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Economic Growth and Climate Change Part 2 - Sustainable Growth - An Economic Oxymoron?

Posted on 29 November 2011 by perseus

In part 1 we examined the principal economic factors which determine anthropogenic CO2 emissions from the combustion of fossil fuels. In this section we examine the potential for reductions in each of these terms.

As a reminder the economic factors determining CO2 can be described by the Kaya identity:

CO2 ≡ population x [energy/GDP] x [CO2 /energy] x [GDP/population]

Where energy refers to primary energy, energy/GDP is called the energy intensity, CO2/energy the carbon intensity, GDP/population the (economic) output per capita and GDP the gross national product. So this reduces to:

CO2 ≡ population x energy intensity x carbon intensity x output per capita

The global trends in each of these terms from 1990 to 2007 and projections from 2007 to 2035 assuming a 'business as usual' scenario are illustrated below.

Trends of Kaya factors determining CO2 emissions

Source: International Energy Outlook 2010 (original source: US Energy Administration Information)


Between 2007 and 2035, energy intensity and carbon intensity are expected to reduce by about 39% and 4%. In contrast population and economic output per capita is expected to increase by 27% and an alarming 91% respectively. All these factors together will increase CO2 emissions by around 42%. Therefore, it appears that if we carry on as normal, economic growth will swamp any benefit attained though technological advances, resulting in a substantial increase in CO2.

To meet CO2 targets, many mainstream politicians and economists such as Nicolas Stern talk about ‘decoupling the relationship between carbon emissions and economic growth by reducing carbon and energy intensity so we can carry on increasing GDP. Stern estimated in 2006 that the annual costs of achieving stabilisation between 500 and 550ppm Carbon dioxide equivalent (CO2e) is around 1% of global GDP if we start to take strong action now.

However, this concentration is too high.  A stabilisation target of 450 parts per million CO2e is more widely regarded as synonymous with keeping mean global temperature by 2100 at no more than 2°C above pre-industrial levels.  Exceeding this would likely result in more severe consequences on human and ecological systems, although even this concentration may be too high.  The  figure of 450ppm CO2e requires that developed countries need to reduce GHG emissions 25- 40% below 1990 levels by 2020, and 80-95% below 1990 levels by 2050.1 

Not surprisingly, a number of academics have suggested that economic growth is the main factor which needs to be addressed. For example, Professor Tim Jackson considers that economic growth “is totally at odds with the finite resource base and the fragile ecology on which we depend for survival”. In his book ‘Prosperity Without Growth’ Jackson calculates how much we would need to reduce the product of energy intensity and carbon intensity (in units of CO2e/economic output) to meet a CO2e of 450 ppm by 2050 without adjusting GDP or population growth rates. In the absence of such controls, we would need to reduce this factor by 10 times faster than the present rate, that is a 21 fold improvement by that date relative to the present to meet this target! Some other scenarios regarding population or GDP growth would require a virtual complete de-carbonisation of our entire energy system.

Recent evidence suggests that there has been limited ‘progress’ in reducing global CO2 except for a unintended temporary drop in 2009 which coincided with the economic recession, with the upward trend quickly resuming in 2010.  Whilst it is difficult for rapidly expanding economies to reduce CO2 in absolute terms,  it is more reasonable to expect that their CO2/GDP reduces as inefficient industries are improved or replaced. However, even these hopes were dashed in the case of China when a recent study suggested that the downward trend in this metric had reversed.  To underline these figures a statement at the 2009 Copenhagen Climate Science Congress said that "recent observations confirm that given high rates of observed emissions the worst-case IPCC scenario trajectories (or even worse) are being realised."  

There are also  non-climate related factors to consider when examining the implications of economic growth.  These include our finite resource limits, local ecological impacts, and in affluent nations the limited societal benefits of increasing incomes still further.

In conclusion, it seems that our present economic policies seem to place far too much reliance on technological methods to stand a reasonable chance of meeting future greenhouse gas targets in time. In view of the rapid pace of climate change, the risk of passing critical tipping points and the immense potential for increased global greenhouse gas emissions, a different set of policies are required. It is suggested that a multi-faceted approach would be far more effective aimed at reducing each of the terms in the Kaya Identity. This would incorporate:

  1. stabilising economic activity once a country has achieved high income status

  2. reducing fertility rates and increasing generational gaps in cultures with projected high population growth,

  3. continuing to reduce energy intensity and, 

  4. encouraging more substantial reductions in carbon intensity through a wide variety of technological measures

1 see IPCC AR4 WGIII. Climate Change 2007: Mitigation of Climate Change. WGIII Contribution to the IPCC AR4 (Cambridge University Press, Cambridge, 2007), chapter 13, Box 13.7 on page 776. 

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Comments 51 to 58 out of 58:

  1. @50, obviously a country by country target would be preferable to a group by group approach. However, I am realistic enough to recognize that a group by group approach is more likely to be negotiated due to political pragmatism (which I believe is best defined as forgetting what you are trying to achieve so that it won't interfere with the possibility of a "successful" outcome). While group 2 nations will require immediate mitigation efforts: 1) Much of that mitigation can be in the development of a small scale distributed energy network for domestic and light industrial needs, and which therefore are not troubled by intermittancy. In that context solar and wind power are already the cheapest options; 2) The west and China, if truly committed to these targets will be massively developing renewable energy infrastructure which will consequently drive down costs very fast (from scale of production if nothing else) making adoption of renewable energy for new infrastructure projects in group 2 nations a minor additional expense (if that). Finally, you keep on saying it is a gamble. Of course it is a gamble. Everything is a gamble because nothing is certain in life. More importantly, facing a world in which climate change has destroyed the Great Barrier Reef and the Amazon Rainforest is a gamble. Simply assuming that food production can keep pace with population growth in such a world is a gamble on a par with Russian Roulette. Unfortunately policy inaction to date has placed us in a position in which any policy response (including inaction) is a gamble. Whatever our policy response, delaying action will make our subsequent policies even more of a gamble. As it happens, pushing for a semi-targeted effort at decarbonization backed by a price on carbon so that we very rapidly decrease carbon intensity is the safest bet in this context. It avoids the excessive risks not to mention the political impossibility (as you will agree) of pushing the world into zero growth as a deliberate policy. It also avoids (or gives us a good chance of avoiding) the worst consequences of climate change. Unfortunately, any other alternative avoids neither the worst consequences of climate change (because their response is too slow) nor the negative growth (due to the consequences of climate change). If you have an alternative policy which avoids crashing through the 2 degree C safety barrier, by all means present it. Otherwise your policy seems like an absurd risk to me.
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  2. Tom Curtis : «Otherwise your policy seems like an absurd risk to me » De facto, we are in a no policy situation – at least, no global policy with emission targets, many local efforts in cities or countries. I think perseus article points one of the main barrier to a global policy : a reform that could threat economic growth is unlikely to be adopted. Of course, this is a stupid gamble if a short term growth implies a long term poverty due to fossil depletion and climate externalities. Where we disagree is probably the cost-benefit analysis of climate reforms and their feasability in a sustained growth perspective. Perseus and I doubt that the most ambitious target (450) is compatible with such a growth because : a) empirically, we have no example of a massive decoupling between economic growth and fossil use in the past decades, even a local example (a country that would have achieved growth during 3 ou 4 decades without increasing its emissions in absolute term, and more, that would have significantly decreased these emissions) ; b) mean energy intensity/density or EROEI of renewable energy is for the moment less than fossil energy, except in the most favourable conditions that are not necessarily the most interesting conditions for installed infrastructures of production and consumption (concentration solar plant in a desert may be productive, but few persons live in the desert and far away distribution of this energy increase costs and losses). Look at the figure SPM 5 (p. 14) of IPCC SRREN 2011 . If you defend a global and immediate reform, the important factor is the global and immediate cost of RE, not just some selective and local examples of costs in the best conditions. You see in this figure that there are some substitution opportunities at the same cost, but neither solar electricity nor ocean electricity are of real interest on a global scale, even wind mean cost is a bit over the mean range of fossil cost. South Africa (for example) produces coal, so the coal-based electricity in this country has a very low cost and to choose wind or solar would be unrational and underproductive from a strict economic point of view. Of course, a reform is progressive and we will see the costs' abatments in 2020 or 2030, but it seems untrue to assert that globally, policymakers and economic actors would choose the ideal condition of short term growth if they choose massively RE energy in their current technological productivity. (In fact, if RE energy was really more profitable than fossil energy, they would be fool to ignore it, we are supposed to live in world obsessed by immediate profitability) ; c) relative costs are just one dimension : you must also achieve a total production of the same amount of energy that the fossil ressource you substitute (or you need for development). As we have discussed, there is no realistic plan for a biofuel production that would replace a large share of oil-products in transportation in the next decades, and the total mean RE annual production of 164 IPCC scenarios in 2050 is 248 EJ, just 50% of the actual ~500 EJ, and probably 30% or 40% of the total amount we would need for 2050 in a high economic growth scenario. In spite of these pessimistic observations, I think we need urgently a global climate-energy policy because a business as usual scenario would be far too risky. But no hope for me that the most ambitious policy will be compatible with a sustained economic growth for 7, 8 then 9 billion humans. And I bet these humans will in last resort prefer a 550 ppm perspective than a socio-economic stagnation. At least, this preference will partly depend on the reduction of scientific uncertainties for climate sensitivity and regional projections.
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  3. Here is a link to the full article of Economic Growth and Climate Change on my website. This addresses a wider range of issues, such as if economic growth provides any benefits to society, if we should be focusing on other methods, and how these affect GHG emissions. Note the disclaimer at the start though!
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  4. To Perseus/Skep/Tom. Let me understand you better. In light that this current economic system monopolieses wealth and power, you believe the solution to AGW lies within the framework of capitalism where these powers have vested interests to maintain BAU???
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  5. adamski @54, regardless of my opinion of the current economic system, tying the needed reform to combat global warming to additional reforms desirable (or not) for political or economic reasons merely ensures that the needed reforms to combat global warming will not occur. That is the nature of politics. As it happens, I believe some other reforms of the west's (and particularly Australia's) economic and political systems are also desirable. (I even have a few ideas about the United States political system.) However, I firmly believe that those reforms should be argued on their merits; and that I should not make more difficult the essential (cutting emissions) as a tactical ploy to obtain the merely desirable (by comparison). That is the path of folly.
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  6. Tom Curtis - I don’t know what reforms you are contemplating but I'm sorry for the bad news but the events over the course of the last 50 years and where we find ourselves today, socially, economically and in environmental terms, show us that the experiment in social democracy has failed. It is dead. (-snip-) We need a system that will allow everyone to operate according to something like C-M-C, where money is not hoarded by economic actors but is used to transact between producers. x
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    [DB] Please take note of the Comments Policy.  Specifically the parts about politics, ideology & one-world governments.  The snipped portion of your comment above strays too far from the topic of this thread.  You are welcome to reformulate your comment such that it better complies with both the Comments Policy and the OP of this thread.  Leeway is given on threads like this except when the discussion gets sidetracked.

  7. #54, 56 Adamski – As Tom in #55, and pragmatically, I’d say ‘the best is the enemy of the good’, whatever your definition of the ‘best’. (-snip-)
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    [DB] Please see my caution to adamski above, RE:  Adherence to the Comments Policy.  Thanks!

  8. adamski @56, as indicates, my 55 is sufficient response to your 56. If you require further comment, @57 states it very eloquently. Beyond that I note that the comments policy states: No politics. Rants about politics, ideology or one world governments will be deleted Personally I believe that your 56 violates this policy, but presume you have been given leeway in light of the topic of the main post. Regardless, I do not believe that I can respond without violating the comment policy restriction against political discussions. In another context I would happily debate with you the virtues of market socialism (or at least my version of it), industrial democracy and my more idiosyncratic ideas (such that advertising should be true and informative). But this is not the time or place, and making such ideas a means to the end of reduced emissions (as opposed to pursuing them on their own merits independently) merely delays action on emissions.
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    [DB] Fixed html tag.

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