Economic Growth

Is Economic Growth Environmentally Sustainable?

Economic growth and environmental renewal go hand-in-hand.


Weerpat Kiatdumrong/Dreamstime

Is economic growth environmentally sustainable? No, say a group of prominent ecological economists led by the Australian hydrologist James Ward. In a new PLoS ONE article—"Is Decoupling GDP Growth from Environmental Impact Possible?"—they offer an analysis inspired by the 1972 neo-Malthusian classic The Limits to Growth. They even suggest that The Limits to Growth's projections with regard to population, food production, pollution, and the depletion of nonrenewable resources are still on track. In other words, they think we're still heading for a collapse.

I think they're wrong. But they're wrong in an instructive way.

The authors describe two types of "decoupling," relative and absolute. Relative decoupling means that economic growth increases faster than rates of growth in material and energy consumption and environmental impact. Between 1990 and 2012, for example, China's GDP rose 20-fold while its energy use increased by a factor of four and its material use by a factor of five. Basically this entails increases in efficiency that result in using fewer resources to produce more value. Absolute decoupling is what happens when continued economic growth actually lessens resource use and impacts on the natural environment, that is, creating more value while using less stuff. Essentially humanity becomes richer while withdrawing from nature.

To demonstrate that continued economic growth is unsustainable, the authors recycle the hoary I=PAT model devised in 1972 by the Stanford entomologist and population alarmist Paul Ehrlich and the Harvard environmental policy professor (and chief Obama science adviser) John Holdren. Human Impact on the environment is supposed to equal to Population x Affluence/consumption x Technology. All of these are presumed to intensify and worsen humanity's impact on the natural world.

In Ward and company's updated version of I=PAT, the sustainability of economic growth largely depends on Technology trends. Absolute decoupling from resource consumption or pollutant emissions requires technological intensity of use and emissions to decrease by at least the same annual percentage as the economy is growing. For example, if the economy is growing at three percent per year, technological intensity must reduce 20-fold over 100 years to maintain steady levels of resource consumption or emissions. If technological intensity is faster then resource use and emissions will decline over time, which would result in greater wealth creation with ever lessening resource consumption and environmental spillovers.

Once they've set up their I=PAT analysis, Ward and his colleagues assert that "for non-substitutable resources such as land, water, raw materials and energy, we argue that whilst efficiency gains may be possible, there are minimum requirements for these resources that are ultimately governed by physical realities." Among the "physical realities" they mention are limits on plant photosynthesis, the conversion efficiencies of plants into meat, the amount of water needed to grow crops, that all supposedly determine the amount of agricultural land required to feed humanity. They also cite "the upper limits to energy and material efficiencies govern minimum resource throughput required for economic production." To illustrate the operation of their version of the I=PAT equation, they apply it to a recent study that projected it would be possible for Australia's economy to grow 7-fold while simultaneously reducing resource and energy use and lowering environmental pressures through 2050.

They crank the notion that there are nonsubstitutable physical limits on material and energy resources through their equations until 2100, and they find that eventually consumption of both rise at the same rate as economic growth. QED: Economic growth is unsustainable. Or as they report, "Permanent decoupling (absolute or relative) is impossible for essential, non-substitutable resources because the efficiency gains are ultimately governed by physical limits." Malthus wins again!

Or does he?

GDP growth—increases in the monetary value of all finished goods and services—is a crude measure for improvements in human well-being. Nevertheless, rising incomes (GDP per capita) correlate with lots of good things that nearly everybody wants, including access to more and better food, longer and healthier lives, more educational opportunities, and greater scope for life choices. Ward and his colleagues are clearly right that there is only so much physical stuff on the Earth, but even they know that wealth is not created simply by using more stuff. Where they go wrong (as so many Malthusians do) is by implicitly assuming that there are limits to human creativity.

Interestingly, Ward and his colleagues, like Malthus before them, focus on the supposed limits to agricultural productivity. For example, they cite the limits to photosynthesis, which will limit the amount of food that humanity can produce. But as they acknowledge, human population may not continue to increase. In fact, global fertility rates have been decelerating for many decades now, and demographer Wolfgang Lutz calculates that world population will peak after the middle of this century and begin falling. Since the number of mouths to feed will stabilize and people can eat only so much, it is unlikely that the biophysical limits of agriculture on Earth will be exceeded.

But it gets even better. Agricultural productivity is improving.

Consider the biophysical limit on photosynthesis cited by the study. In fact, researchers are already making progress on installing more efficient C-4 photosynthesis into rice and wheat, which would boost yields by as much as 50 percent. British researchers just announced that they had figured out how to boost photosynthetic efficiency to create a super-wheat would increase yields by 20 percent.

In a 2015 article for the Breakthrough Journal, "The Return of Nature: How Technology Liberates the Environment," Jesse H. Ausubel of Rockefeller University reviews how humanity is already decoupling in many ways from the natural world. "A series of 'decouplings' is occurring, so that our economy no longer advances in tandem with exploitation of land, forests, water, and minerals," he writes. "American use of almost everything except information seems to be peaking." He notes that agricultural applications of fertilizer and water in the U.S. peaked in the 1980s while yields continued to increase. Thanks to increasing agricultural productivity, humanity is already at "peak farmland"; as a result, "an area the size of India or of the United States east of the Mississippi could be released globally from agriculture over the next 50 years or so."

Ward is worried about biophysical limits on water use. But as Ausubel notes, U.S. water use has peaked and has declined below the level of 1970. What about meat? Ausubel notes the greater efficiency with which chickens and cultivated fish turn grains and plant matter into meat. In any event, the future of farming is not fields but factories. Innovators are already seeking to replace the entire dairy industry with milk, yogurt, and cheeses made by genetically modified bacteria grown in tanks. Others are figuring how to culture meat in vat.

Ausubel also notes that many countries have already been through or are about to enter the "forest transition," in which forests begin to expand. Roger Sedjo, a forest economist at Resources of the Future, has projected that by the middle of this century most of world's industrial wood will be produced from planted forests covering a remarkably small land area, perhaps only 5 to 10 percent of the extent of today's global forest. Shrinking farms and ranches and expanding forests will do a lot toward turning around the alarming global reduction in wildlife.

How about unsubstitutable stuff? Are we running out of that? Ausubel notes that the U.S. has apparently already achieved absolute decoupling—call it peak stuff—for a lot of materials, including plastics, paper, timber, phosphate, aluminum, steel, and copper. And he reports relative decoupling for 53 other commodities, all of which are likely heading toward absolute decoupling.

Additive manufacturing is also known as 3-D printing, in which machines build up new items one layer at a time. The Advanced Manufacturing Office suggested that additive manufacturing can reduce material needs and costs by up to 90 percent. And instead of the replacement of worn-out items, their material can simply be recycled through a printer to return it to good-as-new condition using only 2 to 25 percent of the energy required to make new parts. 3-D printing on demand will also eliminate storage and inventory costs, and will significantly cut transportation costs. Nanomanufacturing—building atom-by-atom—will likely engender a fourth industrial revolution by spurring exponential economic growth while reducing human demands for material resources.

Ward and company project that Australians will be using 250 percent more energy by 2100. Is there an upper limit to energy production that implies unsustainability? In their analysis, the ecological economists apparently assume that energy supplies are limited. Why this is not clear, unless their model implicitly assumes a growing consumption of fossil fuels (and even then, the world is not close to running out of those). But there is a source of energy that, for all practical purposes, is limitless and has few deleterious environmental effects: nuclear power. If demand for primary energy were to double by 2050, a back-of-the-envelope calculation finds that the entire world's energy needs could be supplied by 6,000 conventional nuclear power plants. The deployment of fast reactors would supply "renewable" energy for thousands of years. The development of thorium reactors could also supply thousands of years of energy. And both could do so without harming the environment. (Waste heat at that scale would not be much of a problem.) Such power sources are in any relevant sense "decoupled" from the natural world, since their fuel cycles produce little pollution.

Recall that GDP measures the monetary value of all finished goods and services. Finished goods will become a shrinking part of the world's economy as more people gain access to food, clothing, housing, transportation, and so forth. Already, services account for 80 percent of U.S. GDP and 80 percent of civilian employment. Instead of stuff, people will want to spend time creating and enjoying themselves. As technological progress enables economic growth, people will consume more pixels and less petroleum, more massages and less mortar, more handicrafts and less hardwood.

Ultimately, Ward and his colleagues make the same mistake as Malthus and the Limits to Growth folks: They extrapolate trends without taking adequate account of human ingenuity. Will it be possible to grow the economy 7-fold over this century while reducing resource consumption and restoring the natural world? Yes.