Climate Change

Published on January 15th, 2016 | by Guest Contributor

30

The False Promise Of Decoupling GDP Growth From Resource Consumption

January 15th, 2016 by  


Originally published on SameFacts.org.
By James Wimberley

At the end of the great midwinter potlatch, who does not feel a little sympathy with Pope Francis’ diatribe against consumerism, even with Savonarala’s bonfire of the vanities in 1497 Florence? We are trapped less by our selfish greed, but by the very ancient norms of gift exchange. These were vital to the survival of hunter-gatherers, whose only way of storing perishable food is in social obligations. In a society where our friends and relations have all they need, and most of what they want, the choosing of gifts is for many of us the insoluble old riddle of kings. The Pasha of Egypt’s solution in 1827 for a present to the King of France was a live giraffe, who had to walk from Marseille to Paris.

The malaise becomes, in clever hands, a full-blown condemnation. The current version of the critique is that of limits to growth. I already quoted Guardian Cassandra columnist George Monbiot, but it bears repeating:

Ignore if you must climate change, biodiversity collapse, the depletion of water, soil, minerals, oil; even if all these issues were miraculously to vanish, the mathematics of compound growth make continuity impossible…

The trajectory of compound growth shows that the scouring of the planet has only just begun. As the volume of the global economy expands, everywhere that contains something concentrated, unusual, precious will be sought out and exploited, its resources extracted and dispersed, the world’s diverse and differentiated marvels reduced to the same grey stubble.

Some people try to solve the impossible equation with the myth of dematerialisation: the claim that as processes become more efficient and gadgets are miniaturised, we then use, in aggregate, fewer materials. There is no sign that this is happening.

I argued in a post in 2014 that Monbiot is wrong, and dematerialisation is happening in rich countries. The evidence was a paper by Austrian scholar Julia Steinberger et al. But research moves on, and Monbiot has found  an impressive new study by Thomas Wiedmann et al with the lovely title The material footprint of nations. Wiedmann finds that this progress is largely an optical illusion, so it was me not Monbiot who was mistaken. Join me in a short excursion into the weeds; this is worth getting right. (Tip: for the best view of Wiedmann’s charts, go to the pdf version.)

Environmental accounting looks like a resurrection of the old Soviet system of “material product” indicators: for no good reason, Gosplan decided that services were not real output but transfer payments. However, it did use real or imputed prices, so the tables were in roubles. Environmental economists go the whole hog and just use mass. Everything is normalized to tonnes. But there is more than one way of adding them up. The Steinberger paper used the indicator of Domestic Material Consumption (DMC), which has the advantage of being widely available. Her team’s analysis gave this:

DematerilizatioTrends3-e1452783401433

A cheering story. Rich economies are dematerializing, and a few like Germany, France, Japan and the UK seem to have completely broken the link between material impact and GDP growth. Developing countries like China are not there yet but they will surely follow the same path. There may be material limits to GDP growth, but it is not a resource doomsday machine.

Wiedmann et al found the large hole in this analysis: trade. Perhaps the DMC materialisation in rich countries simply results from shifting resource use to poorer countries though imports? To find out, they developed a new indicator, Material Footprint, also in tonnes. The MF was calculated using an enormous global input-output matrix with 14,787 industries (footnote 1). Sure enough, that is exactly what his team found.

F2.large_-e1452823945378

The resource requirements of traded goods are enormous: “two-fifths of all global raw materials were extracted and used just to enable exports of goods and services to other countries.” The true global elasticity of MF with respect to GDP is 0.6. The apparently impressive dematerialisation of growth in the UK and Japan disappears entirely once you account for imports: “no decoupling has taken place over the past two decades for this group of developed countries… Our analysis does not support the observation of resource productivity increases in developed countries over the past decades.”

This looks pretty convincing, and I think we have to accept the gloomy conclusion provisionally, subject to confirmation or refutation. However, grasping at straws, I see quite a few unanswered questions.

1. The long run
Wiedmann’s series starts in 1990. This is too short a period to show long-run trends. Perhaps the data simply isn’t available for the methodology. But If you run the tape back to 1700, it looks very likely that the first Industrial Revolution of coal, steam, iron, cannon and railways had a very very high MF/GDP, and probably the second one too, of electricity, steel, cars, chemicals and planes. Wiedmann cites estimates that “global average resource intensity (DMC/GDP) … [has] almost continuously decreased from 3.6 kg/dollar in 1900 to 1.3 kg/dollar in 2005”, a 64% decline that cannot possibly all be due to externalising through trade. That suggests a secular dematerialisation, possibly too gradual to avoid a crisis.

2. The recent downtick
The charts show an MF intensity downturn starting in OECD countries starting in 2007. Global financial crisis, sure. But there are numerous pointers to structural shifts happening around the same time, especially in fossil fuels. US carbon emissions peaked in 2007, the world’s probably in 2014. China’s coal consumption is falling, and other indicators of heavy industry are slowing. Oil and coal prices fell, and have not recovered. Wiedmann’s data stop in 2008, and do not include the recent recovery. More recent data are needed to test the hypothesis of a global structural inflection.

3. Germany
Unfortunately Germany is not among Wiedmann’s selected rich countries, and it has been the poster child for DMC dematerialization. Reunification was responsible for some of it, as Trabant factories and other DDR dinosaurs were shut down, but this effect must have been over by 2000. Germany has kept a large manufacturing sector. If there has been an MF dematerialisation in a rich country, this is where it will show up.

4. Construction in China
An astonishing share of the global MF is made up of export-related construction materials in China: Wiedmann gives 5.2 gigatonnes for this in 2008, 8% of the world total MF. The Pearl River megalopolis, the largest conurbation in the world,  has mushroomed to a population of 42 million ex-farmers, largely dedicated to manufacturing for export. However, this capital investment is mainly a one-off. Will China need to build another Pearl River megacity over the next decade? The apartment blocks, factories, roads, sewers and offices are now built, and will need little modification as the composition of exports shifts. Even an increase in volume will not need anything like the same volume of construction inputs. We can expect a large reduction looking forward in this component of export MF.

5. Inputs and inputs
The strength and the weakness of the MF indicator is its Procrustean aggregation over types of resource use. For a clearer view of the threat to sustainability, we need to differentiate. To a first approximation, there are three categories that matter: fossil fuels, construction materials, and biomass. (Mineral ores are very secondary in this analysis.)

Fossil fuels represent an immediate threat, not because we we will exhaust them but because they will make the world uninhabitable first. There is now a global commitment and strategy to fix this well before the end of this century; not an ideal one, but il a le mérite d’exister, and deserves our wholehearted support. There is no need for a separate MF concern.

Construction materials are largely rock, sand, and cement. There is plenty of the first two, even for building a Trantor. Cement is is under 15% by weight. It is a serious worry not because of the supply of limestone but because of the carbon emissions from the chemical process of calcining (60%), plus the energy for this which could become renewable. Here too, the concern is carbon emissions not resource exhaustion.

Biomass is a large share of the trade footprint, mainly from food (timber hardly shows up). In Brazil, it’s the largest component of the footprint. Some biomass use is fully sustainable: humans can’t eat grass, and pasturing livestock on natural grasslands allows us to harvest it. But that isn’t typical of the modern food supply chain, including animal feedlots supplied by intensive corn and soybean farms dependent on fertilisers, and Brazilian beef and Indonesian palm oil raised on land cut from rainforests. It’s not a sustainable system. The world’s population of 7.4 billion will rise by roughly half before it stabilizes, and meat consumption rises with income. We do seem to be on a collision course with nature here.

What does this imply for policy?

What we have now is growth partially coupled to the use of limited material resources. There is no reason to think the link is immutable, and little that it will dissolve by itself. So it becomes a long-term policy issue.

  • Take resource footprints seriously. Dematerialisation of growth is a policy goal.
  • The indicators should be regularly published by national statistical offices and become common knowledge, like GDP or the birth rate.
  • Focus on fossil fuels and biomass, where Nature’s cornucopia is running out.

* * * * *

Footnote

I am personally gratified by Wiedmann’s revival of Leontief’s input-output analysis, which I touted here six years ago. I’m sure my post had negligible impact, but it is still gratifying to be proved right. I/O looks an antique to a state-of-the-art DGSE macroeconomist, but in the real world it works fine, like your grandfather’s hickory-handled hammer. The problem is that environmental economists are still niche players – you don’t see them cited by Brad DeLong or Paul Krugman. I hope this post may publicise their work.

Reprinted with permission.






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  • Jens Stubbe

    The biggest industrial company in the world Samsung has reduced their CO2 emissions by 55% while keeping ahead of the pack. In the ninetieth I worked in a small design company where we conceived the idea to make a environmental report for businesses that could be audited and used as a strategic tool. We had done some different work for Novo and used our good relations with them to persuade them to let us work out their first environmental report, which incidentally was also the first in the world for a business. Novo is now by far the largest company in Scandinavia and certainly the most profitable. Novo is one in a handful of Danish companies that each reduce more CO2 emissions annually than Denmark contribute.

    If americans cared to visit Europe and see what is customary here in terms of energy efficiency and recycling and then went home and demanded the same you could very soon limit your carbon footprint to european standards.

  • sjc_1

    The previous administration in the U.S. told us we need to consume more fossil fuels to be prosperous. Of course the president and vice president were from the oil industry.

  • Freddy D

    The topic of this article really gets at the “elephant in the room” for environmentalism, while people dither over bringing their own bag to the supermarket. While sustainability may seem hard to imagine, as pointed out in the article, there are some very promising examples. Prior to 1978, California per capita electricity consumption mirrored the US as a whole and both were on a rapid long-term growth. From 1978 onward, California decoupled from the US curve (due to efficiency policies), and while California’s GDP has boomed over that period, electricity-per-capita has absolutely flat-lined. google “california energy consumption” and look at images; find one of many time series plots. On generation side, sustainable, low-impact energy infrastructure is very clearly at hand, based on trends put forth on CleanTechnica here.

    On some other materials, I heard an interview with the CEO of Waste Management last fall and the world’s materials recycling is in a very primitive state and improving rapidly, with much improvement needed going forward. Yes, material consumption per gdp is historically inextricably linked and very difficult to decouple. And worth the effort.

  • neroden

    Wow. I’ve seen so many sloppy “analyses” of this stuff which make wild errors in one direction or the other…

    …that it is really, really nice to read one as accurate as this. Thank you.

  • nakedChimp

    Still, this discussion doesn’t touch the driver behind the need for exponential growth – intrinsic advantage of capital over services & goods.
    The mainstream economists won’t be able to tell you what is wrong with that, nor does the current financial system and it’s beneficiaries have any incentive to do anything about it (like support research, test things, etc.).
    Have a google for Gesell, Keynes and some current grass-root experiments like the Chiemgauer that try to do something about this.

    PS: people who read up on that react similar to RE or climate change themes.. even if they do not profit from the status quo they will be against those ideas, even if they belong to the big group of losers (hint: it’s the majority on this planet) in that spiel.

    • rockyredneck

      “communism/socialst/facist” You have lumped together terms that are not necessarily related. They have a much more negative implication in the U.S. than in most of the world.
      There are many primarily socialist countries that are neither fascist or communist. Examples are countries like Norway, Denmark, and to a lesser extent Canada. All of these are generally considered to have wealthier populations than the U.S..

      • nakedChimp

        I didn’t lump it together out of ignorance.. I wrote that, as those are some of the terms used by ‘opponents’ to discredit what I was talking about 2-3 paragraphs further up.
        I don’t know how it works in your neck of the woods, but those buzz-words are being used to pigeonhole ideas/people a lot – that’s why I mentioned it.

        • JamesWimberley

          There is now a serious Presidential candidate who describes himself as socialist, and the word does not seem to be doing him any harm. It would not of course be possible for “fascist” and “communist”. I have not heard of any political movement in the world today that describes itself as fascist, even the ones that are.

      • JamesWimberley

        Norway and Denmark would not describe themselves as socialist but as social-democrat, with a mixed economy. The public sector has roughly the same scope in production as in the USA (the big exception is state provision of health care), but transfer payments and taxes are higher.

        • rockyredneck

          True enough, but they are heavy on socialist programs and policy. I can see where social democrat would be a good description.
          Social style policy includes state ownership of resources in Norway and most oil production by an oil company with majority state ownership. There is a guaranteed minimum income for citizens in both countries.
          The higher taxes and transfer payments effects a redistribution of wages.
          I am not sure how you could get more socialist without total control of production and markets, and that would be closer to communism. I know that the strict definition of socialism includes the state ownership of all production, but that has never proven practical or even possible, as far as I know. Black markets always occur.
          Of course the U.S. has more social style programs and policies than most Americans believe or would admit to. More are likely coming as the people demand access to free health care and a more equitable distribution of wealth.

          • Jens Stubbe

            The reason we have far better social mobility in Denmark is that we have free education (not having free education is so unbelievable stupid) and a parliamentary system where governments tend to be minority governments that have to navigate a complex political situation. Most initiatives are for more than one government period and therefore you need to lock it in with the opposition. The distribution of wealth is perhaps more even in Denmark and everybody receives medical care regardless of income and origins and generally also welfare enough to keep a home.

            In Denmark we are in commerce much more capitalistic than in USA. You can fire and hire and start and stop businesses as well as offshore businesses with very limited red tape if any.

            Just after the financial crisis struck I worked in a Danish subsidiary of a British company where the we were clearly profitable but also better paid than in any other country. Because the cost of shutting down operations in Denmark was so low they decided to do so. Despite the decision everybody kept working full speed ahead in good spirits and was loyal to the company, which the British management found very strange.

            The average Dane shifts job every three years so the economy is very dynamic.

          • rockyredneck

            My Danish relatives have actually been able to visit Canada while unemployed which indicates the existence of a strong safety net.
            The ability to balance strong social programs with a free market economy is admirable.
            The differences, however, between Denmark and countries like Canada are so vast that is difficult to make judgements or comparisons based on the economies or social programs.
            I do agree, wholeheartedly, that not having free education and free healthcare is incredibly stupid and counter productive. How can a nation with a significant sick and ignorant population hope to compete for long.
            In Canada we are partway there with healthcare that is basically free, but a secondary education still relies on crippling student loans.

          • Dragon

            Not having free education isn’t stupid – it has a purpose. It’s easier for the wealthy elite to rule uneducated people and trick them with propaganda. It’s also recently been discovered that you can destroy the economy and also charge more for education as people become more desperate to find work. Those same people are then burdened for decades with high student loan debt which forces them to work long hours which doesn’t give them free time to try to do something about the rigged system they’ve been trapped in even if they might have the education to understand the situation.

  • heinbloed

    The innocent little doggy prefers to be eaten by the lice and ticks, roaches and flies:

    https://www.youtube.com/watch?v=fqIlHzpjQ_E

    The drum is made by Texaco.

  • JamesWimberley

    Thanks for the reprint. But I liked my original title – “Stuff” – and the portrait of Savonarola.

  • Once the young are safely locked away in their VR headsets, their physical resource utilization will flatline and their virtual girlfriends will make population growth a thing of the past.

    • 😀

    • Ulenspiegel

      The virtual population may even grow. 🙂

    • sault

      I read somewhere that the carbon footprint of a “Second Life” avatar is greater than that of the average Brazilian. We still need server farms and energy to run them if we’re going to move towards information flow replacing material flow for entertainment.

      • Martin

        Yes that may be correct, but since it is electricity that could be fully supplied by RE systems (not now but in the near future). 😉

        • nakedChimp

          All those rare earth mats which are needed still for the devices need to come from extraction, as their implementation into goods is via methods like vapor deposition & co. That essentially reduces the concentration of the raw materials in the future ‘waste’ below most of the natural reservoirs, which means it’s still ‘cheaper’ to get them from there than from the waste..

          • rockyredneck

            The key word is “still”.
            As scarcity and extraction costs go up, recovery, reuse, and recycling becomes more economically attractive.
            As a child, my parents devotion to reuse and repurposing of products (a trait that rubbed off on me) was fueled, not by any lack of availability, but simply by a lack of cash. Of course, there was also a healthy fear of future hardship, a fear fueled by memories of the great depression.

      • Ronald Brakels

        Well, Brazil only emits about 2.2 tonnes of CO2 per capita per year while the US emits about 17, so that’s not too bad. But that’s still pretty ridiculous for a virtual avatar. Does it cost several thousand dollars a year to have a second life avatar? Because that’s what the electricity bill would have to come to in a lot of grids.

  • More and more value is in information and less and less in materials.

    • JamesWimberley

      Yes. It’s imaginable that material product in some sense should stagnate – who needs a second dishwasher? – while growth continues endlessly in personal services and information. But since information is a non-rival good with zero marginal cost of reproduction, at some point anarcho-communism becomes more sensible than market exchange, as in Iain M. Banks’ fine Culture SF novels.

  • Imo resource use is not the problem, but resource extraction is. But the article does not make that distinction.

    For me the term ‘raw materials’ refers to materials extracted from the Earth, not recycled wasted. Initiatives as ‘Cradle to cradle’ or the term ‘circular economy’ all imply a move towards reusing ever more materials in new goods, without the need to put in more resources from the Earth.

    A while ago I spoke to someone working at a large carpet manufacturer. They chose the cradle to go for cradle certification, and they are convinced they can attain 95% material reuse. Reuse of the old the old carpet into new, so true recycling (not downcycling). That kind of stories make me hopeful.

    • JamesWimberley

      That’s a very good point. I got close to it in my discussion on biomass: there is a sustainable level of use we needn’t worry about and in some cases should even encourage, see my post pro building in wood (link). In defence of Wiedmann, there is no reuse of fossil fuels and not much of construction materials. Recycling concentrates on metals and plastics, which are comparatively small in gigatonnage terms but obviously important for long-run sustainability.

      • We need to move as rapidly as possible to 100% renewable energy and 100% recycling. When we reach that goal, all growth becomes sustainable growth, and we will have decoupled GDP from *unsustainable* consumption. In other words, it is misleading to lump all consumption under the same umbrella.

      • Freddy D

        And even existing biomass economies could be much less environmentally destructive. Namely, mono-culture farming on a massive scale vs. farming a more diverse population of crops using more sustainable techniques.

  • sault

    If we don’t dematerialize in a coordinated way, environmental disruption (in all its man-made forms) and the laws of scarcity will destroy our GDP enough over the long term to get us into an equilibrium state with what the Earth can provide. This would be the dumbest way to move forward. Concerns about sacrificing GDP to prevent this disruption will be entirely moot as storms / floods / etc. wipe out more GDP than we would ever need to transition to a more sustainable economy.

    Low cost access to space would only expand the resource pool for select metals, minerals and perhaps energy if Helium 3 harvesting ever pans out, but it might make other problems worse. For example, if we mine an asteroid for millions of tons of gold, platinum or whatever, that would really just give us more GDP (with the wealthy taking the lion’s share) to exploit more non-renewable resources on Earth. For one thing, you can’t eat platinum, and for another, it takes a lot of resources to build / run the yachts & mansions of space mining company execs. Finally, other resource constraints and the growing menace of environmental disruption have and will exacerbate growing income inequality over the globe unless governments take an active role in preventing it. This will be increase the relative political power of the wealthy in countries around the world. And the vast majority of these people have shown that they don’t want the “party” to stop let alone slow down at all while they’re on top. The inability of governments around the world to tell the wealthy “no” to anything they want will mean an inability to change our destructive economic habits that almost always harm the poor more than the rich. Unless a lot of other trends change, it will be increasingly difficult to turn things around.

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