‘Decoupling’ means finding ways to grow the economy without damaging the environment (decoupling the growth from the damage).
In this article we explain why, despite some recent arguments to the contrary, decoupling is possible; and, even more importantly, it is critical to the success of any attempt to tackle climate change.
A recent paper on decoupling by T.Vadén, V.Lähde, A.Majava, P.Järvensivu, T.Toivanen, E.Hakala and J.T.Eronen published in the Journal Environmental Science & Policy is being interpreted by some proponents of de-growth as saying that decoupling is not possible.
This is a misleading and dangerous interpretation of the authors’ technically correct conclusion – an example of how a statement that is literally true can be quite misleading.
This is not the first time that the public have been misled on a critically important issue by a statement which is – if taken literally – true.
An important example in the UK is David Cameron’s 2013 comment (subsequently echoed by Theresa May and others) that there is “no magic money tree.” As 99% points out, this is the literal truth – there is no tree on whose branches money grows – but it is utterly misleading as a description of how a fiat-money economy works.
What David Cameron didn’t say – but what he was understood to mean – was that you can’t just create money out of nothing. And that is, of course, quite false: money is created out of nothing.
But as rhetoric, Cameron’s comment was highly effective, and coupled with equally misleading statements about the state of government finances, enabled him to usher in a decade of crippling austerity.
Now another even more important issue risks falling victim to the same kind of rhetorical trick. The climate emergency. Specifically decoupling.
The paper, whose full title is Decoupling for ecological sustainability: A categorisation and review of research literature, concludes that,
“the claim that the economy can grow while at the same time the [environmental damage] diminish[es] … rests, in part, on faith.”
And this literally true statement has been seized on by the de-growth movement as proof that the idea that you can grow the economy without harming the environment is nothing more than wishful thinking and should be discarded (in favour of de-growth).
But is this really a valid deduction from the contents of the paper?
It is not. A more accurate reading of the paper would conclude that decoupling is the only realistic route to tackling climate change:
- If it were true that decoupling is impossible, there would be no plausible route to an attractive future via de-growth;
- In many ways, the paper is excellent, and it contains much useful insight but, as drafted, its conclusion, though technically true, is misleading; and
- A more reasonable conclusion is that while (as with any problem we have not yet solved) we do need an act of faith, there are clear routes to success through decoupling and we should commit to making it work.
Without decoupling, there is no plausible de-growth scenario
Let us assume, just for the sake of argument, that significant decoupling of environmental damage from economic growth is impossible. On this assumption, if the economy grows, environmental damage inevitably increases; and conversely if environmental damage is to decrease, the economy must shrink.
What sort of future would this assumption produce? There are only eight possible futures, defined by the answers to three simple questions:
- Will the pie grow?
- Will the median slice grow?
- Will we have a peaceful, democratic transition to our future state?
The ‘pie’ is a metaphor for the value of goods and services the economy produces to meet the needs of the population.
This gives us a picture like this:
By definition, de-growth takes us to the right-hand side of the diagram. In fact, to tackle the climate emergency, it would not be enough simply to halt growth: in the absence of decoupling we must have significant negative growth – a sharply shrinking pie. To stay within the goals set out by the International Panel on Climate Change (IPCC) would require reduction in CO2-equivalent emissions of around 8% per annum – and if there is no significant decoupling, then that implies a shrinkage of the pie at roughly the same rate.
8% shrinkage is more serious than the contraction that followed the Global Financial Crisis (GFC) – and it would need to happen every year, not just once.
While it may be perfectly straightforward for a billionaire to simplify his or her life significantly, or even for an upper-middle-class academic, for somebody facing a daily choice between heating or eating – and this is a significant proportion of the population even in developed countries like the US and the UK – the only simplification would be to do neither.
What, in practice, would be the distributional implications of such a contraction? The effects of the GFC give us a clue: the wealthiest would increase their share of the wealth, and the most vulnerable would suffer most.
Of course, the wealthy might suddenly change their behaviour, as in the scenario ‘Philanthropy ++,’ and voluntarily give up much of their wealth to make de-growth work. The impact of COVID has given us a further glimpse of what might realistically be expected: since COVID struck, the world economy has shrunk by $4 trillion or around 5%; at the same time, the combined wealth of the world’s billionaires has grown by $1.3 trillion or around 27%. The shift to ‘Philanthropy ++’ does not seem sufficiently probable to make a sound planning assumption.
Or we could have a revolution, as in the scenario ‘Eat the Rich,’ which would usher in a brave new world, but again, past evidence of revolutions does not suggest that this is a low-risk path to an attractive future.
The most optimistic reading of de-growth in the absence of decoupling would be that we would enter the scenario ‘Sharing Decline.’ The most realistic is ‘Collapse.’
In a world without decoupling, faced with a choice between de-growth and climate catastrophe, many people would be better off taking their chances with climate catastrophe.
Is this a fair assessment of the de-growth proposals? Yes and no.
It is a fair summary of the implications of de-growth in a world without significant decoupling. It is not a fair summary of the actual proposals made by the de-growth movement.
A widely-cited de-growth paper describes the EUROGREEN model of a post-growth economy. This paper defines the de-growth policies it models as follows:
De-Growth = Job Guarantee + Working Time Reduction + Energy Mix + Carbon Tax and Border Carbon Adjustment + High Energy Efficiency + Consumption Reduction + De-Growth wealth tax.
The components of their de-growth path are therefore:
- Balancing policies (see 99%, Chapter 15, pages: 284-288 and the model of policy formulation below):
- Job guarantee
- Working time reduction
- Wealth tax
- Energy mix
- Tax and Border Carbon adjustment
- High energy efficiency
- Consumption reduction
This is a far more realistic path to an acceptable outcome than de-growth without decoupling as described above.
But, if we are prepared to be realistic about decoupling, why not take a realistic look at the possibilities of good growth? Does the decoupling paper really rule that out?
The decoupling paper does not imply that decoupling is impossible
The paper is, in many ways, excellent and the conclusion the authors drew from their research is unquestionably true in a literal sense – just as David Cameron’s claim about the magic money tree is true in a literal sense. But both are dangerously open to misinterpretation.
In many ways the paper is excellent
The paper represents a great deal of hard work by its authors, and should be useful for others working in this field:
- It provides a useful taxonomy of decoupling;
- It spells out most of the challenges that must be overcome; and
- It highlights numerous examples of decoupling around the world.
The paper distinguishes between several different types of decoupling, for example, absolute decoupling versus relative decoupling (absolute decoupling is when the economy rose but there is no additional (negative) environmental impact; relative decoupling is when the economy grows, and so does negative environmental and impact, but at a slower rate). This distinction is vital because relative decoupling would not be sufficient to prevent catastrophic climate change.
In addition to the need for permanent, absolute, global, decoupling, the paper highlights a number of other challenges. We need to act fast in order to avert disaster. And our measures of the economy are flawed, as are our data on environmental damage.
There are, however, important obstacles which the paper does not mention:
- many of the world’s decisions are driven by the profit motive, and with profit as currently defined environmental and other kinds of damage can be profitable – we need to re-engineer the profit motive. This is more important than redefining GDP, which is not a direct driver of decision-making;
- Many countries in the world, including the developed world, suffer from mass impoverishment – we need to find a path to the future that does not exacerbate mass impoverishment; and
- political decisions depend on power, which is increasingly linked to wealth – we need to create a credible path to political decision-making for the long-term benefit of the population as a whole.
Most importantly, the paper contains a great deal of evidence of different forms of decoupling around the world. It is based on a review of 179 articles published over the last 30 years and, as the abstract says, “the reviewed 179 articles contain evidence of absolute impact decoupling, especially between CO2 (and SOX) emissions, and evidence on geographically limited (national level) cases of absolute decoupling of land and blue water use from GDP.”
The overall findings of the paper are summarised in this table:
|Kinds of decoupling mentioned in reviewed articles|
|No decoupling||Relative decoupling||Absolute decoupling|
|Local or national||International||Global|
|One sector||Several sectors||Economy wide|
(The numbers do not sum to 179 because many papers included evidence of more than one kind of decoupling)
Its conclusion is technically true because any approach is an act of faith
The abstract of the paper concludes: “Evidence of the needed absolute, global, fast-enough, decoupling is missing.”
Let us just think for a second about what the converse would mean. Suppose that evidence of the needed absolute, global, fast-enough, decoupling had been present. That would mean that the paper had found evidence that sufficient action had been taken, globally, to arrest climate change. In other words, the problem of climate change had already been resolved – at least in principle. We would just need to carry on implementing that absolute, global, fast enough decoupling and we would have averted the crisis.
The climate emergency has not been resolved. Any search for evidence that suggests that it has is bound to conclude that the necessary evidence is missing.
In fact, no matter what approach to tackling climate change the paper had investigated, it would have concluded that “evidence of the needed absolute, global, fast enough reduction in emissions through [approach X] is missing.”
So the conclusion that decoupling economic growth from environmental damage rests on faith is technically true. Technically true but logically vacuous.
The conclusion has been misinterpreted
And as with David Cameron’s magic money tree, the problem lies not in what the authors say, but in what they did not say. They did not say that decoupling requires more of an act of faith than de-growth without decoupling – because this would not be true, as we saw above – but they left their paper open to being interpreted that way.
Perhaps unsurprisingly, the paper has been seized on by proponents of de-growth who have said, for example:
In other words, these proponents claim, the long-standing dispute has now been settled in favour of de-growth.
But as we saw, that is so far from being the case that it risks discrediting the whole environmental cause.
The decoupling paper in fact provides much – but of course not enough for us to be certain – evidence for decoupling.
The evidence suggests that decoupling is possible
And, fortunately, there are other powerful reasons to believe that, with decoupling, we can build a future which is greener, fairer and more prosperous:
- the structure of the economy naturally lends itself to decoupling;
- we can see the sorts of changes needed to produce that decoupling;
- we can therefore map out a demanding but plausible scenario for a much more attractive future.
The structure of the economy naturally lends itself to decoupling
Let’s start by looking at the issue of good growth and bad growth.
We can split all economic activities into three ‘buckets’:
- the good bucket which contains all activities that do not harm the environment: planting trees and insulating houses, for example would fit into the good bucket – growth in these activities would, obviously, be good not only for the economy but also the environment;
- the could-be-good bucket which contains activities which, though desirable in themselves, have at least some environmentally harmful consequences – agriculture, public transport and energy generation would be in the could-be-good bucket – growth in these activities, without transforming the way in which we carry them out, would be harmful; but we can see how we would transform them;
- the bad bucket which contains activities such as burning fossil fuels which we would be better off without – growth in these activities would be good for the economy but bad for the environment, and we cannot see a way in which we could transform them.
Once we know what sits where, we can aim to grow the good bucket quickly; to transform the could-be-good bucket – for example by switching to renewable energy for electricity generation – and to shrink the bad bucket as fast as we can.
When we look at the UK economy that way, the picture looks a bit like this.
So you can see that about 80% of the UK’s GDP is already in the good bucket – at most very minor transformation is required. Most forms of entertainment, the arts, media, sport et cetera fit into this bucket. So do healthcare, many business services, finance and real estate activity.
And most of the rest is in the could-be-good bucket. There is major transformation needed – but in principle we can see how it would be done. And indeed, the decoupling paper gives us over 170 concrete examples to learn from.
In the UK, it is really only the extraction of fossil fuels that cannot be transformed and sits in the bad bucket.
The structure of the economy, in other words, greatly simplifies the challenge of decoupling.
We can see the sorts of changes needed to produce that decoupling
Agriculture is a good test case, both because it has the highest intensity of emissions per £ of GDP which makes it a particularly difficult area to tackle and because we cannot simply de-grow agriculture without starving many people.
So what can we do?
A report commissioned by The Lancet explored this problem on a global scale. Agriculture is a major source of global climate emissions, the population is growing, if we continue to farm in the same way, but just more of it, we will both struggle to feed the population and create enormous environmental damage.
Their solution? Adopt what they call ‘The Planetary Diet’ – a plant rich but not completely vegetarian diet. By switching to this plant-rich diet, they found, we can both feed more people and reduce environmental damage significantly.
What would happen if we tried this in the UK?
Adopting the Planetary Diet and switching the freed-up land into arable farming would both reduce emissions (by about 20%) and increase the UK’s self-sufficiency in food production. Significant decoupling already.
Furthermore, in the UK, at least 24% and maybe up to 30% of food which is edible when it leaves the farm ends up being wasted, much of it in the home.
If that 24% can be reduced to around 16%, and if instead of diverting the freed-up land to arable farming, we divert it to forestry, the reduction in emissions will be almost 75%.
A significant culture change will be required to achieve these dramatic reductions, but no technological breakthroughs or magical thinking are needed to make them happen.
Similarly, with other major sources of emissions like energy generation and transport, if we commit to the transformation, we can produce dramatic reductions in emissions.
So if we target investment at growing the good bucket and transforming the could-be-good bucket, while shrinking the bad bucket, we can both produce economic growth and reduce emissions.
And that would clearly be good for the environment. But what about people? How will we end mass impoverishment?
That brings us back to thinking about the pie – how will we grow it, and how will we share it more fairly?
We can aim to be greener, fairer and more prosperous
Although it’s true that policy formulation is very complex, fundamentally there are only four types of policy. Every policy either grows the pie or it does not grow the pie; and it either shares the pie fairly or it does not.
That gives us this picture.
At the top right are the shared growth policies which both grow the pie and share it fairly. Take fundamental research, for example, we have been gradually funding less and less of this – and yet it is the engine of our future prosperity. Or education; or civil infrastructure; or healthcare – all of these things help everyone in society. We want to see far more of these.
At the top left are policies which do grow the pie, but they don’t share the benefits fairly. Very aggressive automation, for example, could enable us to produce lots more valuable goods and services, which might be good for society as a whole, but would also lead to many job losses. If we do nothing to balance these policies, the pie may grow, but many people will find their slice shrinking dramatically.
Over the last 40 years, in the United States, the pie has grown dramatically but many people have seen their slices shrink – and this is because of captured growth policies such as automation and free trade with low-cost countries which led to the hollowing out a lot of manufacturing jobs in the States. We need to see these policies balanced.
And this brings us to the need for the policies on the bottom right. These policies can be used to balance Type I policies so that everybody shares in the benefit that growing the pie can offer. So if we did have aggressive job automation over the next 10 years, some of the casualties could be mitigated by retraining and direct job creation schemes, and some of the balancing would need to come from a strengthening of the safety net. A good policy portfolio is a balanced policy portfolio.
A recent example is President Macron’s attempt to introduce a fuel tax surcharge in France to help tackle climate change. It was probably a good idea for the economy as a whole, and certainly for the environment, but it hit the poorest in French society disproportionately hard. It may have grown the pie, but the slicing was not fair.
As a result the gilets jaunes movement sprang up and Macron was forced to abandon his policy. Had he been more clear-sighted in his policy formulation, he would have seen the need for a balancing policy. It would have been easy for him to announce a green dividend to be paid to the poorest 25% in French society, funded by a fuel tax increase.
Finally there are the vulture policies which neither grow the pie nor share it fairly. A no-deal Brexit would be an example. The government’s own analysis shows that no deal Brexit would be expected to shrink the pie. When that happens many people are bound to suffer, even if some hedge fund managers do extremely well. We simply should not implement vulture policies.
If we look back over the last 10 years, we can see that the main reason for our problems is that we’ve had a preponderance of Type I and Type III policies, and far too few Type II and Type IV policies.
If significant decoupling is impossible, there is no credible path to an acceptable de-growth future.
If it is possible, then the option of good growth opens up, and with it a credible route both to tackling the climate emergency and to reversing the process of mass impoverishment.
All the evidence suggests that it is possible, so we should commit to building a more prosperous, fairer and greener world – making full use of the opportunities for decoupling.
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