Revisiting our limits

It’s 40 years since the publication of The Limits to Growth. In Europe and in China, writes Patrick Schroeder, a new wave of thinkers and decision-makers are beginning to revisit its core message.

This year marks the 40th anniversary of the Club of Rome’s famous report The Limits to Growth. Using a model of the Earth, the report developed a number of possible trajectories of human development from 1972 until 2100. Most of the scenarios that came out of the model projected “overshoot and collapse”: rapid industrial production, resource consumption and increasing pollution emissions overshoot biophysical planetary boundaries by around 2050 and lead to a collapse in food production and population by end of the century.

The frightening truth is that, in 2012, many of its findings are still valid and we are still on a pathway that could lead to such an outcome. 

The report also developed stabilisation scenarios, and these are still potential future pathways. To avoid overshoot and collapse, according to the report, it is necessary to stabilise our economies, currently based on increasing material through-put; to slow and stabilise population growth; and to reduce pollution levels, all before mid-century. The two latter goals are relatively uncontroversial in most parts of the world, but even questioning the need for ongoing economic growth is still highly politically sensitive. 

Still, the debate about the limits of economic growth has begun to rear its head again, especially in Europe. In France, the movement debating these issues goes by the name “La Decroissance” — literally, “De-growth”, referring to the controlled downscaling of production. This political and counter-cultural movement, which stands for the egalitarian use of global resources, is barely known outside the Francophone world, but has produced valuable texts for readers of French, such as La Décroissance: 10 questions pour comprendre et en débattre (“De-growth: 10 questions to understand the debate”). 

In the UK, Prosperity without Growth by Tim Jackson, commissioned by the (now disbanded) Sustainable Development Commission has been one of the most important books to rekindle the discussion on the ecological limits to conventional GDP growth — and its alternatives. And in Germany, the debate recently shifted when Wolfgang Schaeuble, the minister of finance, said in an interview with a leading newspaper that “as much as we strive on the one hand for the elimination of hunger throughout the world, on the other hand, in our own western developed countries, we have to strive for a limitation of economic growth.” A public enquiry has also been commissioned by the German government on the topic “Growth, Prosperity and Quality of Life”. 

Unsustainable economic growth is generally defined as when the environmental and social costs of economic growth start to outweigh the benefits of economic growth. There are several alternatives. De-growth, reducing our economic activity to reduce the overall amount of natural resources consumed, is the most radical. “Steady-state” or zero-growth approaches limit the scale of our economies to a certain, steady level.

A third approach is to “de-materialise” economic growth: continuing growth but with the absolute decoupling of GDP from resource consumption and environmental impacts. And while there is a global trend toward the relative decoupling of impacts and resource use through increasing efficiency, overall demand and consumption continues to increase and an absolute reduction of environmental impacts has not yet occurred. 

This third approach seems to be the most attractive solution on the surface, but it is unlikely that the global economy will reach such levels of efficiency. Take the reduction of carbon emissions: if the global population reaches nine billion in 2050 and global per capita income levels rise to a level comparable with those in the European Union in 2007, plus annual GDP growth of 2%, carbon productivity would need to decrease to six grams of carbon dioxide per US$1 of GDP to stay within the 450 parts-per-million target. Highlighting the magnitude of the challenge, Japan, the world’s most efficient economy, currently has an intensity of 250 grams of carbon dioxide per US$1 of GDP. 

There are also problems with the technological fixes it would involve. Technical efficiency gains incur direct and indirect rebound effects, where energy and resource savings fall short of expectations due to behavioural or systemic changes that result from greater efficiency. According to one recent study out of the United Kingdom about macroeconomic rebound effects in the global economy, the rebound of technical energy efficiency measures on global level is estimated to be around 50% by 2030. 

So what do these ideas mean for China, where I live and work? First, there is no doubt China still needs to grow its economy. Even after 30 years of rapid economic growth, China still faces the challenge of poverty eradication with 150 million people still living under US$1 per day. But the question remains: what type of growth is needed to achieve the double goal of poverty eradication and environmental protection? 

Interestingly China’s government is already trying to limit the speed of economic growth. China lowered its official annual economic growth target from 7.5% to 7% in 2011, although actual GDP growth was 9.2% that year. Relative decoupling trends can be observed in China too: GDP has increased much faster than water consumption, for example, which only increases about 1% per year. However, figures on decoupling trends can be misleading if viewed in isolation. The fast decline in water availability continues in China. According to the China Statistical Yearbook, per capita water resource availability has decreased from 2,802 cubic metres per capita per year in 1982 to 1,816 cubic metres in 2009. 

Alternative indicators for measuring environmental performance of the economy beyond conventional GDP growth are also being introduced. An initial attempt at calculating “Green GDP” was published in 2006 by the State Environmental Protection Administration (SEPA, now the Ministry of Environmental Protection). It indicated that economic losses in resources and environmental costs in 2004 amounted to 511.8 billion yuan (US$81 billion) or 3.05% of GDP that year.

The following year, a larger scale green GDP index was unexpectedly shelved (see “After green GDP, what next?”). However, the Chinese Academy for Environmental Planning has continued to publish annual calculations, and in its latest report from early 2012, the cost of pollution for the year 2009 was estimated to be 1.4 trillion yuan (US$222 billion) about 3.8% of GDP and an increase of 9.2% on the previous year. 

Moving beyond GDP will also require new social indicators for evaluating human development. As economist Hu Angang has written (see “Building a national happiness index in China”), the country could start measuring happiness and life satisfaction through the introduction of a new index. This would counteract the strong focus on GDP as a benchmark and could help to close the gap between rich and poor in China, which has widened considerably. Developing such indices could also provide a fruitful avenue for cooperation and dialogue between Europe and China. 

Forty years have passed since the publication of The Limits to Growth. If the models are correct – and so far they look that way – business-as-usual development is not an option: we do not have another 40 years to waste before taking action and changing course. 

Patrick Schroeder is international advisor to the China Association for NGO Cooperation (CANGO).

This article is published as part of our Green Growth project, a collaboration between 
chinadialogue and The Energy Foundation.

Homepage image by Vito Marinelli