How risky is economic growth?

It is one of the most daunting tasks humanity faces: stopping climate change and ending poverty at the same time.

But the best-laid plans to do so are dangerously speculative, a DW analysis shows. Betting on green growth risks overheating the planet, while degrowth in rich countries could worsen poverty elsewhere.

In 2015 world leaders promised to try and cap global warming at 1.5 degrees Celsius (2.7 Fahrenheit) by the end of the century — but temperatures are hurtling toward that threshold, which is likely to be crossed in a decade, and current policies are set to heat the planet 2.7 C instead. Sticking to even that level of heating assumes humanity will suck pollutants out of the atmosphere with costly technologies that are unproven at scale. 

Alarmed, some researchers want the countries most responsible for having warped the climate to abandon their pursuit of economic growth and use less energy — most of which comes from burning fossil fuels. But cheerleaders of degrowth lack the detailed modeling to show what these policies would mean for poverty across the world.

There is no academic literature at a global level to show removing that much carbon or degrowing economies works, said Yamina Saheb, a lead author of a review of climate solutions published by the UN Intergovernmental Panel on Climate Change (IPCC) in April 2022. "We don't have the answers."

Decoupling GDP growth from greenhouse gas pollution

Supporters of green growth — the pathway most world leaders are taking to tackle climate change — want to break the link between economic (GDP) growth and greenhouse gas emissions.

Bigger incomes are correlated with higher standards of living. As people get richer, they can afford healthier and happier lives.

But data for many economies around the world shows that more money means more pollution. The more things people buy, the more energy they use.

Most of that comes from burning fuels that clog the atmosphere with heat-trapping gas.

Humanity has begun to buck that trend.

For decades, countries like Germany and the UK have grown their economies while cutting their carbon pollution. Policymakers have shuttered coal plants, forced factories to work more efficiently and built wind turbines and solar panels that make clean electricity. 

An analysis published last year found 32 countries had decoupled GDP growth from greenhouse gas emissions. After accounting for emissions embodied in goods they imported from abroad, this fell to 23 countries.

But in big economies from Brazil to Indonesia, growth and pollution are still tightly linked.

The sluggish pace of change has led degrowth researchers to sound alarm bells. A 2020 review paper found decoupling rates were too low to hold global warming to 1.5 C. 

If governments were to cut emissions fast enough to get there, it would imply a drop in energy use so great that GDP would likely decline, too, said Lorenz Keysser, a researcher at the Swiss Federal Institute of Technology in Zürich who has published studies on degrowth. "It's not a goal of degrowth to reduce GDP. It's just an anticipated consequence — and one which needs to be prepared for." 

Scientists lack research on degrowth and carbon dioxide removal

Green growth and degrowth supporters agree poor countries should grow richer so living standards can rise. Their dispute centers around whether the rich world — which has eaten more than its fair share of the carbon cake and refuses to divide the rest up equally — should be allowed to grow as well.

But scientists have no clear answers — because they lack in-depth modeling showing what degrowth policies would do to society. All 3000 scenarios for cutting emissions evaluated in the latest IPCC report assume countries will keep growing richer.

That has created a conundrum for scientists trying to show policymakers how they can keep global warming to 1.5 C even as energy demand rises and the carbon budget shrinks. The solution their models came up with is to overshoot the 1.5 C target before sucking CO2 out of the atmosphere and bringing temperatures back down later in the century.

This pathway — green growth followed by carbon dioxide removal — is baked into political commitments to reach net-zero emissions. Without relying on these technologies, the remaining carbon budget for hitting the 1.5 C target will be exhausted by about 2044 if countries cut emissions at a constant rate.

The IPCC report found that removing some amount of carbon dioxide is now unavoidable to counter emissions in sectors that are hard to clean up. But the technologies to do so are expensive and untested at the large scales used in the models. Some forms of carbon dioxide removal take up such vast amounts of land that many scientists are reluctant to bet on their widespread use.

Degrowing rich countries could slow fight against poverty

But calls to cut energy demand could make poverty worse, critics of degrowth counter. Protestors pushing for an end to growth often overlook the distinction that academics make between targeting rich countries and not poor ones.

In fact, the net result of degrowth in rich countries and growth in poor ones may be enough to make the global economy bigger. The answer depends on the scale of growth needed to bring people out of poverty.

"To get anywhere close to an end of poverty very large growth is needed, even in a future in which the inequality in the world would be reduced massively," said Max Roser, an economist at the University of Oxford and director of the platform Our World in Data. An analysis he published last year found the world economy would need to grow five-fold for everybody to reach an income level of US$30 per day, which is roughly the poverty line in a rich country.

But focusing on growing the economy to end poverty is a poor way to achieve well-being, supporters of degrowth argue.

A 2021 study found world leaders could stop climate change at 1.5 C and raise living standards by consuming less energy. Providing people with enough energy for a decent standard of living – with good food, shelter, health, education and transport – would require one-fourth of the energy demand projected by 2050, the researchers found.

Such a proposal would upend big, energy-intensive economies but reduce pressure on the climate. It will be very difficult to stay within planetary boundaries if we take our inefficient way of delivering wellbeing in rich countries and continue to scale it up, said Jarmo Kikstra, a climate modeler at the International Institute for Applied Systems Analysis and lead author of the study.

So far, calls for degrowth have been limited to activists and academics rather than policymakers in countries suffering most from climate change. They have demanded rich polluters cut emissions and pay for the destruction wrought by violent weather extremes — but have not demanded they consume less. 

Experts fear that cutting growth in rich countries could also hurt growth in poor ones. Stopping luxury consumption like fast-changing fashions and foreign holidays would be a blow to industries that form the engine of growth in countries from South Africa to Sri Lanka.

In response, degrowth researchers say they are trying not just to stop climate change but also fight for economic justice. Curbing growth in the rich world would need to happen alongside policies to support domestic industries in poor countries and end unequal trade relationships, they say, though they do not have models to show these effects.

The economic hit could be offset if the countries most responsible for climate change paid reparations in the form of money and patented technology needed to decarbonize, said Fadhel Kaboub, an economist at Denison University in the US who studies financial sovereignty in poor countries. "We're really talking about a climate debt that needs to be paid."

Yet even while scientists are undecided on the need for degrowth to stop climate change, they are clear that technological solutions alone are not enough.

In homes, for instance, improvements in efficiency have so far been matched by increases in living space. On roads, the pollution avoided by electrifying cars has been offset by the rise in heavier SUVs.

The latest IPCC report found policies to slash energy demand can cut emissions 40-70% by 2050 through measures like flying less, insulating homes and replacing meat in diets with plants. It highlighted the need for policies to increase sufficiency — meeting human needs within the boundaries of the remaining carbon budget — as well as continuing to improve technological efficiency.

"The choice today is between saying we need sufficiency policies right now ... or continuing with incremental improvements," Saheb said.

Edited by: Gianna Grün and Jennifer Collins

Editor's note: Two graphics originally published as part of this article have been corrected because they contained a calculation mistake. We apologize for the error. (July 1, 2022.)