Competing objectives : trade-offs

Shell oil refinery in Deer Park, TX Photo : David J. Phillip / AP file

While there are several possible explanations for positive relationships between labor productivity, health, living conditions and education - environmental conditions may be more complex because there are costs and benefits to environmental conservation and they are further complicated by time discounting and diffusion of responsibilities. This is true in general for problems of the environment and there are further differentiated factors for local issues of air quality and conservation are different from the diffuse and long term effects of carbon dioxide (CO2) emissions which is linked to energy consumption and climate change. The list of environment measures and their Element are in Table B.3. CO2 emissions are reported as emissions normalized by the GDP and population, or “emissions intensity”.

Table B.3 Environment measures (excluding emissions)

Carbon emissions greater negative association than general environmental performance

Repeating the same regression methodology used for labor productivity on environment measures reveals the following pattern illustrated in figure B.3.

The analysis confirms the presence of trade-offs which are present between living conditions and general environment, and more severe for CO2 emissions. As expected, the relationship dynamics are unique between emissions and other environments likely due to the complicating factors that CO2 emissions are a byproduct of energy consumption and their effects are diffuse over long periods of time and spread out across governance borders to the global commons. In contrast many environmental issues are local and their consequences are realized on shorter time scales within one generation cycle or shorter. The first observation is that CO2 emissions intensity has an inverse relationship as labor productivity with a strongly negative relationship to provision of living conditions and positive relationship to health. This inverse relationship is weaker for other local environment outcomes. The explanation is consistent with the prediction that in general the energy structure is mostly fixed and the provision of living conditions comes with an expenditure of energy and that the consequences of climate change are diffuse in time and space. The observation that health is positively correlated with improved emissions intensity may be due to the fact that coal use in the energy mix is related to emissions intensity and coal is also associated with particulate matter and air quality, whereas other environmental outcomes such as forest conservation may only have modest indirect effects on health at population level. The positive association with education and environmental conservation is encouraging, but discouraging that it is not observed for CO2 emissions.