Navigating trade-offs between the environment and economic growth: Nicholas Ryan on new possibilities for environmental regulation in emerging markets 

Nicholas Ryan in the recording studioEGC Voices in Development, Season 2 Episode 1 • Transcript

Today’s environmental crises are affecting lower-income countries – and within those countries, poor and marginalized communities – most of all. Policymakers in these countries are seeking new ways to balance trade-offs between the economic growth that can provide citizens with income-generating opportunities, and the harmful emissions that industrial production usually entails.

For over a decade, EGC affiliate Nick Ryan and colleagues have worked with policymakers in the highly industrialized Indian state of Gujarat to reduce emissions at low cost to industries. Now the team is expanding their work to implement a cap-and-trade market for carbon emissions from large sources. This series of studies – the first of its kind among today’s emerging economies, outside of China – is a collaboration of the Gujarat Pollution Control Board, EGC, the Energy Policy Institute at the University of Chicago (EPIC), and the Abdul Latif Jameel Poverty Action Lab (J-PAL).

In this episode of EGC Voices in Development, Ryan talks about the challenges low-and-middle income countries face in expanding access to energy while also reducing the health and environmental costs of energy production. He says a critical role that development economists can play in supporting environmentally sustainable economic growth is to generate evidence on the impact different policy changes can have in order to inform decision-making. 

The distinction that's important to economists is between the kind of costs that show up on your bill, and the cost that society pays, which is the cost of the pollution… or the environmental harm that was a consequence of mining the fossil fuels that generated that electricity. This distinction is really important because people just base their own decisions on the costs that are visible to them…So there's a huge branch of literature of economists trying to measure those costs, trying to find out in what situations are they higher or lower, and trying to suggest ways that policy might mediate and reduce this gap between the decisions that people are making on their own versus the ones that might be best for them to make from a societal point of view.” – Nicholas Ryan

Ryan maintains that development economics plays a unique role in environmental policy, due to the attention it pays to empirical data and the costs and benefits to different stakeholders.  

One of the things that development economics does amazingly well is trying to get a sense of what's actually happening and connect to people’s experience and the experience of governments, and to work with policymakers or firms or regulators and see the problems that they're facing, rather than the problems that we envision that they might face… Development economists, I think, do a great job of collecting data and disciplining the research they do by people's actual experience. I think this is especially important for energy and environmental issues, because things are changing very quickly.” – Nicholas Ryan

The debate about equitable distributions of the cost of reducing emissions is at the core of the global move towards sustainable development. While lower-income countries, who are the most vulnerable to the consequences of climate change, have done the least to cause the problem, they are often tasked to address the challenges.

I think what  research can do is articulate well, what are the tradeoffs needed? For example, if you were to clean up the electricity sector in lower-income countries, to move away from capacity in coal fired power plants and use only renewable energy in electricity generation, how much would that cost, and how much of that cost would be borne by local governments? How much of that could be recouped by such payments? So really, to articulate what is possible with different kinds of policy changes, rather than to make a choice as to which of those policy changes is the most desirable. ” – Nicholas Ryan

About the guest

Nicholas Ryan is an Associate Professor of Economics at Yale University. He was a Prize Fellow in Economics at Harvard University from 2012-2014. He received a PhD in Economics from the Massachusetts Institute of Technology in 2012 and a BA in Economics summa cum laude from the University of Pennsylvania. Ryan studies energy markets and environmental regulation in developing countries. Energy use enables high standards of living but rapid, energy-intensive growth has caused many environmental problems in turn. Ryan’s research measures how energy use and pollution emissions respond to regulation and market incentives. His work includes empirical studies of the effect of power grid capacity on electricity prices, how firms make decisions about energy-efficiency and how environmental regulation can be designed to best abate pollution at low social cost. Recent research studies the adoption and pricing of renewable energy in low- and middle-income countries.