I'm not going to defend Lant Pritchett. But there is a serious issue here. In Ghana--where 60% of the urban population has no access to the sewer system, where 70% of energy still comes from burning wood and charcoal (and where rain acidity as a result at times reaches Black Forest levels), where 40% of people drink contaminated water, and where 15% of people suffer from waterborne diseases--should taxicabs have to have catalytic converters installed?
The "no" argument is that it adds $700 or so to the cost of the automobile. That $700 could--if it were used wisely--be devoted to upgrading the sewer system, or building a water purification plant, or expanding the electrical grid so that smoke emissions from firewood could be reduced, or importing medical supplies to treat people once they have gotten cholera. Any of these would do more good than harm would be done by the extra CO and SO2 emitted by the taxicab over the course of its life.
The "yes" arguments--there are two--are, first, that we will never gain control of our environmental problems until clean-up is viewed not as merely one goal to be traded-off against others but as a fundamental ethically-mandated constraint on all human economic activity; and, second, that the $700 saved won't go to the sewer system or the water purification plant or for medical supplies, but to the Swiss bank account of some Deputy Assistant Secretary and nephew of the Colonel commanding the First Armored Brigade somewhere in the Cayman Islands.
There is also a fourth argument: What business is it of anyone in the first world telling people in developing countries that they can or cannot pollute? There's a fifth argument: What developing-country government is truly democratic, and so has the right to legislate a lower level of pollution protection for its people in the first place? There's a sixth argument: environmental protection is everyone's business, and the sooner we get a global pollution control authority in place the better.
I think that all of these arguments have force.
I am inclined to say that democratically-elected governments should be allowed to run their own pollution-control, environmental-standards, and environmental-clean up programs: if people in the first world want to see a greater degree of environmental clean up than democratically-elected politicians in developing countries feel that their countries can afford, let the first world pay for it explicitly through government-to-government negotiations. I am also inclined to think that non-democratic governments should be held to a much higher standard in terms of allowable emissions from activities financed by first world (or World Bank) money--a look at Ogoniland or Lake Baikal or the Aral Sea will convince anyone that non-democratic governments are prone to make definitely wrong decisions about pollution.
But these are hard and serious issues where I don't think I have many (if any) of the answers.