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For these industries, we must fall back on the profit motive. The profit motive got us here in the first place by driving increases in global production, but the same quest for economic returns may also be the best way to help us change course. Why? The key to driving more profit from existing processes is to increase efficiency. The same efficiency improvements also reduce emissions.

While the motivation is strong, until recently, enterprises have lacked the cost-effective and easy-to-use tools needed to identify where processes fail, where waste or pollution occurs and where the opportunities to drive greater efficiency exist.

Up to here, the green agenda being proposed has focused mainly on advanced economies, on the principle that rich countries should take the lead in the transition. Still, as we saw in Chapter 7, the green transition cannot be shouldered by advanced economies alone. To say so is not only to push back against the narrow degrowth proposal to mitigate climate change by shrinking rich countries’ economies. Apart from sociopolitical considerations, strictly from a technical standpoint advanced economies cannot keep global temperatures within safe levels on their own. Figure 8.2 displays CO2 emissions by country, and shows that climate neutrality by rich nations would perhaps have been sufficient in the 1950s. Today, however, the United States, Europe, and Japan combined directly account for less than a third of global carbon emissions. Moreover, most of the economic growth going forward is set to happen in developing countries, which are currently powered mostly by highly polluting technologies like coal and gas. In simple terms, most of the current and future CO2 emissions are produced in developing countries, and any credible green strategy to fight climate change must take this into account. To be fair, leaders in most developing countries are well aware of the dangers associated with unfettered greenhouse gas emissions and the catastrophic consequences of climate change. They are likely, however, to be exposed to constant choices between well-known development options that are polluting but cheaper, and a more expensive and uncertain green transition which may pay off only in the longer run. Perhaps counterintuitively, this dilemma is likely to be made indirectly worse by the climate activism of advanced economies, through a sort of global “rebound effect.” In simple terms, as rich countries phase out highly polluting technologies such as coal and gas from their energy and transport mix, the global prices for these commodities will drop. While carbon pricing is designed to avoid a rebound at home, the price collapse might very well encourage developing countries to take advantage of these cheap resources, frustrating the overall global climate effort. The question could be asked: Given that developed countries used these resources in the past, why should the Global South hold back? To put it bluntly, there is no realistic scenario in which developing countries, which account for over 80 percent of the world population, can emulate the carbon-intensive development path of rich countries like the United States yet avoid global climate catastrophe. As they move up the income ladder, developing countries must instead aim for “leapfrogging,” skipping the journeys taken by rich countries with all their intermediate technological steps and proceeding directly to innovative, low-carbon solutions. This “green development” policy might sound outlandish, but technological leapfrogging has happened frequently, including in recent history. For instance, in the field of information and communications technology, large parts of sub-Saharan Africa have skipped phone landlines altogether, avoiding all the costs that setting up that infrastructure would entail. Instead, mobile phones have become widespread. Soon, these became the favored platform for basic payment services through SMS, bypassing another costly infrastructure: a physical banking system. Mobile payments effectively leapfrogged credit card technologies. Several emerging economies, including China and India, rely on QR codes and mobile phones for payments to a larger extent than rich countries do. Once high-speed internet is provided through space by low-orbiting satellites, such as SpaceX’s Starlink, which recently became operational, creating a broadband infrastructure on the ground might no longer be needed, and could be leapfrogged. Specifically on the energy dimension, it makes sense in rural parts of sub-Saharan Africa not to build capillary electricity grids from scratch; solutions such as mini-grid systems based on solar photovoltaic, small hydropower, and small wind are not only cheaper but offer more resiliency in conflict-ridden areas.59 Green development based on leapfrogging will be particularly important given the path dependency of technology. If a developing country builds coal power plants today, these will remain in operation for decades. With the investment considered locked-in, a switch to low-carbon solutions will be feasible only in the very long term.60 How could this international conundrum be solved? To many internationalists, the solution is simply an international treaty setting binding carbon reduction targets, and perhaps even introducing a global carbon price. We saw in Chapter 7 why this is extremely unlikely to happen. Because broad-based decarbonization treaties cannot realistically be binding, they will inevitably run into trouble, or lead to noncompliance every time that short-term economic (and therefore political) incentives are at odds with longer-term green objectives. Green Deals in rich countries can be designed in a way to shift short- term incentives, also making green development more pressing, palatable, and incentive-compliant in poorer nations.61 The key is for green pioneers— the advanced economies—to leverage their large markets. Combined, the OECD countries command two-thirds of total world demand. This number goes down to half if the set is limited to G7 members, or 60 percent if it includes both the G7 and China, which has all the credentials to be an ambitious early adopter in climate mitigation.62 The EU is the biggest export market for goods coming from roughly sixty countries, and the United States is that biggest market for another thirty. Credible Green Deal plans should therefore be flanked by carbon border taxes, which levy taxes on imports based on how much CO2 was emitted in producing them, effectively acting as carbon pricing at the border.63 A carbon border tax serves as a strong economic incentive: it nudges other countries to embrace a green agenda or else risk losing revenues from their most important export markets. Aside from internationalizing greening efforts, carbon border taxes will also serve other purposes, including avoiding what is known as carbon leakage.64 In simple terms, the tax provides a disincentive for rich-country firms to shift production abroad to avoid tight environmental regulations at home, only to later reimport products for domestic consumption. This, as we saw in Chapter 1 (Figure 1.1), has been a great concern for degrowth advocates, who point to the deceptive gap between production- and consumption-based emissions.65 Finally, carbon border taxes will add to the environmental revenue stream, helping to finance Green Deal investment plans, and activist government agendas more broadly.66 Beyond carbon border taxes, there are other ways to internationalize Green Deals while leveraging the strength of large domestic markets. These include regional and bilateral trade deals, which going forward should include climate and environment chapters and targeted, binding green provisions. There are, however, countries which simply are not in a position to shoulder the initial investment costs of a green transition. This remains true even when accounting for the fact that, by moving first, advanced economies will reduce the cost of low-carbon technologies, and therefore the overall costs of climate mitigation for others. For these “least developed countries,” green pioneers should earmark parts of their foreign-aid spending to finance the investment in climate mitigation and adaptation. This can potentially offer a lot of leverage. At roughly €75 billion in 2019, Europe is collectively the largest donor of international aid in the world, providing over half the total global official development assistance—and that sum does not include financing through (regional) development banks, which likewise should progressively tie their loans to green requirements. Along similar reasoning, it is very likely that in the aftermath of the Covid-19 pandemic, rich countries will need to engage in substantial debt relief or cancellation for least developed countries, going beyond the debt freeze decided by the G20 at the height of the pandemic. Some of this financial relief could be made conditional on climate action, once again tilting short-term economic incentives in favor of green development.67 One last potential avenue of criticism remains to be addressed before this section comes to a close: the argument that the proposed internationalization of Green Deals will hamper much-deserved growth and well-being in countries that desperately need it. The fear is that rich countries will metaphorically “pull up the ladder” of fossil-based development, after having climbed it themselves. Two points should be made on this subject. First, while climate change is surely a global problem, its consequences are expected to be particularly dire in developing countries, which are projected to see droughts, flooding, famine, pests, and forced migration. Policies designed for climate mitigation, then, and especially adaptation, are perfectly aligned with the interests of citizens in the Global South, and this will become very evident in a not-so-distant future. Developing countries realistically have only two paths ahead of them: green development or climate catastrophe. Carbon border taxes and related measures simply make this binary choice more evident. Second, old polluting technologies like coal, charcoal, wood burning, and kerosene are directly detrimental to human health and well-being. People in rich countries learned this the hard way, but there is no reason that developing countries should not benefit from the scientific knowledge that has advanced since then. Unsurprisingly, in all climate mitigation models, poor countries are those where co-benefits from the green transition are the largest, in terms of reduced health conditions and deaths from air pollution. Nobody expects poor countries to walk the entire historical path, or “ladder,” of Western medicine, going through ancient nonsensical practices like bloodletting or trepanning. Rather, international organizations and NGOs strive on a daily basis to make widely available the products of modern medical science, such as antibiotics and basic vaccines. Likewise, foreign aid does not fund steam-powered cotton-spinning projects in rural communities in Africa just because those were steps taken by the West in its technological development. Since 2016, the United States bans the imports of products if child labor is used to make them—surely a good thing, even though this was a common practice in the West during the early days of the Industrial Revolution. Concerning climate change and potential catastrophe, along similar lines of reasoning, it should seem reasonable to encourage adoption of green technologies in the developing world, including through carbon border taxes, on the basis of the latest advancements in climate science research.

Often quoted is this quip by British prime minister Winston Churchill: “Democracy is the worst form of government, except for all the others.” Similarly, a green transition carried out in the pursuit of national interest is not optimal, but probably the most feasible and least worst option, taking all dimensions into account: climate, social, and geopolitical. And while this is not a global solution, there are reasons to believe that it can be engineered to ensure propagation across the world. The master plan would pan out as follows. Industrialized countries with high greenhouse gas emissions would power through with the green transition, and this is more and more likely to happen now that, as we saw in Chapter 6, this is becoming a profitable investment opportunity. This includes not only the West, or OECD countries, but also China, which from the standpoint of resources and technological capacity is well positioned to be a green early adopter. These countries have a strong, self-interested incentive to fast-track the adoption of these new technologies to gain an edge in what will be the energy and production system of the future. By so doing they will be capturing network effects, setting regulatory and technological standards, and effectively shaping the very course of the green industrial revolution.66 In the process, early adopters will show the way to the rest of the world, through two channels. First, their actions will prove that the transition is feasible, and even beneficial, given local benefits such as a better air quality and positive effects on citizens’ health and well-being. Second, they will demonstrate how such a complex transformation can be achieved in practice. When this happens, we will fall back onto a well-known dynamic: the international demonstration effect. First postulated by Estonian economist Ragnar Nurkse in 1957, and later empirically verified by a variety of studies, this is the process by which people in poorer countries tend to adopt the products, technologies, and trends of richer nations. We see this process of emulation within countries, as discussed in the context of the innovation treadmill in Chapter 5. Nurkse, formulating his theory in the aftermath of the introduction of a powerful early information and communication technology—the television—argued that this also applies at the global level. The propagation effect he described is probably even stronger today thanks to the internet and, more specifically, social media. As green technologies become a permanent fixture in advanced economies, these production methods and consumption patterns are likely to expand throughout the world, just like blue jeans, Coca-Cola, and Facebook have in the past. Initially, through the highly interconnected cosmopolitan rich elites emulating green icons of success and modernity. Later, through the standard innovation treadmill within countries. This, incidentally, is what Lant Pritchett was noting in his example of how advanced-country technologies get propagated to the developing world, to an extent irrespectively of local relative prices (see Chapter 6). Of course, this will leave ample space for local experimentation and adaptation. Within this context, having abandoned the logic of self-sacrifice, we can then easily imagine rich countries helping out less developed ones in the energy transition, including through financial transfers, for two reasons. First, by pursuing a model based on a rapid green transition that fosters economic growth and jobs, and technological innovation for climate adaptation, advanced economies will have yet more leeway to devote extra resources to foreign aid, including for a global green transition. Again, abundance rather than scarcity fosters international cooperation. Second, aid will also be powered by a logic of national self-interest, given that the companies of early adopting countries will detain an edge in green technology and infrastructure, and governments will want to push their market and standards also abroad. In other terms, development policy, international climate mitigation objectives, geopolitical interests and national industrial policy will all be closely aligned. Other motives that could favor large financial transfers to ease the transition abroad could include the protection of some specific global common goods, as for example the Amazon Forest. One could see from this perspective the significant international financing connected to the so-called Great Green Wall, to contain desertification in Africa. Clearly, these targeted financial transfers could also be channeled through international and regional development banks. To a more limited extent, we are likely to observe important financial transfers connected to the hosting of some green energy generation facilities, such as solar panels or windmills. Based on natural factors, the best locations for these facilities are often found in developing countries, which could then export energy to high-consumption countries.67 This could be seen as a sort of energy outsourcing, creating local jobs and transferring technological know-how, just like manufacturing outsourcing has over the past decades. Finally, there are solid reasons to expect that over the coming decades, as the effects of climate change will be more and more visible, a green agenda will rise to the top of the priority list. This will constitute another push factor for a global green transition, even in the absence of binding treaties. This is particularly the case in emerging economies, which currently are the most reticent to prioritize decarbonization, but which will feel the strongest early pinch from climate and environmental stress. At this point, the reader could be left wondering: Is there a role for global international agreements, like Paris, and its Glasgow update, or are they useless in light of the above? To be clear, they are not useless at all. Climate treaties play a crucial role by creating forums where countries come together, use standard frameworks to assess their progress, share items of concern, exert some useful peer pressure, and even arrive at some very targeted solutions.68 As with the example of the ozone hole, it is perfectly possible that successful agreements will be signed to adopt some joint policies and fix specific problems. For instance, it is increasingly clear that averting depletion of fish stocks and catastrophic biodiversity collapse calls for, aside from avoiding extreme climate change, establishing no-fishing zones at sea and large natural reserves on land.69 Alliances might similarly be required to stop the damage thawing permafrost and retreating ice shelves in the Arctic and Antarctica. Multilateral, all-encompassing international treaties should be seen for what they are: culminations of aligned national greening political agendas, rather than stepping stones toward top-down, technocratic decarbonization, or silver bullets to defeat climate change. They should not exclude other binding international agreements that are smaller both in scope (focused on selected environmental policies) and in size (involving fewer parties). Recent proposals for a joint EU–US, or possibly G7, initiative for a common tax on carbon, would fall into the latter category.70 Especially among countries that are relatively close in terms of their value systems, levels of development, industrial structures, and political priorities, agreements like this are within reach.

As we saw earlier, there is an evolutionary logic to innovation and knowledge accumulation, and as in natural evolutionary processes there is no inevitability of success. At first blush, this might seem like a pessimistic statement. After all, human-made innovation is a faster and more efficient mechanism than natural evolution, given that technical solutions, unlike mutations in Darwinian natural evolution, do not happen by chance.41 Innovations are designed to solve the problems of the moment.42 This implies that, while the concept of progress does not make sense in biological evolution, it could in social progress, if that is interpreted as sustained knowledge cumulation and increased societal complexity.43 So why is it not the case that humanity is on a safe stride toward never- ending progress, powered by technology and knowledge accumulation? Is it that we are at risk of running out of ideas? In the end, if everything is bounded, shifts in prices and needs notwithstanding, can’t science, innovation, and ultimately human ingenuity be bounded as well? For practical purposes, the answer can safely be no. Nobel laureate economist Paul Romer has built productively on the concept of ideas as instructions for arranging atoms and for using the arrangements to meet human needs. For thousands of years, silicon dioxide provided utility mainly as sand on the beach, but now it delivers utility through the myriad goods that feature computer chips. Throughout history, humans have mixed elements together at different temperatures and pressures to see what comes out. The Bronze Age began with an idea to mix tin and copper. Later, mixing carbon and iron turned into another powerful metal: steel. Later yet, in the 1980s, mixing copper, yttrium, barium, and oxygen created a superconductor. Taking the periodic table, and applying combinatory calculus to just the first ten of its elements, Romer shows there are more possible combinations than there have been seconds since the Big Bang—and this does not even take into account that different proportions would generate different compounds. “There have been too few people on Earth,” Romer concludes, “and too little time since we showed up, for us to have tried more than a minuscule fraction of all the possibilities.”44 In a less mathematical vein, having reviewed thousands of years of human technology development, Dartnell shows that all new inventions build on previous ones. Developments in glass, for instance, made it possible to create new instruments, including telescopes and microscopes, which in turn opened new worlds for research.45 The more that is discovered, the more new opportunities are revealed.46 This is particularly the case where the scientific method is employed, and investigations are guided by hypotheses based on theories. Where there is no guiding theory, as noted by Mokyr, advances associated with new inventions tend to fizzle out, and fail to lay foundations for next steps.47 Simple tinkering and learning-by-doing soon reach a point of diminishing returns, or require a serendipitous event to make another productive leap.48 In the face of all this, evolutionary biologist Stephen Jay Gould bluntly concluded years ago that we are so far from the limits of knowledge that it is not even worth posing the question of when they will be reached. Given that the more we discover the more we open up space for new discoveries, and that the upper bound of knowledge is so far off that it is not even worth discussing, one might assume that humanity is on a sure march toward betterment. Unfortunately, that is not quite so. Up until now, we have discussed only the feasibility side, which simply implies that unbound progress is possible, not that it is inevitable. We know that extremely fast technical progress brings with it social complications. On the economic side, for example, innovation generally entails some degree of technological unemployment, creating winners and losers. With regard to economic inequality, increasing R&D spending can make wealth gaps wider, as it helps skew income distribution in favor of high-skilled labor.49 Innovation also creates cultural issues, as a changing world can undermine long- standing values at a speed that feels unsettling to some. As a consequence, feasible though it may be, technological development has not progressed linearly through history. In China, for example, innovation flourished during the Tang and Song dynasties, in cultural conditions that were conducive to it, but then stagnated in the Ming and Qing dynasties. Often across history fast innovation has been followed by a period of retrenchment or stagnation, as conflict and disorder occur.50 Calestous Juma shows in Innovation and Its Enemies that China is by no means an isolated instance. Analyzing the conditions for acceptance or resistance to innovation, across nearly six hundred years of technology history, Juma surveyed the introduction of the printing press, farm mechanization, electricity, mechanical refrigeration, recorded music, transgenic crops, transgenic animals, coffee, and even margarine. Innovations that threaten to alter cultural identities tend to generate intense social concern.51 Fear of loss can lead individuals and groups to oppose innovation, even if that means forgoing important gains. Objections may focus on material losses, but they also include intellectual and psychological dimensions. Juma’s message, that societies with great economic and political inequities are likely to experience heightened technological controversies, aligns with the idea of an “innovation treadmill” and the importance of social cohesion. The period we are currently living in is not exempt from these dynamics. On the one hand, we need a speedy technological transition to fast-track green, sustainable solutions. On the other hand, the changes will shatter entrenched beliefs, disrupt jobs, and damage some industries. Juma’s work reveals that, perhaps paradoxically, the feasibility of the green transition will rest more on the careful management of the socioeconomic dimension than on science and technology per se. The latter are the pinnacle of innovation, but a well-functioning economic system provides the foundations for it. Aside from preserving economic growth and ensuring that its benefits are spread widely, the other socioeconomic priority to underpin the green innovation vision is maintaining the fundamental principles of the Enlightenment and capitalism that made the Great Divergence possible. These include fair competition, checks and balances within government, freedom of speech, tolerance, and liberal democracy. Those eager to do battle with strawman enemies like “capitalism” and “the establishment” might wish that a regulatory hard limit could simply be imposed on emissions tomorrow. But if the process of climate mitigation is incompatible with the social and economic dimension, popular uproar will keep it from happening.52 Again, the Yellow Vest protest movement comes to mind, sparked by a 2018 tax on fuel in France—a carbon-reducing measure that then had to be reversed. This is why European Commissioner and climate czar Frans Timmermans frequently reminds people that there will either be a just green transition, or there will just be no transition, because people will oppose it. The potential limit on technological innovation, and human progress, is therefore social—echoing Fred Hirsch’s Social Limits to Growth—rather than technical. Its success will rely on the solidity of the socioeconomic infrastructure that sustains and nurtures it.

Diehard degrowth advocates might now point out that such a technology- led plan to tackle climate change will require large material inputs to get everything electrified and get new renewable power plants built. And because “you can’t produce stuff out of thin air,” as their slogan goes, that is the end of innovation; we are simply kicking the can down the road because, on a finite planet, we are bound to run out of raw materials. On this point, as President Obama liked to say, “let me be as clear as I can be.” Innovation, and therefore economic growth, will not run out of materials, because the very definition of a production material depends on what is available. This is something we have observed throughout human history. Societies solve problems using what they have on hand. Think of a widespread basic technology like writing, developed by many societies independently to meet exigencies of commerce first, and then knowledge accumulation more broadly. Depending on location and existing technology, several writing materials have been used throughout history—stone tablets, clay tablets, bamboo slats, papyrus, wax tablets, vellum, parchment, paper, and copperplate—all depending on local availability. The same could be said of basic navigation, which has been with humanity since prehistoric time: early vessels were built using techniques and materials from bamboo and logs to reeds and leather, based on material availability and local needs. In 1968, biologist Paul Ehrlich caused a sensation by predicting, in The Population Bomb, that humanity would run out of resources and people would be starving to death before the next decade was out. The only escape in his view was strict population control, of the type implemented by China with its “one-child policy” ten years later. It was the Malthusian story redux, and just as in Malthus’s time, the power of innovation was underestimated. At the time, economist Julian Simon made a famous scientific wager. He challenged Ehrlich to pick any five commodities, saying that regardless of the choices he would bet on their prices being lower ten years later. Ehrlich picked ones that looked likely to run out: copper, chromium, nickel, tin, and tungsten. By the end of the decade, all were priced lower. It is important to understand that it is not that Simon got lucky. Rather, he understood the dynamics of capitalist markets: as the price of a commodity goes up, it activates a rationing mechanism whereby buyers shift away from that material—and this prods the innovation machine to find alternatives, or devise more efficient ways to use what is available.37 The reason that the price of tin, for example, went down is that aluminum became a cheaper and better substitute for it. Aluminum has a neat story of its own. It is the most abundant metal in the Earth’s crust. And yet, up until the 1880s, when a method for melting and electrolyzing its ore was invented, it was prohibitively expensive, meaning it was not a production material, but treated more as a precious metal. Dartnell reports the curious episode of an imperial banquet organized by Napoleon III in the first half of the nineteenth century. In this setting, aluminum cutlery was displayed as an ostentatious show of power, reserved for the most distinguished dinner guests, while less favored guests used knives and forks of simple gold. The very definition of what is a commodity, and useful in production, varies across centuries, and depends on availability. The concern that some input material will come to an end, and that this crisis will deal a fatal blow to civilization, is a recurrent theme in history. In Britain, the fear was expressed in the age of sail that when the country was depleted of oak, the fundamental wood used in shipbuilding and masts at the time, the country would become defenseless at sea. Clearly, this did not happen; eventually iron replaced the need for wood, and in the meantime, sufficient supplies came through trade with Scandinavia, the Baltics, and North America. For goods that cannot be replaced, prices generate strong incentives to become better at extracting and recycling them.38 Think of copper, which has good properties as an electrical conductor. As electrification was in full swing in the early twentieth century in the United States, geologist and copper-mining expert Ira Joralemon warned that “the age of electricity and of copper will be short. At the intense rate of production that must come, the copper supply of the world will last hardly a score of years.... Our civilization based on electrical power will dwindle and die.” One century later, we can see that this prediction did not age well. It is not even a necessity that the bulk of our technological solutions must be based on geological materials. Think, for example, of recent research on fertilizers, based on the discovery that certain bacteria can capture atmospheric nitrogen, without the high pressures and temperatures of the polluting Haber-Bosch process described above. Likewise, the research frontier is shifting toward new materials, opening up the possibility of producing consumer goods with algae-based bioplastic. It would seem that if the twentieth century was characterized by the triumph of inorganic chemistry, the twenty-first might well be the century of organic materials, repurposed to meet human needs. This age is being ushered in by the advent of biotechnology which, also thanks to recent advances like Crispr / Cas9, will provide powerful tools to address current challenges, from reducing the use of pesticides and herbicides in agriculture to fostering natural carbon sequestration. Innovation not only yields new technologies and products, but also allows more value to be extracted from what is already available. Under the heading of more efficient material use falls, for example, the idea of the circular economy, in which society is organized to reuse or recycle extensively, and rely less on new material extraction. The digital revolution has also caused the economy to be more and more “dematerialized” in production and consumption, as it becomes more based on intangible goods.39 This is what economist Danny Quah refers to as the “weightless economy.” Another push toward more efficient use of reduced material inputs is known as the “sharing economy,” as seen recently in urban settings with cars, mopeds, home rentals, and coworking spaces. Under this model, people shift from individual ownership of an asset to an arrangement, usually employing digital technology, by which it can be shared by multiple users, collectively extracting more utility out of the same amount of material. Andrew McAfee shows in More from Less the extent to which the American economy has dematerialized since the 1970s, including by slashing its consumption of virtually all the seventy-two material resources tracked by the US Geological Survey, including minerals, timber, and cement, whether domestically sourced or imported. In its agricultural sector, the United States managed to increase crop production by 35 percent between 1982 and 2015, while reducing the use of fertilizers and returning to nature an amount of land equivalent to the state of Washington (45 million acres). The same combination of productivity enhancements and dematerialization has allowed many advanced economies to see reforestation and economic growth progressing together over the past three decades.40 To sum up this discussion, an old quip might suffice: The Stone Age did not come to an end because we ran out of stones. Likewise, the age of oil and gas will not end because we will run out of those, and innovation will not come to an end because we run out of material inputs. While in theory, and strictly speaking of physical inputs, it is conceivable that a finite planet could be depleted of all materials at once, as a practical reality this is not a concern. Assuming that point were ever reached, it would be in a future so distant that, by then, our material sources would probably not be confined to this planet.

Even if they accept the mechanics of the price mechanism, staunch skeptics could point out that economists have been saying the same old thing about carbon pricing for ages. As early as 1997, more than 2,700 economists, including nineteen Nobel laureates, issued a public statement ahead of the Kyoto Protocol international negotiations, arguing in favor of carbon pricing to address climate change. Over twenty years later, carbon is still largely underpriced and we are still grappling with the problem. On top of the changes in citizen concerns and voting preferences that we now see, something else makes the green tipping point credibly near.35 Year after year, slowly but surely, environmental regulations have been piling up, investment in green R&D has been accumulating, and government-supported pilot projects have proliferated. As a result of the actions and investments of visionary first movers, philanthropists, and dedicated early adopters, renewable technologies have been rolled out more and more. We saw in Chapter 5 what happens when this is the case: production prices fall, as firms benefit from learning curves. The learning curve for solar photovoltaic is particularly stunning, as production prices are down 99.6 percent since 1976, from $106 to $0.38 per watt (Figure 6.1). Even professional forecasters knowledgeable about the business have been taken aback by the speed at which this has happened. In 2014, the International Energy Agency predicted that average solar prices would reach $0.05 / kWh by 2050, thirty-six years later. In fact, this took six years. As a result of such rapid progress, 2020 marked a turning point: in that year, new energy production became cheaper for renewables, specifically via solar and onshore wind power, than for the cheapest fossil-fuel alternative (Figure 6.2). This powerfully implies that, going forward, the most cost-effective way of producing electricity will also be climate- friendly. This shifts the green transition from a luxury consumption choice, reserved to rich countries and citizens, to a profitable investment opportunity—and, at the macroeconomic level, firmly into new economic growth model territory. It is of greatest importance that this has happened for electricity generation, because this is a fundamental building block. Most climate mitigation plans specify a two-step approach: first, electrify everything that can be electrified (which is why, for example, we see today’s strong push toward electric cars, substituting for combustion engine vehicles); and second, ramp up the share of renewable energies in the electricity generation mix.36 We are on the verge of a world where capitalism’s wind fills the sails of the green transition and we no longer have to rely on the goodwill of philanthropists and dedicated early adopters willing to take one for the team. Following profitable opportunities, financial market money will start flowing to clean technology producers at scale, getting out of older, polluting sectors. As these “brown” sectors decline, they will lose economies of scale, effectively falling backward on their industrial learning curves. Accessing loans will become harder for them, and so will attracting talent. We will see a steady move from a world where it is necessary to decide, even at individual consumer level, whether to go for the cheaper option or the greener option, to a world where both motivations point to the same choice. From an economic perspective, the beauty of this is that we return to a decentralized logic, where we no longer have to rely on the hope that people are willing to make day-to-day sacrifices to benefit future generations and society at large—or be stuck in a world where poorer households need to decide between end of the month and end of the world. Personal and societal incentives will align as if led by a green invisible hand—without the need for the complete ideological conversion that ecosocialism demands. From a political economy perspective, once green technologies also become the most profitable investment opportunities, it becomes politically much easier to introduce or ramp up carbon pricing.

Innovation under capitalism follows precisely the same logic it has throughout human history. Capitalism simply oils the wheels of the knowledge machine with features like clear property rights, contract enforcement, competition, and decentralized decision-making.16 In particular, capitalism fosters not only the development of new ideas, but more importantly their diffusion. The latter is the crucial part of the innovation process in which learning, imitation, and feedback effects arise and enhance the original innovation. As odd as this may sound, very often it is not so much about having big ideas, but making it possible to operationalize them. Leonardo da Vinci in the fifteenth century had loads of ideas, envisioning the airplane, the diving suit, the parachute, the submarine, and the helicopter. Most of these were not credibly produced until three hundred years later. Methane was known in antiquity, and allegedly it contributed to the clairvoyant capacities of the Oracle of Delphi in Ancient Greece. Accounts of a Baghdad battery suggest that two thousand years ago the Persians knew electricity existed, although they had little understanding of the phenomenon, and few applications for it. Thus, it remained mainly an item of intellectual curiosity, perhaps applied in medical therapy. Likewise, in 600 BCE, the Ancient Greeks knew that rubbing cat fur on amber (fossilized tree resin) caused an attraction between the two, in what is known today to be static electricity. But it was not until 1830 that electricity became useful for practical uses, when Michael Faraday created an electric dynamo to generate current in a continuous way. Looking to more recent history, early experiments with self-driving cars were conducted in the 1920s, but only now is the technology available for a possibly viable product. As an engineer friend, CEO of a technology venture, tells me, the hardest part of a start-up is not having the good idea for it—there are plenty of those—but creating the business that can deliver the reliable product at scale. Capitalism provides strong incentives, in the form of personal rewards, to shift from the realm of ideas and intellectual curiosity to that of practical production of solutions that respond to needs of the moment and serve large customer bases. As usual, drawing a contrast with the Soviet Union is instructive. The Soviet system featured strong investment in education, brilliant scientists, and well-equipped research labs. As a consequence, it generated major scientific breakthroughs—such as Sputnik, the first battery-powered satellite in 1957, which orbited around the Earth for a few months. In 1961, the Soviets managed to send the first man safely into space: the famous Yuri Gagarin. In the field of nuclear physics, they created the hydrogen bomb, just a few months after the United States. At least for circumscribed, military, or centralized innovation, the socialist Soviet model worked marvels. When it came to spreading innovation and technology through the economy, however, it fell short. Product and process innovation stalled, because there were no incentives for it beyond some fears of being chastised or punished by the party leadership.17 Without diffusion, raw innovation has very limited social and economic impact. The strength of the capitalist system on the innovation front is not that it creates more geniuses, but rather that it is an efficient organizing principle, providing strong incentives for people to develop ideas.18 Even more crucially, it fosters the deployment of these ideas, matching them with sources of capital—firms on the hunt for novelty to maximize returns and eager to win in (Schumpeterian) market competition. In the process, capitalism also nudges acute minds toward what historian Joel Mokyr calls “useful knowledge,” as opposed to, say, astrology, numerology, or other intellectual endeavors with no impact on well-being. Because capitalism bridges the gap between abstract scientific curiosity and practical applications, it is an efficient machinery to produce economic growth. Indeed, historians of the “Great Divergence” that separated industrializing Europe from the old world view some of capitalism’s standard features, such as strong property rights protection and contract enforcement, as instrumental.19 Strong economic growth in turn opens up space to use more resources for the future, encouraging investment in research.20 Innovation generates economic growth, which in turn fuels innovation—a dynamic that has yielded sustained exponential growth since the Industrial Revolution. Recall the high correlation between innovation and GDP per capita (Figure 3.1). This shows up not only in terms of absolute spending by rich countries on research and development (R&D) but, more crucially, in terms of R&D as a share of their GDPs—a good example of how economic growth reduces the need for trade-offs (exemplified in Table 3.1).21 Innovation serves perceived societal needs, whether it is government funded, particularly through a democratic process and public accountability, or privately funded, seeking to address consumer relative needs and capture demand.22 The process of innovation has an exploratory nature, and is by no means perfect, including under capitalism. We often hear of abandoned research programs which, in hindsight, would have produced real bang for the buck, and also see others turn out to have been a waste. These mistakes are bound to happen given that foresight is imperfect. All we can do is align incentives so that those investing in new technologies will try to collect as much information as possible and use it in making decisions. This happens when they can profit from successful R&D. The same applies to government spending in a healthy democracy, assuming that poor investment of taxpayer money by politicians does not go unpunished at the ballot box.23 Pulling all this together, we see that researchers and scientists are but the tip of the innovation iceberg, below which a societal organization supports their work. This might be news to some toiling away in the hard sciences, members of a profession proud of being insulated from politics and business thanks to institutions such as academic tenure. The truth is that the bright people sitting in labs are there, with access to research funds, expensive instruments, and scores of PhDs and post-docs, because society has decided their research topics are worth resources and attention, and expressed that through some combination of government, businesses, and philanthropy. A picture therefore emerges of innovation and inventions happening, in whatever domain, not by chance but rather as a response to societal priorities. In capitalist systems, most resources are privately owned, and indeed, most R&D in rich countries is funded by the private sector.24 The frequent argument, including from the degrowth movement, is that the private sector focuses on the wrong things, led by its desire to maximize private profits rather than solutions to societal needs. This supposedly results in “useless innovation,” rather than innovation in areas that “truly matter.”25 To understand how frontier innovation really works in the private sector, we must look to the central element of the capitalist system—the price mechanism—and we can start with an anecdote. In 2018, Lant Pritchett, known as a maverick in the field of development economics, was invited by Larry Summers to present a guest lecture to his Globalization and Its Critics class at Harvard. Pritchett’s opening words —“Tesla is dumb!”—generated the expected murmur in a room full of digital natives, who immediately sized up Pritchett as a Luddite. The fact is that Tesla (like Google, for that matter) invests many millions of dollars in self-driving cars as it responds to outstanding incentives, including the relatively expensive price of labor in the United States. At a world level, however, human labor is very cheap, and there are millions of people who might take work as chauffeurs, charging a fraction of the price of a self- driving car. The same could be said for cashiers in supermarkets, whose work is being increasingly automated. What makes these investments locally sensible but globally illogical is clearly the existence of national borders. For cultural reasons that one can agree or disagree with, we have created borders which are rather closed, and this distorts national prices, in turn taking innovation in different directions. Pritchett’s provocative statement highlights that companies respond to price incentives but that, because of existing distortions, the result might not be the most efficient allocation of resources. From his development perspective, and relating to globalization, the worst part is that developing countries tend to import and imitate the technology solutions of rich countries. A museum in India, for example, installs automated gates that project an image that it is quite modern, but this is a country with countless workers willing to take tickets for a dollar per day. This speaks to an important insight. We know that, under capitalism, prices are fundamental in causing supply to meet demand, but that regulation defines the parameters. Innovation is no exception. It is possible for government to steer the direction of innovation by changing these parameters. To do that within a democratic process, however, policymakers need majorities of people on board.26 One can blame capitalism because it focuses on “useless innovation,” but it is more a reflection of people’s revealed preferences than anything else. If borders were made more permeable, as Pritchett has suggested on multiple occasions, the focus on labor-shedding innovation would diminish. But politically, or culturally, people do not seem inclined toward such a solution. The green dimension marks no exception to the rule —a subject we turn to next.

The main topic of this book is the relationship between capitalism and the growth imperative, and this is an essential relationship to understand as we consider a societal rethink to address the challenges posed by climate change and environmental degradation. The point that must be accepted is that economic growth is a result of human desires, rather than a top-down imposition by capitalism on otherwise indifferent individuals. The quest for more will endure as long as humans populate the planet, whether we tear down capitalism or not. It is best to acknowledge this and craft our sustainability strategies accordingly. While we have looked at the origins of the growth imperative from a more individual, or microeconomic, perspective, it is also possible to do so at the country level. Skeptics will surely point to historical estimates of GDP, such as the ones displayed in Figure 5.2, to claim that capitalism and industrialization brought a growth-obsession phase to an economic history previously characterized by simple stability. Such an interpretation of the data is understandable, but fallacious. Aggregate economic growth has accompanied humankind throughout its history, but it accelerated enormously from the Industrial Revolution onward thanks to certain conditions: the Scientific Revolution, better protection of property rights, presence of capital, an extensive banking system, high wages in England, and more. FIGURE 5.2: World real GDP, long-term estimates Data source: De Long (1998). Note: In billions of 1990 international dollars. To understand a hockey-stick chart like Figure 5.2, one should appreciate that behind the astounding growth since the Industrial Revolution is a previous economic history that has been obscured by it.56 More important than the calculation of how much economic growth was realized before that point should be the recognition that the quest for more—the growth imperative—was in place. Aggregate growth could materialize only to a limited extent, as new technologies were developed and spread at a slower pace (and in some cases, were forgotten altogether when their inventor died or a civilization collapsed).57 But that does not mean that early humans did not crave it. In The Measure of Civilization, Ian Morris offers an index to gauge a society’s capacity to harness energy. It combines measures of not only food (for humans and their livestock), but also fuel (for cooking, heating, cooling, firing kilns and furnaces, and powering machines, and including wind and waterpower as well as wood, coal, oil, gas, and nuclear power) and raw materials (for construction, metalwork, pot-making, clothing, and any other purposes). Using this comprehensive, standardized index, Morris shows that energy-capture capacity (and the technology to enable it) rose steadily from its baseline of four to five kilocalories per person per day in a typical pre-agrarian, hunter-gatherer society, accounting for food, cooking, and little else. By the peak of the Roman Empire, it had reached over thirty kilocalories.58 Advancing energy capture and technologies could sustain an increasing population. At the onset of the Agricultural Revolution, ten thousand years ago, the human population of the planet was roughly four million. This was about what you would expect for a medium-sized mammal like homo sapiens. It reached two hundred million, however, by the time of Christ. This was made possible by great enabling inventions like domestication and breeding, language, metallurgy, agriculture, irrigation, cities, writing, money, and commerce. Each time, more available resources spurred population growth, which eventually led to a crisis of overpopulation. Each time, demographic pressure against the limits of available resources spurred inventiveness.59 Through constant struggles, the result has been a slow but steady rise in population over the centuries.60 Thus, human history can be interpreted as a constant struggle against limits imposed by nature, then shattered by tinkering and ingenuity. While climate change, and environmental degradation more broadly, is in a different league in terms of its complexity and scale, it would seem to belong to the same category of problems that humans have faced throughout history. Famine was not the only disaster holding population and economic growth in check. There were also plagues, like the Black Death that killed perhaps 200 million people in Europe in the mid-fourteenth century. And there were wars, too. If one society managed to start accumulating, it quickly attracted the attention of its neighbors, which saw violence as a legitimate way to increase their resource availability. Some civilizations failed to sustain the complexity they achieved, or to respond to changing climate or environment, and either collapsed or were conquered.61 Still, it would be a mistaken interpretation to see a patchy track record of achieving and sustaining broad-based economic and population growth as an historical absence of the quest for more.62 As evidenced by invasions and wars, relative income theory applies at the country level, too. In a context of sustained interactions with other societies, economic comparisons are not limited to the past, but also extend to one’s reference group—in this case, neighboring countries. The broader issue here is that, in a geopolitical context of confrontations among countries, economic growth is highly linked with political clout and military expenditure. This generates a geopolitical growth imperative akin to the desire to keep up with the Joneses, even just to deter foreign interventions. As noted in Chapter 3, an instructive example comes from the experience of the Soviet Union, which was not built on a capitalist system, and so was free from the price mechanism, Schumpeterian competition between firms, and other in-built growth imperatives. It had not even adopted GDP as a metric to guide economic policy. Nonetheless, it was subject to a geopolitical growth imperative due to its Cold War with the United States, and the desire to protect and project its value system in what was then called the third world. Over the course of history, some countries actively chose to withdraw from the iron law of continued economic growth and progress, and to avoid comparisons to others, by embracing self-isolation. In all cases, domestically, this was associated with sentiments of national superiority, insularity, and less innovation. When the curtain came up, these nations were revealed to be relatively poorer, and at the commercial and military mercy of others. Two examples stand out: Ming-dynasty China and Tokugawa Japan (see Appendix B). Harking back to the opening of this chapter, capitalism is blamed for many ills, but it is better understood as a great enabler. It is an efficient way to foster growth. It rewards ingenuity. It prods people to invent practical things and add to the store of useful knowledge. When firms compete for customers, they have an incentive to master the latest technology and learn how to produce it as cheaply as possible. This appeals to consumers, who display all the emulation and status-signaling behaviors we have discussed. In short, capitalism is efficient at delivering what people want, and people seem, due to cultural-evolutionary traits, to constantly want more. This did not start with the Industrial Revolution. The quest for more has characterized most of human history, both in periods when growth was achieved, and when it was not.

Climate science and political realism are two bitter tastes that taste even more wretched together.

Today’s  was a horror story just three decades ago. In 1993, Bill Clinton  that global warming presented such a profound threat to civilization that the U.S. would have to bring its “emissions of greenhouse gases to their 1990 levels by the year 2000.” Instead, we waited until 2020 to do so; in the interim, humanity burned more carbon than it had since the advent of agriculture. Now, it will take a historically unprecedented, worldwide economic transformation to freeze warming at “only” 2 degrees — a level of temperature rise  “once in a century” storms into annual events, drown entire island nations, and render major cities in the Middle East uninhabitable in summertime (at least for those whose lifestyles involve “walking outdoors without dying of heatstroke”). This is what passes for a utopian vision in 2021. If we confine ourselves to mere optimism — and assume that every Paris Agreement signatory meets its current pledged target for decarbonization — then warming 

It was in Malaysia that I first experienced what I now dub “anti‐​human environmentalism”. Sitting in the country’s ministry of energy, technology, science, climate change and environment, a government scientist presented us with a two‐​axis diagram. The lines represented “the natural world” and “human activity.” As he laboured over all the environmental depletion we were purportedly responsible for, I tentatively asked: “Do you assume, then, that human beings are just not part of the natural world?” The silence spoke volumes. Humanity faces huge challenges relating to our coexistence with wildlife, forms of pollution and risks associated with a changing climate. As economists might say, our activities do indeed produce “externalities”. But doomsday anti‐​human thinkers, who see us as mere leeches on Earth, have been utterly wrong in one crucial respect: the idea that growth is rapidly depleting natural resources. Provided we maintain sound economic policies, worrying about humans depleting resources amounts to unfounded hysteria. The biologist Paul Ehrlich is perhaps the most famous proponent of this idea. In his 1968 bestselling book, The Population Bomb, he advanced the idea of resource depletion. He renewed this attack at a 2017 Vatican conference, saying: “You can’t go on growing forever on a finite planet. The biggest problem we face is the continued expansion of the human enterprise … Perpetual growth is the creed of a cancer cell.” The Prince of Wales thinks similarly. He has lamented that Earth just doesn’t have the capacity to “sustain us all” if more and more people consume natural resources at “Western levels”. This notion, that humans are like pigs eating from a finite trough, is intuitive. The Earth, logically, appears to have limited natural reserves. If one accepts this, it follows that bigger population or higher consumption levels will deplete the Earth’s riches. The implications are obvious: first, infinite growth is impossible due to these constraints on physical resources; second, to avoid the rapid depletion of the Earth’s resources, we must limit population growth, reduce consumption, or both. Such thinking is remarkably common among scientists. But it is uneconomic. What it ignores, as the great University of Maryland economist Julian Simon highlighted, is the capacity of human ingenuity to find new recipes and ideas. Anti‐​human thinkers fail to appreciate that our brains are also a resource. When toiling under the right institutions and market‐​based incentives — i.e. prices — we constantly dream up new ways of making or doing things, including new methods of discovery or means of excavating raw materials. Yes, consumption and population growth put pressure on resource availability. But markets provide us with incentives to change our behaviour or innovate. High prices caused by higher demand encourage us to shift to consuming substitutes in the short term. In the longer term they encourage us to seek out new supply or to rethink our whole approach. If this second effect dominates, the prices of natural resources could fall with population growth. More humans, after all, means a greater brain capacity for ideas to engender abundance. That is exactly what my Cato colleague Marian L Tupy, and Gale L Pooley of Brigham Young University, find in a fascinating new paper. The facts speak for themselves. Looking at a basket of 50 global commodities between 1980 and 2017, they find real prices fell by an average of 36pc. That happened despite the global population increasing by 69pc over the same period. A more accurate way to assess the “cost” to humans of these commodities is to calculate their “time price” — the amount of time an average human must work to earn enough to buy them. On that metric, the cost of these commodities fell much further — by a whopping 65pc. If it took 60 minutes of work to buy this basket in 1980, it only took 21 minutes of work to afford them in 2017. A continuation of that trend would see prices of these natural resources halve every 26 years. This utterly refutes the anti‐​human narrative and shows that Julian Simon was right. Population growth, far from exhausting resources, seems to be making them more plentiful. In fact, our current situation indicates a “super abundance”: prices (in terms of working time) are falling at a rate proportionally faster than the increase in population. How does this make sense, physically, on a planet of notionally fixed resources? Tupy and Pooley use a beautiful analogy. They state: “The world is a closed system in the way that a piano is a closed system. The instrument has only 88 notes, but those notes can be played in a nearly infinite variety of ways. The same applies to our planet. The Earth’s atoms may be fixed, but the possible combinations of those atoms are infinite. What matters, then, is not the physical limits of our planet, but human freedom to experiment and reimagine the use of resources that we have.” It is wrong, in other words, to think of human activity as a pure consumption of our physical inheritance. Our existence, provided we are governed by sound institutions, encourages new and innovative ways to fulfil wants and needs by combining and exploring the resources available to us. Earlier this year, for example, scientists discovered a 16m‐​ton patch of deep‐​sea mud rich with “rare earths” almost 800 miles off the coast of Japan. They estimate it could serve the planet’s need for those rare earths for between 400 and 800 years. The earth’s natural resources are neither fully known nor fixed in any meaningful sense. Neither, therefore, are the opportunities for growth. As former US president Ronald Reagan summarised succinctly: “There are no such things as limits to growth, because there are no limits to the human capacity for intelligence, imagination and wonder.” Provided we maintain sound economic policies, worrying about humans depleting resources amounts to unfounded hysteria.

A year with little economic growth seems out of place and many countries now face a recession. Few realize that for most periods of human history economic growth has been zero or very gradual. Growth rates increased after the First Industrial Revolution, influenced by innovation in many areas including transportation, physics and chemistry. This also led the Western world to overtake China which rejected certain technologies such as the expansion of railroads. Economic growth either results from a population increase or higher productivity. With populations decreasing in many countries, higher productivity and efficiency becomes the solution and to achieve this innovation will play a critical role.

Global Economic Crisis

As mentioned earlier (Chapter 3), the first law of thermodynamics (conservation of mass) implies that mass outputs from any process equal mass inputs. However, useful outputs are almost invariably a fraction of total inputs, sometimes a small fraction (as in the case of refining low grade ores). In some cases, the output mass is entirely wasted, as with combustion processes. Thus wastes are an unavoidable by-product of physical production. The law of mass conservation, on the other hand, is far from trivial. The so-called 'mass-balance principle' states that mass inputs must equal mass outputs for every chemical process (or process step), and that this must be true separately for each chemical element.17 All resources extracted from the environment must eventually become unwanted wastes and pollutants. Waste emissions are not exceptional phenomena that can be neglected or treated as exceptions. The standard multi-sector economic model of commodities produced from other commodities is misleading (Walras 1874; Sraffa 1960; von Neumann 1945 [1932]). It follows, too, that virtually all products are really joint products, except that wastes have no positive market value. On the contrary, they have, in most cases, a negative value. A producer of wastes will need a 'sink' for disposal. Options for free disposal are becoming rarer. Producers must, increasingly, pay to have waste residuals removed and treated, safely disposed of, or recycled. The implication that there exists a price-determined equilibrium between supply and demand (of commodities) must therefore be modified fundamentally (Ayres and Kneese 1969). This means, among other things, that 'externalities' (market failures) associated with production and consumption of materials are actually pervasive and that they tend to grow in importance as the economy itself grows. Materials recycling can help (indeed, it must), but recycling is energy (exergy) intensive and (thanks to the second law) imperfect, so it cannot fully compensate for a declining natural resource base. Long-term sustainability must depend to a large extent upon dematerialization and 'decoupling' of economic welfare from the natural resource base (Ayres and Kneese 1989). The mass-balance condition provides powerful tools for estimating process wastes and losses for industrial processes, or even whole industries, where these cannot be determined directly. Even where other data are available, the mass-balance condition offers a means of verification and interpolation, to fill in gaps (Ayres and Cummings-Saxton 1975; Ayres 1978; Ayres and Simonis 1999; Ayres 1995).

All told, some 33 countries have in recent years cut emissions while maintaining growth. Around three-fifths are European, meaning, as was the case during the Industrial Revolution, the old continent is leading the way. But the group also includes America, where emissions fell by 15% between 2007 and 2019 even as gdp per person rose by 23%, as well as others that have joined more recently. These include Australia, where emissions have fallen by 9% since peaking in 2012, and Israel, where they have fallen by 12% in the same period, even as both economies have grown. It would be wrong, however, to characterise decoupling as a luxury reserved for the most affluent countries. Thanks to energy-efficiency improvements, emissions in eastern Europe have fallen since the collapse of the Soviet Union, at the same time as living standards have converged with western Europe. Argentina, Mexico and Uruguay have also joined the decouplers. In Mexico, for instance, emissions have fallen by 16% since their peak in 2012. Around the world, before the covid-19 pandemic distorted the numbers, more than 1bn people lived in countries with falling emissions and growing economies. Territorial emissions, which reflect domestic production, began to fall much earlier. In Britain they peaked in the 1970s, before oil shocks and strikes decimated the country’s industry. But their decline merely reflected the fact that more manufacturing was taking place abroad: British clothes were being sewn in Dhaka instead of Derby, which led to no reduction in global emissions. The figures in this article mostly come from analysis of data produced by the Global Carbon Project, a greenhouse-gas-monitoring outfit. These include estimates of the emissions from imports, and so capture the vast majority of a country’s carbon footprint. In other words, Britain’s figures include emissions from imported t-shirts made in Bangladesh. The more recent decline in emissions is therefore the real deal. Part of the explanation is that the countries to which manufacturing has been outsourced now emit less carbon themselves, notes Viktoras Kulionis of Pictet Asset Management. In all but a couple of dozen industrialising countries gdp growth produces fewer carbon emissions than used to be the case, a phenomenon which is known as “relative decoupling”. In 2008 China’s exported emissions peaked at around 1.5bn tonnes of carbon-dioxide equivalent, before falling to 1bn in 2019, owing to improved efficiency and a move from chemicals and metals exports to less carbon-intensive electronics ones. Emissions imported by the oecd group of mostly rich countries peaked in 2006, at 2bn tonnes of carbon-dioxide equivalent. They have since fallen by more than a third to 1.3bn. But the shift mostly reflects a watershed change in how energy is used in the West. Decoupling can occur for two reasons: either because output becomes less energy-intensive, or because the energy used becomes greener. For the past decade or so, it has mostly happened because of the former. The energy intensity of gdp—the supply needed to produce a dollar of national income—has fallen faster than gdp has grown. This can be seen in America. The country is often considered a polluter par excellence. In fact, its territorial emissions peaked in 2005. Since then, the energy intensity of its gdp has fallen by nearly a quarter. So even though America’s gdp has risen by 29%, emissions have fallen by 15%. Similarly, four-fifths of the fall in German emissions since 1990 reflects lower energy intensity. Only the remaining fifth comes from the use of greener energy. Falling energy intensity is the result of changes to the structure of rich-world economies. A visitor to Coalbrookdale in the 18th century compared its smoke, heat and fire to a vision of hell. Nowadays the old furnace lies cold; the last foundry, which made parts for Aga ovens, closed in 2017; and the site has become a tourist attraction. It is a symbol of Britain’s shift from an industrial economy to a service-based economy—a shift which has big implications for emissions. As Nick Eyre, a climate-policy expert at the University of Oxford, notes, an extra trip to the theatre requires much less energy than making additional pots and pans. The move from manufacturing to services has happened across the rich world. Industry’s share of American gdp fell from 17% in 2007 to 14% by 2019. In Germany, a country known for its manufacturing prowess, its share fell by two percentage points in the same period. Even in Mexico, one of the poorer countries to have decoupled, its share dropped from 27% to 25%. The task now is to accelerate decoupling. One reason for optimism is that so far it has happened without colossal outlays or much political consensus. Many of the West’s high achievers have emissions-trading schemes, or other forms of carbon pricing, but even laggards have managed to reduce their carbon footprints. Increasing use of renewables in electricity generation, as well as electrifying the heating of homes and transport—whether through electric cars or encouraging public transport—has the potential to make a big difference. But perhaps the greatest reason for optimism is the evidence that poorer countries are industrialising in different ways from their predecessors. Data from the Global Carbon Project suggest that Egypt, the cop27 host, reached peak emissions in 2017. India and Vietnam, which are becoming a bigger source of exports as trade shifts away from China, are considerably greener than their economic rival. In 2007, when China’s economy was roughly as big as India’s is today, it emitted around twice as much carbon dioxide. India and Vietnam are still powered by coal. The difference is they are making much more efficient use of it.

As you may know (although a surprising number of people don’t), the Biden administration has taken a huge step forward in the fight against climate change. The strategically misleadingly named Inflation Reduction Act is mainly a climate bill, using subsidies and tax credits to promote green energy. Environmental experts I follow believe that it’s a very big deal, which, if successfully implemented, will greatly reduce greenhouse gas emissions. It’s not quite as aggressive as the climate plans in Biden’s original Build Back Better legislation, but modelers estimate that it will accomplish about 80 percent of what B.B.B. was trying to do. The biggest factor making this kind of climate initiative possible, after so many years of inaction, is the spectacular technological progress in renewable energy that has taken place since 2009 or so. This means that we can greatly reduce emissions using carrots instead of sticks: giving people incentives to use low-emission technologies rather than trying to regulate or tax them into giving up high-emission activities. And the politics of carrots are obviously a lot easier than the politics of sticks. Strange to say, however, at this precise moment — the most hopeful moment for the environment, as far as I can tell, in decades — my inbox has been filling up with woeful claims that environmental protection is incompatible with economic growth. These claims are oddly bipartisan. Some of them come from people on the left who insist that the planet can’t be saved unless we give up on the notion of perpetual economic growth. Others come from people on the right who insist that we must give up on all this environmentalism if we want to preserve prosperity. So let’s talk about why such claims are all wrong. Part of the problem is that many people don’t understand what economic growth means, imagining that it necessarily involves producing the same things you were producing before, in the same ways, but just at a larger scale. But that’s not at all what growth means. Currently, America’s real gross domestic product is about a third larger than it was in 2007. But the economy of 2023 isn’t just the economy of 2007 scaled up by a third. Production of some goods has gone way down — coal production has been cut roughly in half. Official growth measures also try to take quality changes into account: We’re producing fewer cars than we were in 2007, but measured real output in the motor vehicle industry is higher, because government statisticians believe that recently produced cars are better in several ways than older models are, and try to estimate how much people would have been willing to pay for those improvements. Above all, real G.D.P. says nothing about how stuff is produced. A kilowatt-hour of electricity counts the same whether it was generated by burning coal or wind power, but the environmental impact is completely different. As a result, there’s no reason a growing economy must place an increasing burden on the environment. In fact, environmental quality is often better in rich countries, with high G.D.P. per capita, than in middle-income countries — a phenomenon the economists Gene Grossman and Alan Krueger dubbed the environmental Kuznets curve. Consider, for example, a comparison between the New York metropolitan area and Delhi, India. Delhi has a larger population but a much smaller G.D.P. So does New York’s big economy mean a highly stressed environment? To take a very visible indicator, how does air quality in the two cities compare? As anyone who’s visited both places knows, New York air is, well, relatively OK, while Delhi air … isn’t. So there is no necessary relationship between economic growth and the burden we place on the environment. It’s true that the Industrial Revolution greatly increased pollution of all kinds, and countries like India that are still in the early phases of their own economic development are by and large paying a large environmental price. But at higher levels of development, delinking growth from environmental impact isn’t just possible in principle but something that happens a lot in practice. Here’s a favorite chart of mine from the invaluable Our World in Data website. It shows carbon dioxide emissions per capita in Britain, where the Industrial Revolution began. The early phases of industrialization were indeed associated with a huge rise in emissions. But more recently emissions have fallen back to the levels of the ’50s — the 1850s:

How did Britain do that? Part of the answer is that over time the British economy switched from relying on coal to relying on hydrocarbons, which when burned generate less carbon dioxide. Britain also learned to use energy more efficiently over time. But more recently a big factor has been the rise of renewable energy, especially, in Britain’s case, wind power:

If the pursuit of corporate profits led to the paradox now posed by climate change, then the same precept applies if global leaders want to reach net-zero. That’s a cornerstone of the proposed securities rules — requiring companies to disclose their climate-related market risks.

Roger Ballentine explained the logic, a climate capitalist who is the president of Green Strategies Inc. Cheap fossil fuels have powered the globe’s remarkable economic growth. But times have changed, and now is the moment to align profit-seekers with climate-friendly businesses. The market will reward companies that embrace the challenge, while those that do not will get sidelined.

Besides minimizing the class factor, degrowth suffers from two interconnected flaws. First, degrowth underestimates, even ignores, the extent that technology and innovation can decouple economic growth from material usage. As Engels wrote in his critique of Malthus: There still remains an element which, admittedly, never means anything to the economist—science—whose progress is as unlimited and at least as rapid as that of population… Science advances in proportion to the knowledge bequeathed to it by the previous generation, and thus under the most ordinary conditions also in a geometrical progression. And what is impossible to science? Examples of this abound. US crop tonnage has consistently increased for the past 70 years while precision agriculture has enabled the use inputs such as fertilizer and water to decline the past two decades and crop acreage (the amount of land used to grow crops) to remain at a steady level. There’s been the digitization of goods and services. Smart phones have generally replaced cameras, clock radios, calculators, and camcorders, fitting what used to be numerous material devices into one device that fits in the palm of a hand. Aluminum cans are 75 percent lighter than they were decades ago. Building materials are more flexible. As Andrew McAfee describes in his book More from Less, real GDP growth was symbiotic with the consumption of metals for most of the 20th century. However since around 1990 the US has been consuming less metals such as steel, copper, and aluminum all while real GDP growth has continued. Research by Zeke Hausfather, a climate scientist at the Breakthrough Institute, found a decoupling of emissions and GDP growth happening in 32 countries. The Economist recently found such decoupling in 33 countries. A familiar canard that has emerged out of the degrowth movement claims something like “infinite growth on a finite planet isn’t possible.” “Infinite” is perhaps too much to ask of any planet, however we don’t appear to be running out of resources in the near future. According to simulations published in Limits to Growth, even under the most optimistic scenarios, known global reserves of gold would be used up within 29 years of 1972; silver within 42; copper and petroleum 50; and aluminum 55. It is an understatement to say these predictions were inaccurate. Despite a half century of additional consumption, known global reserves of gold are almost 400 percent larger today than in 1972, and silver reserves are more than 200 percent larger. And we haven’t come close to running out of energy or copper. As for aluminum, the most plentiful metal on Earth, it need not be a concern: known reserves are almost 25 times what they were in the early 1970s. Secondly, and more importantly, degrowth mistakes growth itself with markets, ironically echoing libertarians. One of the major contradictions within capitalism is that the system can’t help but reproduce social harms if such harms are profitable and can’t produce necessary social goods if such goods aren’t profitable. There are times when social good coincides with profitability, yet not nearly enough. Degrowth obviously has sprouted in a time of increased anxiety about global warming and other potential environmental catastrophes. Fossil fuels are a perfect example of capitalism’s warped incentives. Fossil fuels, with their energy density, fueled the industrial revolution and helped energetically free us from nature’s dictates. However their continued high use threatens to shift the earth’s temperature from the range that has enabled human flourishing since the last ice age. Market based solutions to carbon emissions such as carbon trading, carbon pricing and offsets, and so-called ESG (environment, social, and governance) investing move far too slowly while depending on the very market incentives that produced the problem in the first place. Carbon pricing, essentially raising the price of energy, also generates resentment from the working class, as the French Gilets jaunes (Yellow Vests) movement showed. Norway is the world leader in electric vehicles, reaching around 80 percent of new car sales this year. Norway is blessed with abundant hydroelectric power, which provides 96 percent of the country’s electricity (electricity prices in Norway are among the cheapest in the world), yet it was the government’s buildout of a wide network of charging stations throughout the country, not just in places where stations are most profitable, along with other steps such as free parking, that accomplished the transition. The largest historical drop in carbon intensity of energy of any economy was France’s nuclear energy program of the late 1970s and early 1980s, a centralized, government led effort. It was the 1972 Clean Water Act that dramatically cut pollution in U.S. waterways. The Clean Air Act did the same for U.S. air pollution. The 1987 Montreal Protocol phasing out of Hydrochlorofluorocarbons (then used in refrigerators and aerosol cans), to this day the only UN treaty ratified by every member state, reversed ozone layer depletion, once the top environmental concern. The reversal began in the early 2000s and is on pace to be completed for most of the planet by 2040. These were neither market nor degrowth solutions. Yet economic growth continued.

First, growth, whether economic growth or population growth, is not the cause of climate change or other environmental challenges. We have had many other environmental challenges in the past that we have overcome, or largely overcome — such as the hole in the ozone layer, acid rain, lead pollution, and a great deal of air and water pollution in the West — and the solution to all of these did not come from halting growth, but instead from new technologies and economic planning in the form of regulation and technology policy. As recently as the 1980s, the ozone layer challenge was perhaps an even greater existential threat than climate change, for it threatened the very ability of macroscopic life on land to exist. We didn’t solve that problem by halting growth in fridges, cans of hair spray, and air conditioning units (and other machines and processes using the chlorofluorocarbons, or CFCs, that contributed to ozone depletion), but by regulating a transition away from the use of CFCs. Today, there are far more fridges and cans of hair spray than ever before. As a science journalist, I would also say that degrowth fundamentally misdiagnoses the cause of climate change, biodiversity loss, and other environmental problems, and as a result has a poor theory of change (a strategy for how the problem can be solved). Imagine a fully socialist twentieth century. Socialists would argue that health care, education, electricity, and industrialization would have been spread to the whole of the world, and not restricted to the West. Prior to the discovery of the full extent of the problem of global warming in the 1980s, socialist societies would have mainly used fossil fuels to power all of this, especially in those areas where the geography does not allow for hydroelectricity. Socialists want their public hospitals to be able to run 24/7 (and indeed many of their factories and other services essential to social well-being). We don’t want to wait for the sun to shine or the wind to blow for the ventilators and dialysis machines to be turned on. Indeed, the vast majority of greenhouse gas emissions entered the atmosphere not since the Industrial Revolution, but since the 1950s, what geosphere-biosphere scientists call “The Great Acceleration.” This is coincident with the advent of the welfare state and the legalization and institutionalization of trade unions across much of the West.

Jun-Young Park et al 23 {M.S., Department of Climate System, Pusan National University, B.S., Department of Oceanography, Pusan National University} - ("Future sea-level projections with a coupled atmosphere-ocean-ice-sheet model," Nature, published 2-14-2023, accessed 7-13-2023, https://www.nature.com/articles/s41467-023-36051-9)//marlborough-HL

Here we used the coupled three-dimensional climate-ice-sheet model LOVECLIP to better understand the impact of ice-sheet/ice-shelf/ocean/atmosphere coupling processes on the future evolution of GrIS and AIS, and to estimate their respective contributions to SL rise. In our high-end emission scenario, the GrIS and AIS each contribute about 60–70 cm to global mean SL rise over the next 130 years. Even though for SSP2-4.5 and SSP5-8.5 global surface temperatures are projected to increase at a reduced rate after 2100 CE (Fig. 2e), the ice-sheet contributions to SL continue to accelerate beyond 2100 CE (Fig. 2g, h), mostly driven by accelerated surface melting in case of the GrIS and due to a combination of effects for the AIS. According to our simulations, limiting 21st century global surface temperature rise to 2 °C above the pre-industrial level41,47 would be insufficient to slowdown the rate of global SL rise over the next 130 years42. Only the more aggressive low greenhouse gas emission scenario (SSP1-1.9), with temperatures leveling off below 1.5 °C (Fig. 2a), avoids SL rise acceleration (Fig. 2f). A longer-term warming and SL perspective until 2500 CE (Supplementary Table S1) illustrates that for the SSP2-4.5 scenario, SL rise due to GrIS melting accelerates for over 250 years after maximum global warming rates occur, and peaks at over 0.3 cm/year shortly before 2300 CE (Supplementary Fig. S7g). The Antarctic SL contribution for SSP2-4.5 fluctuates between 0.2 and 0.3 cm/year from 2200–2500 CE (Supplementary Fig. S7h). This indicates an even more prolonged response and larger commitment to SL rise due to 21st century warming, with the total AIS contribution reaching about 1.1 m by 2500 CE. In contrast, the aggressive greenhouse gas reduction scenario SSP1-1.9 with temperatures leveling off at less than 1.5 °C (Supplementary Fig. S7a, e) is sufficient to prevent substantial ice-loss in Antarctica (Supplementary Fig. S7h) over the next centuries.

We should all welcome opportunities to use less resources to satisfy more human needs. However, this cannot be accomplished through economic commands, especially not those that are associated with the ‘degrowth’ theory. The reason is found in three analytical errors that this theory is guilty of:

It says that we cannot have a growing economy without exploitatively consuming more and more natural resources;

At the heart of the flawed mental model that I believe is responsible for our collective failure to address climate change and resource depletion is an apparently unshakeable conviction that any future for human civilization must include the continuation of economic growth. According to this belief, growth is the engine of the current world order and, without it, the system will collapse and human progress will end. This model has several core principles embedded in it. Here are just a few of them: Economic growth has allowed us to expand our human population to eight billion, a clear sign of success. Capitalism is the best and most equitable way to drive economic growth. It balances market forces of supply and demand and allocates resources in the most efficient, and therefore just, manner possible. Economic growth within a capitalist framework is best measured by increases in Gross Domestic Product or GDP. Economic growth is necessary to meet constantly increasing consumer demand for goods and services. Growth fuels demand, demand requires growth. Economic growth produces human happiness, more growth produces more happiness. Supply scarcity does occur, but it triggers self-correcting responses: investments to find additional supplies and inventions to create substitutes for depleted resources. (source) This system is a perpetual motion machine that can and will continue to produce positive outcomes indefinitely. I am not going to debate the empirical accuracy of these principles here. All are demonstrably false, as others have cogently shown (source, source), including here on Medium (source, source, source). The question I am interested in is not why they’re false, but why the world’s elites appear to be doubling down on them when they are known to be false. I believe this is because of the inherent nature of deeply-embedded mental models. In this case, the mental model underlying the faith in economic growth is not only embedded in decades (centuries?) of economic thought, it is also enshrined in the practices, legal frameworks, and institutions that power the global economic system today. This is why an often-repeated quote rings as true today as it ever has: “It’s easier to imagine the end of the world than the end of capitalism.” (source, p. 1) Adherence to the gospel of economic growth permeates many of the most popular climate change mitigation and adaptation scenarios in circulation today. Indeed, although the IPCC started issuing climate change reports in 2000, it was not until 2022 — and then only after numerous calls by climate scientists (source, source, source) — that a self-described Low Energy Demand (LED) scenario was added to the portfolio of models (source, Table 1.1, p. 174). Why do we cling so desperately to the idea that civilization cannot survive without economic growth? There are most likely two reasons why the world’s political and economic elites cannot acknowledge that we have entered an era in which economic growth must inevitably come to an end with the depletion of fossil fuels. First, our political leaders can’t give up on the idea of growth because, without growth, the only way they can respond to climate change and resource depletion is by radically decreasing human resource consumption, primarily in the global North. This is seen as politically unfeasible and career suicide for any politician who might suggest it.¹ So no political leader, with the possible exception of the Secretary-General of the UN (who is not the leader of a sovereign nation), is willing to talk about it. One consequence of this reticence among our political leadership is that the general public knows much less about resource depletion than it does about climate change. This is likely to leave the world’s population dangerously unprepared for understanding the shortages and scarcities that are already beginning to appear, as climate change disrupts food production, manufacturing, and distribution channels around the world (source). The second reason our political and economic leaders can’t give up on the idea of economic growth is because, without growth, capitalism has no solution to the problem of persistent economic inequality, both within and between nations. Defenders of capitalism like to point out that “economic growth has lifted billions of people out of poverty” (source). This assertion may be technically correct (although there is strong evidence it is not), but it masks a deeper fact: the rate at which growth has contributed to reducing poverty at the bottom of the income ladder is minuscule compared to the rate at which growth has concentrated income and wealth among the world’s most wealthy. According to one recent report on global inequality: “Some countries have reduced the numbers of people living in extreme poverty. But economic gaps have continued to grow as the very richest amass unprecedented levels of wealth. Among industrial nations, the United States is by far the most top-heavy, with much greater shares of national wealth and income going to the richest 1 percent than any other country.” Increasing inequality is a feature, not a bug, of modern capitalism (source). As French economist Thomas Piketty has shown, because return on capital historically grows faster than return on labor, capitalist accumulation inevitably increases the gap between rich and poor. As long as the whole system continues to produce growth, the needs of those at the bottom can presumably be met without sacrificing any of the wealth of those at the top. But without growth, the economic pie becomes fixed and any gains at the bottom must come out of the shares of those at the top, most likely through much-feared and highly-resisted wealth taxes. Or so it is believed by our political and economic elites, which gives them a compelling second reason to reject imagining a world without growth. As one commentator has put it: “economists and policymakers often regard growth as a substitute for equality: it is politically easier to grow total income and expect that enough will trickle down to improve the lives of ordinary people than it is to distribute existing income more fairly, as this requires an attack on the interests of the dominant class.” (source, p. 57) Capitalism is not a system for maximizing abundance or human wellbeing, it is a system for maximizing capital accumulation. This leads to a kind of abundance, but only for some, the small minority of capitalists at the top of the global economy. Ultimately, these people are so deeply invested — both financially and cognitively — in the system that nurtures them that they seem unable to even imagine a world in which it no longer operates. So, why do we cling so desperately to the idea that civilization cannot survive without economic growth? The short answer is: because capitalism cannot survive without economic growth, capitalists cannot survive without capitalism, and the modern neoliberal order cannot survive without capitalists. QED, civilization — as we know it today — cannot survive without economic growth. Ironically, that’s something pretty much everyone can agree on.