Import Demand for Environmental Goods and Services in the Asia‑Pacific Region

Abstract

I. Introduction Over the years there has been considerable interest in adapting cold war-driven to develop materials that solve some of the most pressing problems (such as disease, food and fibre, hunger, and peace) facing mankind (National Science and Technology Council 1995). The production of goods and services (EGS) has been at the top of this agenda. Former U.S. Vice-President Al Gore, an early advocate of this view, suggested the establishment of a Global Marshall Plan for protection, and the promotion of EGS industries. One response was a partnership arrangement between the United States and selected countries in Asia to promote improvements and economic growth. This partnership, known as the US-Asia Environmental Partnership, or USAEP (USAID) may be considered the bedrock of U.S. initiatives in the EGS market in Asia and the Pacific. While this study covers the Asia and Pacific regions, references will usually be made in the context of the USAEP. This partnership presents both challenges and opportunities. Opportunities exist because there is increased awareness of the need to safeguard the environment. On the other hand, there are challenges because the partners will have to streamline their and export policies since they both have the potential to significantly increase their share of world markets. This paper reports elasticity estimates for EGS in the Asia-Pacific region. The elasticity estimates are useful for predicting future direction and structure of the EGS market in the study area. The rest of the paper is organized as follows. Section II defines the EGS market and identifies the key demand drivers. The section discusses the structure and performance of the EGS market including predictions of future demands. Section III uses the drivers identified in Section II to formulate statistical equations that are estimated using data drawn from various sources. Conclusions and policy implications are presented in Section IV. II. Scope of the Environmental Goods and Services (EGS) Market II.1. Defining the Environmental Goods and Services Industry The EGS market or more generally the environmental technology market is defined by those technologies that advance sustainable development by reducing risk, enhancing cost-effectiveness, improving process efficiency, and creating products and processes that are environmentally beneficial or benign (U.S. Industry and Trade Outlook 2000, pp. 20-21). A European Union (EU) Commission report defines the market as all activities which produce goods and services to measure, prevent, limit, minimize, or correct damage to water, air and soil, as well as problems related to waste, noise and ecosystems (Commission of the European Communities 2002, p. 2). The U.S. Industry and Trade Outlook report identifies water supply and treatment, solid waste management, air pollution control, and clean-up as the four main segments of the industry. These definitions highlight the difficulty in clearly placing limits on the size of the EGS market. Since the study relies primarily on data from U.S. sources, the definition of the EGS market as given by the U.S. Department of Commerce (Industry and Trade Outlook 2000) is used throughout the discussion. II.2. The Structure and Size of the EGS Market Measures of the size of the market depend on who is doing the measurement, and especially what is being counted as an good or service. The various measures put the market between US$200 billion and US$500 billion OECD 1994; Environmental Business International 1994; Helmut Kaiser Consultancy 1995; Commission of the European Communities 2002). The U.S. International Trade Administration (ITA) has projected the global market to top US$545 billion by the year 2004 (ITA 2002). …