Environment & the Global Economy
This article will focus on the relationship between the environment and the global economy. This article will provide an overview of the global economy and the global environment. This overview will serve as a foundation for discussions about the three main ways that the global environment is managed and protected in the global economy: voluntary corporate environmental protection, national environmental regulation, and international governance by global policy regimes. Examples of global environmental governance, including the United Nations Earth Summit, the Kyoto Protocol, and Organization for Economic Co-operation and Development's environmental efforts, will be described and analyzed. The environmental concepts of ecology, biodiversity, and sustainable development will be introduced.
Keywords Biodiversity; Environmental Regulation; Global Economy; Global Environment; Global Governance; Globalization; Sustainable Development
International Business: The Environment
Economic globalization complicates the relationship between the global economy and the global environment. Economic processes, such as the production of goods, and waste disposal, strip-mining, over-farming, and the transportation of goods to and from markets, impact the Earth's ecosystem and result in polluted landfills, ozone depletion, global warming, and loss of biodiversity. The global environment, including resources such as air, fresh water, oil, timber, coal, natural gases, gold, salt, and arable land, is used in the global economy. The use of these environmental resources for economic purposes, such as manufacturing of goods, farming, and energy production, creates new environmental problems and scenarios. The global economy-environment relationship is often referred to as entropic in nature (Preston, 1996). “Entropic,” or “entropy,” refers to the steady deterioration of a system. Economic globalization processes, such as the internationalization of trade, ubiquity of gas-powered modes of transportation, migration, and the transnational development and production cycle of goods, challenge the traditional nation-based environmental protection strategy of sustainable development. Neither the global environment nor the global economy respects national boundaries.
In the twenty-first century, global environmental-affairs are characterized by an inextricable link between the world economy and the global environment. Global environmental politics are coordinated and managed by nonstate actors such as nongovernmental organizations (NGOs). The connections between the global environment and the global economy are demonstrated in global environmental policies such as those that govern hazardous waste collection. For example, international trade, production, and financial relationships determined the direction and extent of the toxic waste trade between industrialized and developing countries until the practice of toxic waste trade was ended in 1992 through the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (Clapp, 1994).
Economic globalization has shifted economic, political, and environmental power from local, national, and regional bodies to international governing institutions. The goals and objectives of global environmental governance are complicated by the agenda and motives of economic governance. Global environmental governance has the challenge of simultaneously protecting global and local environments. The need to protect local and global environments as well as promote the economic growth demanded by the global market is challenging. Consumers, producers, and cities need to think globally and locally to protect the earth's environment. For example, cities must address urban air pollution problems to benefit local residents and, in part, to solve global warming problems. Ultimately environmental governance in the global economy will likely require reducing demand and using financial instruments, such as corrective taxes on fuel, to curb consumption (Eskeland, 1998).
The following sections provide an overview of the global economy and the global environment. These sections will serve as a foundation for later discussions about the three main ways that the global environment is managed and protected in the global economy: voluntary environmental protection, national environmental regulation, and international governance by global policy regimes. Examples of global environmental managementincluding the United Nation's Earth Summit, the Kyoto Protocol, and Organization for Economic Co-operation and Development's environmental efforts will be described and analyzed.
The Global Economy
The global economy is characterized by growth in populations and in output and consumption per capita, in interdependence of nations, and in international management efforts. Indicators of global growth and interdependence include the huge increases in communications links, world output, international trade, and international investment since the 1970s. The global economy is built on global interdependence of economic flows that link the economies of the world. The global economy is characterized by economic sensitivity. National economic events in one region often have profound results for other regions and national economies. National economies exist not in isolation but in relationship and tension with other economies worldwide. The global economy includes numerous economic phenomena and financial tools shared among all countries. Examples include the price of gold, the price of oil, and the related worldwide movement of interest rates. The new global economy is characterized and controlled through global management or governance efforts. International organizations, both public and private, work to establish norms, standards, and requirements for international financial governance. These international organizations, including the G-20, Financial Stability Forum, the International Organization of Securities Commissions Organization for Economic Co-operation and Development (OECD), and the Basel Committee on Banking Supervision, develop and encourage implementation of standards, principles, best practices, and economic architecture (Preston, 1996).
The Global Environment
The global environment encompasses the global climate, human use of resources (particularly resources that have become accessible only as a result of technological innovation and advances), and cross-border effects (the environmental concerns arising in different parts of the world involve more than one political jurisdiction) (Preston, 1996). Environmental problems entered public and political consciousness in the 1970s. In 1972, the United Nations Conference on the Human Environment, held in Stockholm, established a connection between economic growth and environmental degradation. The relationship between economic development, poverty, and environmental degradation has been researched in depth since the late twentieth century.
In 1992 the United Nation's Earth Summit brought environmentally sustainable growth into the public's consciousness. Sustainable development has been championed by many environmental organizations that recognize the importance or inevitability of worldwide economic growth. Traditional notions of sustainable development are being challenged by economic globalization. National environmental regulatory controls are increasingly ineffective when faced with increased trade integration, capital mobility, technological innovation, and changes in production.
Global environment stakeholders debate how best to protect the global environment in the context of economic globalization. Economic globalization, which challenges traditional regulatory approaches to environmental protection, requires new environmental governance approaches. Economic globalization empowers international economic and environmental organizations to create environmental policy rather than the local governments, where environmental efforts have traditionally been developed (Conca, 2001). In the global economy, the environment is managed and protected in three main ways: voluntary corporate environmental protection, national environmental regulation, and international governance by global policy regimes.
Voluntary Corporate Environmental Protection
Corporations are responding to stakeholder and shareholder concern for the environment by incorporating environmental ethics into their corporate activities and business practices. A form of corporate social responsibility, the most prominent and common voluntary effortsinclude lifecycle analysis, industrial ecology, design for disassembly, and strategic alliance. One study has found that voluntary corporate environmental protection does help increase profits for participating companies (Yu, 2012). Lifecycle analysis refers to the analytical tool used to calculate how much energy and raw material must be used, and what quantity of solid, liquid, and gaseous waste is generated, at every stage of a product’s lifespan. Industrial ecology refers to the business practice of designing production and distribution facilities as closed systems that are dependent on recycling, reuse, and creative energy production. Design for disassembly refers to the environmentally friendly practice of designing a product that can be taken apart and reused in the manufacture of different products...
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