Can large scale economic growth be based on declined natural resource consumption?

The decoupling theory

An alternative to the degrowth theory is the suggestion that decarbonisation should not be seen as incompatible with economic growth (Hepburn & Bowen, 2013). The theory of decoupling suggests that economic growth can be separated from the use of resources and adverse environmental impacts (UNEP, 2011). In other words, it would be possible for the economy to grow without putting a heavy strain on natural resources or generating the same proportion of GHG emissions (Wijkman & Skånberg, 2017).

There are two forms of decoupling, as shown in Figure 1 and discussed in the following sections.

This figure shows the two forms of decoupling: relative and absolute. The graph shows a continuously increasing economic output alongside the level of resource use and environmental impact, exemplified as GHG emissions. 

In a relative decoupling scenario, resource use and environmental impact may still increase; however, this will occur at a slower rate, as expressed per unit of economic output. 

With absolute decoupling, there is an absolute decrease in resource and energy use, as well as a decrease in environmental impact.

Figure 1: Relative and absolute decoupling of economic growth from resource use and environmental impact
(illustrated here as GHG emissions).

Relative decoupling

In a case of relative decoupling, the rate of economic growth per unit of output is higher than the growth rate of resource consumption and environmental impact (UNEP, 2011). It is therefore an indicator of improving efficiency but not necessarily improved sustainability. While relative decoupling allows the intensity of environmental impact per unit of economic output (eg GDP) to decrease, all the variables may still be increasing in absolute terms. Destructive environmental impacts (eg pollution, habitat destruction and GHG emissions) may still continue to increase (Ward et al., 2016).

Relative decoupling is not uncommon. Stricter regulations and advances in technology have prompted and enabled many countries to make more efficient use of their resources and decrease their GHG emissions relative to the amount of goods produced. In Sweden, for example, GDP has grown by more than 60% since 1990, while electricity demand has remained relatively stable and territorial GHG emissions have fallen by one fifth (Wijkman & Skånberg, 2017).

Nonetheless, the overall consumption of energy, freshwater and other resources continues to increase on a global level, as do the associated environmental impacts. One explanation for this is what is known as the rebound effect: the more efficient we become through relative decoupling, the more resources we tend to consume. As a result, the benefits accrued through increased efficiency are soon cancelled out through increased consumption. For example, as petrol-driven cars have become more economical to run, the incentive to drive has increased (Wijkman & Skånberg, 2017).

It has been suggested that counteracting the rebound effect will require policy intervention in the form of pricing controls, for instance, by regularly matching the efficiency gains with increases in the price of resources and energy. In this way, it is proposed, an absolute decoupling could be achieved, as the negative externalities of energy and resource use would be factored into the cost of consumption (Wijkman & Skånberg, 2017).

Note:

It is important to understand the difference between production-based and consumption-based emissions. While countries or regions typically measure their emissions on the basis of territorial production, these calculations can be misleading in the context of a global economy (Ritchie, 2019). High-income, service-based economies import emissions for their own consumption, while low-income, product-based economies export their emissions. This creates a skewed and unfair picture of who is responsible.

Absolute decoupling

By contrast, absolute decoupling requires an absolute decline in the consumption of resources and environmental impact regardless of the growth rate of the economic output. To transition from relative to absolute decoupling, the intensity of environmental impact must decline at least as fast as economic output increases. In the context of the net zero transition, this translates to an absolute decrease in GHG emissions even as economic growth continues (Jackson & Victor, 2019).

Over the past decade, many mature economies have seen economic growth while GHG emissions have fallen. In Germany, for example, GDP per capita increased by 46% between 1990 and 2019, while consumption-based CO2 emissions fell by 34%. And while this progress is encouraging, the countries who have managed to decouple their economic growth from GHG emissions are in a very small minority and on a global level, emissions are still rising at an alarming rate (Ritchie, 2021). Scientific evidence strongly suggests that absolute decoupling must be a vital feature of both interim and long-term strategies to protect the economy from severe climate-related impacts and resource constraints.