Is Decoupling GDP Growth from Environmental Impact Possible?

Can we have economic growth while reducing our impact on the environment?

Some people believe growth is incompatible with sustainability and that we need to move to a “no growth” or even a “de-growth” economy.

Others think we can still have growth if — big if — our consumption of energy and resources did not increase as the economy grew.  This idea is known as decoupling.

Relative decoupling occurs when resource and energy consumption grows more slowly than the economy; in other words, when we use energy and resources more efficiently.  There’s lots of evidence that we are indeed using fewer resources and less energy to make the things we need and want.  In some areas those efficiency gains have been really impressive.

Absolute decoupling would occur if resource and energy consumption stayed constant or better yet declined while the economy continued to grow.  Here too, there seems to be agreement that absolute decoupling has occurred for some specific resources or pollutants.  For example, we’ve done a good job dramatically reducing the use of chlorofluorocarbons that once threatened the Earth’s ozone layer.

And according to this report, in 2019 greenhouse gas emissions actually declined in the US while the economy grew moderately, largely due to declining use of coal for electricity generation.

These are good steps forward, but the real question is whether absolute decoupling is happening, or even possible, at a national or global level over a sustained period of time.

gray industrial machine during golden hour

Photo by Pixabay on Pexels.com

I’ve been reading quite a bit about this question over the last few months. I’ve written a couple of posts about it too – one post about a book called More From Less, and one about a research paper called Peak Stuff.

In this post I am going to look at another paper about decoupling.

James Ward of the University of South Australia and his co-authors examined decoupling in Australia in a 2016 paper called Is Decoupling GDP Growth from Environmental Impact Possible?  While Peak Stuff looked at empirical data about material as it flows through the economy, this paper takes a more theoretical approach by building a mathematical model of environmental impact and then attempting to determine if absolute decoupling is possible using that model.

Warning: there’s a bit of math coming up.  This won’t hurt a bit.

Ward and his associates modeled environmental impact using something called the IPAT equation which looks like this:

I = PAT

where

I = environmental Impact
P = Population
A = Affluence, usually measured in $ GDP per capita
T = Technology

The IPAT equation has been used since the 1970’s. It represents the relationship between population, affluence, resource consumption and environmental impact.  Increasing population for example will increase environmental impact.

T is probably the most difficult part of this equation.  Apparently, T is usually interpreted to mean the “factor intensity” of a resource or pollutant – the amount of that resource or pollutant required to produce one dollar of GDP.  For example, it might measure joules of energy per dollar of GDP, or metric tons of steel per dollar of GDP.

This leads to another point:  you need an IPAT equation for every resource or pollutant you’re trying to measure.  So in general, for resource “j” the equation would be:

Ij = PATj

Finally, you need to run this equation over time, say each year, over the period you are trying to model.  Using “t” to represent the year, the equation really would be something like:

Ij (t) = P(t) * A(t) * Tj(t)

OK, I don’t want to dive too deeply into the math. Please read the paper if you’re interested.  And if you want to learn more about the IPAT equation you can read a 2001 paper called The IPAT Equation and Its Variants.

Suffice it to say that Ward and his associates make some assumptions, do some calibrations and run the IPAT equation for energy and resource extraction in the Australian economy out to the year 2100.  Their conclusions:

“On the basis of this simple modeling, we conclude that decoupling of GDP growth from resource use, whether relative or absolute, is at best only temporary. Permanent decoupling (absolute or relative) is impossible for essential, non-substitutable resources because the efficiency gains are ultimately governed by physical limits.”

and

“Our model demonstrates that growth in GDP ultimately cannot plausibly be decoupled from growth in material and energy use, demonstrating categorically that GDP growth cannot be sustained indefinitely.”

Essentially their argument boils down to two key points:

  1. In the long run, some resources have no substitutes (e.g. land, fresh water) and therefore efficiency gains will eventually run up against hard physical limits.
  2. For any given resource or pollutant, absolute decoupling requires declines in use or intensity at a rate equal to or greater than GDP growth not just for a year or a decade but forever.

I’m not completely convinced.  I think the authors have overstated their case. They’ve reached some very definite conclusions on the basis of a relatively simple, perhaps simplistic, mathematical model.  My concerns come down to this: the farther out you try to project, the less confidence you can have in the accuracy of your predictions.  Even looking out to 2100, within the lifetime of kids being born today, there’s enough time for some wildly unpredictable events or innovations to occur.  Or for elements of the model to interact in unforeseen ways.  Or for substitutes to be found for supposedly non-substitutable resources.

That said, I think the models do point to a set of plausible outcomes based on current trends and data. The paper should dissuade anyone from assuming that absolute decoupling is going to happen automatically.

As with models predicting global warming and sea level rise out to 2100, we should use them as warning signals that tell us action is needed now if we want to avoid highly undesirable outcomes.

This is also a good time to note that the debate about decoupling is related to but separate from taking action on global climate change.  Without question, one of the things we need to decouple from is CO2 emissions.  And that challenge ought to be our most critical and urgent and overriding concern.

Unless we bring CO2 emissions under control, decoupling will become moot.

UN Sustainable Development Goals

Source: United Nations

The authors make one more important point towards the end of their paper: if we want to build a more sustainable society, we need to adopt a broader set of goals than just GDP growth.  They point to the United Nations Sustainable Development Goals which include eliminating hunger and extreme poverty, providing health care and quality education for everyone, addressing gender inequality, building sustainable cities, action on climate change as well as inclusive and sustainable economic growth.

On that, I completely agree.

References

Chertow, MR (2001) The IPAT Equation and Its Variants. Journal of Industrial Ecology, Vol. 4, No. 4. https://notendur.hi.is/bdavids/UAU_102/Readings/Chertow.pdf

Ward JD, Sutton PC, Werner AD, Costanza R, Mohr SH, Simmons CT (2016) Is Decoupling GDP Growth from Environmental Impact Possible? PLoS ONE 11(10): e0164733. https://doi.org/10.1371/journal.pone.0164733

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