Prosperity without growth?

I have just re-read Prosperity without growth?, by Tim Jackson, published in 2009 by the Sustainable Development Commission, which the government abolished in 2011. I skimmed through it when it first came out but, not then having  the time to study it in detail, I was left wondering whether action to tackle climate change really does mean doing without economic growth. Although in the long run (perhaps when we're all dead) growth can't continue on a finite planet, it's possible to argue in principle that growth can continue for some years or even decades while we transition towards a zero-carbon economy.

In particular, it seems to me that we could have moved more quickly out of the recent recession if we had had a crash programme of investment in renewable energy and in energy conservation. In this way, action on climate change would actually have promoted growth.

More generally, it seems to me that carbon emissions are the product of several factors which we can express as an equation:-

emissions = population growth x growth in GDP per head x energy intensity of GDP x carbon intensity of energy used

This means, theoretically, that population growth and growth in GDP per head can be more than offset by a reduction in the energy intensity of GDP and/or the carbon intensity of energy used. This offsetting can be achieved partly by technical change and partly by changes in the make-up of aggregate demand. Technical change might involve switching to renewable energy (reducing carbon intensity) or improved insulation of buildings (reducing energy intensity of GDP). Changes in the make-up of aggregate demand might include more spending on education and less spending on long-haul holidays. An ongoing higher rate of investment in conservation and renewable energy would itself constitute a shift in the make-up of aggregate demand away from consumer spending, other government spending or other investment - at least once the economy no longer needed a Keynesian stimulus.

Economic growth driven by investment doesn't imply an increase in living standards because investment would probably need to be at the expense of household consumption. It would nevertheless serve to keep unemployment low and help maintain reasonably good living standards for the worst-off.

So there we have an argument that economic growth could be consistent with reducing our carbon emissions. Does Jackson buy that argument?

No. He might agree with the logic but he would say that it falls down when we apply some arithmetic and evidence from the last couple of decades. Jackson would say that my argument above is an exposition of what he calls "the myth of decoupling". He argues that, while some "relative decoupling" of emissions from growth has taken place, in that emissions have risen more slowly than economic activity (so that the carbon intensity of GDP has fallen), this has not given rise to "absolute decoupling" - in other words, total worldwide emissions have not actually fallen while economic activity has risen. He sees no realistic prospect of this changing. Here are the key paragraphs of his argument:-

Carbon intensities have declined on average by 0.7% per year since 1990. That’s good; but not good enough. Population has increased at a rate of 1.3% and average per capita income has increased by 1.4% each year (in real terms) over the same period. Efficiency hasn’t even compensated for the growth in population, let alone the growth in incomes. Instead, carbon emissions have grown on average by 1.3 + 1.4 – 0.7 = 2% per year, leading over 17 years to an almost 40% increase in emissions ... The same rule of thumb allows us a quick check on the feasibility of decoupling carbon emissions from growth in the future. The IPCC’s Fourth Assessment report suggests that achieving a 450 ppm stabilisation target means getting global carbon dioxide emissions down to below 4 billion tonnes per annum by 2050 or soon after. This would be equivalent to reducing annual emissions at an average rate of 4.9% per year between now and 2050.

But income and global population are going in the opposite direction. According to the UN’s mid-range estimate, the world’s population is expected to reach nine billion people by 2050 – an average growth of 0.7% each year. Under business as usual conditions, the decline in carbon intensity just about balances the growth in population and carbon emissions will end up growing at about the same rate as the average income – 1.4% a year. It might not sound much, but by 2050, under these assumptions, carbon emissions are 80% higher than they are today. Not quite what the IPCC had in mind.

To achieve an average year-on-year reduction in emissions of 4.9% with 0.7% population growth and 1.4% income growth [carbon intensity of GDP] has to improve by approximately 4.9 + 0.7 + 1.4 = 7% each year – almost ten times faster than it is doing right now. By 2050 the average carbon content of economic output would need to be less than 40 gCO2/$, a 21-fold improvement on the current global average ... . (pp 53-54)

To increase the rate of reduction in carbon intensity tenfold looks virtually impossible. Even if we assume no economic growth (not even economic growth resulting from population growth) we still need to reduce energy intensity by 4.9% a year - seven times the current rate. So on the basis of these figures, the idea that we can have economic growth and meet our long-term emission targets looks laughable. This is before we take into account the need for growth in the developing world to remove people from abject poverty and chronic undernourishment. Nevertheless, with determination and ingenuity, who knows what is possible?

Prosperity without growth? came out in March 2009, nearly five years ago. Since then, the science has moved on and worldwide emissions have continued to rise. It will be interesting to see what happens if we try and update Jackson's figures to take into account what we now know - but that will have to wait for another blog post.

Lastly, there are, of course, huge questions about how we could cope with zero growth. Those are the main questions that Jackson addresses in this publication. As with the science, thinking on the big practical and political questions has moved on since 2009 and provides a cornucopia of material to be discussed in future blog posts. I'm hoping in 2014 to have more success than in 2013 in keeping up a steady flow of study and comment via (among other things) this blog.

Happy New Year!