Can Economic Growth Be Green?

Against projections of unsustainable growth, industrializing countries are poised to enter an era of “green growth,” explained a panel at the 2015 Breakthrough Dialogue. To encourage this transition, however, requires better metrics for valuing public goods like clean air and longer lifespans.

China has experienced spectacular growth in the past 35 years; the GDP per capita is more than 6,000 USD and in big cities, it’s more than double, around 50,000 USD. While the growing middle class in China now can buy cars, go shopping, and enjoy a richer diet, they suffer from extreme smog in cities and water pollution.

But China is at a turning point, argues Zhongmin Wang, a research fellow at Resources for the Future. A documentary on the country’s deadly air pollution, titled Under the Dome, was viewed by more than 200 million people in the first week of its release and was called China’s Silent Spring by the Minister of Environment Protection.

Increasing prosperity in the country has enabled environmental concerns, which then become a potent political force the central government must respond to, argued Wang.

“The Communist Party is really concerned with social stability,” he said. “People are more likely to protest things like chemical plants in their backyards, and that’s why the government cares so much.”

Today, China represents a leading share of global investments in renewables and nuclear. In 2014, the first environmental protection law was enacted. And, for the first time in history, the Chinese government is in the process of changing the cadre evaluation system to include the environment.

In India public health concerns like heat stroke are part of an uneasy relationship with environmental issues like global warming.

Professor of economics and IPCC lead author Joyashree Roy conducted a study on adaptation measures to improve workspaces in Calcutta. Of all adaptation measures, only air conditioning would create “100 percent workability” conditions in factories and offices. Currently, only two to five percent of workspaces have AC in Calcutta.

“When I presented this data at a conference,” said Roy, “the biggest question among conservative environmentalists was, ‘Could we really give air-conditioned workspaces to all? That would contribute to global emissions!’”

Roy argued that this is not only the wrong way to frame the issue, but misunderstands the transition occurring in India. Economic growth and energy consumption has begun to decouple; population growth is declining; and the government is increasingly concerned with sustainability, creating incentives for energy conservation and investing in clean technologies.

“In India, we can gave the most efficient air conditioning to address human well-being and environmental quality,” she said, but cautioned against thinking that this transition won’t require more energy and infrastructure. “Today, 40 percent of rural households still are not connected to electricity.”

To accelerate the processes that decouple economic growth from environmental destruction will require large public investments, the panelists agreed. Justifying such large investments, however, is difficult when metrics like GDP don’t account for things like better air quality.

“If you are the leader, and GDP is your metric, it’s easy to measure your performance,” pointed out Wang. “But with the environment, the returns are less clear and it’s hard attribute your contribution.”

Wang gave an example in China. Due to slowing economic growth, government leaders have responded by encouraging technological innovation, including in clean energy technologies. There is no intellectual property system to encourage it, however, so the Chinese have become better at copying what others do, rather than inventing radically new technologies.

“Innovation is fundamentally about a future pay-off; it’s a long-term process,” said Wang. “Government officials only stay in power for a couple of years, not long enough to justify long-term innovation.”

Sociologist Fred Block explained that, over time, as economies become richer, they enjoy more of what he calls “qualitative growth” – more leisure, better urban amenities, personal security, etc. – as opposed to “quantitative growth.” The contradiction, of course, is that taxes are pulled from monetized income streams and invested in non-monetized public goods like cleaner water supplies.

“Collectively we fight like hell against government taking more money from us,” said Block, “but the non-monetized goods we demand almost always depend upon public expenditures. We’re trapped in a paradox.”

Only until there are better tools to measure qualitative growth, in combination with more traditional metrics like GDP, can we understand how economies change over time.

“I’m critical toward efforts to replace GDP with another composite measurement in the sense that GDP was a feature of an era of quantitative growth, a time when people imagined a single number could capture it,” said Block. “But a single number can’t capture the messy complexities of postmodern, contemporary life. It’s a tough problem, and I don’t know the solution.”