Is pollution the price of progress or proof that our economy is broken?

1 The trade-off that was not

The traditional argument is that the economy and the environment are opposites on a seesaw—tougher on the economy and easier on the environment, or easier on the economy and tougher on the environment, at a price (if you are look too closely, you will see that the price is not cheap). Externality is a term used in economics to describe such an expense (Pigou, 1920). The pollution that a company releases without paying for is a real burden that is transferred to those who did not want it, to those who did not sign up for it. The firm's books are good; society's books, if there were any, would look different. Pollution never came cheap. It was only unbilled.

This distinction is a new way of thinking about the whole conversation. As long as pollution is the price of a useful activity, it must be paid, and if it must be paid, it is to be accepted as a poorer world. However, when pollution is an unpriced cost, an accounting mistake embedded in our markets, then pollution abatement is not a sacrifice; it is a correction. It is not a question of wealth or a clean planet. It is a question of an economy that is telling the truth about the cost or an economy that is not.

2 The bill always comes due

Hidden costs do not simply vanish; they simply move. In fact, they move onto the balance sheet of the very economy they were supposed to spare. The best proof is in man's health. In 2021, an estimated 8.1 million people died globally as a result of exposure to air pollution, which makes it one of the top 10 risk factors for death in the world (Health Effects Institute, 2024). The financial impact is staggering as well: The global cost of health damage caused by air pollution is estimated to be around US$8.1 trillion, or approximately 6.1% of the world's GDP, and over a billion lost workdays annually (World Heart Federation, 2024). The 8.1 million death toll and the US$8.1 trillion cost estimate are two separate measures from two different sources that happen to share the same figure; this is a coincidence, not a duplication error. Pollution is slowly undermining the very growth that produced it.

The same applies to natural capital—the soils, forests, fisheries, and watersheds that support entire industries. The degradation of these for short-term gains becomes an increase in output the year that the bulldozers are brought in and a loss for the next few years when the gains are swept away by the next flood. Metrics of success are very effective at measuring what we take out and very unable to measure what we use up. Climate change is the externality of the end of all externalities: too large, too far away, and too spread out to be priced by market forces alone.

3 Where the old logic breaks down

If the trade-off were really so simple, wealth and a clean environment would always travel together, and poverty and pollution would always travel together. The evidence is now returning to the other side. Interesting studies have recently shown that some economies have started to decouple economic growth from environmental pressure, with the shift toward renewable energy and the development of new technologies being the drivers of a significant reduction in ecological footprint in some cases, providing empirical evidence of the Environmental Kuznets Curve (Grossman and Krueger, 1995; Smith, 2025). Comparative analysis shows that the European Union has enjoyed “strong decoupling”—falling emissions accompanied by continued output—while emerging economies, where emissions growth rates were faster, have not experienced such a strong effect (Cao, 2025).

Decoupling is not automatic, however. It happens when policies, prices, and institutions conclude that it is finally time to bill unbilled costs. It is not a law of nature that determines which economies become cleaner and which grow dirtier; it is one condition.

A national case illustrates the point. Between 2013 and 2017, under China's Air Pollution Prevention and Control Action Plan, average PM2.5 concentrations across major Chinese cities fell from roughly 89 μg/m³ to 58 μg/m³, even as the economy continued to expand (Lu et al., 2020). Pollution was not an unavoidable by-product of growth that had to be endured; it fell once policy made the cost of emitted visible to firms. The reduction shows that at a local and measurable scale, what the article argues in the abstract: that the trade-off between the economy and the environment is not fixed but a function of how honestly a system prices its externalities.

4 Pricing the truth

No “exotic tools” are required to get an economy to tell the truth about its costs. Imposing a cost on pollution is a way of making the externality of pollution visible and measurable to firms. Carbon pricing is expected to cover ~25% of global GHG emissions by 2023, 75 schemes will generate a record US$104 billion in revenues, with a significant proportion allocated to climate and nature programs (World Bank, 2024). The company that makes the same product with less damage to the environment reaps the benefits of a successful market—exactly what a successful market is supposed to do.

A second lever is to reorganize production around circularity: waste is not an inevitability; it is a failure in design that needs to be engineered out of the system. However, today the world is going in reverse: the amount of secondary (recycled) materials in the world economy decreased from 9.1% in 2018 to 7.2% in 2023, while the amount of materials used in the world is approximately 100 billion tons/year (Circle Economy, 2024). Waste is often simply good business—reduced input costs, reduced risk of resource shocks—and as such, a circular economy can be as much an economic opportunity as it is an environmental one.

The third lever has to do with measurement. So long as GDP grows, as long as we are constructing a hospital or cleaning up a chemical spill, the economic compass points go off track because GDP counts the money spent responding to harm as a positive contribution to output without subtracting the harm itself: rebuilding after a flood or treating pollution-related illness adds to GDP in exactly the same way as building a new factory does, even though one reflects productive activity and the other reflects a cost that was allowed to happen. Two economies can post identical growth figures while one is actually producing more and the other is simply cleaning up more damage. The process of including natural capital and environmental degradation in national accounting is not merely an academic curiosity but a change in what governments and companies optimize for.

5 An honest caveat

None of this is free, and pretending otherwise would be its own kind of dishonesty. A major problem with transitioning is that it produces winners and losers; a coal town is not comforted by the prospect of green jobs elsewhere, and a faltering or hasty transition can exacerbate inequality. That is why the environmental problem is, at heart, an economic one. The issue is not whether we can afford to deal with the environment better; it is how we do it fairly—and how we do not simply move pollution to the poor nations and pat ourselves on the back for having cleaner numbers.

6 Conclusion

To a certain extent, pollution has been regarded as the cost of progress because our economy is broken—because we have created a system where profit is privatized, and harm is socialized. Environment, pollution, and economic activity are not locked in a zero-sum trade-off in which one must be sacrificed to preserve the other two; they are one system. We have been measuring the wrong one. The cost of the harm is priced, the value of the natural capital is measured, and the true cost is counted—and the “enemies of growth” become the conditions for growth that lasts. An economy that pollutes its own water, uses up its natural resources, and makes its own climate unstable is not a robust economy paying a fair price. It is a fragile one that owes money. Debts will be repaid sooner or later. It is not a choice between prosperity and the planet; it is a redesign of accounting that stops pretending the two were ever at odds.

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Footnotes

Edited by: Phoebe Koundouri, Athens University of Economics and Business, Greece

Reviewed by: Saliha Hadna-Bremand, Université Toulouse III Paul Sabatier, France