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Chapter Five - The Relationship Between Economic Growth And Climate Change

To examine the relationship between economic growth and climate change we need to return to the Kaya Identity introduced in Chapter 1.  The two are related insofar as, unless low or zero carbon technologies are promoted, carbon emission reduction means economic growth constraint.

Global CO2 emissions disaggregated

Victor (2008), a Canadian environmental economist, divided the world into high income countries (HIC) and medium/low income countries (MIC/LIC) (roughly equivalent to the Annex A and non-Annex A countries of the Kyoto Protocol (1997)) or, for simplicity, the West and Rest Of the World (ROW) and used World Bank data to populate the following tables for historic average changes in atmospheric CO2 concentrations and related variables for the period 1972-2002.  He considered the key variables of CO2, Population, GDP/Capita, Energy/GDP and CO2/Energy.  In Table 5.1, the percentages refer to the amount the variable has increased or decreased per annum.

Table 5.1: Global CO2 emissions, 1972-2002

Variable           CO2         Population         GDP/Capita        Energy/GDP    CO2/Energy

All
1972-1982        1.6%        1.6%                  1.4%                    -1.1%               -0.3%

All
1982-1992        1.8%        1.7%                  1.6%                    -1.1%                -0.3%

All
1992-2002        1.3%        1.4%                  1.4%                    -1.2%                -0.3%

Table 5.1a: High Income Countries (Annex A countries or 'West') CO2 emissions, 1972-2002

Variable           CO2         Population         GDP/Capita        Energy/GDP    CO2/Energy

West
1972-1982        0.1%        0.9%                  1.9%                    -1.9%               -0.7%

West
1982-1992        1.5%        0.7%                  2.6%                    -1.2%                -0.5%

West
1992-2002        1.6%        0.8%                  1.8%                    -0.9%                -0.1%

Table 5.1b: Middle Income and Low Income Countries (non-Annex A countries or 'ROW') CO2 emissions, 1972-2002

Variable           CO2         Population         GDP/Capita        Energy/GDP    CO2/Energy

ROW
1972-1982        1.5%        1.8%                  1.4%                    -1.7%               0.1%

ROW
1982-1992        2.2%        1.9%                  1.2%                    -0.9%                0.1%

ROW
1992-2002        0.9%        1.5%                  2.5%                    -2.5%                -0.5%

Principal Observations

There are a number of interesting observations to be gleaned from these tables.  Firstly, the fastest economic growth rate for ROW countries, which occurred between 1992 and 2002, was 2.5%.  Secondly, the fastest rates of energy intensity improvement per unit of GDP were -1.9% (1972-1982, West) and -2.5% (1992-2002, ROW).  Finally, the fastest rate of decarbonisation (-0.7%) coincided with major oil price increases during the 1972-1982 decade in high income countries.

If we were to aim for a 2C increase in temperatures relative to 1900 by 2100, the tables demonstrate that even the best energy intensity rates of 1972-2002 sustained over a 30 year period (2020-2050) - the critical period in question by which CO2 emissions would need to fall by 70% in the West and 50% in ROW compared to the base of 1990 - coincident with even better rates of decarbonisation (-2%) in ROW countries facilitated by technology transfer, would be insufficient to meet the target.  Even if these rates are feasible, population and economic growth consequences must be considered.  For Western countries neither can be afforded.  And in the ROW, population and economic growth must be constrained.

The magnitude of the problem now clarifies.  For annual population projections of 0% in Western countries and 0.8% in ROW countries, variable manipulation is now limited to economic growth to meet carbon objectives.  It is questionable whether any industrialized nation would forgo unilaterally economic growth whilst observing growth in the developing world underpinned by funded technology.  So, to the extent that economic growth is pursued by industrialized nations, there must be a renewed push for economy decarbonization via low-carbon technology implementation - although targets might not be met in the absence of population control.

Growth of the 'Right Kind' Needed

Emergence from The Financial Recession of 2008, greeted by much political class jubilation, with a return to economic growth, commends wise use of this with a focus on economy decarbonization rather than repeating the consumerism squander of the 2000s.

In short, we need growth of the 'right kind', as espoused by Lord Stern (2009) when he wrote:

"This is not to claim that the world can continue to grow indefinitely.  It is not even clear what such a claim would involve: societies, living standards, ways of producing and consuming all develop and change.  A picture of indefinite expansion is an implausible story of the future, but two things are key: first, to find a way of increasing living standards (including health, education and freedoms) so that world poverty can be overcome; and second, to discover ways of living that can be sustained over time, particularly in relation to the environment.  Strong growth, of the right kind, will be both necessary and feasible for many decades." (Stern 2009, A Blueprint for a Safer Planet, Random House, London)

We have, as it were, a kind of Faustian pact with economic growth.  On the one hand, we cannot affordto have it as shown in the Kaya Identity unless we discard our carbon reduction committments over the next 30 years.  On the other hand, we need a strong economy, and with it economic growth, to fund the development of new technologies in an environment occupied by entrepreneurs seeking to expand their capital and technology; pertinent factors of economic growth.  In a capitalist world, we have to assume that everyone acting according to their wishes produces the optimal outcome even though market failure is often commonplace and Climate Change, by 2019 at least, can be regarded as the biggest example of this.

The Next 30 Years are Critical

As the IPCC keeps pointing out, the world as a whole needs to meet targets for carbon emissions reduction by 2050 which is only 30 years hence.  Here, we see that with a 2% growth rate in the economy, which we can say is required to fund new inventions/innovations and the roll-out of clean technology, population control remains the variable to meet the CO2 commitments.  To balance the equation in the industrialized West, we would require a staggering annual decrease in population of 3.4% each and every year! And that is for a world 2C warmer.  It is difficult to imagine this being politically acceptable let alone feasible so it is likely that carbon targets will not be met and we will enter a world of temperature increases of perhaps 3C or 4C (...or even higher!)

Table 5.2: Targets for 2C, over the period 2020-2050, to achieve CO2 emission reductions of 60-80% in Western countries and 50% in ROW countries

Variable           CO2         Population         GDP/Capita        Energy/GDP    CO2/Energy

West                 -4%         -3.4%                  2.0%                    -1.9%               -0.7%

ROW               -2%          0.8%                   1.7%                    -2.5%                -2.0%

An alternative to population control could be the one oulined in the next table, Table 5.3.  Here, population is stable with no further growth planned post 2020.  However difficult this is to implement, it has the added complexity of holding economic growth to near zero in the West although, as discussed above, some economic growth is necessary to underpin technology development.  It is also unlcear how economic growth can be held in check per se with the strong profit motive in capitalist societies.

Table 5.3: Alternative targets for 2C, over the period 2020-2050, to achieve CO2 emission reductions of 60-80% in the West and 50% in ROW countries.

Variable           CO2         Population         GDP/Capita        Energy/GDP    CO2/Energy

West                 -4%          0.0%                   0%                      -1.9%               -2.0%

ROW                -2%          0.0%                  2.5%                    -2.5%                -2.0%

For the sake of argument, I also illustrate here a constant population number in the ROW, as in the West, which allows a higher economic growth of 2.5%.  Once again, competition being as it is, the West is hardly likely to stand by and watch the ROW get richer while it stangnates.  Table 5.3, above, is therefore best thought of as a hypothetical stable population case scenario.

1.5C Target not 2C Target

To further complicate the matter, we have so far only considered scenarios to limit temperature increase to 2C.  As James Hansen, the godfather of Global Warming, feared in the late 1980s, climate sensitivity might be double that of our current thinking and if this is the case a target of 1C should be considered (a threshold which we have already arrived at).  By way of compromise, the Paris Accord of 2015 set a target of 2C whilst also recognising that best efforts should be made to meet a lower target of 1.5C.

A 1.5C target equates to carbon emission reductions of 95% in the West by 2050 (to all intents and puposes 'zero-carbon'), and 70% in the ROW - with the entire planet becoming anthropogenic carbon free by mid-century.  Unfortunately, unless we can decarbonize the economy by rates much higher than we have achieved in the past, then, as the table below, Table 5.4, shows, we are facing the very real possibility of requiring a population decrease of as much as 90% in the West and 50% in the ROW before 2050 (-8%p.a. in the West and -2%p.a. in the ROW).

Table 5.4: Targets, over the period 2020-2050, to achieve CO2 emission reductions to meet the new 1.5C target with 95% reductions by 2050 in the West and 70% reductions in ROW countries.

Variable           CO2         Population         GDP/Capita        Energy/GDP    CO2/Energy

West                 -10%        -8.0%                 2.0%                    -2.0%               -2.0%

ROW                -4%          -2.0%                 2.5%                    -2.5%               -2.0%

The International Energy Agency (IEA) based in Paris is very much aware of the immense challenge this 1.5C option entails.  In its World Energy Outlook 2016 report, for example, it wrote: "The energy sector challenge associated with a temperature goal of 1.5C is stark: it could require reaching net-zero emissions as early as 2040.  For this to happen, all end use sectors would need to be electrified at unprecedented pace, and practically all power and heat production would need to be low-carbon.  It would need rapid deployment of biomass with CCS (carbon-capture and storage) to compensate residual emissions fossil-fuel use in sectors where they are difficult to substitute.  Regardless of future technology availability, it would require radical immediate reductions in CO2 emissions, using every known technological, behavioural and regulatory decarbonisation option." (World Energy Outlook, 2016, IEA Paris).

It is not all doom and gloom however, provided you live in a country which has taken Climate Change seriously for a long time.  The Western countries, which initially backed the (first) Kyoto Treaty saw, by 2012, CO2 concentrations fall by 23% below 1990 concentrations.  This, however, masks the fact that most of this was accounted for by the post-1990 USSR collapse and the offshoring of heavy industry and manufacturing to developing countries such as China.  The global problem remains unsolved!

The United Kingdom

For the U.K., the results are not as severe.  Thanks to early legislation in the form of The Climate Change Act (2008), which sets legally binding targets for CO2 concentration reductions via 5-year Carbon Budgets, by 2020 the concentrations will approximate to 40% below 1990 concentrations.  This means that a further 60% is required by 2050 - although admittedly this will be much harder to realise.  The U.K. has already exported much of its heavy industries to the developing world and transformed the country into a largely services sector economy.  By 2025, for example, coal will be removed completely.   As Table 5.5 below shows, however, the population would still need to decrease by 1% per annum over the 30-year period even as decarbonization proceeded at a high rate of 2% p.a.

Table 5.5: Targets, over the period 2020-2050, to achieve emission reductions to meet the 1.5C target - with a 60% reduction by 2050 in the U.K.

Variable           CO2         Population         GDP/Capita        Energy/GDP    CO2/Energy

U.K.                -3.0%        -1.0%                  2.0%                    -2.0%               -2.0%

A 90% Western world population reduction (and 50% elsewhere) would necessitate a global-scale catastrophe.  This may seem unacceptable although runaway global warming would be just as threatening, if not worse, with catastrophic species and ecosystems collapse.  This is not to say there would not be safe havens where man would survive but by the end of this century this would be a desperate/untenable existence.

A 1% reduction in UK population per annum equates to an approximate 25% reduction over 30 years.  This contradicts plainly the current Office of National Statistics (ONS) predictions of an increase in the U.K. population over the same period of 0.8%p.a.

The United States of America

The situation in the U.S.A. is more difficult still since it is a laggard in reducing its own CO2 emissions with the 2014 totals 7% higher than those of 1990 - although 7% lower than its preferred based of 2005.  In recent years, CO2 emissions have also risen not fallen.  To be consistent with international norms, a common base point of 1990 should be used so that by 2020 CO2 emissions would be comparable to the 1990 totals, which, sadly, represents no real progress (despite all the clean techology innovation in the U.S.A).  The U.S.A. population would therefore need to fall by about 8%p.a. during the period 2020-2050 (or at least until decarbonization rates accelerated!).

Conclusion

Whichever way one examines the problem, it is important to remember that the critical equation:

             F = P * (G/P) * (E/G) * (F/E) = P * g * e * f

must balance.  If economic growth is higher, either the population must fall or the economy must 'green' faster.  If we are to save more people, either the real economic growth must be lower or, again, the economy must 'green' faster.  Having established that some economic growth of the 'right kind' is necessary, more people can only be saved by increasing our efforts to 'green' the economy.

Available measures to 'green' the economy will be explored in Chapter 8 (due 1 January next year) after first, on 1 November, considering how possible it is really is to reduce the general population total.



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