This blog post contributes to an ‘oldie but goldie’ debate in environmental economics – it boils down to the question whether economic expansion (in real i.e. physical terms) is compatible with the goal of preventing environmental degradation. Javier has nicely shown in his blog series on ‘Green Growth’ that absolute decoupling of economic output and environment-harming inputs such as carbon has not materialized although advocated and expected by many mainstream and environmental economists. From this point of view “we have no empirical grounds to be optimistic regarding the economic growth-ecological sustainability dilemma”.

However, I think that this perspective essentially ignores several aspects. For instance, Vincent raised in his blog post the question if “climate change [mitigation] and economic growth [is] really incompatible?” and correctly points to the missing recognition of possible substitution possibilities of input factors such as switching from fossils to renewables. But keeping also this aside, I’d like to extend the discussion to another ‘old’ debate which relates to the famous Porter hypothesis. Basically it claims that profit-motives drive so called double-dividend outcomes (“double” in the sense that there are synergies in reaching economic and environmental goals).

For this purpose it is useful to investigate the huge amount of empirical work which indicates that especially harmful by-products have been a core area for innovative activities (cf. Simmonds, 1873, Rosenberg, 1994, Desrochers, 2008, Perez, 2015). Industries not only aimed at getting rid of various wastes (disposal is costly!) – no, they rather pursued strategies to transform ‘bads’ into goods (Kurz, 2006) in order to up-/re-cycle wastes and exploit them economically. Those strategies have been major driving forces for economic expansion since the industrial revolution.

Regarding climate change mitigation, this brings us to the idea of a circular economy whose focus is the management of carbon emissions (preventing their atmospheric release) rather than solely avoiding emissions. To be clear, for complying with a ‘well below 2°C’ target it would be sufficient to drive down carbon emissions to zero for a given timeframe (which in itself is a very complex and ambitious task). But is it also necessary?

At first sight the raised question seems to make the case for silver-bullet technologies like carbon underground storage (or as some would call them, ‘out of sight – out of mind’ options). But note that carbon emissions could also serve as feedstock for other economic purposes which would turn incentive structures totally upside down stimulating ‘double-dividends’. For instance, an EU-funded project currently investigates carbon usage in various industries, e.g. cement, polymers, steel, waxes, synthetic fuels, etc. (EC, 2016). Those plausible (but currently not cost-efficient) options are examples that render discussions on ‘the limits to growth’ and thus the focus on decoupling of economic output and harmful-inputs like carbon dioxide less relevant. However, this shift in focus does not mean that the mitigation challenges ahead are solved particularly regarding the urgency of action. Additionally, solutions to mitigation problems could bring about new non-intended consequences. But those would again give rise for further technological and social innovations.

In this respect there is also a task for economic analysts (including myself) who mostly restrict themselves to investigate single production – a theoretical construct for the purpose of simplification – which is the notion that input combination leads to homogenous output. However, economic activities are almost always reflected by joint production. For instance, think about meat, leather, manure and methane emissions in cattle-breeding obtained from one and the same production process. From an anthropogenic viewpoint and for current economic conditions, the former two outputs represent goods/commodities and the latter ‘bads’/discommodities. The emphasis here is explicitly on current but, however, permanently changing economic conditions (cf. Kurz, 2006). Hence, searching for ‘double dividends’ options and associated socio-economic regimes in which such options may unfold is an interesting area of investigation.

References

– Desrochers, P. 2008. ‘Did the Invisible Hand Need a Regulatory Glove to Develop a Green Thumb? Some Historical Perspective on Market Incentives, Win-Win Innovations and the Porter Hypothesis’. Environmental and Resource Economics 41 (4):519–39. https://doi.org/10.1007/s10640-008-9208-x.

– EC 2016. Carbon Capture Utilisation and Storage. SETIS magazine 11. European Commission. Available at: https://setis.ec.europa.eu/system/files/setis-magazine_11_ccus_final.pdf [24.11.2017]

– Kurz, H. D. 2006. Goods and bads: Sundry observations on joint production, waste disposal, and renewable and exhaustible resources. Progress in Industrial Ecology, an International Journal, 3(4), 280-301.

– Perez, C. 2015. 11. Capitalism, Technology and a Green Global Golden Age: The Role of History in Helping to Shape the Future. The Political Quarterly, 86: 191–217. doi:10.1111/1467-923X.12240

– Rosenberg, N. 1994. Energy-efficient technologies: past and future perspectives. In: Rosenberg N (ed) Exploring the black box. Technology, economics, and history. Cambridge University Press, Cambridge pp 161–189.

– Simmonds, P.L. 1873. Waste Products and Undeveloped Substances: A Synopsis of Modern Progress Made in their Economic Utilisation during the Last Quarter of a Century at Home and Abroad, London: Robert Hardwicke.

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