Economic growth measure fails on green front

The UK economy shrank by 9% in 2020 but bounced back in 2021, growing by 7.5%. This year, it is expected to grow by 3.6%. These numbers matter a lot to the government, but there is increasing debate about how relevant they are to setting economic policies to tackle the climate and ecological emergencies.

That’s because our national prosperity is measured purely by the rise or fall in the market value of all the goods and services we produce (known as gross domestic product, or GDP). There is no consideration of anything that can’t be measured in price terms, including environmental and social matters. And that is a problem, according to climate focused economists called on to give evidence to the government’s Environmental Audit Committee earlier this year.

For example, the value of planting trees will only be measured if and when those trees are cut down and sold as timber. They are not valued for the shade they provide, the carbon they sequester, or the habitats they offer to wildlife. Even more perversely, the likelihood of more severe storms, floods, heatwaves and wildfires due to climate change will be good for economic growth because cleaning up after such events will add to GDP. There is no accounting for the loss of life, livelihoods, housing or infrastructure.  

Similarly, GDP, which was developed as a measuring tool in the 1930s, ignores both the environmental damage caused by extracting fossil fuels and the pollution and greenhouse gas emissions caused by burning them. And what doesn’t get measured doesn’t get managed, as the well-known saying goes.

Another critical aspect in tackling climate change is that of equity. Richer nations have caused the problem while poorer nations not only suffer most from the effects but are also less able to adapt. This is recognised in environmental treaties, with richer nations committing to help poorer ones develop and cope with adaptation. 

GDP also ignores distributional issues. This is most obvious when the government celebrates a rise in GDP whilst a majority of the population see a stagnation in their income and a drop in living standards. But it is also present when importing natural resources and value from poorer nations without properly compensating them.

Given these defects, the Environmental Audit Committee asked its five witnesses whether GDP is still up to the job of guiding economic targets. Only one declared support for GDP remaining a key metric, with perhaps some enhancement for environmental effects. The other four said it was no longer fit for purpose and we need to employ a range of measures, perhaps in the form of a dashboard, to record financial, social and environmental elements of prosperity or damage. 

Many such measures are readily available, including sustainable development goals, environmental and planetary boundaries and measures of social wellbeing, but few countries build them into their economic plans or give them any prominence.

Some witnesses also threw doubt on the goal of ever increasing economic growth in rich countries like the UK, with research quoted showing that the richer a nation becomes, the less beneficial is additional wealth. 

The ability to grow our economy whilst reducing carbon emissions, a process known as “decoupling”, was another topic of discussion. Witnesses criticised the government’s claim to have achieved significant decoupling, pointing out that the emissions embedded in our imports are not counted. We should also take account of our historic emissions and our material (non-carbon) footprint on the environment and planet, they said.

It will be hard to move away from the metric of economic growth as it is built into many of our social structures, and much work is needed to imagine how a post-growth society and economy would operate. But the consensus among the witnesses to the committee was that it needs to be done.

IPCC Working Group lll report on mitigation of climate change

António Guterres

Climate activists are sometimes depicted as dangerous radicals. But the truly dangerous radicals are the countries that are increasing the production of fossil fuels. Investing in new fossil fuels infrastructure is moral and economic madness.

Christiana Figueres

The IPCC report tells us we are on a suicidal path. Change or kiss stability goodbye.

There is a wealth of analysis and opinion on this report in the press and professional journals but CarbonBrief’s comprehensive detailed question and answer paper covers the main aspects. 

Much more has still to be written but here is a summary highlighting some key areas of interest.

Introduction

On 4 April the IPCC released its third report, by Working Group lll (WG3), from its 6th Assessment Report, with an updated global assessment of climate change mitigation progress, explaining developments in emission reduction and mitigation efforts and assessing the impact of national climate pledges in relation to long-term emissions goals.

As is always the case, the main report from the scientists, of about 3,000 pages, was then summarised with every line of the summary discussed, and where necessary amended or removed, in order to gain the approval of 195 countries. The result is the 64 page  “Summary For Policymakers” (SPM). 

At two weeks, the discussions over the SPM were the longest of any such report with key text such as “vested interests”, “lobbying”, “degrowth”, “media” and even “economic growth” all appearing multiple times in the main report but missing in the SPM, reflecting the influence in the review process of vested interests determined to avoid publishing issues that reflect badly on their activities.

Based on current policies the report gives a likely increase in temperature over pre-industrial levels of 3C (2.2C to 3.5C) by 2100 and says that if we are to stay below 1.5C, with limited or no overshoot (ie exceeding 1.5C before 2100), greenhouse gas emissions must fall 43% below 2019 emissions by 2030 – on the whole that’s  48% for carbon dioxide and 34% for methane. 

It’s worth noting that, as a result of the pandemic, CO2 emissions dropped by about 6% in 2020 but they have since bounced back meaning that, effectively, from the start of 2022 the report says we have to match 2020’s reduction in each of the remaining eight years of the decade.

One aspect of the report that has been widely misreported in the press is the point at which emissions must peak, covered in the report as:

Global greenhouse gases are projected to peak between 2020 and at the latest by 2025, in global modelled pathways that limit warming to 1.5C 

This was taken to mean that we can continue to increase emissions for another  three years whereas, in reality, emissions should have peaked closer to 2020. It is explained here

What the new IPCC report says about how to limit warming to 1.5C or 2C 

(based on: CarbonBrief analysis)

The report provides a detailed view of possible futures and potential solutions  based on 1,200 scenarios from the IPCC’s database that were considered suitable to calculate a broad range of future greenhouse gas emissions and global climate outcomes. 

In other words, the report doesn’t offer a projection of where we are going but, given where we are and promises made, provides a detailed view of possible futures, with emphasis on those indicating temperature outcomes of below 1.5C and 2C. So, for example, some will involve rapid reductions in fossil fuel use and others rapid reductions in energy demand.

Nearly all scenarios however rely, in differing degrees, on Carbon Dioxide Removal (CDR) either to cater for residual emissions of CO2 and non-CO2 gases (eg Methane) or to reverse interim temperature “overshoots”, say to 1.6C, by anticipating “net-negative” emissions, to bring the average temperature back down to the target by the end of the century.

The CDR envisioned is a mix of natural, eg afforestation (planting on new ground) & reforestation (replacing trees lost), and technological, eg Bioenergy with Carbon Capture & Storage (BECCS) & Direct Air Capture & Carbon Storage (DACCS). 

There are no scenarios where large deployments of CDR avoid the need to substantially reduce emissions over the course of the 21st century, if warming is to be limited below 2C.

Nevertheless the authors caution that CDR “cannot serve as a substitute for deep emissions reductions” pointing out that the role of CO2 removal can at times be over promoted in some scenarios due to insufficient reliance on renewables, such as wind and solar, limited use of demand-side options (reducing the energy we use) and understating the future costs of CDR technologies.

Concerns are also expressed that: 

..the prospect of large-scale CDR could…obstruct near-term emission reduction efforts, mask insufficient policy interventions, might lead to an overreliance on technologies that are still in their infancy, could overburden future generations, might evoke new conflicts over equitable burden-sharing, [and] could impact food security, biodiversity or land rights.

Despite these warnings scientists and environmentalists see CDR, and now larger overshoots, to say 1.7C or 1.8C, as just another way for policy makers to kick the can further down the road, rather than take the radical action needed today to both replace fossil fuels with renewables and reduce energy demand.

It is also noticeable that with the IPCC judging that 1.5C is now likely to be reached early in the next decade; statements by policymakers and media are shifting from emphasising a 67% likelihood of staying below 1.5C and “keeping 1.5 alive” to a 50% chance of 1.5C and a 67% chance for 2C. The report indicates that, with current policies, the chance of remaining below 1.5C with little if any overshoot, is now around 33% and some academics are now indicating that 1.5 is no longer achievable.

As an aside, research subsequently published in Nature assessed and plotted all national pledges (promises) currently on the table and surmised that if all came to fruition (action) temperature at the end of the century could be limited to just below 2C. Unfortunately some in the media have painted this in an over optimistic light, ignoring both the poor history of turning pledges into policy, then action and warnings of the threats in a +2C world. Here is a more balanced opinion by Christiana Figueres

Summary of mitigations

Section C12 of the SPM (page SPM-48) sets out the costs and savings associated with each mitigation option, making the point that no account is taken of the costs of doing no more than is already in place.

It ends with this chart which shows, for each type of mitigation, its potential for reducing emissions by 2030, so the longer the bar the better the result, with the colour gradation indicating the relative costs, blue = saving  and red = the costliest.

Chapter 5: Demand, services and social aspects of mitigation

The title of this chapter in the main report belies its importance. This is the first time a WG3 report has contained a section on the realities of demand in terms of what people currently consume and what they need, rather than what suppliers, eg the fossil fuel industry, say drives them to keep supplying more, a given in all the climate models.  

The chapter dispels the myth, again favoured by fossil fuel companies, that poorer nations will need to continue to use fossil fuelled energy to improve their wellbeing, before being able to switch to renewables and other forms of mitigation.

The environmental movement has always promoted circular economies of reuse, sharing, more efficient alternatives and the need to stop overconsumption and it’s now official, scientific research not only backs this up but takes it to the wider global economic level best summed up by one of the chapter’s co-lead authors, Prof Joyashree Roy :

Assessment of social science literature from various disciplines helped this report to mention with high confidence that people do not need energy per se but they need a set of services to meet their basic needs such as comfortable homes, mobility and nutrition.  

A paradigm shift in the way we think about climate action is reported for the first time in this IPCC report. If people are provided with opportunities to make choices supported by policies, infrastructure and technologies, there is an untapped mitigation potential to bring down global emissions by between 40 and 70% by 2050 compared to baseline scenarios.

The evidence described in the chapter dispels the myth that demand drives supply and economic growth, rather suppliers drive increasing supply, economic growth, overproduction, built in obsolescence and waste (in resources and money). Similarly it highlights that, by using the potential of demand side mitigations, the need for CDR technologies could be minimised. 

Environmental economist Prof Julia Steinberger, a contributing author to chapter 5 commented:

This is the first time we’ve ever had a chapter on demand because this idea about economic growth and demand being linked was just untouchable. Everybody wants economic growth, so everybody wants demand to increase and that’s it. But as soon as you start questioning it, you realize that it’s a God with clay feet. That you can actually do a lot better with a lot less. There’s nothing preventing us from doing a lot better and using a lot less, including resolving poverty and deprivation around the world.

Recognising the inequitable use of energy, and greenhouse gas emissions of wealthier regions and households, the chapter describes how the global population could be provided with the essential services it needs for decent living standards with half of the energy currently expended.

Not surprisingly, considering the need for international approval, including by vested interests, much of Chapter 5 didn’t make it to the SPM however a few seeds were sown including, in Section B, regional and societal disparities summed up in this extract from B.3.3:

In 2019, around 48% of the global population lives in countries emitting on average more than 6t CO2-eq per capita….35% live in countries emitting more than 9 tCO2-eq per capita. Another 41% live in countries emitting less than 3 tCO2-eq per capita. A substantial share of the population in these low emitting countries lack access to modern energy services. Eradicating extreme poverty, energy poverty, and providing decent living standards* to all in these regions in the context of achieving sustainable development objectives, in the near-term, can be achieved without significant global emissions growth. (high confidence).

*Decent living standards are defined as a set of minimum material requirements essential for achieving basic human well-being, including nutrition, shelter, basic living conditions, clothing, health care, education, and mobility.

In addition to the chapter 5 download there’s an easier read starting on page 101 of the Technical Summary.

Other reference material:

CarbonBrief: Scientists react: What are the key new insights from the WG3?

Dr Gilbz: 6 minute video

Guardian: “Now or never

Discussions with Amy Westervelt: Economics, Conflicts of Interest, Media Manipulation & More (including Chapter 5)

Environmental Audit Committee: Call for emissions to be published with GDP figures to measure progress towards net zero

Following the committee’s inquiries in February & March into “Aligning the UK’s economic goals with environmental sustainability” and, in particular, how the reliance on GDP as a sole measure of prosperity can hide the climate and ecological impacts of economic growth, the committee has written to both the Chancellor and the ONS to call for estimates of greenhouse gas emissions to be published alongside GDP figures to indicate whether economic growth and slashing emissions can be achieved together.

The letters highlight in general the isolation of climate and ecological data reporting from fiscal reporting and how a true picture of how the country is progressing in all aspects of the economy, the environment and net zero targets is impossible unless integrated reporting is provided. 

Much is made of the failure to implement the recommendations of the “Dasgupta” review into our economy’s reliance and impact on the natural world.  This was a review commissioned by the Chancellor and had these headline messages

The two letters are similar in content but the one to the Chancellor provides the main thrust of the committee’s recommendations.