Yiping Huang: Environmental pollution is a common problem that faces most rapidly developing economies. Although the “polluting first and cleaning up later” approach is not the first best choice, existence of the so-called “environmental Kuznets curve” clearly implies that environmental degradation is common during the early stage of economic development. In the end, this is a public policy choice question of trade-off between higher income and a cleaner environment. It applies to both advanced and emerging market countries. In fact, air quality in London, New York, and Tokyo 60 years ago was probably as bad as that in Beijing and New Delhi today.
How to clean up the environment is a big challenge for many middle- and high-income countries. The most commonly applied method is through environmental regulation (i.e., charging fines or even closing polluting factories). This often encourages or forces companies to upgrade their technologies or use cleaner materials...