Economic growth in a finite world – the stupidest oxymoron you could imagine

I’ve just finished reading Enough is Enough: Building a Sustainable Economy in a World of Finite Resources, so I’m pretty ‘primed’ in terms of statements urging “economic growth” as the solution to the world’s economic ills.  One thing the book has made me realise is just how often we are bombarded with the mantra of economic growth, and how much it is seen by politicians, conservative economists and the media as the only way to achieve social, industrial and political goals.  And if you combine references to the need for economic growth with the media’s fascination with economic indicators such as GDP and stock market indices, it’s really clear that we are on an economic growth express train.

I’d always been of the view that targeting economic growth is the lazy policy option, believing that we can have a fair, effective and comfortable society without growth – it would just take a lot more brain-power than the average policy formulator is willing to apply.  However reading Rob Dietz and Dan O’Neill’s book convinced me that a steady state economy is the only way forward, though I felt that there was little chance of there being any kind of mainstream movement toward this approach before it is too late.  How often do you even see or hear the term “steady state economy”?

Well, an article in today’s edition of The Conversation might indicate that we are going to hear about it a whole lot more in the near future.  It’s an important opening to a conversation that the world has to have now (and should have had long ago).  I hope it won’t spoil the story if I tell you the author’s conclusion: Climate stability demands nothing less than a wholesale economic shift – moving beyond growth and into a culture of consumption based on sufficiency. Or as Dietz and O’Neill say: Enough is Enough.  Read the book next.

Reblogged from The Conversation:

A newly released report called Better Growth, Better Climate draws the seductive conclusion that “we can create lasting economic growth while also tackling the immense risks of climate change”. But while…

Economic growth is incompatible with the rapid emissions reductions that are now necessary. AAP Image/David Crosling

A newly released report called Better Growth, Better Climate draws the seductive conclusion that “we can create lasting economic growth while also tackling the immense risks of climate change”.

But while the report, spearheaded by former Mexican president Felipe Calderón and UK climate economist Nicholas Stern, wisely points out the importance of efficiency improvements and renewable energy, it fails miserably to back up its core message.

The fact is that the world has a finite carbon budget, and we’ll blow that budget – sooner rather than later – if economic growth remains our objective.

Carbon budgets

The fundamental weakness of the new report can be shown by considering the implications of the world’s carbon budget, a notion that has entered the vocabulary of climate science in recent years. This concept refers to the maximum carbon emissions that can be released into the atmosphere if the world is to avoid dangerous climate change.

Although the science underpinning the carbon budget is increasingly robust – and has been built into the modelling of the Intergovernmental Panel on Climate Change (IPCC) – scientists, politicians, and the broader public have been slow to recognise its radical socio-economic and political implications.

The unpalatable truth is that, for developed nations, continued economic growth as conventionally measured is incompatible with climate stability. Indeed, a safe climate requires that we now need a phase of planned economic contraction, or “degrowth”.

The prospect of deliberate economic contraction will strike most people as an outrageous proposition, but the numbers below speak for themselves. My research has focused on this need to power down our energy-intensive economy if we are to avoid blowing the carbon budget.

This does not simply mean producing and consuming more efficiently and shifting to renewable energy, necessary though these changes are. It also requires that we produce and consume less – a conclusion that few dare to utter. Fortunately, the extent of wasteful overconsumption in the developed nations means that degrowth can actually be in our own interests, if we manage the transition wisely.

Degrowth and the carbon budget

To set our carbon budget, we have to answer three initial questions:

  1. What temperature rise above pre-industrial levels should we be aiming to avoid?
  2. What risk of exceeding this temperature limit are we prepared to accept?
  3. How should the resulting global carbon budget be distributed between nations?

In order to unpack the economic implications of carbon budget analysis, I draw on the seminal work of climate scientists Kevin Anderson and Alice Bows, whose analyses are based on the following answers to the above questions.

1. Temperature

The world should aim to keep warming below 2C relative to pre-industrial levels. This threshold has been reaffirmed in recent international climate negotiations, including at Copenhagen and Cancun, so it represents an agreed goal.

Nevertheless, in recent years evidence has indicated that many ecosystems are more sensitive to increases in temperature than previously thought, meaning that 2C might not be a “safe” threshold after all. Many scientists, not to mention the small island states, argue that a 2C average rise in global temperature would be extremely dangerous, and that 1.5C or less would be more appropriate. Far from being a radical goal, 2C is actually a moderate one.

2. Risk

Because the future effects of further carbon emissions are complex, they can only be expressed in terms of probability. For the purposes of this analysis, we’ll aim for a carbon budget that gives us a 50% chance of avoiding 2C of warming. Given the dire consequences of exceeding the 2C threshold, the precautionary principle really demands a far higher probability of success than 50%, but let’s stick with this for now.

3. Distribution

Developing countries (known in UN climate negotiations as “Non-Annex 1 countries”) deserve a greater per-capita share of the global carbon budget, primarily because they are home to billions of people who still live in poverty and because these nations are less responsible for historic emissions.

Nevertheless, a stable climate calls for ambitious assumptions about when developing nations’ emissions should peak and begin to fall. Anderson and Bows assume that non-Annex 1 nations will peak in emissions by 2025 and then decarbonise at an unprecedented rate of 7% per year.

Such ambitious emissions cuts would also benefit developed (“Annex 1”) nations, because less of the global carbon budget would be consumed by the developing nations.

The carbon budget for the developed nations is calculated by subtracting the developing nations’ budget from the global budget. In order to keep to this budget, developed nations must reduce emissions by 8-10% each year in absolute terms (rather than per unit of economic productivity) over the coming decades. (For more detail on this calculation, see here.)

These numbers were formulated in 2011. Since then global greenhouse emissions have continued to increase, so these emissions-reduction targets should be regarded as a bare minimum.

The economics of cutting carbon

We can’t make such deep emissions cuts while still growing the economy. In his landmark 2006 review, UK economist Nicholas Stern calculated that decarbonisation of more than 3-4% is incompatible with economic growth. He noted that emissions reductions of more than 1% per year have historically been “associated with economic recession or upheaval”.

We can decarbonise our economic activity progressively by moving to renewable or low-carbon energy systems, and by producing goods and services in more energy-efficient ways. But this takes time – probably decades. Also, don’t forget that renewable energy systems themselves require energy to build.

We can’t cut emissions by 8-10% per year – as the carbon budget says we must – purely through energy efficiency and renewable power, especially if we expect to keep growing the economy while we do it. Significant emissions reductions will require us to use considerably less energy. And because energy use and economic activity are intimately related, less energy means less production and less consumption.

Beyond economic growth

It therefore follows that developed nations should immediately begin a strategy of planned economic contraction, with less energy and resource use. This “radical” conclusion follows logically from the moderate assumptions stated above, and it contradicts the widespread assurances that maintaining a safe climate is compatible with continued economic growth.

It is even harder to reconcile climate action with economic growth when you consider that the assumptions above are too moderate anyway. If we were to decide on limiting warming to 1.5C instead of 2C, with a higher chance of avoiding that threshold (say 80% or 90% instead of 50%), then that would render our carbon budget even smaller – or already used up.

Climate stability demands nothing less than a wholesale economic shift – moving beyond growth and into a culture of consumption based on sufficiency.

The conclusions drawn by the Better Growth, Better Climate report seem to suggest, however, that disciples of growth are still not ready to let go of their god. They will continue to insist blindly that we can “green” capitalism and grow ourselves out of our ecological crises.

Moving to a stable, post-growth economy is a complex, challenging and confronting prospect for many people. Success is unlikely, admittedly, but it is even more unlikely if we don’t have the courage to face the facts.

As thousands prepare to rally in New York and around the world ahead of next week’s United Nations climate summit, we need to challenge ourselves to transcend growth fetishism and see the world with fresh eyes.

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