The Global Quest for Green Growth: An Economic Policy Perspective

Abstract

Economic growth has historically been the main driver of rising greenhouse gas (GHG) emissions. To achieve steep emission reductions, the world would have to either decouple global GHG emissions from gross domestic product (GDP) at an unprecedented pace or face deep cuts to GDP. The so-called ‘green growth’ literature is optimistic that suitable policies and technology can enable such fast decoupling, while ‘degrowth’ proponents dismiss this and argue that the global economy must be scaled down, and that systemic change and redistribution is necessary to accomplish this. We use the so-called Kaya identity to offer a simple quantitative assessment of the gap between the historic performance in reducing the emission intensity of GDP and what is required for green growth, i.e., the basis of ongoing disagreement. We then review the literature on both degrowth and green growth and discuss their most important arguments and proposals. Degrowth authors are right to point out the considerable gap between current climate mitigation efforts and what is needed, as well as the various technological uncertainties and risks such as rebound effects. However, the often radical degrowth proposals also suffer from many uncertainties and risks. Most importantly, it is very unlikely that alternative welfare conceptions can convince a critical mass of countries to go along with a degrowth agenda. Governments should therefore instead focus on mobilizing the necessary investments, pricing carbon emissions, and encouraging innovation and behavioral change.

1. Introduction

Climate change is one of the most pressing issues of our time. The science is clear: human activities have already caused approximately 1.1 °C of global warming and at current rates will almost certainly cause over 1.5 °C of global warming above pre-industrial levels as early as by mid-century [1] With the Paris Agreement, governments have committed to limiting the temperature increase this century to well below 2 °C above pre-industrial levels and to pursuing efforts to limit it to 1.5 °C [2]. Keeping global warming below this limit will require net global net CO₂ emissions to decline sharply by 2030 and to reach net zero around 2050. Any delay will push forward the net-zero deadline, as cumulative emissions must stay within a given carbon budget. Emissions of other greenhouse gasses (GHG) must face similar cuts [1,3].

Economic growth has historically been the main driver of rising GHG emissions. To achieve steep emission reductions, the world would have to either decouple global GHG emissions from gross domestic product (GDP) at an unprecedented pace or face deep cuts to GDP. In other words, the causality between economic activity and GHG emissions must be eliminated quickly, or economic activity must be scaled back. Because of the weak historical track record of decoupling, scholars disagree about whether humanity can afford continued economic growth [4].

Very broadly speaking, two camps exist in this debate, although both are quite diverse, with both moderate and extreme positions. The so-called ‘green growth’ literature is optimistic that suitable policies and technology will reduce emissions to sustainable levels, while allowing for continued or even boosted economic growth. This thinking is backed by many governments and international organizations. For instance, the European Commission defines its European Green Deal as “Europe’s new growth strategy”. Likewise, the long-term climate strategy of the US government promises broad economic benefits [5]. Degrowth (i.e., negative growth) proponents, on the other hand, dismiss this as “fairy tales of eternal economic growth” (see Greta Thunberg’s speech at the 2019 UN Climate Action Summit [6]) and argue that the global economy must be scaled down, and that systemic change and redistribution is necessary to accomplish this.

On some level, this academic debate on extreme positions is largely theoretical. Developing countries will want to grow and will implement policies to that effect. The alternative, which is to allow developing countries to grow to a ‘sustainable’ global GDP per capita and to cut GDP per capita in rich countries to the same level, is also theoretical, as economic growth is of central importance for welfare and issues, such as debt sustainability, pensions, and social security. A shrinking or ‘degrowing’ economy could potentially also exacerbate the distributional implications of decarbonization (stopping the release of carbon gasses by eliminating fossil fuel combustion and other polluting activities) that will arise regardless (see, for example, [7]).

However, the sharp contrast in the theoretical positions of scholars is a way to conceptualize the magnitude and uncertainty of the climate challenge and should remind policy makers not to take established narratives for granted. The purpose of this paper is therefore to introduce the reader to the debate by briefly reviewing the main green growth and degrowth ideas, and to assess whether these visions can realistically help us reach net zero in due time. To that end, Section 2 first explains the problem of decoupling by discussing the so-called ‘Kaya identity’ and by offering a simple quantitative assessment of the gap between our historic performance in reducing the emission intensity of GDP and what is required for green growth, i.e., the basis of ongoing disagreement. Section 3 reviews the literature on degrowth, while Section 4 discusses green growth. Section 5 presents some critical comments and concludes that, despite the fact that both visions suffer from uncertainties regarding their feasibility, unlikely support for degrowth makes green growth imperative. Section 6 concludes.

2. The Challenge of Decoupling

Pursuing deep decarbonization will be challenging. Annual global GHG emissions keep rising and show no sign of peaking. In 2019, they were 62 percent higher than in 1990, the year of the first Intergovernmental Panel on Climate Change report, and 4 percent higher than in 2015 when the Paris Agreement was signed [8]. Even unprecedented circumstances such as the massive restrictions introduced to contain COVID-19 led only to a 6 percent drop in emissions in 2020, from which a quick rebound to pre-pandemic levels promptly followed [9].

Historically, economic growth—by which we mean real GDP growth—has long been associated with increasing GHG emissions. Empirically, the causal chain is straightforward: higher levels of economic activity tend to go hand in hand with additional energy use, for example by households wishing to travel more or by industry to meet a higher demand for manufactured goods, and with more consumption of natural resources. Fossil fuels still account for 79 percent of the global energy mix [10], and so energy consumption is closely related to GHG emissions and hence to climate forcing. The expansion of industrial processes, livestock rearing, and other agriculture adds to emissions, while deforestation reduces carbon sinks.

A far-reaching transformation of the global economy is needed to break the causality and reduce emissions. As 73 percent of global GHG emissions (and nearly all CO₂ emissions) comes from energy production [11], the energy sector is an interesting illustration of the broader problem of decoupling. A simple identity, formulated by Kaya and Yokoburi [12] on the basis of Holdren and Ehrlich’s work [13], is useful to understand this concept:

$$C{O}_2 emissions=population\ast \frac{GDP}{population}\ast \frac{energy demand }{GDP}\ast \frac{C{O}_2 emissions}{energy demand}$$

The ‘Kaya identity’ breaks down emissions from energy into a logical product of four factors: population, GDP per capita, energy intensity of GDP, and the carbon intensity of energy. More generally, we can say that GHG emissions are a product of population, GDP per capita, and the GHG emission intensity of GDP. Such an approach allows to theoretically detangle the drivers of growing emissions and to identify where action can be taken [14,15].

Limiting population growth is one way to limit growth in CO₂ or general GHG emissions, but the debate on this topic goes far beyond the scope of our paper. We instead consider population growth as a given. Cutting emissions from energy would therefore need to happen by lowering some or all of the other factors. Since lowering the second factor (GDP per capita) is regarded as compromising economic and social welfare in ‘mainstream’ policy discussions, the core question is whether the third and fourth factor (energy intensity and carbon intensity) can decline at a sufficient speed to allow the first and the second factor to remain on their current paths.

A decline in energy demand/real GDP can be driven by improvements in energy efficiency from using better technologies for production, transport, and isolation; by behavioral change towards less energy-intensive consumption (e.g., increased use of public transport, a larger sharing economy, and more re-use of durable goods); and by a changing economic structure towards a more ‘immaterial’ service-oriented economy. A decline in CO₂/energy demand is mostly driven by the shift from fossil fuels to renewable energy sources.

If the decline in these two factors outpaces economic growth, absolute decoupling of GDP and emissions will take place (i.e., a situation in which emissions go down while real GDP continues to grow). This is already happening, albeit modestly, in Europe and the United States. (Note that developed economies such as the EU and the US import a lot of goods that are produced elsewhere, and thus GHG emissions attributable to consumption are somewhat higher than territorial emissions. Fortunately, these broader emissions are also declining for the EU [8].) Globally, however, there is no sign of absolute decoupling, but only of relative decoupling (CO₂ emissions grow less than proportionately to real GDP). Explained in terms of the Kaya identity, while energy-related CO₂ emissions per unit of GDP are falling (the third and fourth factors combined), the fall is slower than the increase in real GDP (the first and second factors) so that overall emissions continue to rise. Figure 1 shows that in the last 100 years, annual CO₂ emissions from energy production have risen tenfold, even though emissions per unit of GDP have been slashed by almost two thirds (1.6 percent per year on average since 1995, see

Table 1. Factors of the Kaya identity, CO₂ and CO₂/GDP, and average yearly rates of change (%) in 1995–2018 (historical data) and in net-zero emission scenario 2019–2050. Source of data: based on data from IEA [17] for CO₂ emissions, CO₂/real GDP, and CO₂/energy demand; OECD for GDP per capita [18]; for population [19]; and for energy demand/real GDP [20].

	World		EU27
	Historical 1995–2018	Scenario 2019–2050	Historical 1995–2018	Scenario 2019–2050
CO2	2.0	−6.9	−0.7	−6.9
population	1.2	0.8	0.2	0.0
real GDPpc	2.6	2.3	1.2	1.4
energy/GDP	−1.7	−1.7	−1.8	−1.8
CO2/energy	0.0	−8.2	−0.7	−6.5
CO2/GDP	−1.6	−9.7	−2.5	−8.2
	US		China
	Historical 1995–2018	Scenario 2019–2050	Historical 1995–2018	Scenario 2019–2050
CO2	−0.1	−6.9	5.3	−6.9
population	0.9	0.5	0.6	−0.1
real GDPpc	1.5	1.3	8.4	3.0
energy/GDP	−2.1	−2.1	−3.7	−3.7
CO2/energy	−0.5	−6.7	0.3	−6.1
CO2/GDP	−2.5	−8.6	−3.4	−9.6

). This is simply because the global economy has grown at a much faster pace (3.8 percent per year on average since 1995).

To understand how much the world still falls short of the required speed of decoupling, we use historical and projected data from the OECD on population and GPD per capita, as well as historical IEA data on energy and emissions, to compare recent average rates of change in each factor of the Kaya identity to what it would take to reach net-zero emissions by 2050 (Table 1). We assume that the reduction in energy use to produce GDP will continue its current downward trend rather than decline faster. We make this assumption because, unlike energy use in general, one can eliminate the use of fossil fuels with technology. Furthermore, while energy efficiency has an important role to play in reducing emissions, most of the ‘untapped’ potential to accelerate decoupling is with the speed at which energy production decarbonizes. The methodology is presented in Figure 2.

The global decoupling rate between emissions and GDP (bottom row) needs to accelerate by a factor of six to reach net zero by 2050. If the reduction in energy use continues on its current path, the decarbonization of the energy system has to proceed at around 8.2% per year—a huge acceleration compared to previous decades. The same exercise as above shows that for the EU and the US, the decoupling challenge is somewhat less daunting, as only a threefold acceleration is needed. This is partly because their economies are expected to grow more slowly than the global average. However, it is also because the EU and the US both have higher decoupling rates of −2.5%, as they are already visibly reducing the carbon intensity of their energy production. Meanwhile, China has seen even faster decoupling of CO₂ and real GDP, as well as very strong catch-up growth in GDP per capita still drove up emissions for now. China’s historic decoupling rate seems largely driven by efficiency gains that arose as its economy rapidly modernized during the last decade. As this may not continue as before, China will also have to double down on decarbonizing its energy production in order to bridge the gap with its required decoupling rate.

Thus, progress on decoupling GDP growth from CO₂ emissions has been achieved; however, the continued expansion of the global economy has proven to stop annual emissions from increasing, let alone to allow them to decrease at the high pace required by the Paris Agreement. Whether decoupling can accelerate to this extent is the central question in the green growth vs. degrowth debate.

3. Degrowth

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 GDP grows. Current economic models, which are inherently focused 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 [21]. 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 [22] and Vogt [23], and most notably in The Population Bomb by Paul Ehrlich [24]. Meadows et al. [25] 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.

As iterated by The 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 1972 [26], and in the work of economist Georgescu-Roegen [27,28], 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 popularized in the 1990s and 2000s by Serge Latouche [29] who criticized 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 [30,31], with many publications being produced particularly in the first half of the 2010s, in the context of the global financial crisis and the sovereign debt crisis in Europe. Authors including Giorgos Kallis (e.g., [32]), Jason Hickel (e.g., [33]), Tim Jackson (e.g., [34]), and Kate Raworth (e.g., [35]) are at the current 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’ (shrink). There are at least five different interpretations: degrowth of GDP, consumption, worktime, the economy’s physical size, or ‘radical’ degrowth, referring to a wholesale transformation of the economic system [36]. 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 is a necessary condition to make a post-growth economy socially sustainable [32].

By realizing 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. [30] (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 labor. 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 labor-intensive sectors and steering innovation to increase resource productivity rather than labor productivity, using green taxes and ‘cap-and-share’ schemes [31,32]. 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 [31].

Other ideas found in the literature are the re-localization of economies to shorten the distance between consumers and producers, and encouragement of the sharing economy [37], as well as new forms of (regional) money and limitations to property rights [38,39]. Some advocate for zero interest rates to avoid the growth imperative created by having to pay back interest [40], 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 can end growth [41].

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. [31] 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, such as 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 [42].

4. Green Growth

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 this need not continue. For instance, there has been a drastic decline in prices of renewable energy technologies during the last decade. Figure 3 shows that, since 2010, the cost of energy from solar panels and wind turbines have declined by 85 and 68 percent, respectively, thus becoming lower than fossil fuel alternatives even without subsidies. This should change the economic incentives of governments and firms, as well as 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, similar to in the past. It is therefore incorrect to say that decoupling cannot accelerate. Already in the earlier literature rejecting degrowth pessimism, the central role of technology was highlighted. Stiglitz [46] and Kamien and Schwartz [47] did not yet address GHG emissions, but rather 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 papers, including those by Weitzman [48], Acemoglu et al. [49], and Aghion et al. [50], discussed endogenous and directed technical change with more optimistic outlooks.

The 1987 Brundtland Our Common Future report is seen as a milestone for green growth with its definition (“Development that meets the needs of the present without compromising the ability of future generations to meet their own needs” [51] (p. 41)) of ‘sustainable development’ (Jacobs 2012), since it laid out the basis of global ecological policy thinking over 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., [52]), and was adopted as a policy objective by international organizations in subsequent years [53]. Today, it underpins the United Nations’ Sustainable Development Goals (goal 8), and most governments and international organizations have adopted the green growth narrative as part of long-term development policies (e.g., [54,55,56,57]) and post-covid recovery plans (e.g., [58]).

Like degrowth, the term ‘green growth’ is not precisely defined. The OECD [55] (p.4), for example, describes it as “fostering economic growth and development, while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies”, while the World Bank [56] and UNEP [57] each have different green objectives in their definition, such as simply ‘minimizing environmental impacts’ or, more ambitiously, ‘reducing ecological scarcities’ [59]. Regarding the ‘growth’ part, Jacobs [53] wrote that green GDP growth is understood as either: (1) higher growth than in a scenario without strong environmental or climate policies, both in the short and long run (dubbed the ‘strong’ version of green growth); or (2) 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 (the ‘standard’ version, as found in the Stern review [60]). Sometimes adding to the confusion is a lack of clarity about the baseline against which growth is compared. Is it a trajectory based on historical average growth rates or a no-action scenario that includes serious damage from climate change in the long run? This is not trivial, as in comparison to an economy wrecked by runaway climate change, an economic scenario that avoids climate disaster yet has sluggish economic growth could still be called ‘green growth’.

Whatever the exact interpretation of green growth, publications following this school of thought promise, on the one hand, environmental benefits in the form of substantial avoided climate damages and short-term co-benefits, such as improved air quality [61], and, on the other hand, economic benefits resulting from increased investment and innovation. This ‘double dividend’ forms the heart of the green growth argument. Note that maintaining positive GDP growth while decarbonizing does not mean that the costs of the transition (such as high environmental taxes) will not negatively impact certain segments of society. It means that the environmental benefits and new economic opportunities (more than) compensate for the decline of ‘dirty’ sectors. 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 [62]. Furthermore, whereas green growth plans from advanced economies, such as the EU, are confident that the green transition will bring new business opportunities and jobs to replace old ones, global green growth plans can hide regional differences, since low-tech or fossil-fuel-exporting economies might be less well-positioned to benefit economically from a global energy transition [63].

Green growth policy plans generally rest on four pillars: (1) subsidies for innovation and investments in renewable energy and energy efficiency that boost GDP; (2) carbon pricing to further stimulate investments in efficiency and renewables, and to avoid rebound effects, combined with recycling tax revenues to cut corporate or labor taxes and boost employment, or increase redistribution; (3) assumptions about innovation to accelerate the decoupling process, notably about the use of negative emission technologies; and (4) compensation schemes for the poorest households, displaced workers or disadvantaged regions to make the transition politically feasible (see for example

Table 2. Different green growth scenarios, showing targeted emission reductions, estimated GDP impact, key policies, and adversely affected groups (in case of no compensation).

	Barrett et al. [63]	European Commission [62] a	IEA [64]
Emission reductions	Reduce gross global CO2 emissions by 80% by 2050	Reduce net EU GHG emissions by 55% by 2030	Reduce global net CO2 emissions to zero by 2050
GDP impact	Standard version: baseline GDP + 0.7% first 15 years, −1% in 2050, + 13% in 2100	Standard version: baseline GDP −0.27%/+ 0.50% by 2030	Strong version: baseline GDP + 4% in 2030
Key policies	green investment push carbon pricing compensatory transfers supportive macro policies	green investment push carbon pricing tax recycling	green investment push carbon pricing
Adversely affected groups	Low-income households, due to electricity prices and job status Fossil-fuel-exporting countries	Fossil fuel industry Low-income households	Fossil-fuel-exporting countries Fossil fuel industry

^a Includes JRC-GEM-E3, E3ME, and E-QUEST model estimates.

). The green growth narrative therefore usually still involves substantial government intervention, even if the most bullish proponents of green growth argue that it will come about as a result of free markets, and that green growth does not require anything other than carbon pricing.

5. Discussion

As we have seen above, the disagreement between green growth and degrowth scholars is essentially about whether GDP and GHG emissions can be decoupled at a sufficiently fast pace to avoid dangerous climate change. Degrowers argue that absolute decoupling has never been achieved on 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 IPCC, which assume continued economic growth, rely on technologies to varying degrees, such as carbon capture and storage (CCS) applied to fossil power plants, or bioenergy with carbon capture and storage (BECCS), which are 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 since their economic viability is unproven, and they could even create new environmental problems, such as excessive land and water use [65].

Similarly, the net-zero pathway drawn up by the IEA [64] also relies, to a great extent, on future innovation: 15 percent of the emissions reductions by 2030 and 46 percent of the reductions between 2030 and 2050 are to be achieved with technologies that are currently in a demonstration or prototype phase, such as CCS, green hydrogen, and advanced batteries. The breakthroughs achieved in the current decade will therefore be crucial. Unfortunately, none of the technologies needed beyond 2030 are currently on track to being deployed in time [66], as the road from concept to commercialization is typically long and winding.

Antal and van den Bergh [67] 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, 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. The former happens if, for example, cars become more energy-efficient, convincing consumers to buy large SUVs, since driving them becomes cheaper [68]. In terms of the Kaya identity, 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 clean energy investments raise GDP per capita growth, which in turn necessitates even faster decoupling. Here, several terms of the Kaya identity are impacted differently, suggesting that they are not independent [69].

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 emission reduction efforts, for example soil pollution from mining for minerals used in batteries.

The arguments above show that there is indeed considerable uncertainty about the feasibility of rapid decoupling and therefore of green growth, not least because of technological questions. However, scholars that predicted an 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 [70]. 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. However, as stated in the introduction, 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 (as well as how much further the global population will grow) and the interactions between them. As average incomes decline in rich countries, there is uncertainty as to whether the energy intensity of GDP will decline too due to a more modest consumption behaviour, or whether the opposite might happen in the absence of incentives for efficiency. Would people revert back to cheaper, more dirty technologies [36]? 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 it is very unlikely that wealthy liberal democracies will find much support.

GDP per capita is of course flawed as a measure of welfare, at least at elevated levels. One can also raise legitimate questions about its normative basis. However, 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, presumably non-degrowth world, the external effects of degrowth in a single country therefore remain unclear.

In sum, degrowth narratives carry their own unpredictability and environmental risks, perhaps even more than green growth. Unless degrowth is forced upon society, there might not be many other alternatives besides serious attempts at achieving green growth. For that reason, we end our discussion with a few conditions that are, in our view, key to unlocking green growth.

Firstly, massive investments will have to be mobilized in order to decarbonize energy production and improve energy efficiency globally, in the order of USD 5 trillion per year for the next 30 years, up from a current yearly average of USD 2 trillion per year in 2019 prices. This represents an investment jump of two percentage points of global GDP during this decade [64]. Other estimates by the IRENA [45] and Bloomberg NEF [71] are very similar. Carbon pricing can and should be used to create incentives for private investment in renewables, efficiency, and R&D, as public resources are not sufficient to finance the transition. Revenues from carbon pricing should then serve to help vulnerable households transition away from fossil fuels. In order to mitigate the risk of rebound effects, it is important that carbon prices have a broad coverage. Carbon border taxes could be used to avoid ‘carbon leakage’ through trade and to finance clean energy investments in developing countries. Moreover, enabling financial ‘green’ regulations and credible long-term policy commitments can facilitate private investments by reducing the uncertainty that can keep firms from investing [72]. In that regard, detailed net-zero pledges which are cast into law are useful. Unfortunately, by the time of COP26, only the EU (incl. some individual member states), Canada, Japan, and the UK had comprehensive and binding plans to reach net-zero emissions among G20 members (

Table 3. G20 members net-zero emission goals. Source: UNEP [73].

Country	Net-Zero Year	All GHG	Commitment
Argentina	2050	?	announcement
Brazil	2050	?	announcement
Canada	2050	yes	law
China	2060	yes	announcement
EU	2050	yes	law
India	2070	?	announcement
Japan	2050	yes	law
Rep. of Korea	2050	?	policy document
UK	2050	yes	law
USA	2050	yes	policy document

). Other major economies such as the US, China, and India would do well to follow suit.

Uncertainty regarding the timeliness and feasibility of certain technological breakthroughs should not hold back efforts to support their development. It should rather make clear that the prospect of green technological solutions cannot serve as an argument against actual immediate emission abatement. Governments and the private sector both need to substantially increase their research and innovation funding. Public–private partnerships schemes, adequate risk-taking by public institutions, and green industrial policy can further deliver breakthrough innovation [74]. The example of solar panels shows that public policies and global cooperation can, in time, give the necessary push to make new technologies available at competitive prices, fundamentally altering the economic case for decarbonization.

In the meantime, encouraging behavioral change may well be necessary to support a reduction in GHG emissions, especially in the most hard-to-abate areas, also outside of the energy sector. For instance, agriculture and livestock rearing emits a lot of methane and takes up land. Because of its biological nature, there is not much scope for technological progress to reduce emissions here [75].

6. Conclusions

In the above, we looked into both green growth and degrowth ideas, discussing some of their most important arguments. A key argument of degrowers is that absolute decoupling between GDP and GHG emissions has never been observed globally, debunking hopes of green growth. Average decoupling rates of 1.6% per year have indeed been insufficient to lower global emissions. However, in several developed countries, absolute decoupling is ubiquitous, thanks to slower GDP growth and higher decoupling rates of around 2.5%. However, this too falls far short of what is needed to reach net-zero emissions by 2050.

We would argue that faster decoupling then today is possible, given the vast potential to expand renewable energy at competitive prices, which have declined by up to 85% during the previous decade. While there is substantial uncertainty as to whether this, together with technological progress, will sufficiently reduce GHG emissions to limit global warming to 1.5 °C, this uncertainty works both ways, as one cannot exclude the idea that technological progress will bring solutions based on the past. Moreover, the degrowth narrative is also confronted by several other uncertainties, some of which question even their ecological merits.

What does appear clear to us is the very low likelihood that degrowth proposals will be implemented on a global scale. From a pragmatic point of view, it is therefore imperative that governments and society at large can start to create the necessary conditions for green growth without delay, by assertively pushing clean energy and efficiency investments, introducing broad carbon pricing with revenue distribution to vulnerable households, casting green commitments into an enabling regulatory framework, doubling down on green innovation, and encouraging behavioral change where necessary. It remains to be seen to which extent GDP growth can be boosted by global climate action, but any scenario where climate targets are reached without drastic economic contraction in advanced economies or stagnation in emerging economies is preferable, since the latter would go against the eighth UN Sustainable Development Goal. The economic opportunities of the transition seem to be concentrated in advanced economies, although emerging countries around the equator also stand to benefit from avoided damages and from the possibility of producing and exporting cheap and renewable energy. Advanced economies will have to support emerging partners to make the global transition fair and inclusive.

We do not mean to suggest that no more scholarly work should be carried out on alternative development paths and measures of welfare; instead, we advocate more specific attention to how such visions can avoid pitfalls, such as a lack of technological innovation and misalignment of economic incentives, or how individual jurisdictions could implement degrowth in a non-degrowth world, for example. On the other hand, more research could also focus on the presence of interdependencies between factors of the Kaya identity that threaten to undermine green growth efforts (such as the rebound effect), and how such effects could be minimized by adequate policy design.