Economic growth – the continuous increase in the size of a country’s economy – has become almost synonymous with progress. When growth is strong, a nation feels prosperous. When growth falters or reverses in times of recession, war or pandemic, politicians tremble.
But economic growth has historically been associated with a corresponding carbon price. The challenge for the modern world is to reconcile economists’ belief in the primacy of growth with the planet’s ever-shrinking carbon budget.
The recent inflation-mitigating law gives renewable energy a multi-billion dollar boost, promising a brighter future where new technologies deliver economic growth and lower prices without the consequences of climate change. But how realistic is that?
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Prosperity grows with energy.
And the world needs more of both
1. Energy ends poverty. All over the world and throughout human history Energy consumption has increased in step with economic growth. The more productive a society becomes, the more energy its economy requires. Coming from fossil fuels since the industrial revolution, this energy continues to lift billions out of poverty – with more than 140 million join the global middle class each year.
2. But we still live on a carbon planet. Even as some nations are beginning to take the transition to renewable energy seriously, the planet remains highly dependent on coal, oil and gas. Fossil fuels as a share of global energy production peaked at 68% in 2007 and fell to just 62% last year. The evidence suggests that carbon will drive economic growth decades to come.
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The world needs more energy
No more carbon
1. Our society’s carbon consumption is not inevitable. That Anti-Inflation Act aims to boost the American economy and transition US society to renewable energy with a broad package of incentives spanning the economy from consumer to industry to government. If successful, it could reduce US carbon emissions by 40% by 2030 — though that will not be easy.
2. Carbon guy progression. Some countries have already broken the link between economic growth and emissions – a process known as decoupling. Have over 30 countries absolutely decoupled emissions from economic growth since 2005, reports the Breakthrough Institute. That means their GDP went up even as their carbon emissions fell. The list includes both highly developed countries, such as Denmark and Great Britain, and emerging countries, such as Romania and Jamaica.
3. Perhaps energy efficiency can break the cycle. The relationship between energy (regardless of the source) and growth is also on the brink. By embracing efficiency, Sweden GDP has grown by over 50% since 1995 even though per capita energy consumption has fallen by more than 10%. However, whether other countries – and particularly the rapidly growing and evolving “global middle” – can emulate these achievements remains to be seen.
Source: Our World in data based on BP; shift energy; UN population and the World Bank. Note: Energy refers to primary energy, the use of energy before it is converted into forms of energy for end use (e.g. electricity or petrol for transport).
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Growth is the problem
Degrowth is the answer
1. It’s an appealing idea… That degrowth movement proposes that instead of expanding our economies, we should shrink them so that we use fewer of the world’s resources and put wealth ahead of profit. Jason Hickel from the University of London points out that planned degrowth is not a destructive recession. “It seeks to reduce ecologically destructive and socially non-essential production (i.e., production of SUVs, weapons, beef, private transportation, advertising, and planned obsolescence) while expanding societally important sectors such as healthcare, education, nursing, and socializing,” writes he in one Paper of 2020.
2. But the evidence is scant. Andrew McAfee, research director of MIT’s Tech for Good program, calls degrowth “the worst idea on the planet‘ in Wired. He believes in the ecological Kuznets curve (EKC): the idea that as GDP per capita increases from a low level, so does environmental damage; but as wealth continues to increase, the damage levels off and then decreases. “The EKC is a direct refutation of a core idea of degrowth: that environmental damage must always increase with population and economy,” he writes.
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What to keep an eye on
1. A snowball effect? The IRA is setting the tone for broad-based, ambitious climate action, like California’s recent announcement to phase out gas-powered vehicles. Will other governments and countries now follow suit?
2. Who gets the biggest payouts. The Roosevelt Institute says that tax credits tend to reproduce, not reduce, existing economic inequalities, particularly by race. This could mean that any growth benefits the wealthiest individuals and companies, and the IRA ends up simply trading one problem for another.
3. More evidence (or not) of degrowth. The accuracy of the environmental Kuznets curve is still in question. Some recent research has found the theory inconclusiveor applies only to some developing countries. Economists and scientists will be watching closely countries that don’t appear to be following him, such as Mexico, Indonesia and South Africa.
Image: ©Anthropocene Magazine
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