Opinion

Can climate change be tackled without ditching economic growth?

The ultimate answer to the question on whether climate change can be tackled without ditching economic growth depends on our willingness to step up climate action massively.

By: , and Date: September 27, 2021 Topic: Green economy

This piece originally appeared in Corriere della Sera (print), De Tijd, Die Zeit, Kathimerini, Kapital.bg, Rzeczpospolita, Le Monde and Helsingin Sanomat

Corriere della Sera logo

Rzecszpospolita logo

Le Monde logo

Economic growth, so far, has fuelled global warming. The mechanics of this inconvenient truth are straightforward: higher levels of economic activity tend to go hand-in-hand with additional energy use and consumption of natural resources. Fossil fuels still account for 80% of the global energy mix, so energy consumption remains closely related to greenhouse gas emissions and hence to climate forcing.

In principle, to achieve the deep greenhouse gas emission cuts required to tackle the climate crisis, the world therefore has two options: decouple global emissions from economic growth, or simply ditch economic growth.

Decoupling is clearly the most desirable, as both developed and developing nations want to grow. Economic growth is indeed of central importance for welfare and issues including social security, pensions and debt sustainability. But decoupling is difficult: current projections of global population size and GDP per capita imply that the world must reduce the rate of CO2 emissions per unit of real GDP by around 9% per year on average to reach net-zero by mid-century. For the sake of comparison, between 1990 and 2016 global emissions per unit of real GDP decreased only by 1.8% per year.

Confronted with this sobering reality, economists disagree about whether humanity can realistically decouple growth and emissions. ‘Green growthers’ are optimistic that suitable policies and technology will allow emissions to be reduced to sustainable levels while enabling continued or even boosted economic growth. This thinking is shared by several governments and institutions. For instance, the European Commission defines its European Green Deal as “Europe’s new growth strategy”. On the contrary, ‘degrowthers’ dismiss this and argue that the global economy must be scaled down to reduce emissions, and that systemic change and redistribution are necessary to accomplish this in a socially sustainable way and address the “fairy tales of eternal economic growth”, as Greta Thunberg told world leaders back in 2019.

We think this debate is largely theoretical. Degrowth simply is not an option that will be pursued by either poor or rich countries. The crucial question is thus how to achieve green growth, bearing in mind that a massive stepchange in the technological capacity and societal organisation of our economies will be necessary. Four factors will be crucial to accelerate decoupling: green investment, breakthrough innovation, behavioural change and climate adaptation.

Massive investment is needed in energy-system decarbonisation. The International Energy Agency estimates that the current annual level of energy-system investment of 2.5% of global GDP will need to increase to 4.5% in 2030. Governments will have to foot part of the bill, especially for large green energy-infrastructure projects or green technologies still under development. But the private sector will need to cover most of the investment. Governments must therefore create incentives and facilitate investments, in particular through carbon pricing, but also regulations. Clear and credible policy commitments also help by reducing the uncertainty that deters firms from investing.

Technological development must also take place to reach net-zero. Hydrogen produced with renewable electricity and enhanced battery storage capacity are notable examples for which costs are still prohibitively high. Technologies that extract CO2 from the air or capture it on release from exhausts are also part of the solution in most decarbonisation scenarios but still too expensive to be used at sufficient scale. To accelerate their development, the private sector and the government both need to increase substantially their research and innovation funding.

Behavioural change meanwhile will be needed to swiftly and affordably reduce emissions from sectors that are more difficult to decarbonise, such as air travel, agriculture and land use. Behavioural change can also reduce the cost of the green transition: the European Commission estimates that behavioural changes could cut the additional annual investments required to reach net zero by a third.

Finally, climate change is already with us. Investment in climate adaptation is necessary to cope with fires, floods and other extreme weather events driven by climate change. But adaptation investments must not come at the expense of immediate climate change mitigation. Much more of both is needed from now and is urgent because keeping climate change in check – especially having the chance to keep the global temperature rise to 1.5°C above pre-industrial levels – will become much harder the longer one waits.

Overall, the ultimate answer to the question on whether climate change can be tackled without ditching economic growth depends on our willingness to step up climate action massively. It will take an extraordinary effort and massive investments in technologies and infrastructure to reach our necessary climate goals. Hoping for humanity to sacrifice growth appears even less likely.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to [email protected].

Read about event More on this topic
 

Upcoming Event

Jun
7
10:30

Future of Work and Inclusive Growth Annual Conference

Annual Conference of the Future of Work and Inclusive Growth project

Speakers: Erik Brynjolfsson, Francis Green, Francis Hintermann, Ivailo Kalfin, Laura Nurski, J. Scott Marcus, Anoush Margaryan, Julia Nania, Poon King Wang, Fabian Stephany and Guntram B. Wolff Topic: Digital economy and innovation Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event More on this topic
 

Past Event

Past Event

Adapting to European technology regulation: A conversation with Brad Smith, President of Microsoft

Invitation-only event featuring Brad Smith, President and Vice Chair of Microsoft who will discuss regulating big tech in the context of Europe's digital transformation

Speakers: Maria Demertzis and Brad Smith Topic: Digital economy and innovation Location: Bibliothéque Solvay, Rue Belliard 137A, 1000 Bruxelles Date: May 18, 2022
Read about event
 

Past Event

Past Event

[Cancelled] Shifting taxes in order to achieve green goals

[This event is cancelled until further notice] How could shifting the tax burden from labour to pollution and resources help the EU reach its climate goals?

Speakers: Niclas Poitiers and Femke Groothuis Topic: Green economy, Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 12, 2022
Read article More on this topic
 

Blog Post

Insights for successful enforcement of Europe’s Digital Markets Act

The European Commission will enforce digital competition rules against big tech; internally, it should ensure a dedicated process and teams; externally, it should ensure cooperation with other jurisdictions and coherence with other digital policies.

By: Christophe Carugati and Catarina Martins Topic: Digital economy and innovation Date: May 11, 2022
Read article
 

External Publication

The Global Quest for Green Growth: An Economic Policy Perspective

A review on green growth and degrowth arguments.

By: Klaas Lenaerts, Simone Tagliapietra and Guntram B. Wolff Topic: Global economy and trade, Green economy Date: May 5, 2022
Read about event More on this topic
 

Past Event

Past Event

COVID-19 and the shift to working from home: differences between the US and the EU

What changes has working from home brought on for workers and societies, and how can policy catch up?

Speakers: Jose Maria Barrero, Mamta Kapur, J. Scott Marcus and Laura Nurski Topic: Inclusive growth Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 28, 2022
Read article More on this topic
 

Blog Post

Climate migration: what do we really know?

While uncertain, studies suggest that climate change will cause significant internal and international migration over the next century.

By: Klaas Lenaerts and Simone Tagliapietra Topic: Global economy and trade Date: April 25, 2022
Read article More on this topic
 

Blog Post

The decoupling of Russia: European vulnerabilities in the high-tech sector

Although Russia bears the brunt of Western high-tech sanctions, the European Union will face challenges in sectors where it relies on Russian and Ukrainian commodities and technologies.

By: Monika Grzegorczyk, J. Scott Marcus, Niclas Poitiers and Pauline Weil Topic: Global economy and trade Date: April 12, 2022
Read article More by this author
 

Podcast

Podcast

What to expect from China's innovation drive?

How much has China progressed technologically?

By: The Sound of Economics Topic: Digital economy and innovation, Global economy and trade Date: April 6, 2022
Read article More on this topic More by this author
 

External Publication

Dans l’urgence climatique

Book published by Gallimard and overseen by Groupe d’études géopolitiques (GEG)

By: Simone Tagliapietra Topic: Green economy Date: March 22, 2022
Read about event More on this topic
 

Past Event

Past Event

Decarbonising Germany: conversation with Patrick Graichen

A special off-the-record conversation with Patrick Graichen.

Speakers: Patrick Graichen and Guntram B. Wolff Topic: Green economy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 10, 2022
Read article More on this topic More by this author
 

Opinion

Global chip shortage may soon turn into an oversupply crisis

Only companies investing in advanced semiconductors will see their margins increase.

By: Alicia García-Herrero Topic: Global economy and trade Date: February 25, 2022
Load more posts