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The Sustainable Economy 

Economic growth has decoupled
from carbon emissions
by Michael Barnard

This empirical observation alone invalidates the argument that countries have to emit CO2 in order to get richer


Economic advancement goes through stages: agriculturally dominated societies to industrially dominated societies to consumer and information worker societies. It’s typically only as the shift to the consumer and information worker societies occurs that significant negative externalities such as climate change and air pollution start to be truly addressed by most nations.

Industrially dominated societies require a tremendous amount of cheap energy. The cheapest form of energy for a long time was coal. Coal had hideous negative externalities in the short term and long term. In the short term, it’s about the most polluting form of energy we’ve discovered. NOx, SOx, hydrocarbons, CO, and particulate emissions typically make the cities and regions where coal is used heavily polluted, with significant population health impacts and longer term clean-up costs. Basically, coal fouls your nest. Coal is also a very large source of CO2, with one kg of coal producing almost three times its weight in CO2. That’s not just fouling the nest, but fouling the planet.

There are simplistic arguments made about greenhouse gas emissions regarding both developed and developing economies, arguments aimed at arguing that the other side has to do the heavy lifting. But the arguments are increasingly irrelevant. These aren’t unreasonable arguments at heart, but are used in unreasonable ways.

• The first reasonable side is that the currently rich developed countries are the source of most CO2 emissions in the atmosphere above naturally-occurring emissions, and as such should bear the lion’s share of costs for dealing with the problem. This is often posited as cash transfers from rich economies to poor economies. There’s a reasonable argument there, and global agencies such as the World Bank are now providing financial support for clean energy and good grids as part of that, and limiting support for coal. Similarly, rich countries are the ones that invested heavily in wind and solar technologies, manufacturing and supply chains, driving down the costs of those technologies globally, so poorer countries can buy into clean technology cheaply.

• The second reasonable side, one posited in many places as the only reasonable side, is that the developing world is where the majority of future emissions will come from, so if we don’t solve the problem for them, it won’t do us any good to clean up our own nests. This is often used as a rationalization for continuing to drive SUVs and burn gas in the developed world. China is often cited as not doing anything, so any actions in the traditionally developed countries would be for nought. However, fixing our own nest is also necessary, and our per capita CO2 emissions dwarf those of the developing worlds. With global problems, pointing fingers and claiming insignificance — as very rich Australia does for example — just doesn’t wash.

There are several important factors to pay attention to in this set of discussions.

The first is that globally, gross domestic product has decoupled from CO2 emissions for the first time in about 250 years. For the past two years, and likely trending through this year, GDP has been rising, but CO2 emissions have been flat. This empirical observation alone invalidates the argument that countries have to emit CO2 in order to get richer. Most countries in the world have become richer, and carbon emissions have stayed flat. The causation has been broken. It’s worth looking at why this is so.

Many developed nations have transitioned into the consumer and information worker stage. That means that they are getting increased GDP from inherently lower energy requirement forms of economy such as banking, information technology, and luxury goods. Further, they are farther along the scale of driving efficiency as part of the information worker element. LEDs are becoming ubiquitous and are a fraction of the lifetime energy and CO2 emissions of previous lighting products. Automobile and truck fleet mileage standards are driving overall transportation emissions per capita down, even while peak car has not been reached. Urban densification and good transit systems are becoming more prevalent.

And those countries care about the health of their populace because population health has a strong correlation with population economic effectiveness. Clean air promotes growth. Clean water promotes growth. They are more heavily regulated and efficiencies are driven in. They are also most of the countries with the greatest penetration of renewables, as mentioned earlier. Europe is a leader. The USA is a leader.

But let’s look at another leader, one which has more promise for the path that other developing nations might take: China. In 2015, it turned on 45 GW of the 145 GW of new capacity installed globally in that year. By itself. It turned off a lot of coal plants. It stopped permits for coal plants being built. Part of this is that as a centrally planned economy, It is intentionally bringing more people out of poverty more rapidly than any other country or region in the world, and it used a lot of coal to do it. That argues for the ‘rich requires coal’ argument. But China isn’t out of industrialization and hasn’t transitioned to consumer and information worker status, yet is already doing massive work to clean up the air it fouled and likely as a pleasant side effect than the primary purpose, is dropping a lot of carbon from its emissions.

It has a big stake in climate change of course. The Pearl River Delta, of which Guangzhou is the center, is the largest urban center in the world and a huge source of China’s economic miracle. And it’s heavily threatened by climate change because it’s a vast plain with a shallow river beside a rising ocean. China has weighed the costs and benefits and realized that if climate change continues, a lot of its economic prosperity is threatened, just as it is by hideous air pollution.

China’s growth was ‘only’ 6.9% in 2015, which would be astoundingly good for most other countries. And it reached peak coal. It’s a leader in the developing world. Many others will follow suit. It also makes most of the world’s solar panels and has a couple of its biggest wind turbine OEMs. It also has the largest electric vehicle sales of any country globally, and its BYD firm sells more than anyone else pretty much. It’s going to take those brands global for sure.

It’s common now for analysts such as Bloomberg Energy to predict slipping oil consumption due to electric vehicles. I’ve done an analysis myself which shows softening growth and then actual declines starting in 2040, and I ignored the impacts of ridesharing and autonomy leading to potential peak car scenarios. So back to the pure economic argument.

• Wind energy is now seeing global prices of less than 5 cents USD per KWH LCOE in many, many jurisdictions. These are no longer rare — this is the baseline for onshore wind energy, without negative externalities.

• Solar energy is regularly seeing less than 5 cents USD per KWH LCOE in good conditions and is falling in price faster than wind energy. It’s directly competitive in many jurisdictions, especially tropical ones, with fossil fuel generation today, and will only out-compete them tomorrow, without negative externalities.

• Almost every mainstream automotive manufacturer is delivering multiple affordable (by developed world standards) fully or partially electric vehicles in the next five years. California, a bellwether, is already seeing pure electric growth eating into hybrid growth, meaning that the next shift is already starting to dominate. China is the most supportive country in the world for EVs, with key and mostly pragmatic programs to maximize their deployment. This is happening because battery prices are plummeting too.

The above is a virtuous cycle. The more wind and solar there is on a grid, the lower carbon wind and solar manufacturing are. The more wind and solar there is on a grid, the lower carbon electric cars are. The more wind and solar generation and electric cars there are in a country, the cleaner the air and water is, reducing negative health impacts.

Wind, solar, and other renewables are economic drivers. They require capital outlay, manufacturing, distribution, construction and operations. They employ people in high value jobs, just a lot more virtuously than the ones employed in the coal industry. That money part is why there are already more people working in solar in the USA than in coal. Electric cars are economic drivers. With transformation comes opportunity for growth of the economy. That’s why China is betting big on taking over the largest industrial market in the world.

What’s really clear is that countries which insist on building coal as the answer to their economic needs won’t be competitive against countries which shift to renewables instead. They won’t employ as many people, they will pay too much for electricity and they will push too many negative externalities onto their populaces to have them be truly effective drivers of the economy. Pollution, after all, is an inhibitor to productivity.

◊ Publ. here 15.9.2016


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