Economic growth—the continual increase in the size of a country’s economy—has become almost synonymous with progress. When growth is strong, a nation feels prosperous. When growth falters or reverses in times of recession, war or pandemic, politicians quake.
But economic growth has historically come with a matching carbon price-tag. The challenge for the modern world is to reconcile economists’ belief in the primacy of growth, with the planet’s ever-dwindling carbon budget.
The recent Inflation Reduction Act gives a multi-billion dollar boost to renewable energy, promising a brighter future where new technologies deliver economic growth and lower prices, without the climate consequences. But how realistic is that?
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Prosperity grows on energy and the world needs more of both
1. Energy ends poverty. All around the world, and through human history, energy use has increased in lockstep with economic growth. The more productive a society becomes, the more energy its economy demands. Since the Industrial Revolution, that energy has come from fossil fuels, and continues to lift billions out of poverty—with more than 140 million entering the global middle class every year.
2. But we still live on a carbon planet. Even with some nations starting to get serious about transitioning to renewable energy, the planet remains highly reliant on coal, oil, and gas. Fossil fuels as a share of global energy production peaked at 68% in 2007, and have only declined to 62% last year. The evidence suggests carbon will be powering economic growth for decades to come.
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The world needs more energy not more carbon
1. There is nothing inevitable about our society’s carbon use. The Inflation Reduction Act aims to boost America’s economy and rejigger USA society to run on renewables, with a broad package of incentives, spanning the economy from consumers to industry to government. If it succeeds, it could reduce US carbon emissions by 40% by 2030—although this won’t be easy.
2. Unhitching progress from carbon. Some countries have already broken the link between economic growth and emissions—a process called decoupling. Over 30 countries have absolutely decoupled emissions from economic growth since 2005, reports the Breakthrough Institute. That is to say, their GDP increased even as their carbon emissions fell. The list includes both highly developed countries like Denmark and the UK, and up-and-comers like Romania and Jamaica.
3. Perhaps energy efficiency can break the cycle. Even the connection between energy (regardless of its source) and growth is up for grabs. By embracing efficiency, Sweden’s GDP grew by over 50% since 1995, even as its energy use per capita declined by more than 10%. However, whether other countries—and particularly the rapidly growing and developing “global middle”—can emulate these achievements has yet to be proven.