Impact of Global Recession on Sustainable Development and Poverty Linkages

Venkatachalam Anbumozhi, Armin Bauer
JEL codes: 
ADBI Working Paper Series

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 gasesthe principal global warming pollutantsas 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 usewhich has direct implications for the urban poors 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 purposesthe 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 lowcarbon 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.