Some evidence indicates that, for local pollutants like oxides of nitrogen, sulphur dioxide and heavy metals, there is an inverted-U shaped relationship between income per head and emissions per head: the so-called ‘environmental Kuznets curve’, illustrated in Figure 7.A.1. The usual rationale for such a curve is that the demand for environmental improvements is income elastic, although explanations based on structural changes in the economy have also been put forward. So the question arises, is there such a relationship for CO2? If so, economic development would ultimately lead to falls in global emissions (although that would be highly unlikely before GHG concentrations had risen to destructive levels).

In the case of greenhouse gases, this argument is not very convincing. As societies become richer, they may want to improve their own environment, but they can do little about climate change by reducing their own CO2 emissions alone. With CO2, the global nature of the externality means that people in any particular high-income country cannot by themselves significantly affect global emissions and hence their own climate. This contrasts with the situation for the local pollutants for which environmental Kuznets curves have been estimated. It is easier than with greenhouse gases for the people affected to set up abatement incentives and appropriate political and regulatory mechanisms. Second, CO2 had not been identified as a pollutant until around 20 years ago, so an explanation of past data based on the demand for environmental improvements does not convince.