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Growth or emissions reduction? Decoupling please!

Growth or emissions reduction? Decoupling please!

What is decoupling?

The biggest mental obstacle to implementing aggressive climate policies is the conflict between economic growth and emissions reduction.

It is true that, historically, CO2 emissions have been strongly correlated with how wealthy, healthy and educated we are.

However, this correlation primarily applies to low-income economies. Many developed countries seem to have managed to achieve economic growth while reducing emissions. They have decoupled the two.

Environmental Kuznets Curve

According to the Kuznets curve, increases in GDP per capita initially result in higher greenhouse gas emissions. But, as a country transitions from an industrial to a service-based economy, the environmental damage starts to fall.

Wait a minute! Yes, developped economies are now largely service-oriented, but we still use stuff, we still eat food. Goods production and the corresponding emissions have been exported.

Production-based VS consumption-based

Production-based emissions, also called territorial emissions, are total CO2 emitted within a country but don't take into account emissions related to the production of imported goods.

Theoritically, a country could outsource its goods production, achieve territorial net-zero, while contributing to a global increase in CO2 emissions. To avoid this, CO2 in imported goods must be added to domestic emissions.

Consumption-based emissions account for CO2 emitted in the lifecycle of goods and services consumed, covering production, transportation, and disposal.

Globally, total production-based and total consumption-based emissions are logically equal.

So is absolute decoupling possible?

In fact, the difference between production-based and consumption-based emissions is not really significant. Most emissions stem from sectors that can't be outsourced overseas, such as transportation and construction.

A study released by Our World in Data shows that about 30 countries did achieve absolute decoupling between GDP and consumption-based emissions:

Economists always love a good fight! Timothée Parrique in particular has been fighting the decoupling theory for several years, notably in this article.

🇬🇧 The UK case study

Few people believe it when I tell them that UK emissions in 2023 fell to their lowest level since 1879 (source: CarbonBrief). But they did!

In the meantime, the GDP is still going up.

Some serious decoupling happening in the UK (source)

The UK’s greenhouse gas emissions fell by 5.7% in 2023 and reached a level that hadn't been seen since Queen Victoria was on the throne.

Two-third of the decline is driven by an 11% drop in gas consumption, while electricity import from the French nuclear fleet went up.

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The UK’s emissions are now 53% below 1990 levels, while GDP has grown by 82%.

To put it in perspective, the UK CO2 emissions dropped by 23 million tonnes in 2023 and they must decrease by at least 14 million per year to reach net zero by 2050.

Territorial emissions in the UK (million tonnes of CO2)

So is the UK on the right track? Not quite. Progress in 2023 was not primarily due to deliberate climate action, significant structural changes remain needed.

But comparing recent achievements with the coal-reliant industrial past of the UK, there's hope that many more countries could follow suit.

See you next week!
Colin Rebel
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