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Financial Crises, Environment and Transition

Part of the Sustainable Development Goals Series book series (SDGS)

Abstract

The chapter contributes state-of-the-art perspectives and results for the poorly understood relationship between economic crises and the environment in the context of sustainability transition. We first develop a theoretical perspective on the relationship between crises and the environment using case study evidence from the literature. We point to key parameters such as the nature of each crisis and its context, the degree of socio-environmental resilience, the multiple environment and economic sectors involved, the diverse temporality of effects, the capacity of the countries involved, and the policy responses adopted. In the second part of the paper, we present evidence on the environmental impact of more than 400 financial crises during the period 1970–2015, focusing on atmospheric emissions, deforestation and biodiversity. We complement this analysis with evidence on the environmental impact of the Great Stagnation, i.e. the period of slower growth rates following the global financial crisis of 2008/09. Our findings demonstrate that financial crises do not have a unidirectional effect on the environment. We find short-term benefits to air pollution, decreases in biodiversity and some evidence of decreasing deforestation rates. Benefits can be short-lived, though, and may be accompanied by shifts in the involved actors’ practices and behaviours that lead to negative longer-term impacts. Neither is the Great Stagnation associated with a unidirectional environmental impact, and there is worrying evidence of a worsening of biodiversity. We conclude that a slowdown in economic growth rates –even a prolonged one that acquires the characteristics of a ‘new normal’ does not inevitably lead to environmental improvement. Meeting the SDGs and transitioning to sustainability requires a paradigmatic policy shift that goes beyond a narrow focus on the rate of economic growth.

Keywords

  • Financial crises
  • Great Stagnation
  • Environmental sustainability
  • Air pollution
  • Biodiversity
  • Forests

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Notes

  1. 1.

    For a literature review see Carson (2010); Alsamara (2021). For evidence in favour of EKC see also: Grossman and Krueger (1995); Panayotou (1993); Galeotti et al. (2006); Dasgupta et al. (2002), For evidence against the EKC see also: Harbaugh et al. (2002); Sirag et al. (2018); Dinda (2004); Perman and Stern (1999).

  2. 2.

    The respective definitions according to the World Bank are as follows: Adjusted savings: particulate emission damage: Particulate emissions damage is the damage due to exposure of a country’s population to ambient concentrations of particulates measuring less than 2.5 microns in diameter (PM2.5), ambient ozone pollution, and indoor concentrations of PM2.5 in households cooking with solid fuels. Damages are calculated as foregone labour income due to premature death [data available for 1990-2018]. Adjusted savings: carbon dioxide damage: Pollution damage from emissions of carbon dioxide is calculated as the marginal social cost per unit multiplied by the increase in the stock of carbon dioxide. The unit damage figure represents the present value of global damage to economic assets and to human welfare over the time the unit of pollution remains in the atmosphere. Carbon dioxide damage is estimated to be $20 per ton of carbon (the unit damage in 1995 U.S. dollars) times the number of tons of carbon emitted [data available for 1970–2018].

  3. 3.

    ‘Crisis’ from the Greek noun ‘κρίσις’ (krisis), meaning judgement, decision; deriving from the verb ‘κρίνειν’ (krinein), meaning to exercise judgement, take decision, come to a choice, think through.

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Acknowledgement

The research on which this chapter is based is part of the ‘Financial Crises and Environmental Sustainability’ (FCES) unit of the Sussex Sustainability Research Programme (SSRP). We gratefully acknowledge funding from the SSRP and warmly thank for their critical input, Bernardo Cantone, Lucia Pacca, Indra Widiarto, Patrick Schroeder and Joseph Alcamo.

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Antoniades, A., Antonarakis, A.S. (2022). Financial Crises, Environment and Transition. In: Antoniades, A., Antonarakis, A.S., Kempf, I. (eds) Financial Crises, Poverty and Environmental Sustainability: Challenges in the Context of the SDGs and Covid-19 Recovery. Sustainable Development Goals Series. Springer, Cham. https://doi.org/10.1007/978-3-030-87417-9_3

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