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Is decoupling GDP growth from environmental impact possible?

22 November 2016

While an economy that grows forever may be seen as desirable, the environmental and societal impacts of this may be unsustainable. Research led by James Ward of UniSA and assisted by Institute associate Steve Mohr suggests that society should instead reorientate itself towards societal wellbeing in line with the UN’s Sustainable Development Goals (SDGs), in order to continue society’s growth in a sustainable manner.

The question of perpetual growth relies on asking whether a country can decouple “economic growth” and “resource consumption & environmental impact”. As societies develop, both in terms of population and prosperity, they continue to consume an ever-increasing amount of resources. While developments in technology may assist in reducing this consumption, this reduction is offset by the growth in population and the increase in the affluence of the population.

Decoupling takes two forms – absolute, and relative. In an absolute decoupling model, a nation’s GDP continues to rise, while their material and energy consumption falls.

Conversely, in a relative decoupling model, GDP and resource use both continue to rise, but the effect of resource use on an increase in GDP is lessened.

Throughout much of the OECD decoupling has been observed in recent years, however, this effect may be an illusion for a number of reasons, such as the substitution of one resource for another resource, the exporting the impact of resource use (such as pollution) to another country or region.

 Recent trends in real GDP, total energy use and total material use
Recent trends in real GDP, total energy use and total material use for China, Germany, OECD and the World. Data are normalized to 100 in the year 1990.

In order to model the interaction of GDP growth and resource consumption, the researchers utilised the IPAT equation, which tracks environmental impact as a function of economic activity. The equation goes as follows:

Impact = Population x Affluence x Technology

Within this equation, Impact represents the environmental impact of a nation, Population represents the nation’s population, Affluence represents the GDP per capita, represented as $ per person per year, and technology initially represents technology, but within this context, represents the economic intensity of a resource or pollutant.

The use of this equation within an economic context represents one of the key issues with technological change in regards to economic growth. For growth of GDP to become sustainable, the influence of resource or energy use on economic growth must decline at a fast rate, in order to outweigh the impact of growing population and wealth.

One issue with continuing GDP growth is that it typically requires some form of non-substitutable resource, such as land, water or energy. While efficiency gains for the use of these non-sustainable resources may be possible, there is a physical limit to the efficiency gains possible within the use of these resources, such as the rate of photosynthesis for plant productivity, or the minimum amount of water required to develop an agricultural environment that produces crops. When these physical limits are reached, there can be no further efficiency gains resulting from resource use, and all decoupling must then become relative decoupling. Even utilising the most optimistic modelling scenarios, this article shows that absolute decoupling of GDP growth and resource use is not possible.

The increasing resource and energy costs of continued growth within the population and economy, and the inability to develop new technologies to offset these increasing costs, means that attempting to decouple GDP growth and environmental impact would be a “misguided effort”, as decoupling resulting from technological advances would not be able to offset population growth in long-term scenarios. Instead, the authors of this study have suggests that it is now necessary for the world to begin a transition towards a scenario where the world’s GDP remains stable, or begins to decline. It will be easier to begin the transition towards a more sustainable growth of society now, while there is still possible improvements to sustainability resulting from technology gains.

Ward JD, Sutton PC, Werner AD, Costanza R, Mohr SH, Simmons CT (2016) Is Decoupling GDP Growth from Environmental Impact Possible? PLoS ONE 11(10): e0164733. doi:10.1371/journal.pone.0164733