Climate change mitigation and degrowth: why system approach matters

 

A systemic approach to seize the opportunity window from current challenges

We are already ending 2020, and several decades lacking effective action to mitigate climate change have brought us to a very challenging situation. However, often, challenges act as catalysators of necessary changes and opportunities to progress, so let’s focus and get the best out of it.

The systems through which humankind organizes its activity in planet Earth are very complex. But we humans, and specially the management layers we put in place, have a strong tendency to oversimplify, and ultimately end up confusing the simplifications with reality. As a consequence, we often lose the systemic perspective and fail to address the options for structural change.

By addressing structural change we could unleash a huge potential for improving our chances to navigate current challenges. A systemic layer where this becomes evident is the economy:  We became fully dependent from a growth imperative for our socioeconomic systems to be more or less in equilibrium (although an unstable and unfair equilibrium). This is a rather simplistic and immature setup, fully inconsistent with any logic (exponential growth within a finite Planet), and leaves us far from approaching a thriving socioeconomic system. But we still do not dare to address the structural changes needed to progress…

The urgency of the current global challenges (climate and ecosystem breakdown) leaves no room for us to avoid addressing structural issues. Doing so would allow us to simultaneously address other long-standing challenges like distributional issues, universal access to social services and democracy itself.

During the last few years, further spurred by the context of the first wave of the COVID-19 pandemic and its aftermath, we have assisted to a surge in degrowth literature, every time with better articulated conceptual arguments, and beginning to nail down specific proposals about how to advance in that direction. These are extremely positive developments aiming at addressing structural issues, but we should not lose of sight the huge dimension of the underlaying challenge: Our societies still do not know (and have never experimented with) how to organise themselves for surviving (let alone striving) without a growing economy (we are still that simple or undeveloped). Therefore, the systemic perspective and approach should never be lost.

Often, within degrowth literature there is a limited and biased consideration of technology’s evolution role for the transition. This facilitates putting forward the main degrowth arguments (no absolute decupling within the available timeframe is feasible, and hence the focus must be on degrowth). But again, this may fall into the trap of oversimplifying reality and losing the needed systemic approach.

The point I try to make here is that under the current extreme challenging context we cannot lose the systemic approach and must look holistically to how better combine the different pieces in order to seize the full opportunity window (that the current challenges bring about) for advancing towards a shared prosperity.

Put it more simply: Yes, we need to learn how to organize our socioeconomic system away from the growth imperative, but given the absolute lack of experience on organizing our socioeconomic system in a non-growth context with the current population level, for the sake of shared prosperity, let’s minimize degrowth requirements (at least during the transition while we learn about how to reorganize ourselves under this new context) with a system approach, so that we maximize the chances of success and reaping the huge benefits this structural change offers, and prevent barriers that could likely lead to a collapse of socioeconomic systems and a drift towards authoritarianism and fascism.

 

The energy transition and its links with outer systemic layers

The energy system does not exist in vacuum. It is embedded into other systems, with strong interactions and feedbacks with the outer systemic layers (economy, society, Earth). This fact is often overlooked when addressing the energy transition, which can have fatal consequences both for the chances of transition roadmaps to be materialized, and to inform policy making to guide the transition (see here).

The energy system will be subject to complex endogenous dynamics during the transition. But on top of that, the economy systemic layer may impose additional burdens with an upwards energy demand trend to underpin economic growth.

Transitioning today’s energy and power systems towards renewables within the time window available for climate consistency is already a huge challenge (see here, here, here and here). Adding the economy’s growth imperative on top of it makes the task still more difficult, because renewable’s and efficiency deployment have to deal simultaneously with the substitution of the existing fossil fuel infrastructure and coping with the additional energy demand increase linked to economic growth. Hence, the chances of success in transitioning within the available time window would increase significantly if the economic growth imperative could be relaxed or eliminated.

The economic growth imperative has dominated economic policy and mainstream economics since the classical economists of the 19^th century. Today, the economic growth imperative is so deeply embedded into our socioeconomic structure and policy mindset that any slowdown in economic growth triggers deep crisis episodes (recessions, depressions…). The way socioeconomic systems are currently structured is such that if economic growth stops, jobs are lost, businesses close and people lose access to fundamental basic services (food, housing, health, transport…). However, the current socioeconomic structure is a social construct: There is nothing that prevents societies to introduce structural changes to adapt and improve its organizational structures, so that they are better adapted to the prevailing systemic boundary conditions, and perform better in fulfilling its goal, which should be providing  shared prosperity and allow all of use to develop and thrive within our shared means.

In the past, while the social system was relatively small compared to the size of the outer systemic layer (Earth system), economic growth did not produce evident negative macro impacts. However, since the mid-20^th century it is becoming increasingly evident that these impacts exist and are unsustainable. Climate change is one of the main impacts, but others include biodiversity loss and air pollution.

Although economic growth has brought about important progress in social dimensions, this does not rule out the possibility of progress and prosperity being achieved or improved with different socioeconomic structures. In fact, there is mounting evidence that economic growth could be an inefficient way of reaching good social performance, and that it is subject to a saturation process whereby economic growth beyond a certain threshold would not produce additional social improvements (Jackson T., 2017).

Moving from a stand-alone consideration of the economy to a systemic approach, it becomes evident that the economic activity has both lower and upper activity boundaries: The lower activity boundary is to prevent shortfalls in social needs; the upper activity boundary is to avoid overshooting the Earth system capacity. A safe and just space for humanity to thrive exists within these two boundaries (Raworth K., 2017). Hence, recent years have witnessed increasing efforts to address the structural changes that would allow us to transition from past socioeconomic structures towards mature ones, signaling the end of the growth phase (Trebeck K., Williams J., 2019).

Transitioning our societies towards sustainability while maintaining the economic growth imperative would require very strong decoupling of GDP from emissions and material consumption. Recent analyses of historic evidence of decoupling and the prospects provided by several scenarios is not encouraging in terms of the capability to achieve and sustainably maintain the required rates of decoupling within the available time window (Hickel, Kallis, 2019), (Li, 2020), (Schröder, Storm, 2020).

The climate consistency of the energy transition is linked to its cumulative CO₂ emissions, and specifically on how these compare to the remaining carbon budget. The mitigation rate deployed during the transition is the tool available to control cumulative emissions. The emissions compound annual mitigation rate associated to limiting global warming at 2C with 67% likelihood and 1.5C with 50% likelihood are 5% and 16% respectively. These results are based on using the carbon budgets provided in (IPCC, 2018), updated to 2020 and interpreted as indicated here (see here and here for a discussion on these carbon budgets and how they compare with those of the IPCC’s Fifth Assessment Report).

 

Tackling the energy transition’s systemic interdependencies

Energy transition roadmaps exist only on paper and often do not consider systemic interdependencies (paper supports anything we write on it…). However, when trying to implement a transition roadmap, these interdependencies come to the fore and lead to specific socioeconomic outcomes, which can be good (welfare improvements) or challenging (restrictions in economic activity, distributional impacts, job misalignments, negative impacts for specific communities…). That is why analysing the socioeconomic footprint of transition roadmaps it is so important to inform society and policy making in order to bring transition roadmaps from paper to reality (for socioeconomic footprint analyses see for instance here, here, here, here and here).

A full socioeconomic footprint analysis can be quite elaborated and depends on sophisticated integrated models. However, a simple way to address the first order implications of systemic interdependence is using the Kaya identity. The Kaya identity relates the size of the economy with CO₂ emissions, energy intensity and CO₂ emissions intensity of energy. Hence, the Kaya identity can be used to explore the links between the rates of change of these four variables. Here I use the Kaya identity to evaluate the economic growth consistent with a transition pathway defined by the rate of mitigation  of CO₂ emissions and the evolution of energy intensity (EI) and CO₂ emissions intensity of energy (EmI_E).

The EI is the ratio between the energy demanded by the economy and the size of the economy (in gross domestic product – GDP - terms). The EmI_E is the ratio between the energy-related CO₂ emissions and the energy demanded by the economy. The time evolution of EI and EmI_E can be understood as the endogenous technological characterization of an energy transition roadmap, although it also includes an important social component through behavioural change elements. The improvement (reduction) of EI is linked to the deployment of energy efficiency (EE), while the improvement (reduction) of EmI_E is linked to the deployment of renewables (RE) (I rule out nuclear energy for sustainability and social reasons). It should be understood that even if EI and EmI_E are constant, when the economy grows there is need for additional EE and RE deployment to cope with the consequences of the increased economic activity. If on top of that, the transition pathway introduces improvements in EI and EmI_E, the deployment rate of EE and RE has to increase still more.

The Kaya identity implies that there is an equilibrium point between the rates of change of the economy size, EI, EmI_E and CO₂ emissions. This means that given three of these four rates, for instance those that technologically characterize the transition (EI and EmI_E) and a goal for CO₂ mitigation rate (to align with a carbon budget), there is only one possible value for the economy growth (or degrowth) rate.

Let’s quantify these relationships so that we can extract insights about the current challenges and how to address them.

Figure 1 presents the per capita GDP growth rate (the population scenario employed for this analysis is that from IRENA’s GRO), which considers a 0.65% CAGR - Compound Annual Growth Rate - up till 2050) as function of the CO₂ mitigation rate (for reference purposes, the COVID-19 pandemic is estimated to produce a 7%/y reduction of energy-related emissions in 2020), and for three transition pathways (each of them technologically defined by the improvement rates of EI and EmI_E, all expressed as CAGR). At the top of the figure the CO₂ mitigation rates associated with climate consistency with the 1.5^oC with 50% likelihood and the 2^oC with 67% likelihood climate goals are shown.

The three transition pathways presented in Figure 1 are associated to the following contexts:

•          The first transition pathway is a business as usual (BAU) evolution, technologically characterized by improvement rates of EI and EmI_E aligned with historic values.
•          The second transition pathway (‘current transition scenarios’) is technological characterized by improvement rates of EI and EmI_E from the dominant currently available transition roadmaps, such as those from IRENA  and IEA.
•           The third transition pathway (‘room for increased ambition’) is technologically characterized by what could be considered the potential improvement in efficiency and renewables deployment (see for instance here and here).

 

Figure 1: GDP growth rate as function of CO₂ emissions mitigation rate for different transition pathways characterized by the CAGR of energy intensity (EI) and the emissions intensity of energy (EmI_E). The figure presents also the emissions mitigation rates linked to the available 2020 carbon budgets for 2C at 67% likelihood and 1.5C at 50% likelihood. 

 Relevant conclusions can be extracted from the analysis of the results presented in Figure 1:

•           For any given technological characterization of a transition roadmap (defined by its efficiency and decarbonization deployment: EI and EmI_E improvement rates), the higher the annual CO₂ mitigation rate, the lower the GDP growth. Hence, as mitigation requirements increase (in order to adjust to ever reducing carbon budgets) the margin for maintaining positive economic growth reduces or vanishes.
•        For a BAU evolution of EI and EmI_E improvements (current deployment rates of efficiency and decarbonization), degrowth is required for any meaningful climate goal. Indeed, to maintain positive economic growth under BAU, CO₂ mitigation rates lower than 1.5%/y are needed, and these would lead to global warming well above 2^oC. For having a 67% chance of limiting global warming to 2^oC, a -4%/y growth rate (4%/y degrowth) would be needed, and for reaching just a 50% chance of limiting global warming to 1.5^oC, degrowth would need to be about 15%/y. Needless to point out that these are high degrowth rates, which would impose a huge challenge on our socioeconomic system because we still did not learn how to organize it even under a mild degrowth context. Hence, this is certainly not the way we would like to go, because not only it would introduce unsurmountable transition barriers, but would likely lead to socioeconomic breakdown. Hence, the prospects under BAU are really bad: either we collapse because of climate change impacts (and the subsequent socioeconomic breakdown), or we collapse because of direct socioeconomic breakdown. We better move away from BAU ASAP.
•           Even for the technological characterization of efficiency and decarbonization deployment implemented in the dominant transition roadmaps (curve for ‘current transition scenarios’ in Figure-1), positive economic growth can be maintained only for climate goals consistent with a 2^oC global warming. When aiming to a 1.5^oC climate goal, the technological characterization of these current mainstream roadmaps would require degrowth rates of about 10%/y, which is still a huge degrowth rate for our socioeconomic system to have any change to survive before mastering the structural changes needed to prosper and thrive away from the growth imperative. This is also not a place where we want to find ourselves, because it would likely lead to socioeconomic breakdown and unsurmountable transition barriers. It must be pointed out that the unaddressed wrongs of our current socioeconomic setup (like inequality, poverty and other access distributional issues) would likely magnify under a socioeconomic breakdown context, as we are already starting to glimpse in regard to the response to the COVID-19 pandemic.  Still, the current degrowth literature, in the best case, focuses in these current mainstream transition scenarios, because together with the BAU these scenarios make clear the case for degrowth. But by departing from the (holistic) system analysis perspective, following these transition roadmaps with the required degrowth to reach the needed CO₂ mitigation rate could potentially be as dangerous as insisting on maintaining ourselves within the growth imperative.
•          However, there is still room to increase the rates of efficiency and decarbonization deployment beyond those used in the current mainstream transition roadmaps, and we urgently need to explore these possibilities and its socioeconomic implications before it becomes too late. With increased technological ambition (higher rates of improvement of EI and EmI_E) the margin to maintain growth (or to limit degrowth) for different climate goals increases (‘room for increased ambition’ curve in Figure-1). This would provide a much needed buffer to advance in our understanding and experience about how to organize socioeconomic systems away from the growth imperative without triggering socioeconomic collapse.  However, Figure-1 shows that even for a fairly ambitious transition (5%/y reduction of EI and 12%/y reduction of emissions intensity of energy use), the 1.5^oC at 50% likelihood climate goal would require an almost steady state economy (zero growth).
•          Degrowth it is not an absolute imperative for the transition to comply with climate goals (as proposed by many references that tend to underestimate the potential for efficiency and decarbonization deployment potential (Hickel, Kallis, 2019), (Schröder, Storm, 2020), (Li, 2020)). But limiting growth, or even being able to organize our socioeconomic system to thrive under degrowth, at our current stand point (end 2020 without meaningful climate action still undertaken) very importantly increases the chances of complying with  the kind of climate goals that would prevent huge climate impacts (limiting global warming to 1.5^oC degrees with at least 50% likelihood). It seems advisable to proceed with the right combination of increased technological ambition and degrowth so that we provide ourselves with the space needed for learning while doing and introducing lasting structural improvements in our systems. Different approaches could be used for this combination. For instance, the Absolute Zero UK’s report proposes a temporal reduction of supplied services while the technologies needed to provide them become available. This example, where degrowth provides a climate buffer for technology deployment, could be understood as the complimentary of what I commented above with higher ambition technological deployment providing a climate buffer to mature the economy.
•          Our current socioeconomic structure collapses under a degrowth context. For complying with ambitious climate goals that prevent catastrophic impact on our socioeconomic system it is likely that there is need to move into the degrowth area of Figure 1 (to a higher or lower extend depending on how fast we manage to deploy efficiency and decarbonization). Hence addressing structural aspects that allow our socioeconomic systems to progress and thrive under degrowth contexts, as well as gaining experience on how to set and operate such socioeconomic setups at an accelerated pace, should be a priority.
•          Under the current context, neither technologic improvement nor degrowth alone are capable to bring us to save port, avoiding the worst effects of the climate breakdown storm while preventing our socioeconomic ship to sink. Hence, a systemic, holistic and collaborative approach is needed to find the right pathway. Advancing this approach, by itself, is an additional potential benefit we can reap from the current challenging context.

 

The way forward?

A steady state economy seems to be the appropriate goal for human activity in a planet with finite resources and impact bearing capacity. Despite being so far from current mainstream economic thinking and policy, the concept of a steady state economy was already in the mind of main classical economists like Adam Smith and John Stuart Mill in the 18^th and 19^th centuries, as well as in the thoughts of some of the most influential 20^th century economists as John Maynard Keynes (See for instance Center for the Advancement of the Steady State Economy). For reaching a steady state of the global economy, some countries will have to grow further (coupled with appropriate distribution) in order to satisfy basic social needs, while other countries where economic activity has surpassed the carrying capacity of the ecosystems that contain and sustain it will need to degrow (while also addressing distributional issues).

In order to address the current challenges while progressing towards a mature economy following a safe pathway an holistic system approach is needed which simultaneously and collaboratively progresses in these two fronts:

·       Reduce as fast as possible and without further delay both the energy intensity (EI) of the economy and the emissions intensity of the energy system (EmI_E). The margin to accelerate these improvements, and specially the EmI_E reduction, is still very important, even when compared with current mainstream transition pathways. 

·       Address structural changes that reduce or completely eliminate the current growth dependency of our economies and learn-by-doing how to set up such a mature socioeconomic system and thrive within it.

At this point one could wonder where behavioural changes fit in this systemic approach to address current challenges, because indeed they constitute an important transition pillar. Behavioural changes form part of both action fronts mentioned above. A move towards a vegetarian or vegan diet reduces the emissions intensity of the economy, as well as increasing the use of public transport, biking or walking in detriment of private motorized transport does, or pushing within your working context for a reduction in commutes and flights while delivering the same professional service. Likewise, the decision to reduce consumption, or even to actively demand from governments that expenditure (both public and private) in activities with low (or even negative) social value is eliminated and redirected towards high social value areas (education, health, universal basic income, job guarantees…), are important components to evolve towards a mature economy. Moreover, behavioural change can link the two action fronts outlined above, potentiating collaborative attitudes and triggering synergies between them. But behavioural change must be underpinned with appropriate organizational structures, and the two action fronts herewith commented outline the main areas where public and private effort should be directed to deploy these structures.

Analyses of the socioeconomic implications of deploying more ambitious transitions that simultaneously address structural changes are urgently needed, providing insights capable to inform the required holistic policy framework for a just and fair transition.

Transitioning and avoiding dangerous climate impacts would have been much easier 20 or even 10 years ago: Lower mitigation rates, lower EE and RE deployment rates, and weaker requirements to revisit fundamental structural issues about our socioeconomic setup, with more space for learning how to thrive away from the growth imperative. But we humans are rather slow in reacting when there is room enough to do it comfortably. So now we are faced with a huge challenge. Let’s use this opportunity window and seize the chance for addressing those fundamental structural issues as well as we can.