π Economics
Degrowth: is this the end of GDP?

Green growth is an illusion

On February 1st, 2022 |
4 min reading time
Alain Grandjean
Alain Grandjean
Co-founder of Carbone 4 and member of the High Council for the Climate
Key takeaways
  • Carbone 4 argues that reducing environmental impacts requires a change in economic models – particularly GDP.
  • Our economies must therefore be steered by more relevant physical and social indicators that allow us to ensure that we are respecting our planet’s limits.
  • For this to happen requires “decoupling” to occur, the dissociation between economic prosperity and consumption of resources and energy.
  • This decoupling can only partially be possible decreases in fossil fuel consumption end up affecting other environmental pressures or if it is limited to a decrease in the carbon intensity of GDP.
  • Solar, wind, nuclear and biomass energies face numerous technical, financial, and sometimes even democratic limitations. These low-carbon energies are neither free, nor unlimited, nor easy to deploy.

From a seman­tic point of view, “green growth” is just as mis­lead­ing as degrowth. While the term degrowth acts as a deter­rent, con­jur­ing images of depri­va­tion and depres­sion, green growth is akin to mag­i­cal think­ing, giv­ing the illu­sion that we can con­tin­ue to pro­duce and con­sume more thanks to tech­ni­cal progress. Except that there is absolute­ly no rea­son to believe that finance or the mar­ket, whose sole objec­tive is to max­imise prof­its, will save the planet.

Neo-lib­er­al econ­o­mists work­ing on the links between growth, nature and the envi­ron­ment main­tain that mon­etis­ing neg­a­tive exter­nal­i­ties and rais­ing the price of car­bon will solve the prob­lem of glob­al warm­ing and, more gen­er­al­ly, all the envi­ron­men­tal dam­age caused by human activ­i­ties. But again, this is a pipe dream, as the price tag doesn’t show the full extent of the envi­ron­men­tal issues, espe­cial­ly when it comes to the preser­va­tion of biodiversity.

The illu­sion of decoupling

To sup­port their argu­ment, the pro­po­nents of green growth assume that it will be pos­si­ble to decou­ple the rise in GDP from envi­ron­men­tal dam­age, large­ly thanks to tech­ni­cal progress. This is far from being the case. It is true that in cer­tain regions of the world, and at cer­tain times, there has been a decou­pling of GDP and green­house gas (GHG) emis­sions. Between 2010 and 2016, for exam­ple, Euro­pean GDP increased, while GHG emis­sions fell. But this is not what we have seen on a glob­al lev­el: over the peri­od between 1980–2018, GDP is esti­mat­ed to have grown by 198% (base 100 in 1980), while GHG emis­sions increased by 65% (in CO2 equivalent).

Accord­ing to the Unit­ed Nations Envi­ron­ment Pro­gramme, if we want to lim­it glob­al warm­ing to 1.5°C, we need to reduce our emis­sions by 7 to 8% per year, start­ing today. This is why, in a recent study, Car­bone 4 states that for decou­pling to work, it must be absolute (GHG emis­sions must fall), glob­al (all areas of the world must be affect­ed), sus­tain­able (it must be main­tained over time), rapid, and total (GDP must be decou­pled from all pres­sures on the envi­ron­ment, not just green­house gas­es). In prac­ti­cal terms, this means that decou­pling is only par­tial if the reduc­tion in fos­sil fuel con­sump­tion results in oth­er envi­ron­men­tal pres­sures, such as defor­esta­tion, or if it is lim­it­ed to a reduc­tion in the car­bon inten­si­ty of GDP.

Low-car­bon ener­gy solu­tions are not unlimited

In this con­text, it is under­stand­able that some observers are wor­ried about the ener­gy tran­si­tion being bran­dished as the infal­li­ble tech­ni­cal solu­tion capa­ble of lead­ing us “pain­less­ly” towards this ide­al sce­nario. Con­trary to what is some­times pro­ject­ed, low-car­bon ener­gy is nei­ther free, nor unlim­it­ed, nor easy to deploy. In fact, there is no ener­gy pro­duc­tion that is strict­ly neu­tral in terms of GHG emis­sions. Fur­ther­more, the tech­ni­cal solu­tions involved in the tran­si­tion, such as ener­gy effi­cien­cy or car­bon cap­ture, are not always suc­cess­ful or deploy­able on a large scale. Final­ly, whether it is solar, wind, nuclear or bio­mass, these ener­gies come up against numer­ous tech­ni­cal, finan­cial, and some­times even demo­c­ra­t­ic lim­i­ta­tions that can no longer be ignored: nuclear ener­gy is a long-term ener­gy, cost­ly, indus­tri­al­ly and demo­c­ra­t­i­cal­ly com­pli­cat­ed to imple­ment, solar and wind ener­gy have a sig­nif­i­cant land foot­print, in addi­tion to pos­ing more and more prob­lems of social accep­tance. As for bio­mass, it pos­es prob­lems of resource lim­i­ta­tion and management.

In light of this the way in which insti­tu­tions, par­tic­u­lar­ly Euro­pean ones, draw up prospec­tive sce­nar­ios is regret­table: start­ing from the prin­ci­ple that the ener­gy tran­si­tion is tech­ni­cal­ly fea­si­ble, they do not pay enough atten­tion to the con­di­tions required to achieve it. In this respect, the ques­tion is less whether the tech­nolo­gies exist than how quick­ly they can be gen­er­alised, and who will pay for them. What­ev­er sce­nar­ios are cho­sen, we must be pre­pared for the tran­si­tion to come at a very high cost to soci­ety. The Euro­pean Court of Audi­tors recent­ly esti­mat­ed that it would cost $11.2 tril­lion between 2021 and 2030. There will be win­ners and losers, and it will be up to the pub­lic author­i­ties to respond to the result­ing inequalities.

Mov­ing away from the obses­sion with GDP

So, in order to reduce the pres­sure on our ecosys­tem, will we have to reduce our qual­i­ty of life, as those advo­cat­ing for degrowth claim, and aban­don any prospect of growth in our economies? On paper, this way of pos­ing the prob­lem may seem con­vinc­ing: our lin­ear eco­nom­ic sys­tem – take, make, con­sume, dis­pose – has led to the sit­u­a­tion we are now fac­ing, and we will not reduce our impact on the envi­ron­ment with­out mak­ing pro­found changes to our eco­nom­ic mod­els. For exam­ple, we know the toll the excess­es of cap­i­tal­ism and the dereg­u­la­tion of mar­kets has tak­en on our plan­et. How­ev­er, mak­ing GDP the source of all our ills, and the focus of our debates, is dan­ger­ous and a waste of time.

GDP is any­thing but an envi­ron­men­tal indi­ca­tor. By nature, some val­ue-cre­at­ing activ­i­ties reduce emis­sions, while oth­ers are harm­ful. More­over, eco­nom­ic growth is always used in base­line sce­nar­ios as an exoge­nous input to the mod­el, over which nei­ther the rise in tem­per­a­ture nor the deple­tion of nat­ur­al resources has any influ­ence. This con­struc­tion gives the false impres­sion that GDP can con­tin­ue to increase, inde­pen­dent­ly of any phys­i­cal real­i­ty. For exam­ple, if we take the worst-case cli­mate sce­nario stud­ied by the ECB and the NGFS, it appears that a 5°C rise in 2100 would only reduce GDP by 25% com­pared to a no-warm­ing sce­nario, which is ridicu­lous­ly low. This proves the inad­e­qua­cy of the mod­els used.

This is why we need to move away from the obses­sion with GDP once and for all, and put this indi­ca­tor back in its right­ful place, name­ly that it is a use­ful account­ing and man­age­ment tool for pub­lic finances, but that it can no longer be the alpha and omega of pub­lic poli­cies. Our economies must be steered by more rel­e­vant phys­i­cal and social indi­ca­tors that allow us to ensure that we are respect­ing the “plan­e­tary lim­its”. One such indi­ca­tor is the Donut The­o­ry by the Eng­lish econ­o­mist Kate Raworth, which clear­ly out­lines the social and plan­e­tary lim­its with­in which any form of eco­nom­ic pros­per­i­ty should be contained.

Find out more here

Interview by Julie de la Brosse

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