Templet, Paul H. 1994. "Equity and Sustainability: An Empirical Analysis." Society and Natural Resources 8: 509-523.

Thesis:

"Externalities lead to environmental inequality (in toxic emissions, energy pricing and taxes) and inequity and to poorer environmental, energy and socioeconomic conditions and decreased sustainability" (p. 521). Equity is a necessary component of sustainability.

Summary:

Templet introduces ecological economics and neo classical economics as having very different premises in their approach to "growth" and "development." Free market economics is seen to focus on profits by growth, which fosters inequality, while ecological economics stresses development (increased quality) over growth (quantity) and seeks to limit inequality. Sustainable development's focus on development and equity raises the question of whether equity is a necessary component for sustainability, or whether it is merely an altruistic ethic of the perspective. (p.510).

The basic tenets of sustainability, as proposed by Daly (1990) are "poverty reduction, limiting wealth inequality, reduced resource throughput, increased efficiency of resource use, matching economic scale to ecological carrying capacity, and waste emissions within ecological assimilation capacity" (p. 516). In laissez-faire free market activity, firms seek to externalize costs to increase profits. Templet argues that "externalities lead to inequities that are antithetical to sustainability" (p.510).

To test this hypothesis, Templet constructs a composite index of equity along the dimensions of energy, taxes, and pollution to measure "sustainability" in terms of energy, economic and environmental equality. A cross-sectional analysis of states based on U.S. government data sets is conducted. The three dimensions are as follows:

1. Environmental Equity and Pollution:

Templet measures levels of emissions relative to jobs across states. "If one state has a higher emissions to jobs ratio than another, the state's public sector is absorbing a higher pollution cost for the same number of jobs and an inequality exists" (p. 511).

2. Energy Equity and Costs:

A ratio of residential price/industrial price is used as the equity measure. Energy price becomes an equity issue when "states that have very low prices for industry and high prices for residents...are overcharging citizens to benefit industry" (p. 511).

3. Tax Equity:

The equity measure is a sales tax/income & poverty tax ratio. In general, states that rely more heavily on sales tax have higher poverty and income diversity and lower personal income. Income taxes are seen to be more progressive because the rate is graduated and more of the tax is paid by those with higher incomes.

These three ratios are normalized to create a composite measure of equity for each state. Regression analysis is then run to identify relationships between equity and three of the sustainability conditions (using state government indicators of these measures) outlined above by Daly. In addition to Daly's indicators are "environmental quality," operationalized by a green index and full employment. The analysis on these data indicate that each condition for sustainability is better satisfied in states with high equity. Thus, "as the composite equity index increases...social welfare and the health of the economic and environmental systems also improves" (p. 520).

In his discussion, Templet explores the role of government in the process of how economic sectors externalize their costs. In states where there are strong industrial interest groups, they are able to pressure government to lower pollution spending, energy prices and taxes at the expense of other sectors (citizens). He concludes that "government has a role in promoting health...by ensuring a threshold of equity" (p.520).

Templet also conducts a brief analysis of racial environmental equity across states. The composite equity index is linearly regressed with the percentage of African Americans and persons of Hispanic origin in a state. In the case of African American populations, equity decreased as percentage of African Americans increased. For Hispanic populations, no relationship was found.

Templet concludes that externalities lead to environmental and economic inequality, and that equity is a necessary component of sustainability. He calls for government involvement in limiting externalities and insuring equity.

Key Words: emissions-to-jobs, energy, equity, externality, socioeconomic, sustainability.