The myth of green growth

It sounded good, and in fact the European Green Deal has attracted a lot of attention as the most serious and ambitious effort to ‘build back better’ after the pandemic. But there’s a problem. In fact, there are two. First, it’s clearer by the day that there is no such thing as sustainable growth; and second, in current circumstances there is no intrinsic merit in growth in GDP in any case.

Covid-19 has given momentum to ‘green growth’ activists: the call for a green recovery has spread across borders, and the idea that economic activity at its current rate is damaging has made converts. The crisis has revealed the degree of pressure day-to-day life pre-Covid put on the environment. Pictures have been widely circulated of the clean water in Venice, the clear air in London, the goats in Llandudno.

The meme of the moment was ‘nature is healing: we are the virus’, and there was something to it. Emissions fell 18% in China from February to March; March saw India’s CO2 emissions fall for the first time in 40 years; global air traffic halved in June.

In the US, left-wing sentiment has coalesced around a Green New Deal. In the UK, Labour’s 2019 manifesto included a pledge to lead a green industrial revolution.

These historical references – New Deal, Industrial Revolution – create an image of large-scale investment, compounding growth and rising productivity. The underlying theme is that GDP growth need not be sacrificed as countries’ primary target; indeed, that GDP growth might be enhanced by green investments.

Governments can – should – continue to seek year-on-year economic growth, but make it less environmentally damaging by reducing carbon intensity and investing in ‘green’ sectors.

An emerging group of thinkers, politicians, and activists says: enough. Even without any further growth, humanity’s current patterns of consumption require 1.75 earths if they are to be sustained.

Environmental economists have in fact been pointing out the infeasibility of green growth for decades. Improvements in energy efficiency tend to reduce relative prices, undermining any beneficial effect on overall emissions.

This is the ‘rebound effect’: increased efficiency is reflected in lower prices, which lead to an expansion in demand. The resulting increase in consumption will go some way to offsetting the efficiency improvement.

Increasing the fuel-efficiency of driving, for example, results in each kilometre of driving being cheaper: this leads to an increase in distance travelled or speed. Increased efficiency of lighting has – a 2011 study concludes – been behind the growth in artificial light use in recent years.

Irrigation improvements tend to lead to more water being used, rather than saved. This effect was first pointed out in 1865, when William Jevons noted that the increase in the efficiency of coal consumption caused by the introduction of the steam engine had increased demand for coal. Moreover, the falling price of more efficient technology enables consumption elsewhere to be increased. Cheaper driving, lighting, or water leads to rising disposable incomes and more money spent on carbon-intensive activities. A recent study found that much of the saved money thanks to smart thermostats, for example, goes on travel.

Producers, too, use money saved from cheaper inputs to grow. Prices fall and demand expands. This is the economy-wide rebound effect, by which growth more than offsets energy savings on a macro level. As a paper in Nature showed, although carbon intensity per unit of GDP is expected to decline, this will be cancelled out by the continued growth in GDP.

So it turns out that sustainable growth is something of an oxymoron. But even leaving this aside, the question arises whether GDP growth should be a goal in and of itself. The originator of the concept of GDP, Simon Kuznets, made clear that ‘distinctions must be kept in mind between quantity and quality of growth’. In 1962 he argued that ‘goals for more growth should specify more growth of what and for what’.

Since then, feminists have criticised GDP for not taking the value of unpaid labour into account. GDP growth has failed as a predictor of better health or education, or more happiness. It doesn’t prevent inequality. It means an increase in emissions that the earth cannot support. Attempts to reduce emissions frequently do not show up in GDP calculations, or distort them. Selling products with planned obsolescence built in, which guarantees future consumption, will increase GDP by more than products built to last. Selling on or repurposing used goods, does not show up in GDP calculations. Moving a conference online, rather than requiring participants to fly to a single location, registers as a loss in GDP.

It matters that GDP is so central: it has become the metric against which we compare politicians, and a primary goal politicians set themselves. Consider Donald Trump, and his mantra, ‘Make America great again!’.

His tweets frequently cite the stock market, or the economy, as incontrovertible evidence of his success: here, greatness is equated to rapid economic growth. Even critics of his presidency tend to praise the economic growth that until Covid took place on his watch.

Although a 2016 study in the Journal of Industrial Economics found that household consumption accounted for more than 60% of greenhouse gas emissions, continually increasing consumption is taken to be a bipartisan, unmitigated, good. Growth is seen as evidence of national greatness. There is no incentive for politicians to promote the kinds of changes that would facilitate reaching net zero but entail a decline in GDP.

To live sustainably – to reduce carbon emissions and prevent ourselves from running up against resource limits – we have to reduce consumption and shift away from a social system centred around growth, within which sustainable changes appear to be failures. But shift away to what? Alternatives do exist, and they give a more accurate picture of social success.

New Zealand produces a well-being budget, and Bhutan a gross national happiness index. Kate Raworth has, influentially, laid out a model of ‘doughnut economics’, which promotes the idea that countries should seek to keep consumption and production within ecological limits, while ensuring all their population meet certain living standards.

Covid has persuaded some that growth should be abandoned altogether. Amsterdam has been the first major city to move away from the growth economics model in its post-coronavirus plans. Marieke van Doorninck, the deputy mayor, has announced a plan to adopt Raworth’s doughnut model. James Shaw, New Zealand’s climate minister, has argued that the economic recovery after coronavirus must have the climate crisis at its heart. Emmanuel Macron has hinted at a move away from the centrality of growth for France.

It’s hard to face up to the impossibility of continued growth while cutting carbon emissions to net zero. Our current economic and social system is built around constant economic growth; businesses and jobs rely on it, and it can lift millions from poverty. Charges of elitism and naivety are levelled at people who reject growth as a metric of success; ‘green growth’ is an easier sell than ditching growth.

Even those most invested in abandoning the growth paradigm don’t ignore the difficulties of a transition that implicitly abandons jobs and livelihoods. Lavinia Steinfort, of the Transnational Institute, stresses the need to adopt alternative metrics for success in place of growth. She rejects the ‘degrowth’ terminology some activists have picked up, in favour of emphasising investment in care work, public services and the creative and cultural sectors.

So far, cities have led the transition. It’s not just Amsterdam that has committed to the doughnut model. Copenhagen has too. It voted to adopt the model as a tool for economic management in June. Let’s hope Copenhagen and Amsterdam can serve as models for cities elsewhere: as Steinfort says, the local is international. Abandoning the growth paradigm is risky, but essential.

• This article was originally published by Tortoise. Tortoise is commited to open, inclusive journalism and helping its members make sense of the world around them. Try it today. Download the Tortoise app and you can get your first 30 days free.