Decoupling growth

Our current financial system is built on the idea of infinite economic growth. Reliant on ever-increasing quantities of production, consumption and financial returns, this system requires continuous growth in order to maintain its stability. However, more than a century of unsustainable consumption and production has eroded our natural capital, transgressed the safe operating space for several planetary boundaries and dramatically accelerated the speed of climate change. This presents businesses, policymakers and the financial sector with a dilemma: How do we reconcile the stability of the financial system with an economic model that operates within global environmental limits, while providing social stability for all?

According to the IPCC, sustainable development is indeed compatible with well-managed climate mitigation and adaptation pathways. While energy poverty still affects a significant proportion of the population in low-emitting countries, coordinated cross-sectoral policy interventions and equitable partnerships can help raise living standards, increase energy access and enhance economic activity and employment – without resulting in significant increases in global emissions. Moreover, several countries have already managed to reduce their GHG emissions for longer than 10 years, through policy action and structural changes in their economies (IPCC, 2022a).

In this unit, we will build on the concepts presented in Module 3 and consider the need to re-design the current economic system to reduce our reliance on intensive resource and energy use for economic growth. We will also explore whether innovative approaches can trigger a shift towards a model that separates, or decouples, the concept of economic growth from negative environmental and social impact.