25 january 2010

Economic growth no longer possible for rich countries, says new research

Press release, New Economic Foundation, 25 January 2010

Growth ‘drowns-out’ efficiency gains. Environmental ‘tolerance thresholds’ are being pushed too far making a growing economy and a safe climate incompatible according to new modelling from nef (the new economics foundation).

As economists and politicians anticipate the publication of official figures for UK economic growth and the World Economic Forum gathers at Davos, new research from independent think-tank nef, warns that we should be wary of celebrating rising GDP.

The report, Growth Isn’t Possible: Why rich nations need a new economic direction, published today, Monday 25 January 2010, presents evidence that endless economic growth isn’t possible when faced with the threat of climate change and other critical environmental boundaries.

In a unique analysis, the authors assessed a combination of the leading models for climate change and energy use in the global economy. They then asked whether global economic growth could be maintained, while retaining a good likelihood of limiting global temperature rise to 2 °C, the agreed political objective of the European Union and considered the maximum rise to which humanity could adapt without serious difficulty. They found that this would require unprecedented and probably impossible reductions in the carbon intensity of a growing economy. None of the models or variations looked at could square the circle of global economic growth with climate safety. Their analysis shows that:

Even at a growth rate of 3 per cent (low for many developing countries), the global economy would need to reduce its carbon intensity by 71 per cent by 2050 (compared to 2002) or 2.7 per cent per year. This would mean achieving more than double the yearly average improvement between 1965 and 2002. But even this would result in a level of carbon dioxide (CO2) in the atmosphere of 500 parts per million (ppm). Whereas the latest climate science shows that such a level would push temperature rises far passed the 2 °C threshold.

But even this scenario assumes that there is general, significant political will and international co-operation to move to low carbon economies, neither of which was demonstrated at the Copenhagen Climate Change Summit in December 2009. And in the previous decade the carbon intensity of the economy (i.e. the amount of carbon needed for every unit of output) showed no improvement and in the first half of the decade actually headed in the wrong direction, up.

Leading NASA climate scientist, James Hansen, recommends a target of 350 ppm CO2 for avoiding dangerous climate change. According to the new analysis, with a growth rate of 3 per cent, this requires an unprecedented and likely impossible change to the carbon intensity of the economy.

At a growth rate of 3 per cent, in order to stabilise emissions at 350ppm by 2050, carbon intensity of the global economy would need to fall by 95 per cent by 2050 (compared to 2002) or 6.3 per cent per year, an almost five-fold increase in the yearly average between 1965 and 2002.

However, between 2000 and 2007, the carbon intensity of the economy effectively flat-lined. Given this, in order to achieve a 350ppm target, the annual fall in the carbon intensity of economy would need to improve by more than 200-fold. For each year that the target was missed, the necessary improvements would grow higher still.

The report also looks at the practical and theoretical limitations of various technological developments seen by many politicians as central to tackling climate change. Carbon Capture and Storage (CCS), although hugely hyped is still largely untested. Doubts surround the cost, site availability and energy needed to implement CCS. Where biofuels are concerned, if the UK were to use oilseed rape and corn biofuels instead of petrol and diesel we would need 36 million hectares of land to grow it – 650 per cent more than all the arable land in the UK.

Even before considering inevitable additional side-effects, these calculations suggest that there is no magic technological bullet that will allow us to continue with business as usual in the face of climate change and other critical resource thresholds. Instead, the report suggests, we should focus on the policy implications of extensive new research indicating that high levels of well-being and quality of life can be achieved in rich countries at much lower levels of consumption. With an increasing number of life-supporting environmental services becoming over-burdened, the report highlights the key task of re-engineering economies to work within their environmental budget.

Andrew Simms, co-author of the report and nef policy director said, "We tend to think of growth as natural for economies, forgetting that in nature things grow only until maturity and then develop in other ways. A world in which everything grew indefinitely would be strange indeed. A young hamster, for example, doubles its weight each week between birth and puberty. But if it grew at the same rate until its first birthday, we’d be looking at a nine billion tonne hamster, which ate more than a year’s worth of world maize production every day. There are good reasons why things don’t grow indefinitely. As things are in nature, so sooner or later, they must be in the economy.

“The economic priorities of the rich world are as ridiculous as the impossible hamster. Endless growth is pushing the planet’s biosphere beyond its safe limits. The price is seen in compromised world food security, climatic upheaval, economic instability and threats to social welfare. We urgently need to change our economy to live within its environmental budget. There is no global, environmental central bank to bail us out if we become ecologically bankrupt.”

The reports findings are supported by the recent work of Prof. Kevin Anderson of the Tyndall Centre for Climate Change Research at Manchester University, which concluded that: “Economic growth in the OECD cannot be reconciled with a 2, 3 or even 4°C characterisation of dangerous climate change.”

“The latest climate science shows that we are already terribly close to being committed to crossing the 2°C threshold. This means if there is to be any chance of avoiding this rise there needs to be a ‘crash’ reduction in greenhouse gases, specifically CO2,.” said Dr Victoria Johnson, co-author of the report and lead researcher of the climate change and energy programme, “The easiest way to achieve this is for a rapid phase-in of energy demand reduction in developed nations – who, on average, are consuming excessively the world’s fossil fuels and other natural resources. There are historical precedents for rapid reductions in energy consumption such as the 1970s oil crises and the 2001 Californian electricity crisis, so we know when there is the political will, rapid change is possible.”

“At the same time, we need to make sure the solutions to climate change work for adaptation to climate change too. Magic bullets such as carbon capture and storage, nuclear or even geo-engineering are potentially dangerous distractions from more human-scale solutions. These, like decentralised renewable energy, can help achieve the emissions cuts necessary and improve society’s ability to adapt to climate change. There is an emerging movement of these human-scale solutions but they need government support. At the moment, magic bullets such as biofuels, nuclear and carbon capture are getting much of the funding and political attention but missing the target. Our research shows that to prevent runaway climate change this needs to change.’

The report concludes that, in an economy designed to respect environmental thresholds, it may actually be easier to achieve human well-being, social equality, full employment and strong public services. nef's recent report, The Great Transition, outlined how best to organise a economy in which people can flourish, while also remaining in a dynamic equilibrium with the biosphere.

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