PerspectiveEconomics

Unraveling the claims for (and against) green growth

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Science  22 Nov 2019:
Vol. 366, Issue 6468, pp. 950-951
DOI: 10.1126/science.aay0749

American economist Kenneth Boulding famously quipped, “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist” (1). He was giving evidence to the U.S. Congress in 1973, in the wake of the Club of Rome's first, enormously influential and provocative report, The Limits to Growth (2). The remark has survived to this day as a somewhat satirical comment on the economics profession, but it also has a certain internal logic and provides a useful starting point for thinking about the “decoupling wars” that tend to be fought around the compatibility between economic growth and environmental limits (3).

When economists contend that growth can continue indefinitely, it is because in their view, growth is something measured in terms of economic value rather than material throughput. The preferred measure of output for economists—the gross domestic product (GDP)—is denominated in monetary value rather than in material weight. These things, they argue, are separable: By decoupling one from the other, economies ought to be able to escape the dominion of finite limits at least to any relevant degree (if not literally forever) (4).


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ILLUSTRATION: ADAM SIMPSON/HEART AGENCY

Nobel laureate Paul Krugman goes as far as to suggest that physical scientists simply have a false conception of economic growth: “They think of it as a crude, physical thing, a matter simply of producing more stuff, and don't take into account the many choices—about what to consume, about which technologies to use—that go into producing a dollar's worth of GDP” (5). His conviction that these “many choices” will allow for even the most stringent ecological goals to be achieved without ever compromising economic growth leads him to denounce growth skeptics as “prophets of despair.”

Krugman's argument is essentially an appeal to technology: more efficient processes, lighter and less polluting products, or a structural shift from materially intensive goods to materially light services, for instance. The importance of this kind of decoupling is not disputed, even by those who maintain that growth may not be feasible nor even necessarily desirable on a finite planet (6, 7). What divides opinion, rather, is the question of whether a continuous decoupling might allow economic expansion to go on indefinitely.

It is useful to clearly distinguish between relative decoupling and absolute decoupling. The former refers to a decline in resource (or environmental) intensities, whereas the latter refers to an absolute fall in consumption or emissions (8). Put very simply, relative decoupling is about doing things more efficiently; because efficiency is one of the things that modern economies are supposed to be good at, decoupling has a familiar logic and a clear appeal to those who hope that growth can continue indefinitely. It isn't hard to find evidence for relative decoupling, even at the global level. For example, the carbon dioxide intensity of the global economy fell from about 760 g of carbon dioxide per dollar (g CO2/$) in 1965 to less than 500 g CO2/$ today, a decline of almost 35% in half a century (6).

But relative decoupling is barely half the story. An improvement in the emissions intensity of economic output does not necessarily mean that emissions themselves are falling. For this, absolute decoupling needs to occur, where emissions fall over time, even as economic output continues to rise. For relative decoupling to lead to absolute decoupling, the emissions (or resource) intensity must decline at least as fast as economic output rises. If the rate of decline in emissions intensity is greater than the rate of economic growth, then the level of emissions will decline. If not, then it won't.

It is not impossible to find some partial evidence for absolute decoupling over specific time periods, particularly when looking at data on a national or regional level. For instance, across the European Union, between 1990 and 2017, carbon emissions fell by 22% even as the economy grew by 58%, as measured on a territorial basis (9). Similar evidence can be found of both relative and absolute declines at the regional level in relation to material resource consumption (10).

One problem with this “partial” evidence is the porous nature of national and regional trade boundaries. In a globalized economy, territorial accounts of production-based emissions fail to take adequate account of a region's “footprint”—that is, the carbon emissions associated with a region's consumption patterns. The carbon footprint of the EU, for example, has fallen considerably more slowly, and remains 20% higher, than territorial emissions (11).

Such findings emphasize that, for a pollutant like carbon and for resources generally, it is what happens at the global level that counts; and here, there is no evidence of absolute decoupling at all. The amount of carbon dioxide going into the atmosphere today is more than 60% greater than the amount in 1990, despite the best efforts of the United Nations Framework Convention on Climate Change (7). Since the global financial crisis of 2008, the rate of growth in carbon dioxide emissions worldwide has slowed somewhat. Between 2014 and 2016, total global emissions seemed momentarily to have stabilized. But they rose again by 1.6% in 2017 and are estimated to have risen by a further 2.7% in 2018 (12).

There is another crucially important point here: Even absolute decoupling is not enough to ensure sustainability. Neither a stabilization in carbon emissions, nor a moderate decline in emissions, is enough to avoid a climate breakdown. The Intergovernmental Panel on Climate Change has estimated that to have a 66% chance of remaining below a 1.5°C temperature rise, there is a maximum available global carbon budget of 420 Gt of CO2 that can be emitted into the atmosphere (13). At the current rate of emissions, this carbon budget would be exhausted within a decade.

In other words, decoupling GDP from the flow of emissions is not the same as decoupling economic activity from the stocks of environmental and material resources on which future prosperity depends. To achieve the latter, sufficient (14) or strong (7) absolute decoupling is needed. At the global level, sufficient absolute decoupling to prevent climate breakdown would require an average annual decline in the carbon intensity of global economic output of around 14% every year for the next three decades (6). The highest rate of decoupling ever achieved by the world's advanced economies was a little under 3%, in the years immediately following the oil crises of the 1970s. The average rate of decline across the world at the moment is less than 1%. In the case of a rich country like the United Kingdom, sufficient absolute decoupling would mean a decline in the nation's carbon footprint at a rate in excess of 20% each year, with a net zero target that might need to be as early as 2030 (15).


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ILLUSTRATION: MICHAEL J. DIMOTTA

Proponents of so-called green growth—economic growth that uses natural resources in a sustainable manner—must show that it is possible to effectively eliminate carbon emissions from developed economies in the space of little more than a decade with no impact at all on economic expansion. This challenge cannot be answered solely by an appeal to technology. The question is not whether technological measures such as energy efficiency and solar power are possible (they clearly are); nor whether, in the past, countries have managed to harness these technologies sufficiently (they clearly haven't); but rather, whether countries can now achieve sufficient gains in a short enough time to allow the pursuit of economic growth indefinitely, while still remaining within the safe operating space of the planet.

In a sense, this once again raises the question of whether economic value is something completely separate from—or at least separable from—physical and material flows. Certainly, in the past, the two things have gone hand in hand. According to economics, monetary value surely has something to do with activity. According to physics, activity is impossible without the expenditure of energy. There may well be efficiencies to be had, but these will ultimately be constrained by thermodynamic limits, as all activity is. Those who believe that this is not a constraint on expansion typically appeal to the massive quantities of solar energy that flood Earth. But it remains true that these flows are diffuse (rather than concentrated, as fossil fuels are) and must be captured using material devices.

It still is not clear that this immediately rules out some form of growth. But it is clear that the larger the economy becomes, the more difficult it is to decouple that growth from its material impacts. One doesn't need thermodynamics to make this point. A bigger economy implies a bigger capital stock. A bigger capital stock means higher depreciation. An infinite economy (the ultimate outcome from eternal growth) means infinite depreciation and infinite maintenance costs. The only alternative would seem to be to begin assigning economic values to increasingly immaterial exchanges—love, friendship, the spoken word, perhaps—which seems both abusive and inflationary.

None of this is to suggest that decoupling itself is either unnecessary or impossible. On the contrary, decoupling well-being from material throughput is vital if societies are to deliver a more sustainable prosperity—for people and for the planet.

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