Peter Victor "Managing withouth Growth: Slower by Design, not Desaster"

Managing without Growth Slower by Design, not Disaster Dr. Peter A. Victor 11 December 2009 Towards an ecological macroeconomics WU-Vienna University of Economics and Business

World Population

World GDP 8 out of 125,000 generations have experienced growth

World Fossil Fuels

World in Year 1 World in 2009

Bio-physical Cycles Waste Outputs (SINKS) Economic Firms Households Cycle Natural Inputs (flows of materials & energy from SOURCES and Environmental SERVICES)

Growth is not possible Managing Without Growth is over long term Growth? disappointing Sources Sinks Growth does not Services bring happiness

Growth is not possible over the long term Sources SOURCES

Material intensity is declining, but not fast enough GDP 110% Resource Extraction 47% Material Intensity 29% Key message: Environmental impact depends on intensity and scale

Energy consumption - same story GDP 110% W. S. Jevons Primary Energy 59% Energy Intensity 24% Key message: Environmental impact depends on intensity and scale

The era of fossil fuels

Energy Transitions e in global energy us e since 180 0 reas 20+ fold inc Oil Coal Wood Gas Electricity •Higher quality (higher energy density, easier storage, greater flexibility) •Lower cost

Technology

1946 1968 1992 2009

‘I would say this is most environmentally friendly cruise ship to date. It is much more efficient than other similar ships. …It dumps no sewage into the sea, reuses its waste water and consumes 25 percent less power than similar, but smaller, cruise liners.’ (Project engineer)

Growth is not possible over the long term Sources SINKS & SERVICES

Transgressing Planetary Boundaries

Growth is not possible over log term Growth does not bring happiness

Real Income per person Percentage very happy

Making room How slowing the rate of economic growth can help deal with climate change

World population income

Scale and Intensity: the Colours of Growth Any combination of GDP and GHG/GDP along the red line gives 592 mt of emissions Brown growth Black growth Higher Lower Green growth Canada’s GDP 1990 592 mt Black degrowth Green degrowth Canada’s GHG Intensity 1990

USA’s Economic Growth Scale and Intensity 1990-2007 $11,524,000 7,150mt $7,113,000 6,099mt 0.62 0.86

Britain’s Economic Growth Scale and Intensity 1990-2007 637mt 1,266,347 825,099 773mt 676mt Kyoto target 0.50 0.94

Canada’s Economic Growth Scale and Intensity 1990-2007 $1,314,000 747mt $825,318 592 mt 556 mt [Kyoto Target] 0.57 0.72

An 87% reduction in Canada’s GHG emissions from 2007 level in 50 years: Scale and Intensity $5,785,000 3%/yr growth in 2%/yr growth in $3,552,000 0%/yr growth in 747mt $1,314,000 97mt Intensity after .02 .03 .07 .57 50 years 3% 5% 13% compared with 2007 2007 2007

Environmental Kuznets Curve ct De pa cr Im ea g sin sin g ea Im cr In pa ct

Scale, Intensity and the Environmental Kuznets Curve EI’ EI’’ EI’’’ EI’’’’ (Scale growing slower than decline in intensity) Green Growth Scale (GDP) (Scale growing faster than decline in intensity) Brown Growth EI’’’’ EI’’’ EI’’ EI’ Environmental Impact Intensity (Environmental Impact/GDP)

Managing without growth?

Can we have full employment, no poverty, fiscal balance, reduced GHG emissions without relying on economic growth? LowGrow Canada

You bet! LowGrow Canada

Y = GDP LowGrow - simplified structure C = consumption I = investment G = government X = exports MACRO M = imports DEMAND Y =C+I+G+X-M Fiscal Population Investment Position GDP Employment, Capacity Utilization Labour Force Poverty Forestry MACRO GHG Emissions SUPPLY K = capital Y=f(K,L,t) L = labour t = time

What makes an economy grow? • Macro demand (what we spend money on): – Consumption – Investment – Government – Trade • Macro supply (what we can produce): – Labour – Capital – Productivity

‘Business as usual’ GDP per Capita GHG Emissions Poverty Debt to GDP Ratio Unemployment

What happens if we eliminate increases in all sources of economic growth? (starting in 2010 over 10 years) • Consumption • Investment • Government • Trade • Population/labour • Productivity

A no growth disaster Unemployment Poverty GDP per Capita Debt to GDP Ratio GHG Emissions

Larry Elliot (economics editor) The Guardian Weekly 29th August 2008 ‘The real issue is whether it is possible to challenge the “growth-at-any-cost model” and come up with an alternative that is environmentally benign, economically robust and politically feasible.’

A better low/no growth scenario How? • Macro demand and supply stabilized (stable population and labour force) • Carbon price • Shorter work year • More generous anti-poverty programs GDP per Capita GHG Emissions Unemployment Poverty Debt to GDP Ratio

What would change?  New meanings and measures of success  Limits on materials, energy, wastes and land use  More meaningful prices  More durable, repairable products  Fewer status goods  More informative advertising  Better screening of technology  More efficient capital stock  More local, less global  Reduced inequality  Less work, more leisure  Education for life not just work

Average hours worked per employed person - Canada 1736 2007 Germany 1433 Norway 1417 low/no grow Netherlands 1392 scenario

Selective Growth High Intensity Limited Expenditures Final Stable or decline Demand (GDP) Relative Rate of Intensities of GHG Economic Commodities GDP Growth (GHG/$) GHG (Direct & Indirect) Low Intensity Expanded Expenditures Increase

Business as Usual GDP/capita 90% increase in GHG GHG Year

Limited Expenditure: 50% GDP Relative intensity: 10 Limited Expenditure Target: 10% in 2020 GDP/capita GHG 47% reduction in GHG LE % of GDP Year

Limited Expenditure: 22% GDP Relative intensity: 10 Limited Expenditure Target: 10% in 2020 GDP/capita No reduction in GHG GHG LE as % GDP Year

Limited Expenditure: 22% GDP Relative intensity: 4 Limited Expenditure Target: 0% in 2020 Selective growth requires: - LE to be large % of GDP - High relative intensity GDP/capita 15% increase in GHG GHG LE as % GDP Year

High Real Land GDP All Items Footprint Items (20% GDP - UK) High Carbon Footprint Items (22% GDP UK) 3rd Set of High Impact Items High Impact Items (15.2% GDP - UK based on combined Footprints)

We must knock economic growth off its pedestal

Entering the Mainstream “It is possible that the US and Europe will find that…either continued growth will be too destructive to the environment and they are too dependent on scarce natural resources, or that they would rather use increasing productivity in the form of leisure… There is no reason at all why capitalism could not survive with slow or even no growth.” Robert Solow (Harper’s Magazine, March 2008) Nobel Laureate in Economics

Elements of an ecological macroeconomics • Full world • Economy as a subsystem – Biophysical limits – Relevance of 1st and 2n laws of thermodynamics – Use of non-monetary data – Risk, uncertainty, ignorance • Scale matters • Longer time horizon • Technological skepticism • Definition and measurement of progress • Ethical framework • New institutions • Spatial definition • Money

Some questions • How should we measure progress and prosperity? • What new institutions are required to limit throughput and protect habitat more effectively? • How should financial, corporate and legal institutions be redesigned? • What would be the role of money in a low or non-growing economy, what would determine the rate of interest? • What are the micro foundations of a macro economy that has dispensed with growth? • Is low/no growth feasible for an individual economy? • Is capitalism compatible with an economy that respects the limits of the biosphere?

Peter Victor "Managing withouth Growth: Slower by Design, not Desaster"

by Institute for the Environment and Regional Development - WU on Feb 18, 2010

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Peter Victor "Managing withouth Growth: Slower by Design, not Desaster" — Presentation Transcript