The relationship between economic growth and the environment is complex. For example, due to our high material standard of living, the U.S. emits 24 times as much carbon dioxide per person as India. Yet our higher income also allows us to afford cleaner technology: The U.S. emits less than one-third as much carbon dioxide per dollar equivalent of GDP as India.

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Manufacturing oftentimes results in pollution, a negative externality that takes the form of uncompensated costs on people, the environment, agriculture, and natural resources. For example, manufacturing pulp for paper can result in emissions of chlorine (a bleaching agent) into bodies of water. Policies to limit pollution emissions include pollution taxes, pollution standards (maximmum emissions), and "cap and trade" systems in which overall emissions are capped and firms can trade emissions allowances within this ca.

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