. The high average RTPs indicate, however, that complementary policies may be needed to ensure sufficient levels of investment in conservation. Another logical implication is that institutionalization of private property rights may not be a sufficient tool to initiate sustainable resource management.

Human-generated greenhouse gases depend on the level and emissions intensity of economic activities. Therefore, most climate-change studies are based on the models and scenarios of economic growth. Economic growth itself, however, is likely to be affected by climate-change impacts. These impacts affect the economy in multiple and complex ways: changes in productivity, resource endowments, production and consumption patterns. We use a new dynamic, multi-regional computable general equilibrium (CGE) model of the world economy to answer the following questions: Will climate-change impacts significantly affect growth and wealth distribution in the world? Should forecasts of human-induced greenhouse gas emissions be revised, once the climate-change impacts are taken into account? We found that, even though economic growth and emission paths do not change significantly at the global level, relevant differences exist at the regional and sectoral level. In particular, developing countries appear to suffer the most from the climate-change impacts.

The long-term impacts of disasters are ‘hidden’ as it becomes increasingly difficult over time to attribute them to a singular event. We use a synthetic control methodology, formalized in Abadie, A. et al. (2010), Synthetic control methods for comparative case studies: estimating the effect of California's tobacco control program, Journal of the American Statistical Association105(490): 493–505, to estimate the long-term impacts of a 1992 hurricane on the Hawaiian island of Kauai. Hurricane Iniki, the strongest storm to hit Hawaii in many years, wrought an estimated US$ 7.4 billion (2008) in direct damages. Since the unaffected Hawaiian Islands provide a control group, the case of Iniki is uniquely suited to provide insight into the long-term impact of natural disasters. We show that Kauai's economy has yet to recover, 18 years after this event. We estimate the island's current population to be 12 per cent smaller than it would have been had the hurricane not occurred. Similarly, aggregate personal income and the number of private sector jobs are proportionally lower.

Because their assets and income represent such a small share of national wealth, the impacts of climate change on poor people, even if dramatic, will be largely invisible in aggregate economic statistics such as the Gross Domestic Product (GDP). Assessing and managing future impacts of climate change on poverty requires different metrics, and specific studies focusing on the vulnerability of poor people. This special issue provides a set of such studies, looking at the exposure and vulnerability of people living in poverty to shocks and stressors that are expected to increase in frequency or intensity due to climate change, such as floods, droughts, heat waves, and impacts on agricultural production and ecosystem services. This introduction summarizes their approach and findings, which support the idea that the link between poverty and climate vulnerability goes both ways: poverty is one major driver of people's vulnerability to climate-related shocks and stressors, and this vulnerability is keeping people in poverty. The paper concludes by identifying priorities for future research.

This paper assesses the strength of the Environmental Kuznets Curve (EKC) which posits an inverted-U relationship between per capital income and pollution. Specifically, answers are sought to the following related questions: (1) How robust is the EKC relationship?; (2) To what extent can the EKC relationship be explained by changing trade patterns as opposed to growth-induced pollution abatement? With regard to question (1), the alleged weaknesses with the EKC are assessed and new EKCs are estimated using more appropriate econometric techniques. Turning to question (2), it is argued that the impact of trade liberalization on the environment will differ from country to country depending on whether or not they have a comparative advantage in pollution-intensive production. In turn, it is argued that this depends on a country's relative factor endowments and/or its relative environmental regulations. EKCs are therefore estimated in a manner that allows the impact of trade liberalization on pollution to depend on these country characteristics. The results indicate that the inverted-U relationship between per capita income and emissions is reasonably robust and little evidence is found to suggest that trade patterns are a significant determinant of the inverted-U shape.

This paper reviews the state of economic understanding about fuelwood in developing countries. It synthesizes the main results from numerous empirical studies with the intent of identifying implications for policy and pointing out where important questions remain unanswered. Overall, the empirical results reviewed reinforce the contention that households alter their behavior in the presence of sufficient scarcity in ways that are least costly to them. Still, the cost can be substantial and many cases remain where policy intervention is justified to address concerns of both equity and efficiency. Addressing the coping capabilities of the very poor and the open access conditions of woodlands appear to be two ways of dealing with fuelwood scarcity that are likely to yield high social rates of return. Community forestry has the potential to address these two important areas, but there is little evidence to date that this is being done with fuelwood in mind.

The benefits of nature-based tourism to biodiversity conservation are often presumed but rarely quantified. The relative value placed on attributes of nature parks is unknown, as is the contribution of biodiversity to tourists' willingness to visit a particular protected area. We surveyed tourists and foreign residents in Uganda to determine how preferences for particular protected areas are formed. We evaluated tourists' demand for elevated biodiversity levels (increased numbers of bird species seen), relative to other protected areas attributes. As the number of bird species increased, tourists demonstrated increased willingness to visit a protected area, independently of all other factors. We used these results to evaluate a revenue-maximizing park management strategy, and consider how revenues from nature-based tourism compare with those from local agricultural land-uses.

This paper extends the debate on the environmental performance of developing countries by focusing on a new factor. Theoretically, financial development has capitalization, technology, income, and regulation effects on the environment. Using the provincial panel data of China, the econometric analysis provides some evidence of a linkage between financial development and industrial pollution discharges. In recent years, the environmental performance of China has been significantly improved by financial development and some environmental protection schemes. This relationship offers new implications for policy makers in developing countries.