Crunched: is economic growth fuelling climate change?

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So, Federica, what has been bugging you this week.

Well, I thought we could stick our teeth into this debate about whether economic growth is the enemy of the environment.

All right.

There was this video that caught our attention, that went viral.

We have to overthrow this system which is eating the planet with perpetual growth. I mean, since when was GDP a sensible measure of human welfare. And yet everything that governments want to do is to try to boost GDP.

Now people like the OECD or the World Bank are saying, oh, we're not asking for a lot of growth. Just 3 per cent a year. That means doubling in 24 years.

Yeah, we're bursting through all the environmental boundaries and screwing the planet already. You want to double it? Double all that. Double it again. Keep doubling it? It's madness. We've got to find a better way of measuring human welfare than perpetual growth.

You know, it's a very striking video. He makes a very strong argument there. But I think there's a difficulty, there's a risk here that we say that economic growth and sustainability and environment are mutually exclusive. That we're sort of saying you can't reduce emissions while having economic growth.

But there's a really interesting chart I saw the other day which is showing how economic growth has changed but also how the energy intensity of that growth has changed. So how much energy it takes to produce a given amount of GDP.

We're starting from 1980 and going through to 2017. And if we normalise all the numbers, so whatever the figure was in the year 2000 becomes a value of 100. And GDP globally has come through, and it is now double what it was, global GDP, in 2000.

However the carbon intensity of that GDP has been gradually decreasing. So the amount of carbon dioxide and the amount of energy that is used to create economic growth has reduced, and that sort of pulled down the total fossil fuel emissions. So fossil fuel usage has risen by much less than economic growth because the energy intensity of GDP has improved.

If this energy intensity, the efficiency at which we grow the economy continue to improve, you could get to a point where we have growth, but we are still cutting emissions. So I just think we shouldn't throw out the baby with the bathwater and say economic growth is now suddenly a bad thing.

This chart purports to show that fossil fuels and energy intensity, that the pace of growth, of these elements of economic growth has either slowed or is actually declining. So everything is rosy. However, I think that it isn't. If we look at oil consumption, for example.

OK. So this is global oil consumption from 1994 to 2019. We've now hit 100m barrels per day being consumed. So clearly, if we want to save the environment we can't carry on like this. Where I disagree with George Mombiot is that I don't think it's necessary that we start with overturning the system. I think we should go back to how the system is measured.

OK.

And I'm not the only one who thinks that. There is a massive debate amongst economists in terms of how we measure economic growth. And some have come up with this idea of green GDP. So this is environmentally-friendly economic growth, and it all goes back to the idea that gross domestic product and how we measure it is very faulty.

Let's say, for example, when often in our articles we'll cover quarterly growth and we'll see the economy this quarter is growing by 0.2 or 0.4 per cent. This decimal point gives us the idea that it's a very accurate and precise number. But there's a lot of uncertainty behind this number, actually.

Let's say there's a natural disaster. Because of all the reconstruction efforts that are needed to rebuild a society after a natural disaster, that also counts as economic growth. So even though we've lost assets, there's been destruction, by definition, that's still counting towards economic growth to the economy.

The output is still there, yeah.

So statisticians have come up with a new measure for economic growth that is more environmentally-friendly, that discounts waste, social disharmony, and so on and so forth. And that's actually been pioneered by some Chinese statisticians, and they come up with a formula for green GDP.

OK now, green GDP, to me, I mean, it sounds conceptually great, but how does that even work? How do you calculate it? Are they going around counting trees being planted, and polar bears being saved? How do you calculate green GDP?

And what kind of monetary value can you assign to a river, for example. I mean, some people have tried to do that, but let's not get stuck into this. I'll show you the formula for green GDP. It's actually kind of simple. Almost too simple, which will make us a bit sceptical.

So basically, it's... we'll just start from GDP as we measure it now and we subtract from that CO2 emissions, waste, and the money that we could have made had we converted that waste into electricity, and we remove also the natural resources that we depleted when creating this economic growth.

Cool.

And they've applied this to a couple of countries to see what difference the real GDP and the green GDP will make to economic growth.

So I guess this will show us which countries are getting the sort of dirtiest economic growth, and which have got sort of the cleanest growth, as you were. Like the difference between those numbers.

Yeah, I suppose so. And let's try and make a chart with something that I used to use in elementary school. This is in Italy.

Excellent.

Number blocks. They just extracted GDP growth figures from 2014 from a bunch of countries, and they looked at those measures for economic growth. And then applied that green GDP formula. Let's have a look at a couple of countries. Now we were going through this, and we thought Mexico was quite interesting.

So Mexico's conventional GDP growth rate in 2014 was 2.87, so about 3 per cent.

About 3 per cent.

But it's green GDP growth in that same period was actually a contraction of 3 per cent.

Yeah. So in fact, it's negative. So the economy contracted if we consider waste, CO2 emissions, environmental depletion. Mexico's economy contracted.

So we're sort of saying they were using a lot of the fossil fuels. They were creating a lot of waste, and they were probably depleting natural resources to produce that growth.

Now let's look at China. China grew by 9 per cent. Actual green GDP...

Dropped to 6 per cent. Now let's see. 1, 2, 3, 4, 5, 6. So it came in from 9 to 6 when you factor in those resources.

Let's have a look at the US and the UK.

So the US was going to 4 per cent and came in to 3 per cent.

UK 10 per cent growth in 2014.

Let's do it.

I don't believe this. OK, but whatever. This is 10 and then green GDP, it's 9 per cent. So to be clear here, we have the green GDP, it doesn't actually mean that our environmental resources have grown. This is just a more eco-friendly way of measuring economic growth in itself.

Now separately, there are efforts to actually calculate what is called our natural capital, our trees, and our fish, and so on, but it's still at a very primordial stage.

And so I guess to bring this back to what George Mombiot was saying in the video at the start, the problem we have today is that economic growth, as it's currently measured, is in tension with environmental conservation, and generally when economies grow part of that growth is coming from resource depletion, from damaging the planet.

If economists, natural accountants, as it were, all of these different bodies can come together and create a new measure, a more ecologically-friendly measure of green GDP, then we could get to a stage where countries could be targeting that green GDP in their growth. Could be growing, and yet not at the same time damaging the planet.

So effectively, the ball now is in the court of the beancounters. It's up to them.

We need a robust measure that all countries can agree is a precise and useful measure, but one that includes, takes into account of the value of natural resources and waste in fossil fuels. Let's see what they can do.