Ecological Economics: Is Green Growth Possible? - fmi*igf Economics_Is Green Growth... · Is Green...

Ecological Economics: Is Green Growth Possible?

Peter A. Victor25 November 2014

Seven Questions

1. What is ecological economics?2. What is economic growth?3. What is green growth? 4. What is the history of decoupling?5. What are the future prospects of decoupling?6. Is green growth possible? 7. Are fundamental changes required?

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1. What is ecological economics?

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Firms Households

Bio-physical Cycles

EconomicCycle

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Billiontonnes Global Materials Extraction 1900 to 2005

100%

700%

F. Krausmann et al Ecological Economics 2009

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Transgressing Planetary Boundaries

J. Rockstrom et alNature, October 2009

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2. What is economic growth?

An increase in the final goods and services produced by an economy during a given period, as measured by the rate of change in real gross domestic product (GDP).

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Economic growth as a policy objective

Article 1a) The aims of the OECD shall be to promote policies designed: to achieve the highest sustainable economic growth and employment... (1960)

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Progress as economic growth

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Uneconomic growthGross Domestic Product

The Ecological Footprint

What we are promised

What we get

Innovation leading to increased labour

productivity

if inadequate economic growth

unemployment up

consumption down

tax revenues downdeficits up

public expenditures down

loan defaults up

investment down

lower economic growth

The dilemmaof growth

Tim Jackson

3. What is green growth?

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Decoupling environmental impact from resource use

GDP

Resources

Environmental Impact

Decoupling - The essence of green growth

Decoupling resource use from economic growth

TIME16

“...to stress the key point for the last time, these impressive achievements of relative dematerialization have not translated into any absolute declines of material use on the global scale.” (Smil, 2014)

4. What is the history of decoupling?

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Technology

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1946 1970

1995 2014 19

1946 1970

1997 2014

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‘I would say this is the most environmentally friendly cruise ship to date. It is much more efficient than other similar ships.’ (Project engineer)

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Jevons’ Paradox(rebound effect)

“It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth”

The Coal Question (1865)

1835-188225

High Income Countries ‘Decoupling’ 1971-2010

0

50

100

150

200

250

300

350

400

1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

GDPENERGY

CARBON DIOXIDE

World Bank Data

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Low and Middle Income Countries ‘Decoupling’ 1971-2010

0

100

200

300

400

500

600

700

800

1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

GDP ENERGYCARBON DIOXIDE

World Bank Data

Note – different scale

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Ratio of GHG shadow to production GHGs

0%

20%

40%

60%

80%

100%

120%

140%

160%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

UK

EU-27

USA

CAN

BRIC

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Material Footprint ‘Decoupling’ in OECD countries

T. Wiedmann et al, PNAS, 201330

5. What are the future prospects of decoupling?

“The global gap between the haves (approximately 1.5 billion people in 2013) and the have-nots (more than 5.5 billion in 2013) remains so large that even if the aspirations of the materially deprived four-fifths of humanity were to reach only a third of the average living standard that now prevails in affluent countries, the world would be looking at the continuation of aggregate material growth for generations to come.” (Smil, 2014)

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Green growth

Brown growth Black growth

Black degrowth

Scale and intensity: the Colours of Growth

Canada’s GDP 1990

Canada’s GHG Intensity 1990

Green degrowth

Any combination of GDP and GHG/GDPalong the red line gives 591mt of emissions

Higher

Lower

Canada’s economic growth scale and intensity 1990-2011

591 mt

702 mt

555 mt[Kyoto

Target]

0.51

$1,367,000

0.72

$825,318

(kt/$m)

An 87% reduction in Canada’s GHG emissions from 2011 level in 50 years: Scale and Intensity

702mt

90mt

0%/yr growth in GDP

2%/yr growth in GDP

3%/yr growth in GDP

.51.025 .067.015

$1,367,000

$5,999,000

$3,675,000

Intensity after 50 yrs 3% 5% 13%

2011 2010

4%6%7%Rate of decarbonization

Rate of economic growth 3% 2% 0%

6. Is green growth possible?

• Green growth requires the rate of throughput to decline faster than the rate of economic growth

• If the rate of economic growth is 3%/yr, GDP increases 10-fold in 78 years. Throughput per dollar would have to decline by 90% to avoid an increase in throughput, and by more for green growth.

• How long can this go on?

Throughput

Throughputper dollar GDP

Environmental Impact

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Larry Elliot (economics editor)29th August 2008

‘The real issue is whether it is possible to challenge the “growth-at-any-cost model” and come up with an alternative that is environmentally benign, economically robust and politically feasible.’

7. Are fundamental changes required?

LowGrowCanada

Can we have full employment, no poverty, fiscal balance, reduced GHG emissions without relying on economic growth?

Managing without growth

What makes an economy grow?

• Demand (what we spend on):– Consumption– Investment– Government– Trade

• Supply (what we can produce):– Labour– Capital– Productivity

‘Business as usual’

GDP per Capita

GHG Emissions

Poverty

UnemploymentDebt to GDP Ratio

What happens if we eliminate increases in all sources of economic growth?

(starting in 2010 over 10 years)

• Consumption• Investment

• Government• Trade

• Population/labour• Productivity

A no growth disaster

GDP per Capita

GHG Emissions

Poverty

Unemployment

Debt to GDP Ratio

A better low/no growth scenarioHow?• New meanings and measures of success• Fewer status goods• Limits on materials, energy, wastes and land use• Stable population and labour force• Carbon price – more informative prices• More efficient capital stock• Shorter work year• More generous anti-poverty programs• Education for life not just work

GDP per Capita

GHG EmissionsUnemployment

Poverty Debt to GDP Ratio

Jeff Frankel’s Weblog

Origins of the financial/economic crisis

More than just a financial crisis

• A financial system that serves the real economy

• A real economy that serves the interests of people and communities

• Absolute reductions in throughput

• Stem the loss of biodiversity

Ecological Macroeconomics

Real

Natural

Financial

Ecological Economics

Modern MoneyTheory

Towards an Ecological Macroeconomics

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