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Let’s Harness Economic Growth With Innovation And A Carbon Price

By Ruy Teixeira, Guest Contributor on June 21, 2013 at 3:38 pm

"Let’s Harness Economic Growth With Innovation And A Carbon Price"

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This is one in a series of viewpoints on the core question of growth — JR.

(Credit: Flickr user Novae)

Should we try to limit economic growth? Given the dire straits carbon-powered growth has put our planet in, it’s hard not to at least consider the possibility — but we shouldn’t think about it too hard.

The situation is well-summarized by Ramez Naam in a recent blog post for Scientific American based on his recent book, The Infinite Resource: The Power of Ideas on a Finite Planet:

The world is facing incredibly serious natural resource and environmental challenges: Climate change, fresh water depletion, ocean over-fishing, deforestation, air and water pollution, the struggle to feed a planet of billions.

All of these challenges are exacerbated by ever rising demand -– over the next 40 years estimates are that demand for fresh water will rise 50%, demand for food will rise 70%, and demand for energy will nearly double –- all in the same period that we need to tackle climate change, depletion of rivers and aquifers, and deforestation.

All of these problems are tied in one way or another to economic growth. So, logically, if we want to stop the problems shouldn’t we just stop or even reverse economic growth? Naam rejects this logic despite fully embracing the scale of the problems we face. His first reason is that stopping growth would not work morally or practically.

It would not work morally, Naam argues, because most of future growth will benefit people whose living standards are far below those in the developed world. To tell these people to forego the benefits of economic growth, when those in the developed world have already received those benefits, is grossly unfair. As Naam points out:

Roughly one billion people alive today on the planet have access to automobiles, air conditioners, and central heat. The other six billion do not. Two billion lack access to a toilet. One billion lack access to electricity. The bulk of the growth to come over the next few decades – in global GDP, in energy consumption, in CO2 emissions, in food consumption, in water use – will all come from the developing world. That growth isn’t trivial. It isn’t about building McMansions or driving SUVs. It is, by and large, growth that reflects the aspirations of billions of people around the world to rise to a level of comfort that nearly everyone in the rich world – even those we consider poor – enjoy. A path forward that doesn’t allow room for billions to rise out of poverty and to at least this modicum of comfort is not a very appealing one.

And stopping growth would definitely not work practically. Even if we could stop growth in the developed world, how are we to stop those in the developing world who want to consume more from doing so? Short of enforcing austerity in the developing work, we can’t do that.

Naam’s second reason is that stopping growth is not necessary. The resources—water, food, energy, etc.–available to humanity greatly outstrip the potential needs of our population, not only today but in the future. The problem lies in accessing those resources in an economically feasible and environmentally sustainable way. That in turn depends on innovation, both technological and economic.

Take energy and, by extension, climate change. The price of solar energy is coming down fast; a watt of solar power today costs only 5 percent of what it cost in 1980. But it’s still too expensive to out-compete fossil fuels, even setting aside, for the moment, the storage problem. The solution: massive investment in clean energy R&D (we currently invest only $5 billion a year in this, actually less than we invested in the 1980’s) and a carbon tax to encourage clean energy use and accelerate innovation. As Naam puts it:

The fundamental driver here is economics. Consumers, businesses, and industry want energy. They need energy. That’s true everywhere in the world. And they will buy whatever sort of energy is cheapest. Indeed, if a new source of energy is sufficiently cheaper than the old, consumers will switch their energy consumption from the old to the new.

If we want to win the race against climate change, one thing matters more than all others: make renewable energy (including storage) cheap. Dirt cheap. And do it fast.

Naam makes similar arguments about challenges in the areas of water and food: the solution is not to stop growth but to innovate and to do it fast. In this, he joins such “green growth” advocates as Ralf Fücks, President of the Heinrich Böll Foundation and a leading member of the German Green Party, whose new book Smart Growth: The Green Revolution lays out a number of ideas similar to Naam’s (see our post on the book here). Refreshingly, unlike libertarian promoters of technological innovation, both authors see the very important role government has to play in regulating, investing and generally getting the economics of innovation right. My hunch is that this kind of thinking will play an increasingly important part in our struggle to solve our looming environmental problems.

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50 Responses to Let’s Harness Economic Growth With Innovation And A Carbon Price

  1. There is no need to put direct limits on growth, but we obviously do need to limit resource consumption and emissions to sustainable levels. A cap on co2 emissions is just one such limit.

    For perhaps the next half century, these limits will not slow growth significantly – if at all. Eg, the CBO projected that cap-and-trade on co2 would slow growth by only 1% to 3% by 2050. Initially, it should be possible to come up with substitutes for other resources, just as it is possible to come up with substitutes for dirty energy.

    But if you do the math and see the levels that the Gross World Product would reach in the next century or two if current growth rates continue, it becomes obvious that limits on resource supplies will slow growth significantly at some point.

    Remember that maintaining a given rate of growth requires repeated doublings – which means
    –growth of more than one-thousand fold in ten doubling periods,
    –more than one-million fold in 20 doubling periods,
    –more than one-billion fold in 30 doubling periods,
    and so on.
    It is impossible to sustain that indefinitely.

    • Omega Centauri says:

      Economic growth has an expiration date. Maybe we aren’t there yet, but we do have to start thinking about how we will eventually handle that truth.

      So we have a lot to do. Billions to get out of poverty. Transitioning developed economies so the future residents can have a quality life, but also live sustainably. Plenty of work to do. But, we have to think and plan starting now.

    • Mulga Mumblebrain says:

      There is almost certainly no ‘next half century’ for humanity, certainly not if any type of ‘growth economy’ is aimed for. Already we are way past the planet’s capacity to support the current extent of human depredation, and, consequently, ecosystems are in accelerating collapse. We urgently need de-growth, which can only be achieved by radical redistribution of the planet’s wealth currently monopolised by the tiny, hyper-avaricious, parasitic and kleptocratic elites. In any case any ‘wealth’ produced by any type of ‘growth’ will be stolen by these elites, as ever.

  2. Turboblocke says:

    US GDP has gone up by about 50% since 2004. Do you feel 50% better off?

  3. BobbyL says:

    They are now predicting that by the end of this century there will be almost 11 billion people as growth rates in Africa exceed expectations. Does anyone seriously believe we have the resources for all 11 billion to live a Western lifestyle with modern conveniences? Such an aspiration makes no sense. As it is, almost all global ecosystems are in decline and a few are seriously failing. To believe people can innovate their way out of this mess seems to be largely wishful thinking and certainly has no scientific underpinning.

    • Mulga Mumblebrain says:

      Absolutely. I put the chances of reaching eight billion as about 8 billion to one, against.

      • Jan Freed says:

        Agreed, the main factor is slowing both population and emissions may be climate change, as it is impossible to drive one’s SUV on a freeway no longer above the ocean.

  4. robert says:

    Define growth. Are we talking GDP — an utterly outdated metric that is almost completely divorced from human well-being?

    As for growth and poverth, the New Economics Foundation has a study revealing that for every $100 of global economic growth from 1990-2001, on 60 cents went to pople below the $1-per-day line. Someone is profiting from economic grwoth, it would seem, but it isn’t the world’s poor.

    • Merrelyn Emery says:

      Yes, growth in what? One thing we need to stop immediately is growth in inequality both within, and between, countries, ME

  5. Mark E says:

    Two of Naam’s biggest errors

    #1, even if the following is true, which I doubt
    “The resources—water, food, energy, etc.–available to humanity greatly outstrip the potential needs of our population, not only today but in the future. ”
    if we preserve an economic system that requires nonstop growth FOREVER there is a single conclusion: someday, eventually, Naam’s belief that resources outstrip need will become untrue.

    Either need is greater than resources right now, or if we try to economically grow FOREVER, need will be greater than resources later.

    In ecology, population studies show again and again that the hardest falls happen after the greatest overshoots.

    Since hitting the growth wall is inevitable if we try to grow nonstop FOREVER, the lesson such studies hold for us is that it is only rational to try to rein in growth now, when the fall is less.

    Big Error #2

    Naam assumes that the only non-growth future is to halt the growth model with the developed world maintaining their current standards of “convenience everything and disposable anything”, and that this is the standard to which everyone else will (indubitably) aspire. But in a non-growth world, there isn’t much need for marketing and lots of room for replacing induced consumer wants with an emphasis on developing the human being.

    In fact, I’ll go so far as to say that this change in values is synonymous with nongrowth economics.

    In sum, Naam’s evaluation appears to lack much vision as to what a world could be like, once freed from its delusional and ultimately self defeating obsession with trying to grow the economy, nonstop, FOREVER while the resources of the planet are finite.

    • ozajh says:

      Sorry Mark, I have to agree with Mr Naam and disagree with you on this one. However you might package it, your vision of possible change will be seen by most of the “West” as averaging down. Ain’t Gonna Happen without SERIOUS coercion.

      Similarly, the rest of the World’s population undoubtedly aspires to things like cars, refrigeration etc. that we in the West take for granted. Until those aspirations are met in some form or another, any attempts to prevent BAU progress in the 3rd world will generate a furious popular response.

      The Science Fiction writer Jerry Pournelle put it in a nutshell back in the 1970′s when he wrote in a non-fiction article ‘that isn’t conservation, that’s DEPRIVATION’ when considering some suggestions from conservationists after the Club of Rome report. (Please note that I totally oppose Mr Pournelle’s general political attitudes, but I have to agree with this one.)

      • Omega Centauri says:

        ozajh: Your arguing from political feasibility, Mark from mathematical certainty. The trick is to try to bridge both truths, political feasibility, and the mathematical truth about limits and exponential functions. Within a couple of generations if not earlier, growth of consumption of physical resources will have stopped. We can pretend otherwise, and be unprepared, -or we can start thinking hard about how we are going to deal with it.

        • Mark E says:

          That’s a good summary; and I agree that people in the growth-obsessed economies are unlikely to choose to adopt any other economic model.

          I often say in these pages that global warming, as bad as it is, still constitutes a symptom of a much bigger civilization-busting problem: nonstop growth. It’s one head of the mythical hydra; nonstop growth is the beast’s heart.

          We *must* slay the heart of this beast;

          But I believe that we won’t ever really try.

          And that makes the human species no more “wise man” than the rabbit or elk populations when you remove all the predators. They breed, eat up all the primary foods, then the secondary foods, and then the tertiary foods, and then their numbers drop off “the cliff”. Apparently, our species has a lot in common with arctic sea ice.

          On the other hand, even though I think these things, I am only responsible for me. So the ultimate question is “Regardless what the world around me is doing, are my choices consistent with an alternative vision?” And then I carry on.

      • Mulga Mumblebrain says:

        A total load of bollocks, if you’ll pardon my French. Downsizing is going to happen any way, as the global ecosystems collapse. We can do it constructively, and most people will survive, with a more than decent sufficiency of life’s material goods, (and increased non-material well-being, I would assert)or we can try to cling on to our SUVs, air-con, McMansions, Jetskis etc (much bought with borrowed money), and we will all go down together. What is absolutely required is a small decrease in material consumption and extravagance by the masses in the West (who, in any case are either suffering ‘austerity’ or, as in the USA, have endured decades of stagnation in median household income and wealth, and savage falls in the latter amongst black and Hispanic households)and a gargantuan redistribution of the immense wealth held by the tiny, parasitic, elites. Redistribution of wealth will allow material consumption to be decreased for the over-endowed, while the masses of deliberately deprived poor, can live without the fear of destitution and starvation. Such conditions have always led to the demographic transition to smaller families, another development that we absolutely require. Arguments against downsizing in the West are always, I have found, not so hidden assertions against equality and economic justice, and for elite privilege and power.

  6. John McCormick says:

    Ramez Naam, let me begin with the tnaky yu for this brilliant view you included:

    “All of these problems are tied in one way or another to economic growth. So, logically, if we want to stop the problems shouldn’t we just stop or even reverse economic growth? Naam rejects this logic despite fully embracing the scale of the problems we face. His first reason is that stopping growth would not work morally or practically.

    It would not work morally, Naam argues, because most of future growth will benefit people whose living standards are far below those in the developed world. To tell these people to forego the benefits of economic growth, when those in the developed world have already received those benefits, is grossly unfair.”

    Absolute common sense, and I mean this; give the poorest, very poor and the poor the equipment they need to prosper while we overweight and greedy northern hemisphere population scale down our carbon footprint to accommodate their reasonable increase in climate-forcing gases.

    Lets see the big green weigh in on this.

  7. Mark E says:

    BTW, Joe, an overdue thank you for this series re economic growth. I haven’t been reading as regularly as usual (real life issues) and missed the Robert Kennedy piece…. a belated “wonderful post”!

  8. M Tucker says:

    From the article:
    “by 2050, we will need to grow 70% more food than we do today to feed the world.

    If food production doesn’t rise by that amount, prices will rise further. Hunger – something we’ve made steady progress against for 40 years – may rise once more. Political unrest and global instability may follow.

    Farm irrigation uses 70% of the world’s fresh water

    On current course and speed, the Ogallala aquifer will run dry before this century is over, and possibly much sooner. The North China Plain aquifer will run dry. The Indus River Valley aquifer will run dry.”

    So where do we get the water from, and it must be cheap water if you want to keep farmers in business, to increase food production by 70%?

    Why innovation of course! That lovely word that harkens to the future, encourages our can-do spirit and sparks our imagination. Innovation: the techno solution, the efficiency solution, the favored solution of technophiles like computer scientists (Naam is a computer scientist).

    Yeah baby, you just gotta believe, you gotta open your mind to the possibilities. We are going to grow 70% more food on the same amount of land used today and be able to supply water for that food from shrinking aquifers, rivers and lakes. We are going to have food and water for all the teeming masses at affordable prices…no food riots, no hunger, and certainly no famine. And this innovation is going to be cheap. The food and water will be cheap. Innovation is the cheap solution for all our problems.

    • Mulga Mumblebrain says:

      ‘Innovation’ here is Newspeak for GE crops and other techno-fixes, controlled by Western capitalist corporations, which will impoverish poor farmers, lead to lower yields, the spread of ‘superweeds’ and vastly increased herbicide and pesticide use,all with the real aim of increasing the corporations’ profits, and Western control over global food supplies. Once you have the world gripped in a deadly hold, through their bellies and those of their children, their ‘hearts and minds’ will surely follow.

  9. dan allen says:

    Hmmm….This guy really needs to read some Richard Heinberg (The End of Growth), Chris Martenson (The Crash Course, http://www.peakprosperity.com), Dmitry Orlov (The Five Stages of Collapse), and David Korowicz.

    We are in for a non-negotiable contraction as rates of resource extraction peak and decline — e.g., (fossil energy, metal ores, fresh water, etc.). The contraction of the global economywill likely be non-linear, as complex system tend to fall apart faster than they were built.

    Again…non-negotiable. Just hope/pray your local nuclear reactors and all their conbustible, grid-cooled spent fuel stay intact.

    • Ken Barrows says:

      It is non-negotiable. It doesn’t matter what people want; it’s what they can have. People in the “third world” are a bit more adaptable than we westerners and don’t need air conditioning (I can tell you as a Peace Corps volunteer in the Solomon Islands 20+ years ago.).

      If the marginal cost of a barrel of oil (the highest cost to extract oil, e.g. Bakken) exceeds what a “growing” economy can bear in the next few years, then growth will be a mere wish. Good luck to the solar and wind entrepreneurs.

      One final point: World GDP growth rising faster than debt seems to be a thing of the past.

  10. Paul Klinkman says:

    Innovation would have been nice, it could have been done last year and it should have been done a decade ago. Woulda shoulda coulda.

    Still sitting here on what we need.

  11. Hans Berg says:

    Health is wealth, not air conditioners.

    Ecosystem knowledge is real value.

    Living off this is obviously infinitely better than modern economic slavery.

    We need to be careful how we define living standards; I believe they have been repeatedly and consistently stolen in the name of economic growth.

    Clans will return (conveniently how humanity is best served) but it is going to be a painful process.

    Hang on everyone and focus on what counts.

  12. Omega Centauri says:

    Its always been a race, can we get the developing world past the demographic transition (the effect that when wealthy enough birth rate drops), before the combination of population growth and resource depletion makes that impossible. Ruy is just propounding this long conventional wisdom. the problem is we have wasted far too much time, we humans get distracted by secondary issues, like war, religions, ideologies, etc. etc. We’ve probably lost this race -but maybe there is still time.

    • Mulga Mumblebrain says:

      How do we get to the demographic transition when the world’s wealth is being misappropriated by the elite at a rate unprecedented in history? Growth that only benefits the 1% is the exact antithesis of what is required. First must come redistribution and economic justice, the precise opposite of what the parasites and their MSM stooges insist on.

  13. fj says:

    Tight or profound integration with natural systems; poor people first; net zero and net positive; whole system design are probably design philosophies that pretty much cover this here and now.

    Nano technologies by mid-century may start to revolutionize the advance of civilization at rates faster than information and computer technologies (ICTs); where the built environment may have a lower footprint than natural systems.

    • fj says:

      Eden Effect:

      High quality of life with a low cost of living.

      • Raul M. says:

        Redirecting a force of nature might include taking the electricity of a CSP system and grounding the electricity.
        That would take surface heat and transfer it to the ground as electricity. What, though, would nature do with that redirected force of nature?

      • Raul M. says:

        Of course, another concept of redirecting a force of nature would be to have the CSP tower near an apartment area where the directing mirrors are on the roofs of the apartment buildings.

      • fj says:

        Yes, walls of concentrating mirrors on skyscrapers focused on the tops of the tallest ones with turbines . . . a terribly interesting vision of the future.

        • Raul M. says:

          Yes, it is an interesting thought of the recessed line of reflectors rising up the wall of the building forcing the heat and light to one point of reception and collection.
          I suppose that if the point of collection is close to the reflectors and the reflectors are above 3rd floor level, there would be a reduction of possible risk of interception of the stream of light and heat.

        • Raul M. says:

          And so if the point of collection on the adjacent was a mirror, then I guess the point of light could be reflected back to a point on the building with the recessed collectors. Would there be some overshoot of heat and light surrounding the mirror that could be transmitted through the building for lighting and to heat water. Thanks for holding the mirror so steadily. With the heat and light coming back to the starting building at one point, what could be done with it. Could the heat and light be separated to separate forces?

      • fj says:

        Or, even better, streets lined with fruit trees, vegetable gardens, watermelon patches . . . vineyards.

        • Streets and buildings. Break up high-rise office buildings into multi-use structures. Some areas will be devoted to living, some to work (people can work and live in the same building), some to growing and processing food in multi-story greenhouses (remove the floors, which are non-structural in any case, for a couple of levels). Put solar power units on the top and the building becomes a more-or-less self contained living pod.

          • Merrelyn Emery says:

            Also, put in some windows that can be opened and show people how to stay cool without air con. And, get people organized into self managing groups so they can cooperate willingly to make the joint work. It won’t if they are structured on the military model, ME

          • fj says:

            Or, buildings as giant Zeer “pot-in-a-pot(s)” using heat of vaporization cooling known by ancient East Indian and Egyptian civilizations.

  14. Leif says:

    Not any job, only Green Jobs can start to move the economies of the world out of the morass. As long as capitalism has the ability to profit, handily I would add, from polluting the commons, every “Black” job just digs the hole deeper. Only green jobs ADD VALUE to the economy and start to rejuvenate Earth’s life support systems as well as the economy via energy from the renewable sector.
    Corporations are “People” now for better or worse. Speaking as a “Real People”, if I throw a paper cup out the car window, bingo, ~$100 fine. ($1,000 in Alaska.) Corpro/People can pollute the air, water, dirt, and oceans with Toxins and the dirtiest Corpro/People have become richest Corpro/People in the world. The foundation of Western Capitalism. Even the breast milk my Daughter-in Law feeds the Grand daughter is contaminated with their toxins. ,Still Corpro/People get rich and even subsidized with YOURS & MY TAX MONEY. And I cannot stop it. GOP don’t fund abortion. Fine. A precedent. How come I must fund the Ecocide of Earth’s life support systems? Go figure. Please help! Stop profits from the pollution of the commons…. PLEASE…

  15. Bill D. says:

    Unless we clearly define what we mean by “growth,” this discussion is meaningless. It’s obvious that economic growth cannot continue for very long if it’s based on the conventional model of rampant exploitation and befouling of the planet’s natural resources. Thus, the conventional model of growth surely must be discarded to secure the survival of our species. Whether in the developed or underdeveloped world, economic growth is simply impossible on a hot planet with rising sea levels, shrinking fresh water supplies and massive crop failures.

    As for a new model of growth, this can only be based on very strict principles of environmental sustainability. In order to survive, humans must use our intelligence today to project the cumulative impacts of every one of our current activities many years into the future. This represents an extremely tough challenge, particularly given our short-sighted, material culture.

    But the excellent work of climate scientists has opened a door to the horrific future we surely will face if we fail to change our current course. Our survival depends on marshaling a similar level of science and impact analysis with respect to everything we’re doing today. We already have clearly established that business-as-usual represents a dead end for humanity. It’s time to stop behaving as though our economic activities are inconsequential.

  16. SecularAnimist says:

    Bill D. wrote: “Unless we clearly define what we mean by ‘growth’, this discussion is meaningless.”

    Exactly.

    There are concepts of economic “growth” that are as different from each other as the “growth” of a blastocyst into a fetus is different from the growth of a cancerous tumor.

    Without the first type of “growth”, you would not be alive.

    Whereas with unrestricted “growth” of the second type, you won’t be alive for long.

  17. I’ve had a lot of these discussions (some of them are available on my website), but after last summer’s big Arctic meltdown I’ve concluded they are irrelevant. Anyone look at the U.S. Drought Monitor recently?

    The negative economic effects of climate change are coming down much faster than the “growth” economy will be able to override them. Resilience and “mitigative adaptation” (e.g. increasing the number of mid-sized organic farms that both feed people and store carbon) will become the “growth” of the future.

    Nanotechnology is all good and well, but we’ve let things get out of hand. If we’re going to survive, we need to try to get ahead of the eco collapse curve by diversifying, conserving resources and sequestering carbon. The government, now a tool of the 1%, will be of little help — it will probably exacerbate the problems with regulations designed to enrich it’s “donors.”

    You’d better learn to grow your own.

  18. Joseph Dillard says:

    Growth can be vertical, focusing on quantity, or horizontal, focusing on quality. For too long, “progress” has assumed vertical growth. What is required is the realization, not grasped by this article, that the world needs a much greater emphasis on horizontal growth in quality (life, human rights), and much less emphasis on vertical growth with emphasis on quantity (money, population.)