Globalization and the Environment
Chapter Thirty-Seven
Syllabus topic 2, "Sustainable Development."
Pages 109 to 110 of 663
In one line
Globalization means that production, finance and consumption are organised across borders, and its environmental significance is that regulation is not.
In exam wording: globalization is the increasing integration of markets for goods, services, capital and technology across national borders; its environmental significance lies in the asymmetry between the mobility of economic activity and the territoriality of environmental regulation, which produces the pollution haven argument, the race to the bottom argument, regulatory chill, and the displacement rather than the reduction of environmental harm.
The asymmetry, stated once
A factory can move. A law cannot. Every environmental statute in the world is territorial, and almost every significant producer of environmental harm operates in more than one territory. That single asymmetry is what MU's questions on globalization, on the global market and on multinational corporations are all about.
The four arguments, and the evidence for each
One: the pollution haven hypothesis. Firms relocate polluting production to jurisdictions with weaker environmental standards. The evidence is weak. Environmental compliance is a small fraction of production cost for most industries, and labour cost and market access dominate location decisions. The effect is measurable for a few very pollution-intensive sectors and small overall.
Two: the race to the bottom. States compete for investment by lowering standards. The evidence is mixed. Standards have generally risen, not fallen, and what is observed more often is failure to raise them or failure to enforce them, which is a quieter thing.
Three: regulatory chill. A State does not lower a standard, it simply does not raise one, for fear of losing investment or of an investment claim. This is the strongest of the four, because it explains the observed pattern, standards that do not fall and do not rise either, and because the mechanism is documented in investment arbitration.
Four: displacement. Consumption in one country causes emissions in another, so a country's territorial emissions can fall while the emissions embodied in what it consumes rise. The evidence for this is strong and it is measured routinely in consumption-based accounting.
A good answer says which arguments the evidence supports. Repeating all four as established fact is what a weak answer does.
The legal responses
| Response | Instrument | Effect |
|---|---|---|
| A floor for standards | Rio Principle 11, requiring effective environmental legislation | Hortatory |
| A duty not to attract investment by lowering standards | Rio Principle 14; environmental chapters in modern trade agreements | Rarely enforceable |
| Reaching the parent company | Home State liability, and the United Nations Guiding Principles on Business and Human Rights 2011 | Non-binding, and developing |
| Making the importer responsible | Prior informed consent; border carbon adjustment | Effective where it exists, and contested in trade law |
| Preserving regulatory space in investment treaties | India's 2016 Model Bilateral Investment Treaty | Applies only to new treaties |
Globalization and the Environment
Worked example
An Indian State offers a fifteen-year exemption from a state effluent standard to attract a textile investment.
- Is that lawful in Indian law? It depends on statutory power. In A.P. Pollution Control Board (II) v. Prof. M.V. Nayudu (Retd.), (2001) 2 SCC 62, an exemption granted by government order to an industry upstream of two drinking water reservoirs was struck down as having no statutory backing, as wholly arbitrary and as violative of Article 21, and the Court said that an exemption granted carelessly, ignoring the precautionary principle, could be catastrophic.
- Is it lawful in international law? There is no rule that forbids a State to set a low standard. Stockholm Principle 21 preserves each State's right to exploit its resources pursuant to its own environmental policies.
- So what stops it? In India, the Constitution and the courts. Internationally, nothing directly; only the indirect responses in the table above.
That contrast is the answer to MU's question. The effective constraint on the race to the bottom in India has been domestic constitutional law, not international law.
What it does NOT mean
It does not mean globalization has increased total pollution everywhere. Trade in efficient technology reduces emissions, and the ozone regime succeeded precisely because the substitutes could be traded.
It does not mean a low standard is a wrongful act. It is not. A State may set its own standards; what it may not do is cause significant transboundary harm.
It does not mean firms are unaccountable. They are accountable in the host State's law and, increasingly, in the home State's. What is missing is an international rule that binds them directly, and that gap is MU's topic 7.
Quick revision
- The asymmetry: activity is mobile, regulation is territorial.
- Four arguments: pollution haven (weak evidence), race to the bottom (mixed), regulatory chill (strongest), displacement (strong).
- Rio Principle 11 on effective legislation; Principle 14 on discouraging relocation of harmful activities.
- Nayudu is the Indian answer: an exemption ignoring the precautionary principle was struck down under Article 21.
- The effective constraint in India has been constitutional, not international.
Test yourself
1. Which of the four globalization arguments is best supported, and why? Regulatory chill, because it explains the observed pattern of standards that neither fall nor rise, and because the mechanism, fear of investment claims and of losing investment, is documented.
2. Does international law forbid a State to set low environmental standards? No. Stockholm Principle 21 preserves the right to exploit resources pursuant to a State's own environmental policies. What is forbidden is causing significant harm beyond its borders.
3. What happened to the exemption in Nayudu, and on what grounds? It was struck down as without statutory backing, wholly arbitrary and violative of Article 21, the Court holding that an exemption granted carelessly, ignoring the precautionary principle, could be catastrophic.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.