Why degrowth won’t solve climate change: the case for green growth economics

The degrowth movement is claiming climate change can only stop in a degrowth scenario.

The arguments of the degrowth movement can be summarised as following:

1. There’s a big positive correlation between GDP and greenhouse gases emissions. As GDP increases, emissions increase too.
2. The “rebound effect” of technological improvements, e.g. if we invent more fuel efficient cars, we will drive more and this will compensate for the technological progress in fuel efficiency.
3. So far we only have been able to achieve relative decoupling, no absolute decoupling. While emissions per GPD decrease, the total emissions are still rising.
4. Technology is progressing only incrementally and according to the law of diminishing returns. We already plucked the low hanging fruit.
5. The current climate policies are green growth policies. These policies are ineffective in reducing emissions, so a radical policy shift toward degrowth is needed.

While these arguments may look convincing, green growth economics can respond to this criticism and eventually, we would need a growing economy with additional money to take on the fight against climate change, not a shrinking economy with less money. Many current policies (e.g. USA) can’t be described as “green growth” anyway.

Climate change is already happening

Greenland ice is melting, the temperatures are at a record high, storms an forest fires are increasing, drought is happening, islands are drowning in 2019. So, climate change is already happening and it will continue to happen for the following decades.

We know the IPCC report is a quite conservative consensus of climate scientists. Every year the IPCC reports happen to be more alarming than the year before.

So any strategy (both growth and degrowth) is too late to stop climate change completely and any strategy to tackle on climate change should consist out of both migitation and adaptation.

Against degrowth 1 - The mathematics: why degrowth isn’t enough

We know in order to stop CO2 emissions, in 2050 the CO2 net emissions should be 0. Now let’s write some mathematical equations:

CO2 emissions = persons * GDP/person * CO2/GDP

Or

CO2 emissions = population * economic wealth * carbon intensivity of the economy

Now, if in 2050 we would have a degrowth rate of 20% compared to today’s economy, 20% more population and 50% better technology, emissions would be half of the current emissions. This is still way too high.

The only way to really solve climate change is emitting 0 CO2. According to the equation this would mean either 0 population, 0 wealth or completely carbon neutral technology (C02/GDP=0).

The key for solving climate change is carbon neutral technology, as we never would be able to get the factor population or wealth to 0. If we can achieve completely carbon neutral technology, it doesn’t matter anymore of we are affluent or not.

Against degrowth 2 - The discounting effect

We know money now is more worth than money in the future. Therefore damages of climate change in the economic models can be discounted to calculate damages in net present value. This discount rate is higher with a growing economy. By growing our economy the amount of damages relative to the gross domestic product will be less in the future. E.g. if economic growth is 3% in 24 years we will double our economy, thus a climate damage of 1 million $ would be relatively half than if we the economy didn’t grow. Climate damages in 48 years would be only 1/4.

The relative damage of extreme weather events reduces when GDP increases

In order to tackle the effects of climate change, adaptations to the new climate are needed. If we have a growing economy and more money available, we would be able to make investments to adapt to climate change. With a thriving economy, we would also be far more willing to help out the Global South in adapting to the effects of climate change.

Growing our economy = more money available for the Global South = more climate justice

Against degrowth 3 - Politics and enforcement

First, it’s highly unlikely a degrowth politican will get in power, as people generally like progress.

Second, how would the degrowth movement even enforce degrowth anyway? Would we prohibit employers to hire new employees? Should the government choose to make bad economic choices? Would we like people to become lazy and unproductive?

Yes, we should enforce the right consumer choices with politics, but this would mean a shift in consumption patterns rather than a decrease.

Against degrowth 4 - The financial system

Even if degrowth can somehow be enforced, this will collapse the whole financial system. The current financial system is based on that money now (e.g. 1000 dollar) is worth more than money in the future (e.g. 1000 dollar in the year 2030). In a degrowth economy, the real value of money now will be less than in the future, and thus nobody would want to save or rent out money. So, in a degrowth scenario all banks would collapse.

Companies and governments wanting to invest in migitation and adaptation are more unlikely finding funding in a degrowth scenario.

The case for green growth

OK, to stop climate change, we won’t be able to count on degrowth. So what are the green growth solutions? And how can the green growth theory be improved by providing answers to the criticism of the degrowth movement?

Green growth solution 1 - Stop delving fossil fuels

CO2 emissions are increasings mainly by burning fossil fuels. So the solution is quite simple: if we limit and eventually stop the delving of fossil fuels, the CO2 emmissions will dissapear

The degrowth movement is correct in its analysis of the rebound effect concerning demand-side measures.

E.g. if a technologic innovation is limiting the use of oil, the price of oil will decrease. Because the decrease in price, consumption will increase again according to the law of demand and supply. This is the “rebound effect” or the “green paradox”.

Now if we limit fossil fuels delving, the supply is decreasing. The amount of fossil fuels burned will decrease. But more importantly the prices will rise according to the law of supply and demand. So the consumption will not increase. Thus, by taking supply-side measures, no rebound effect will occur.

By also incorporating supply-side measures, the green growth policies can become more effective in reaching absolute decoupling.

Green growth solution 2 - The carbon tax

Carbon taxes and emission trading systems are the most superior and cost effective climate measures that can be taken within a free market system. Taxes should not be used to stop people working and creating (as is now the case), they should be used to stop people emitting CO2.

There are three advantages to carbon taxation:

1. The consumption effect: carbon consumption will decrease and the economy will shift to less pollution markets
2. The innovation effect: companies will spend money innovating because they get a competitive advantage by limiting their emissions
3. The revenue effect: the government gets additional revenue it can spend on public investment

A static CO2 tax always leads to relative decoupling, but may not always lead to absolute decoupling. But by gradually increasing the carbon tax rate over time (when innovation is happening), we can achieve absolute decoupling all time.

A carbon tax increasing over time is the key for achieving absolute decoupling

Green growth solution 3 — Public infrastructure investments

The better the economy, the higher tax revenues and the more possibilities we would have to invest in these public green infrastructure projects.

More economy = more money = more tax revenue = more green investments

One public infrastructure project would be a global renewable energy network. We also have more public funds available to plant trees.

Another important public investment is bicycle infrastructure. Copenhagen is currently the capital with the most happy and healthy population. It’s also the capital with the most bike infrastructure. The cost per QALY (quality adjust life year) of investing in bicycle lanes is less then preventive breast cancer screening, according to a research in New York. Investing in bike infrastructure will profit us as society.

Green growth solution 4— Green innovation

Degrowth thinkers believe technology is only incrementally improving and the progress rate follows the law of diminishing returns. This is a false claim, technology is actually exponentially improving over time. E.g. there was far less technological innovation between 1900 and 1920 than in the period of 2000–2020.

Just have a look at the price of solar panels. The cost is decreasing exponentially, not incrementally. Investing in exponential innovations is needed.

Green growth solution 5- Personal choices

Our personal choices can also affect the CO2 emissions. As we encounter the effects of climate change more and more, we will be more willing to change their behaviour. We can move the economy by our own choices from unhealthy excessive meat consumption to more vegetarian diets, from energy consumption to energy savings, from many cheap Primark clothes to few durable clothes, from cars to bicycles…

If we have more money to spend on goods, we can afford to make the choice for the most eco-friendly alternative, even if this is more expensive.

Yes, we may have to do some lifestyle changes, but this does not mean we should live like the people before the industrial revolution.

Does green growth actually work?

Degrowth activists claim that current “green growth” policies don’t work. But are the green growth policies implemented? Currently there is no such thing as a global carbon tax. The emission system is working in Europe, but is too limited in scope.

We can divide countries policies nowadays in 3 categories: Black growth (Trump, Bolsonaro), Grey growth (most countries) and light-green growth (Scandinavian countries)

We see in countries using a “light-green growth” policy, an absolute decoupling between GDP and emissions have been achieved.

(source graph: https://www.government.se/government-policy/taxes-and-tariffs/swedens-carbon-tax/)

Conclusion

Climate change is a real problem and should be solved as effectively as possible.

Degrowth may not be a feasible solution for preventing climate change and even less for the adaptation to climate change. From an utiliarian viewpoint, it’s highly unlike degrowth will maximize happiness and minimize suffering for all people around the world. It’s also risky proposing degrowth as the solution to climate change as it will dealineate people from the climate change problem if they hear the only solution is stopping progress.

Analyzing the theory of degrowth can be very important though. We need to provide answers to these criticisms within the green growth paradigm. E.g. by taken supply side measures, incorporating an increasing carbon tax and making green investments.