Can we have more dollars and less CO2?
Our economies are growing, but so is our carbon footprint. Is there a way to make both things happen at once? A well-debated model called the Environmental Kuznets Curve suggests yes.
Credits to Alexandre Magnin
In 1955, Simon Kuznets showed that as countries develop economically, they will experience an increase in income inequality until a breaking point. Forty years later, the same model was applied to the carbon emissions space. Economic development initially leads to a deterioration in the environment, but after a certain level of economic growth, society takes actions to reduce pollution levels. This is the Environmental Kuznets Curve (EKC). Put differently, when it comes to pollution it has to get worse before it can get better. Guess what? More growth will make it better!
Diagram of Kuznets curve
I like this model, simple and straightforward but is there any empirical evidence of it? Honestly, not much. Experience shows that very often economic growth leads to environmental degradation – exactly the opposite of the EKC. Also:
Pollution is not simply a function of income. Just to name a few, pollution levels also depend on government regulations and population levels.
Developed countries simply export environmental degradation to developing ones. If we look at the full picture, high-income countries have seen a reduction in industry and growth in the service sector. Still, they are importing goods from low-income nations. Think about deforestation: European countries tend to stop it, but they still import meat and furniture from countries that are creating farmland out of forests. What is the net result?
Growth leads to additional resource use. Simple as it sounds - if the economy continues to expand, then inevitably more resources are needed.
So what?
All the scenarios presented in the IPCC’s Report to stay below 2°C, are green growth scenarios. They assume to stabilize global temperatures while total GDP continues to rise. But how can these scenarios concretize if there is only little empirical evidence of the EKC? By using Carbon Capture and Storage technologies (CCS). Indeed, all the IPCC scenarios rely on the availability and widespread deployment of negative emissions technologies. This allows for a much larger carbon budget by assuming that we can successfully reduce global atmospheric carbon in the future.
But what if CCS technologies will be unsuccessful because too expensive or difficult to roll out soon on a global scale? Well, society will be locked into a high-temperature pathway. So, let’s make a step back and consider what will happen without CCS technologies. A study found that (under optimistic assumptions) it is empirically feasible to achieve green growth within a carbon budget for 2°C only:
with the most aggressive possible mitigation policies;
if GDP growth rate is very close to zero (0.45% per year);
if mitigation starts immediately.
This conclusion does not hold for the more ambitious scenario. Emissions reductions in line with 1.5°C are not empirically feasible except under de-growth assumptions. Without an immediate, large-scale and affordable roll-out of CCS technologies, my suggestion is to forget the Environmental Kuznets Curve and make yourself ready for times of financial constraints. Unless you plan relocating to Mars!
