I was just reading an article in the newly established Ecological Economics Review on economic growth, written by Peter A. Victor. In this article, Victor is revisiting Kenneth Boulding‘s remarks on the economy of the coming spaceship Earth, focusing on economic growth and environmental impact.
He defines the concept of green growth as an economic state in which the rate of reduction of environmental impact per unit GDP exceeds the rate of increase in GDP. This is distinguished from “brown growth” where reduction of impact is positive but smaller than increase in GDP, and “black growth” where reduction of impact is negative and GDP increases. Analyizing the US economy over the last 20 years, Victor shows that only brown growth can be observed i.e. although environmental impact per GDP is decreased, the increase of GDP in total is increasing environmental impact in absolute terms.
This so-called “rebound effect” or Jevons paradox, is not a surprise. William Stanley Jevons wrote about it in 1865 in relation to coal, as he found out that an increase in efficiency e.g. a more economic use of a resource does not lead to less use of that resource but acts similar as a price cut which c.p. causes the demand for that resource to increase.
Victor continues to compare annual growth rates and annual changes in environmental impact per GDP of high income countries (HIC) between 1966 and 2005. His findings are questioning the assumption that faster rates of economic growth are better for bringing more environmentally efficient technologies and lowering impact than slower rates: “Broadly speaking, in the 40 years from 1966 to 2005 slower rates of economic growth in the HIC were, on average, associated with greater reductions in CO2 intensity and greater reduction in energy intensity.” (Victor, 2010: 243)
This got me thinking a bit, as I am especially concerned with issues of degrowth on a corporate level. If you start crunching some numbers on an Excel sheet, you can very easily see that given a constant rate of economic growth of 3 percent — which still is the goal of the European Union as layed out in the Lisbon Agenda — and a constant rate of efficiency increase of the same size will not do much about total impact. Below there is a table in which I calculated total GDP, impact per GDP and total impact on the environment from 2010 to 2050. A constant growth rate of 3 percent expands total GDP over a 40-year-period more than three times (2010 = 100 GDP, 2050 = 326.6 GDP). At the same time, technical progress in efficency helps to bring down impact per GDP to less than a third in 2050 compared to 2010. For Germany e.g. this would be the necessary size of “degrowing” physically: we consume about 10.8 tons carbon dioxide per capita and per year, whereas the sustainable yield would be around 3 tons. However, as total GDP increases, total impact is only being reduced by around 1.7 percent by 2050. The large efficiency gains are “eaten up” by growth.
This is irritating, as the rate of efficiency increase or the decrease in impact per GDP is, with its 3 percent, higher than the average rate over the last 10 years in Germany. Energy efficiency increased well below 2 percent per annum whereas material efficiency increased at about 2.7 percent per annum. We would need an instant doubling of efficiency increase from 2011 onwards to meet the necessary reduction in total impact by 2050. This is however not very realistic. Starting with an average efficiency increas of 2.5 percent in 2010, which might be a realistic starting point, and a slow increase by .1 points per annum throughout the 40-year-period would leave total impact at around 52 percent compared to 2010. So, even with an ongoing increase in efficiency, which might be just as unrealistic as doubling it in one year, the necessary reduction in total impact cannot be met by any means.
The only scenario in which this is possible is when growth is decreased slowly between 2010 and 2050. For ease of calculation, in the 2010s an average growth of 3 percent has been taken, in the 2020s it is 2 percent, and from 2030 onward 1 percent economic growth per annum. With this “degrowth scheme” total impact is decreased by 2050 towards 32.4 percent compared to 2010. Whatever the growth rates might be, or the efficiency increase rates, if we don’t want to leave the grounds of realism the only way to achieve the necessary reductions in environmental impact is a combination of efficiency increase and growth decrease. This is clearly not a call for shrinking the economy, at least not within the next decades, but for a “smart degrowth”, reducing economic growth to a sustainable size so that efficiency gains can benefit our natural environment.
