Is economic growth compatible with ecological sustainability? To answer this question, we need to talk about decoupling. The term ‘decoupling’ refers to the possibility of detaching economic growth from environmental pressures. Economic growth is a measure of market activity, most often Gross Domestic Product (GDP), while environmental pressures include all the consequences an economy has on nature – a useful distinction being between resource use (materials, energy, water, and land) and environmental impacts (e.g. climate change, water pollution, biodiversity loss).
Generally speaking, two variables are said to be ‘coupled’ if one evolves in proportion with the other (e.g. more of A means more of B), and they decouple when they cease to do so. What matters for sustainability is the nature of that decoupling: its magnitude, scale, durability, and how effective it is in achieving environmental targets.
Relative or weak decoupling, for example between GDP and carbon emissions, refers to a situation where the emissions per unit of economic output decline but not fast enough to compensate for the simultaneous increase in output over the same period, resulting in an overall increase in total emissions. Said differently: even though production is relatively cleaner, total environmental pressure still goes up because more goods and services are produced. Absolute or strong decoupling, on the other hand, is a situation where, to stay with the same example, more GDP coincides with lower emissions.
Local decoupling refers to cases where decoupling is observed in one specific place (e.g. decoupling of water consumption and GDP in Australia), while global decoupling occurs at the planetary scale. Also, decoupling can be temporary or permanent –just as GDP and environmental pressures can decouple at one point in time, they can also recouple later on.
Finally, decoupling can be evaluated based on its magnitude and fairness. Decoupling can be either sufficient or insufficient in reaching a specific mitigation target. And following the principle of shared but differentiated responsibilities, decoupling needs to be sufficiently large in affluent countries in order to free the ecological space necessary for consumption in regions where basic needs are unmet.
Green growth vs. degrowth
The debate on decoupling has two main sides. Proponents of “green growth” expect efficiency to enable more economic activity at a lower environmental cost; on the other hand, advocates of “degrowth” appeal to sufficiency, arguing that less goods and services is the surest road to ecological sustainability.
Many proponents of the green growth narrative have put forward that economic growth inevitably leads to more efficiency and, therefore, to reduced environmental costs. In the 1990s several economists conducted empirical work that led them to believe that economic growth was negatively correlated with environmental pressures. Environmental damages would first grow but then decline. This inverted bell-shaped development came to be referred to as an Environmental Kuznets Curve, named after economist Simon Kuznets, who, in the 1950s, proposed that, as a society industrializes, it would first become more unequal, and then less. Over the years, scholars developed several theoretical reasons to explain such phenomena. For example, as income per capita grows, basic needs get satisfied and nations can afford to dedicate more of their attention and resources towards environmental protection. Another explanation is that richer nations’ industries are able to develop and afford cleaner and less resource-intensive technologies. They also transition from industrial activities to services, which are assumed to be less natural resource-intensive.
However, it is now widely recognised that decoupling does not occur naturally by the mere fact of a country increasing its GDP—thereby complicating the Environmental Kuznets Curve hypothesis. Responding to this, some argue that policies such as carbon taxes, quota markets, and other regulations could foster it. Many also argue that a shift to clean energies, the establishment of a circular economy, incentives for environmentally-friendly consumption, turning products into services, and ecological innovations like, for example, exhaust filters, water-saving irrigation systems, and carbon capture and storage could make decoupling happen.
For green growth advocates, decoupling is either inevitable or has not yet occurred because of lack of adequate policies and technological development. Degrowth proponents, however, argue that the reason why this long-awaited decoupling has not yet occurred is that because it is impossible. Here is a list of seven reasons why this is so:
(1) Rising energy expenditures. It takes energy to extract resources. The less accessible the resource, the higher the energy bill. Because the most accessible resources have already been used, the extraction of remaining stocks is a more resource- and energy-intensive process, resulting in a rising total environmental degradation per unit of resource extracted.
(2) Rebound effects. Efficiency improvements are often partly or totally compensated by a reallocation of saved resources and money to either more of the same consumption (e.g. using a fuel-efficient car more often), or other impactful consumptions (e.g. buying plane tickets for remote holidays with the money saved from spending on meat). It can also generate structural changes in the economy that induce higher consumption (e.g. more fuel-efficient cars reinforce a car-based transport system at the expense of greener alternatives, such as public transport and cycling).
(3) Problem shifting. Technological solutions to one environmental problem can create new ones and/or exacerbate others (e.g. the production of electric cars puts pressure on lithium, copper, and cobalt resources; nuclear power generation produces nuclear risks and logistic concerns regarding nuclear waste disposal).
(4) The underestimated impact of services. The service economy can only exist on top of the material economy, not instead of it. Services have a significant footprint that often adds to, rather than substitutes, that of goods.
(5) Limited potential of recycling. Recycling rates are currently low and only slowly increasing, and recycling processes generally still require a significant amount of energy and raw materials. Most importantly, in the same way that a snake cannot build a larger skin out of the scraps of its previous, smaller one, a growing economy cannot rely on recycled materials alone.
(6) Insufficient and inappropriate technological change. Technological progress is not targeting the factors of production that matter for ecological sustainability (it saves labour and not natural resources) and not leading to the type of innovations that reduce environmental pressures (it is more profitable to develop new extraction techniques than it is to develop new recycling techniques); it is not disruptive enough as it fails to displace other undesirable technologies (solar panels are being used in addition to coal plants and not instead of it); and it is not in itself fast enough to enable a sufficient decoupling.
(7) Cost shifting. In competitive, growth-oriented economies, firms have incentives to relocate activities where environmental regulations are the lowest. What has been observed and termed as decoupling in some local cases was generally only apparent decoupling resulting mostly from an externalisation of environmental impact from high-consumption to low-consumption countries enabled by international trade.
Empirical evidence for decoupling
The validity of the green growth discourse relies on the assumption of an absolute, permanent, global, large and fast enough decoupling of economic growth from all critical environmental pressures. As Parrique et al. (2019) have recently showed, there is no empirical evidence for such a decoupling currently happening. Whether for materials, energy, water, greenhouse gases, land, water pollutants, and biodiversity loss, decoupling is either only relative, and/or observed only temporarily, and/or only locally. In most cases, decoupling is relative. When absolute decoupling occurs, it is only observed during rather short periods of time, concerning only certain resources or impacts, for specific locations, and with very small rates of mitigation.
Debunking the decoupling hypothesis
The decoupling hypothesis has played an important role in legitimating a growth-based economy with a disastrous record in terms of social-ecological justice. Its meagre achievements in the last two decades cast serious doubt as to whether prospects for the future are better. Given the historical correlation of market activity and environmental pressures, relying on decoupling alone to solve environmental problems is an extremely risky and irresponsible bet. Until GDP is actually decoupled, any additional production will require a larger effort in reductions of resource and impact intensity to stay away from resource conflicts and ecological breakdown. Decoupling should today be recognised as what it is, a figment of statistical imagination. This should prompt us to reframe the debate altogether: what we need to decouple is not economic growth from environmental pressure but prosperity and the good life from economic growth.
Parrique et al., 2019. Decoupling debunked: Evidence and arguments against green growth. The European Environmental Bureau.A report reviewing the empirical and theoretical literature to assess the validity of the decoupling hypothesis.
Mardani et al., 2019. ‘Carbon Dioxide (CO2) Emissions and Economic Growth: A Systematic Review of Two Decades of Research from 1995 to 2017’. Science of The Total Environment 649 (February): 31–49. The latest literature review of the empirical literature concerning the decoupling of economic growth from carbon dioxide emissions.
Smith et al., 2010. Cents and Sustainability: Securing Our Common Future by Decoupling Economic Growth from Environmental Pressures. The Natural Edge Project. Routledge: London. A good example of a case for decoupling and green growth
Hickel J. and Kallis, 2019. Is Green Growth Possible? New Political Economy. https://doi.org/10.1080/13563467.2019.1598964. A good example of a case against decoupling and green growth.
UNEP, 2011. Decoupling natural resources use and environmental impacts from economic growth. A Report of the Working Group on Decoupling to the International Resource Panel. Fischer-Kowalski et al.
UNEP, 2014. Decoupling 2: technologies, opportunities and policy options. A Report of the Working Group on Decoupling to the International Resource Panel. Von Weizsäcker et al. The two reports published by the United Nations Environment Programme, the first on the state of resource decoupling, and the second on policies to foster decoupling.