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Impact of Global Recession on Sustainable Development and Poverty Linkages

Venkatachalam Anbumozhi and Armin Bauer
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Armin Bauer: Asian Development Bank Institute

No 227, ADBI Working Papers from Asian Development Bank Institute

Abstract: The global financial crisis and the resulting economic slowdown may be assumed to have at least the benefit of also reducing environmental degradation in the individual countries. This paper discusses the consequences of the crisis for energy use, pollution prevention, and land use in Asia and the associated emissions of greenhouse gases-the principal global warming pollutants-as well as their linkage with poverty. There are some short-term benefits to the global environment from the economic slowdown. Such benefits include reduction in the rate of air and water pollution from reduced energy use-which has direct implications for the urban poor's health. However, modest benefits to global and local environments arising from the economic slowdown are likely to be much smaller than the costs associated with many environmental conservation measures, related to energy savings, natural resources protection, and water environment. Both supply and demand side investments in energy and environment are being affected. Many ongoing projects are being slowed and a number of downward revisions are being made in expected profitability. Meanwhile, businesses and households are spending less on energy efficiency measures. Tighter credit and lower prices make investment in energy savings and environmental conservation less attractive financially, while the economic crisis is encouraging end users to rein in spending across the board. This is delaying the deployment of more efficient technology and equipment. Furthermore, solution providers are expected to reduce investment in research, development, and commercialization of more energy-efficient models, unless they are able to secure financial support from governments. The economic slowdown is likely to alter land use patterns by increasing the pressure to clear forests for firewood, timber, or agricultural purposes-the livelihood opportunities available with the rural poor. Further, the likely additional delay in many countries in the construction of effluent treatment plans for limiting the discharge of pollutants into the rivers is expected to harm the water environment. Thus on balance, the modest benefits to global and local environments arising from the economic slowdown are likely to be much smaller than the costs of many environmental conservation measures for improving the livelihood conditions of the poor. Natural resources and ecosystem services provided by the environment are essential to support economic growth and better livelihood conditions of the poor. Inaction on key environmental challenges, such as climate change, could lead to severe economic consequences in the future. These concerns justify government action to support investment in green growth measures, promoting direct investment or fiscal incentives for energy efficiency and clean environment low-carbon technologies. But much more needs to be done. The investment needed to put national economies in low-carbon green growth pathways far exceeds what is expected to occur. Governments should be looking to increase the new funds they commit to long-term energy and environmental policies to improve livelihood conditions and to shift our development trend into an environmentally sustainable future. Hence a commitment that extends well beyond the economic stimulus packages is needed.

Keywords: poverty reduction; greenhouse gas emissions; global financial crisis (search for similar items in EconPapers)
JEL-codes: Q27 Q42 Q48 Q54 Q57 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-env
Date: 2010-07-08
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