We started our journey by illustrating in the Introduction the relationship between economic growth and greenhouse gas (GHG) emissions and by discussing the historical challenge of decoupling them at a sufficient speed to achieve carbon neutrality by mid-century. The subsequent chapters then provided an in-depth analysis of the various macroeconomic implications characterising this process. At this point, we would like to go back to our initial question and ask ourselves: given all the complexities we have analysed, is it realistic to expect the world to be able to decouple economic growth from GHG emissions in time to save the planet, and by avoiding negative repercussions on our economies and societies? To do so, we will first discuss how the economic literature has so far tackled this question – namely presenting degrowth and green growth theories – and we will then conclude by illustrating our view on all of this.Footnote ¹

A Look at Degrowth Theories

Guided by past experience, the basic premise of degrowth theorists is that the world will not be able to sufficiently reduce GHG emissions while global gross domestic product (GDP) grows. Current economic models, which are inherently focussed on accumulation and growth, are therefore inevitably headed towards environmental and climate disaster.

Such pessimistic views about the long-term sustainability of economic growth are not new. They have been around in some form at least since the Essay on the Principle of Population by Thomas Malthus (Reference Malthus1789). He postulated that famines and economic collapse were inevitable unless birth rates decreased, based on the belief that population growth is exponential and growth of food production merely linear. This argument was echoed throughout the twentieth century in environmentally inspired works by, for example, Osborn (Reference Osborn1948) and Vogt (Reference Vogt1948) and, most notably, in The Population Bomb by Paul Ehrlich (Reference Ehrlich1968). Meadows et al. (Reference Meadows, Meadows, Randers and Behrens1972) predicted in The Limits to Growth that global population and economic activity would peak in the early twenty-first century and advocated an economic and demographic ‘equilibrium state’ to avoid an uncontrolled collapse when humanity’s need for resources finally exceeds the earth’s capacity.

Like Limits to Growth, modern degrowth theories subscribe to the idea that humanity must achieve a lower economic ‘steady state’ to avoid environmental catastrophe. The term ‘degrowth’ was probably first used in the writings of French philosopher André Gorz in Reference Gorz1972 and in the work of economist Georgescu-Roegen (Reference Georgescu-Roegen1971, Reference Georgescu-Roegen1979), who wrote that economic activity in the long run is limited to a level supported by solar flows due to the laws of thermodynamics. The term was popularised in the 1990s and 2000s by Serge Latouche (e.g. Reference Latouche2009) who criticised economic development as a goal. In the early 2000s ‘degrowth’ was used as a slogan by social and environmental activists in France, Italy and Spain. Finally, it emerged as an international research area in 2008 at the first Degrowth Conference in Paris (Demaria et al., Reference Demaria, Schneider, Sekulova and Martinez-Alier2013; Kallis et al., Reference Kallis, Kostakis, Lange, Muraca, Paulson and Schmelze2018), with many publications being produced particularly in the first half of the 2010s, in the context of the 2008 Global Financial Crisis and the sovereign debt crisis in Europe. Researchers including Giorgos Kallis (e.g. Reference Kallis2011), Jason Hickel (e.g. Reference Hickel2020), Tim Jackson (e.g. Reference Jackson2009) and Kate Raworth (e.g. Reference Raworth2017) are today at the forefront. Several variations of degrowth are advocated under different names, including ‘wellbeing economics’, ‘steady-state economics’, ‘post-growth economics’ and ‘doughnut economics’.

Despite the common basic premise, ‘degrowth’ does not always mean the same in practice. Authors are also not always clear on exactly what should ‘degrow’. There are at least five different interpretations: degrowth of GDP, consumption, worktime, the economy’s physical size and ‘radical’ degrowth, referring to a wholesale transformation of the economic system (van den Bergh, Reference van den Bergh2011). It is perhaps better to say that degrowth covers all these interpretations. Material and energy consumption and the economy’s physical size need to degrow, out of a concern for resource depletion and more recently climate change. Worktime degrowth is one tool to do so, GDP degrowth is an inevitable consequence (not an aim per se) and radical degrowth a necessary condition to make a post-growth economy socially sustainable (Kallis, Reference Kallis2011).

Realising the negative social consequences commonly associated with recessions, degrowth scholars indeed set out to define a path to actively ‘guide’ GDP downward, rather than to passively let the world slip into a depression and to cause widespread suffering. Demaria et al. (Reference Demaria, Schneider, Sekulova and Martinez-Alier2013, p. 209) therefore defined degrowth as a call for ‘a democratically led redistributive downscaling of production and consumption in industrialised countries as a means to achieve environmental sustainability, social justice and well-being’. As the definition suggests, the degrowth literature is not limited to the economy–environment nexus but is also concerned with (international) redistribution and equity, political participation, social fairness and ‘beyond GDP’ conceptions of welfare.

To achieve a managed transition, proponents advance a myriad of policies as part of a systemic change. We will only touch on them superficially. Perhaps the most important and common proposal is to limit the supply of production factors, most notably labour. Reductions in working hours are seen as a way to reduce consumption while increasing social welfare through more free time and achieving high levels of employment. The latter must also be supported by shifting employment towards labour-intensive sectors and steering innovation to increase resource productivity rather than labour productivity, using green taxes and ‘cap-and-share’ schemes (Kallis, Reference Kallis2011; Kallis et al., Reference Kallis, Kostakis, Lange, Muraca, Paulson and Schmelze2018). Another element is to reduce aggregate investment by firms to net zero, which does not exclude that some (clean) sectors grow at the expense of other (dirty) sectors (Kallis et al., Reference Kallis, Kostakis, Lange, Muraca, Paulson and Schmelze2018).

Other ideas found in the literature are the re-localisation of economies to shorten the distance between consumers and producers and the encouragement of the sharing economy (Paech, Reference Paech2012), as well as new forms of (regional) money and limitations to property rights (Kallis et al., Reference Kallis, Kerschner and Martinez-Alier2012; van Griethuysen, Reference van Griethuysen2012). Some advocate for zero interest rates to avoid the growth imperative created by having to pay back interest (Binswanger, Reference Binswanger2013), caps on savings to reduce wealth inequality and doing away with the logic of accumulation by firms and owners of capital. The aim is to arrive at a steady state in which the whole economy is consumed, which would end growth (Loehr, Reference Loehr2012).

Importantly, many of the proposed policies are considered by authors themselves to be incompatible with capitalism and unlikely to be implemented by liberal representative democracies. Kallis et al. (Reference Kallis, Kostakis, Lange, Muraca, Paulson and Schmelze2018) therefore argued that in the absence of democratic degrowth policies a period of involuntary economic stagnation caused by climate change might usher in an authoritarian version of capitalism, unless more democratic alternatives are put forward.

Finally, it should be noted that degrowth proponents, like green growth, devote relatively little attention to limiting population growth, which would theoretically offer another – though contentious – way to reconcile GDP per capita growth and emission reductions. Where it is discussed, most authors view it as undesirable, especially when non-voluntary, and point out that the large and growing populations of the Global South put relatively little stress on the environment (Cosme et al., Reference Cosme, Santos and O’Neill2017).

A Look at Green Growth Theories

Whereas degrowth backers believe that the slow decoupling of GDP and emissions thus far is indicative of the future, the green growth narrative is more optimistic. It is often noted that there have not yet been significant climate efforts globally, but that this need not continue. For instance, there has been a drastic decline in the prices of renewable energy technologies during the last decade. Since 2010 the cost of energy from solar panels and wind turbines have declined by 85 per cent and 68 per cent respectively, thus becoming lower than fossil fuel alternatives even without subsidies. This should change the economic incentives of governments and firms and encourage the much higher investments needed in low-carbon energy generation.

Furthermore, green growth proponents argue that suitable policies and price mechanisms can spur technological development in unexpected ways, as they have done in the past. It is therefore incorrect to say that decoupling cannot accelerate. The central role of technology was already highlighted in the earlier literature rejecting degrowth pessimism. Stiglitz (Reference Stiglitz1974) and Kamien and Schwartz (Reference Kamien and Schwartz1978) did not yet address GHG emissions but rather examined whether continued consumption growth is possible in a world with exhaustible resources. They found that technology-driven efficiency gains allow the limits set by nature to be pushed forward so that continued expansion is possible. Later works, including Weitzman (Reference Weitzman1999), Acemoglu et al. (Reference Acemoglu, Aghion, Bursztyn and Hemous2012) and Aghion et al. (Reference Aghion, Dechezlepretre, Hemous, Martin and Van Reenen2016), discussed endogenous and directed technical change with more optimistic outlooks.

The 1987 Brundtland report Our Common Future is seen as a milestone for green growth with its definition of ‘sustainable development’ (Jacobs, Reference Jacobs2012),Footnote ² since it lay at the basis of global ecological policy thinking of the next few years, such as at the Earth Summit and the Rio Declaration in 1992, which explicitly called for economic growth to address environmental problems. The term ‘green growth’ only gained popularity in the wake of the Global Financial Crisis of 2008 as an idea for short-term stimulus that incorporated environmental objectives (e.g. OECD, 2009) and was adopted as a policy objective by international organisations in the subsequent years (Jacobs, Reference Jacobs2012). Today it underpins the United Nations’ Sustainable Development Goals, and most governments and international organisations have adopted the green growth narrative as part of long-term development policies (e.g. European Commission, 2019; OECD, 2011; UNEP, 2011; World Bank Group, 2012) and post-COVID recovery plans (e.g. White House, 2022).

Like degrowth, the term ‘green growth’ is not precisely defined. For example, the World Bank, the Organisation for Economic Co-operation and Development (OECD) and the United Nations Environment Programme each define green objectives differently (Hickel & Kallis, Reference Hickel and Kallis2020). Jacobs (Reference Jacobs2012) wrote that green GDP growth is understood as either (i) higher growth than in a scenario without strong environmental or climate policies, in both the short and the long run (dubbed the ‘strong’ version of green growth), or (ii) lower though still positive growth in the short run and higher growth in the long run, as high future costs of climate damages are avoided by incurring manageable costs now (the ‘standard’ version, as found in the Stern review (Reference Stern2007)).Footnote ³

Whatever the exact interpretation of green growth, publications following this school of thought promise on the one hand environmental benefits in the form of avoided climate damages and short-term co-benefits such as improved air quality (Karlsson et al., Reference Karlsson, Alfredsson and Westling2020) and on the other hand economic benefits resulting from increased investment and innovation. This ‘double dividend’ forms the heart of the green growth argument. Overall, however, the empirical evidence for a double dividend looks mixed. In fact, some of the reports by official institutions state that an economic dividend can be achieved only if very specific assumptions are made, while in many scenarios, strong climate action could at least in the short-term lower GDP growth (European Commission, 2020).

Green growth policy plans generally rest on four pillars: (i) subsidies for innovation and investments in renewable energy and energy efficiency that boost GDP; (ii) carbon pricing to further stimulate investments in efficiency and renewables, and to avoid rebound effects, combined with the recycling of tax revenues to cut corporate or labour taxes and boost employment, or to redistribute; (iii) assumptions about innovation to accelerate the decoupling process, notably about the use of negative-emission technologies and (iv) compensation schemes for the poorest households, displaced workers and disadvantaged regions to make the transition politically feasible. The green growth narrative therefore usually still involves substantial government intervention, even if the most bullish proponents of green growth argue it will come about as a result of free markets and does not require anything other than carbon pricing.

A Global Green Growth Pathway Is Possible

Given the magnitude of the challenge, it is unsurprising that economists disagree about whether the world can decouple economic growth and GHG emissions at a sufficiently fast pace to avoid dangerous climate change. Degrowers argue that absolute decoupling has never been achieved at a global scale and that even countries that do achieve it progress too slowly. As such they arrive at the conclusion that global GDP must inevitably decline to save the planet.

They are right to highlight the considerable gap that still exists between the current climate mitigation efforts and available tools on the one hand and what is needed on the other hand. They point to the fact that most of the low-emission scenarios envisioned by the Intergovernmental Panel on Climate Change, which assume continued economic growth, rely to varying degrees on technologies such as carbon capture and storage, which is applied to fossil power plants, or bioenergy with carbon capture and storage, which is used to extract GHG from the atmosphere and thus compensate for earlier emissions. These technologies do not yet exist at scale and should not be relied on, they argue, since their economic viability is unproven and they could even create new environmental problems such as excessive land and water use (Keysser & Lenzen, Reference Keysser and Lenzen2021).

Antal and van den Bergh (Reference Antal and van den Bergh2016) gathered a few more arguments directed against the prospect of decoupling through green policies. The most common argument is the existence of a rebound effect from investment in energy efficiency and clean energy. This means that as societies invest to reduce emissions, the increased income or savings resulting from those investments will at least partially offset the intended beneficial effects through increased consumption of non-renewable energy in another way. This can happen both at a micro level and at a macro level. An example of the former is that as cars become more energy efficient, consumers are more inclined to buy large SUVs, since driving them becomes cheaper (Cozzi & Petropoulos, Reference Cozzi and Petropoulos2021). In terms of the Kaya identity, this means that a reduction in the energy intensity of GDP is cancelled out and nothing changes. At the macro level there could be a rebound effect if large energy investments raise GDP per capita growth, which in turn necessitates even faster decoupling. Here the terms of the Kaya identity discussed in the Introduction are impacted.

In addition, there is a risk that more stringent policies could see lower compliance because of what the authors call an ‘environmental Laffer curve’, with economic actors preferring to cheat rather than to respect regulations as the expected cost of being caught and sanctioned is lower than the cost of complying.

A final objection is the possibility of burden-shifting: while not an issue for climate change, other environmental risks could be exacerbated indirectly by emissions reduction efforts, for example soil pollution from mining for minerals used in batteries.

These arguments show that there is indeed considerable uncertainty about the feasibility of rapid decoupling and therefore of green growth, not least because of technological questions. Yet scholars that predicted imminent collapse in the past all proved too pessimistic (at least so far) precisely because they failed to predict the significant advances in agricultural yields, technological innovation and substitution, and declines in population growth rates. Advances in resource efficiency have often been driven by market forces, such as for oil in the 1970s, when scarcity drove up prices, creating incentives for cost-saving innovation. However, technological progress is highly unpredictable, and since the atmosphere as a deposit for CO₂ is a rival but non-excludable good, purely market-driven innovation and substitution will not solve the problem of climate change (Eastin et al., Reference Eastin, Grundman and Prakash2011). The other arguments mentioned also do not seem unsurmountable given the right policy responses.

This is why, in any case, strong policies are indeed necessary. But we do not believe degrowth is a valid option. Firstly, it is hard to imagine that a critical mass of the global population will voluntarily agree to it. The level of income per capita to which rich and poor countries would have to converge is difficult to estimate because it depends on the future dynamics of the factors of the Kaya identity (how much further will the global population grow?) and the interactions between them. As average incomes decline in rich countries, will that also reduce the energy intensity of GDP due to a more modest consumption behaviour or might the opposite happen in the absence of incentives for efficiency? Would people revert back to cheaper and more dirty technologies (van den Bergh, Reference van den Bergh2011)? It is clear that at least ceteris paribus the average global income should be even lower than it is today. This will not offer much solace to poor countries that are still allowed to grow and is very unlikely to find support in wealthy liberal democracies.

Of course, GDP per capita is flawed as a measure of welfare, at least at elevated levels. One can also raise legitimate questions about its normative basis. Yet alternative conceptions proposed by degrowth seem equally flawed for the same reason. Furthermore, declines in GDP will have very real effects on debt sustainability and the affordability of health care systems in the current institutional context. In a connected and presumably non-degrowth world, the external effects of degrowth in a single country therefore remain unclear.

To conclude, it is important to outline how degrowth narratives carry their own unpredictability and environmental risks, perhaps even more than green growth. In short, bar coercion, there might just not be many alternatives besides serious attempts at achieving green growth.