Can green growth really work? A reality check that elaborates on the true (socio)economics of climate change

Ulrich Hoffmann

Introduction

In the run-up to the Rio+20 Conference in June 2012 and the UN Climate Summit on 23 September 2014, virtually everyone from multilateral agencies to politicians, to businessmen, and to NGOs has advocated a fundamental shift towards 'green and inclusive growth' as the new, qualitatively different growth paradigm, which would considerably improve the energy efficiency of the economy and lead to drastic changes in its energy and material mix (replacing exhaustible by renewable materials), with corresponding structural changes. 'Green growth' advocates argue that such paradigm change would unleash new wealth creation and employment opportunities; provided that there was sufficient investment and companies had better information and supportive incentives. In other words, the impression occurs that the 'green growth' concept is flawless; just the enabling conditions for it are lacking. 'Green growth', which should be rather seen as a process of structural change, may indeed create some new growth impulses with reduced environmental load, in particular at microeconomic level. But can it also mitigate climate change at the required scale and pace (i.e. significant, absolute and permanent decline of GHG emissions in a historically very short period of time) at macroeconomic and global level?

The reality check below casts a long shadow on the 'green growth' hopes. Our analysis argues that the arithmetic of economic and population growth, energy/resource/material efficiency limits related to the rebound effect and horizontal shifting of problems, governance and market constraints, as well as systemic limits call into question the hopes of decoupling GHG from economic growth. Rather, one should not deceive oneself into believing that such an evolutionary (and often reductionist) approach will be sufficient to cope with the socio-economic complexities related to climate change (and some other global environmental problems, such as loss of biodiversity). 'Green growth' may give much false hope and excuses to do nothing really fundamental that can bring about a U-turn on global GHG emissions. The approach is largely reduced to a technocratic and technology-fetishized one, because changing technologies is much easier than altering societies and their socio-economic drivers.

'Green growth' proponents need to scrutinize the historical macro-(not micro-) economic evidence, in particular the arithmetic of economic and population growth, the colossal reductions required in the GHG-emission intensity of economic growth as well as the significant influence of the rebound effect. Furthermore, they need to realize that the required transformation goes far beyond innovation and structural changes to include better distribution of income and wealth, power over markets, and a culture of sufficiency. Against this very background, an attempt is made below to elaborate on the true economics of climate change. Global warming also calls into question the global equality of opportunity for prosperity (i.e. ecological justice and development space) and is thus a huge developmental challenge for the South and a question of life and death for some developing countries.

Limits set by the arithmetic of economic and population growth

In the last few years, the fossil-fuel-related CO2-emission trajectory has followed a trend that is worse than the worst-case scenario used in the 4th assessment report of the Intergovernmental Panel on Climate Change (IPCC) of 2007. If current GHG-emission trends continue unabated, according to the 5th IPCC assessment report of 2014, we are likely on course for temperature increases of 4–6°C and even more, which would undoubtedly have apocalyptic implications. The 4th IPCC assessment report concluded that GHG reductions in the order of 85 per cent for developed countries and some 50 per cent for developing countries would be necessary by 2050 to keep global warming at a range of 2 to 2.4°C.

It is, however, highly questionable whether the required drastic GHG-emissions reductions are really achievable under the prevailing growth paradigm. By way of illustration, global carbon intensity of production fell from around 1kg/$ of economic activity to just 770g/$ (i.e. by 23 per cent) in the 28 years between 1980 and 2008 (a drop of about 0.7 per cent per annum). Even if recent trends of global population (at 0.7 per cent per annum) and income growth (at 1.4 per cent per year) were just extrapolated to 2050, carbon intensity would have to be reduced to 36gCO2/$ – a 21-fold improvement on the current global average to limit global warming to 2 degrees. Allowing developing countries to catch up with the present level of GDP per capita in developed nations would even require a much higher drop in carbon intensity of almost 130 times by 2050 (see Figure 1.1). More recent analysis of global carbon intensity dynamics by Pricewaterhouse-Coopers (PwC) as part of its annual Low Carbon Economy Index supports Jackson's projections. According to the PwC experts, carbon intensity of the global economy would have to be reduced by 6.2 per cent a year between now and 2050. Even a doubling of the current rate of decarbonization (some 1.2 per cent in 2013) would still lead to emissions consistent with 4–6°C of warming by the end of the century.

Not once since World War II has humankind achieved the rate of reduction of carbon intensity of GDP required for limiting...