Asia's 'Brown Cloud': Speculations about its Implications (2002)

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NASA study suggests that haze has contributed to climatically related disasters (eg China's flooding). However scientists in India suggest that the problem is only winter haze - and that it is inappropriate to blame developing Asia for global pollution. ('Asian haze affects climate: study',  FR,  1/10/02)

Astronauts have noted that the planet has changed since 1990 - becoming blurred rather than blue. Smoke and dust in the atmosphere are widespread. Much of South Asia is covered with a 3km thick blanket of man-made smog. The Asian brown cloud covers the northern Indian cean and much of South Asian (including India, Pakistan, SE Asia and China). It involves ash, acids, aerosols that result from forest fires, burning of agricultural wastes, dramatic increases in the burning of fossil fuels (in vehicles, industries and power stations) and inefficient cookers burning wood and other bio-products.  The cloud has been visible for 20 years - but has been getting worse while Europe and North America have been cleaning up their environmental act. Connections with climate change (eg droughts in Australia) are being suggested - noting the effect of reducing sunlight and heating the atmosphere. Hundreds of thousands (or millions) of people are at risk from respiratory diseases. UNEP scientists identify risks in change rainfall patterns - droughts and floods. Western Asia is drying up. Air pollution causes 500,000 deaths pa in India. The effect will intensify over the next 30 years - and potentially have global impacts because the cloud could travel around the world in a week. 20 years ago droughts in Northern Africa may have been due to European air pollution. And the el nino effect may be linked to growing greenhouse gas concentrations.  Australia is very vulnerable because it already has a very variable climate. (Montgomery B. 'Killer cloud over asia',  A,  16/8/02)

Asian brown haze (ash, acids, and aerosols) has the potential to disrupt Asian growth. It will alter weather, seriously hurt agricultural production according to UNEP. The effect on sea temperatures will also affect el nino, and alter Australia's agricultural production. The haze results from forest fires, burning of agricultural wastes, vehicle emissions, inefficient cooking. It cuts sunlight by 10-20% and heats the lower atmosphere. The winter monsoon has been altered, leading to 20-40% less rain in NW India, Pakistan and western China (Taylor L. 'Brown haze threat to Asian growth',  FR,  12/8/02)


[Preliminary]  CPDS Comments

Assuming that reports about this environmental difficult facing South and East Asia are correct, the situation has very broad economic implications.  These are far wider than the (potentially serious) implications for agriculture that the UNEP has identified.

Firstly economic growth in Asia can not continue indefinitely in its past 'low quality' pattern. This medium-term need for ever greater concern for environmental factors compounds the need for change that was revealed by the Asian financial crisis of 1997-98. In particular:

  • the environmental hazard appears to be partly the outcome of pre-industrial activities which (if it is not to dislocate economies altogether) would need to be reduced / eliminated by significantly raising the level of economic development and living standards in affected countries; 
  • large populations and poor environmental standards for manufacturing are probably also contributing to the problem - and the latter would need to be raised.

One obvious effect will be to create significant further growth opportunities for environmental management industries.

Secondly, the priority that will need to be given to environmental concerns in Asia will require changes that have global economic repercussions.

Asia's ability to act simply as a low-cost producer in mature industries (which remains a major strategy in most regions) will be reduced. This will alter one of the drivers of economic change that has been in place since the 1960s - namely the relocation of capital intensive production to low cost locations (mainly in Asia) - whose consequences have included:

  • de-industrialisation in Europe and North America since the 1970s - which has resulted in economic and social stresses in many regions and a shift into knowledge intensive and service industries;
  • exporting of environmental problems associated with capital intensive production from the more developed, to the developing regions;
  • access to cheap mass-produced imports which has provided a competitive pressure that has constrained inflation in developed economies. In particular, this aided a high rate of economic growth (and the emergence of an asset bubble) in the US in the 1990s, because this competition allowed monetary policy to be very loose and capacity utilization to be very high without triggering inflation.

Because Asia's ability to compete as a low cost producer will be impeded:

  • the competitive position of mature industries in more developed regions that might otherwise have migrated to lower-cost regions will be improved;
  • Asian countries will need to search for more sophisticated strategies in boosting economic competitiveness (eg to base growth on increasing productivity rather than on simply increasing inputs of capital and labour). This search may take many years. However, eventually it will  again create a new competitive challenge to more developed economies - as the strategies that the latter have adopted since the 1970s lose their potency;
  • the 'inflationary dragon' that appeared to be slain in the 1990s could re-appear.

Thirdly, the challenges of environmental management outside Asia could also increase, eg:

  • it would be harder to 'export' (rather than solving) the environmental difficulties associated with some mature industries. Japan, which was the original recipient of such industries, experienced severe environmental problems 10-20 years ago and was able to solve this by adopting higher environmental standards and by re-exporting those industries. Eventually there will be no suitable destinations;
  • pressure for action to address known global environmental concerns will be increased by the potential impact of the Asian 'brown cloud' in compounding the global effect. In particular, this will tend to support arguments by Australia and the US that it makes no sense for efforts to constrain global greenhouse gas emissions to exclude developing countries - as, to date, the Kyoto protocols have proposed doing (see Greenhouse).

August 2002