Decoupling Demystified

by Joshua on February 3, 2010 · 15 comments

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Can We Separate GDP Growth And Ecological Limits?

Next time you run into a classically trained economist (happens all the time, right?) start talking with him/her about ecological limits. They might squirm a little, but probably respond as trained: with some zombie-like responses about “decoupling.” What is decoupling? Basically, it’s a concept of being able to continue growing economic output without a corresponding increase in environmental impact.

The overall idea is that improvements in production efficiency allow you to make more with less. Theoretically we can increase our efficiency and make more stuff using the same amount of resources and/or generating the same amount of pollution.

Applying this concept to renewable resources would be incredibly beneficial. We could use wood, for instance, in a more sustainable fashion if we decoupled the economic growth from resource use and did so under the ecological limits of forest regeneration.

As you might have already guessed, there are quite a few flaws with this concept. You might have also noticed that it seems at first glance to have a broad definition. In general, however, there are two types of economic decoupling: relative and absolute. The first type appears to have a cursory chance of working, the latter is fundamentally impossible.

Relative decoupling refers to a decrease in environmental intensity per unit of economic output. This means the impacts on resources decline relative to GDP, but they don’t decline completely – just grow slower than GDP. Absolute decouple occurs when ecological intensity declines in “absolute terms,” or an overall decrease as GDP increases.

Relative Decoupling

Inputs in production (aka, resources and natural capital) are costs to the producer. So it seems reasonable to argue that in a free market economy producers will push to reduce costs by increasing their efficiency. This leads one to believe that over time we should use less materials to produce more – relative decoupling. One example of this is found in the amount of energy needed to produce each unit of economic output, which globally has fallen over the last 50 years.

However, this tread is only apparent in some developed nations. Outside of the US and Europe this number has been less consistent, in many cases increasing. This makes it difficult to say for certain that a free-market, growth-centered economy will lead to reduced energy intensity, or relative decoupling.

As one might think, as the overall energy intensity of the global economy has decreased, so has our emission intensity (remember, this is per unit or per dollar of GDP). Unfortunately, this tread has begun to falter, and in the last decade has been slowly increasing. This is disconcerting to those fearful of continuing economic growth in a finite world. As Tim Jackson puts it in his book Prosperity Without Growth,

“For decoupling to offer a way out of the dilemma of growth, resource efficiencies must increase at least as fast as economic output does. And they must continue to improve as the economy grows, if overall burdens aren’t to increase. To achieve this more difficult task, we need to demonstrate absolute decoupling. Evidence of this is much harder to find.”

Absolute Decoupling

In the face of the overall decrease of energy intensity, we must remember that our total economic output has increased – the growth economy is the whole reason this blog exists! Taking the example of emissions we can see that in general our emission intensity per unit has decreased over the last half century, yet our total emissions have steadily increased. Even in the face of arguable relative decoupling, our growth has seriously outpaced improvements in efficiency.

Today’s global emissions are 40 percent higher than the Kyoto base year, 1990, and 80 percent higher than 1970 levels. While we claim emission cuts in some developed nations, these results are deceiving at best. The decrease in emissions is always connected to simply moving production out of the country, along with the pollution it generates. European countries that have decreased their emissions have failed to account for increased imports and the carbon emissions associated with them.

This leads us to a critical point: the important thing is the global statistic. Worldwide our resource use has increased. In the case of cement production it has doubled; structural metal extraction is increasing quicker than GDP. While some argue that developed economies make improvements in air pollutants like sulphur dioxide, they seem ambivalent to other indicators like CO2 emissions or species lost.

The overwhelming truth is that for every unit of growth we use more resources and create more waste – decoupling is not happening, nor does it appear to have any hope of ever happening.

Something Doesn’t Add Up

Economic equations can be a bit of a drag, but there are some that don’t completely suck. One in particular has been around for 40 years, developed by Paul Ehrlich and John Holdren. The Ehrlich-Holdren Equation states that impact of human activity is the product of three factors: population, affluence, and a technology factor (the impact per dollar spent). It’s a simple equation: I = P*A*T.

In order to sustain a growing population and growing affluence (economy) we force ourselves to rely on decreasing T, our impact per dollar (or increasing our efficiency). This is where the “simple equation” gets tough. In order to reduce, for instance, our carbon emissions to stabilize atmospheric CO2 at 450ppm (a weak target) with a growing population and economy we’d need to make some seriously unprecedented technological improvements to efficiency.

Assuming population growth slows, and the economy only grows at a low rate, we’d still need to improve efficiency some ten times faster than we have been doing in the past. That is a low-end estimate, if population and/or economic growth expand faster than expected we could need up to 21-times current efficiency improvement rates – or more. Unfortunately, the latter is more likely necessary as there is virtually no political will behind stabilizing population or economy for the most part.

Here’s another crux to the idea that we can continue to improve efficiency and save our precious growth economy: the second law of thermodynamics. We are physically constrained by the fact that efficiency cannot increase forever. We can only get so efficient. Even if you can get past the historical precedence showing efficiency can’t keep up, and you are willing put all your eggs in the basket of a miraculous technological increase, you still will have to face the  laws of nature in the end.

Absolute decoupling is not supported by the history. Even relative decoupling is founded in false statistics. Without decoupling growth from environmental impact we will be forced to face the limits of our finite planet. If we fail to adjust our course, the Earth will take care of it for us. And no one will like that outcome, so let’s try an make a peaceful, amiable transition to a stable economy and sustainable society.

The answer is to seek out a society with a stable population, a stable economy, and increasing technological efficiency (as far as we can push it) to decrease environmental impacts. This will make a better world for those living in it. We can pursue what Tim Jackson calls “a credible vision of what it means for human society to flourish in the context of ecological limits.”

A major source for this post was Tim Jackson’s amazing work Prosperity Without Growth. I highly recommend reading it. If you don’t have time for 215 pages, then download the free report. If you’re attention span is even shorter at least read the summary of the report!

{ 7 comments… read them below or add one }

Scott Gast February 19, 2010 at 22:24

“We are physically constrained by the fact that efficiency cannot increase forever. We can only get so efficient.”

SO glad you wrote this post. I think the above point – thermodynamics – is THE key to the steady state argument and the case against infinite economic growth. Wish there was more discussion about this because it seems so crucial. A side note: Sometimes folks get worked up about the prospect of “virtually inexhaustible” energy sources (think nuclear) – but these limits STILL apply. Right?? If energy is not the limiting factor, then it’s water, atmosphere, soil, materials, etc.

The fact is: we live on a planet. We depend on things. We can’t cut those planetary ties in the end, and most likely, we probably wouldn’t want to anyway. After all, in universe terms, things are pretty good here.

I like Tim Jackson’s phrasing: the only “credible vision for humanity” is to work within these natural limits. He’s right. Technology saving the day really doesn’t seem all that “credible”, does it?

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Joshua February 20, 2010 at 12:19

Thanks, Scott! Yea, even if we could solve, say, the energy problem (with cold fusion or some such) we still have multiple other planetary limits that are fundamentally “unsolveable” – there is only so much iron ore, water, farmable land, et cetera. There is only so much we can really, credibly do to allow for more growth. I think Jackson’s words are quite apt – we’re reaching the end of the rope and we must rely on credible solutions, not fantasies of limitless power, space travel, or perpetual motion machines.

Glad you like the post!

Cheers,
Joshua

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Jauho March 26, 2010 at 03:29

Great post!

But I think I’ve understood the idea of decoupling differently. DISCLAIMER: I am about to get an M.Sc in one of the best business schools of the nordic countries but I’m not majoring in economics. I may be naive but I’m honestly trying to understand.

You seem to be writing about growth as it pertains to material growth and that decoupling would mean improving efficiencies in material production. This isn’t the way I understand the idea of decoupling.

I understand the concept of decoupling as “decoupling economic growth from material production”, which would mean that as an economy and a people, we would strive to produce “intangible” economic growth.

What would this mean?

Instead of producing a pair of sneakers, we write books, and instead printing those books, we distribute them in digital format.

Instead of seeking economic growth from products, we can invest in developing services. Instead of more products and “things” we would strive to make life more meaningful and rewarding through a service economy based on “intangible production”.

We can even add value (=economic growth) to existing material objects through customization, recycling and – dare I say – advertising. Stories, images, fantasies, and culture – something that the advertising industry has been historically frowned upon for creating – could actually be where the future of growth lies. In the intangible cultural value decoupled from material production.

This highlights what I think is the fundamental flaw in thinking about decoupling from the perspective of (at least classical) economics: It’s based on the idea of transaction of a product for a money as the basis of an economy.

But really we don’t need the products, do we? We just need whatever they do, right? We don’t need food (products), we need to be fed (service). We don’t need make-up (product), but we want to feel beautiful (experience).

Services utilizing human interaction, cultural production of meaning and digital distribution is where the future of growth lies – and the material costs for that are not necessarily equatable to their value.

As a final example:

I just recently bought a computer game online. In practice I only paid for information as there was no material parts exchanged (not even material money), which provides me a service through which I can play and interact with other people. I’m very happy with it, and so seems to be about a million other people. The computer it takes to run it does require energy. Given, the people who made the game did require some kind of food and energy as well to develop the service, but I would argue that those are relatively fixed costs. Am I badly off?

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Joshua March 26, 2010 at 08:57

Jauho,

Thanks for the comment! Yes, there are many different ideas of decoupling. In general it is not so much the material production as the environmental impact. Like you said, we could transition to more service-based, experiential products (e.g. your online video game). However, these services will still make an impact, albeit a less obvious one to the consumer (that video game took many people and resources to develop, store on servers, and run on your computer). I don’t think anyone would argue with the logic that everything we do has an impact on the environment weather we notice it or not.

The services and experiental products you mentioned might very well provide less of an impact on the environment, per unit (relative decoupling) but the overall tread would still be increasing those impacts as a whole if it is tied to expanding the economy – that is, if we intend on growing those services and therefore physical size of the economy (more programmers, more servers, more development of video games). So you see, while you might think of them as fixed costs, if we want more video games (or other experiential products) we will need more resources to create them. The end user might use less resources (like you said, you’re not buying any physical piece, just information), but the process as a whole uses resources and will use more if that industry grows.

The argument you touch on is not a new one for neoclassical economists, that we can create an impact-free economy (absolute decoupling), but it does get at a very basic flaw in neoclassical economics: the thought that the economy is separate from the Earth. In fact, the economy rests very firmly on the Earth and will always create an impact – the larger the economy gets, the great the impact – regardless of relative decoupling.

Tim Jackson’s work on this topic is pretty convincing. He shows that history does not even come close to supporting relative decoupling, especially when a greater world view is taken and all the impacts identified.

Thanks again for reading and commenting! I hope that makes more sense.

Cheers,
Joshua

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Nick Palmer January 9, 2011 at 08:43

Jauho. I think it is aklways helpful to discriminate between the terms growth and development when talking about economics. It is not just a trivial semantic distinction.

Growth can be described as those aspects of the economy that consume more and more energy, use more and more material resources, space etc and create more and more waste. Development is those aspects that achieve more and more “production” of things of value to humanity whilst using the same or less energy, materials, space etc and creating less and less waste.

While we lived in an “empty” world of up to a couple of billion souls growth served us well but we are now charging towards the limits that, unless we want to avoid a horrendous Jared Diamond like crash, show us that it is imperative to stop the growth economy in its tracks and substitute the steady state economy. Developing that will give inceasing real human wealth without threatening out futures.

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Rav Casley Gera September 25, 2012 at 13:13

Joshua,

Thanks for a very concise summary of the post-growth argument on decoupling. Here’s why I disagree:

The argument made by those who believe that economic growth can be sustained while 450ppm is achieved (350ppm is much harder, I admit) isn’t that decoupling is already in effect, simply that it’s possible. It requires a WWII-level mobilisation of energy efficiency measures, electrification of vehicles, clean energy, carbon capture, all the usual solutions. The argument made by, for example, Joe Romm, Nick Stern, McKinsey or the IPCC – all of whom argue 450ppm is in fact entirely compatible with growth – is that decoupling is difficult but achievable, at least for the next century or so. That gets us through the ‘crunch period’ of population peak.

But every time I hear someone argue against decoupling, their evidence is merely that it isn’t really happening enough now. You argue the same above. But that’s not the point! What’s your response to clean-growth optimists like those I list above?

Thanks!

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Joshua February 6, 2013 at 09:03

Rav,

Thanks for the comment. I agree that the historical evidence argument is part of my piece above, and that it is the standard platform for this debate elsewhere. There is relevance in the fact that this level of decoupling required hasn’t been seen anywhere ever, and that it is no where near what we are doing in our current, meager attempts. History is important, and you are right that it doesn’t mean we can’t change – but it is not irrelevant in planning for our future. That said, the logic behind decoupling and how it relates to basic laws of thermodynamics is a further, and I think more important, point that I discuss in the second part of my piece.

The amount of decoupling that would be required for a continually growing economy is SO immense that it balks at basic limits of our physical universe. Exponential growth of our economy, and a correlating exponential growth in our decoupling, is fundamentally unsustainable. Let’s not forget that our growth is based entirely upon carbon-emitting fossil fuels – we haven’t grown our modern economy at any point without our precious black gold – and that may very likely be the only way to “sustain” our growing economy. Without these limited and polluting fuels every aspect of our economy would crumble.

That is the true crux of the argument. I agree that we need to do everything we can to reduce our carbon emissions, but I believe chasing the wholly unpractical and likely unfeasible goal of completely decoupling our fossil-fuel-based economy from carbon emissions is largely a waste of our time. We need to drastically change our lifestyles, and embrace an economic model focused on well-being and qualitative development instead of one based on quantitative increase of throughput. Part of that should be trying to decouple now, while we phase out of fossil fuels, and move to an economy that stays within the very real, finite bounds of our planet.

Cheers,
Joshua

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