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The challenge of growth: Can economic growth be compatible with climate change mitigation targets?

Written by Natasha Grist, Jodie Keane

Natasha Grist, Karen Ellis and Jodie Keane

Few would question that developing countries should have the opportunity to grow their way out of poverty: economic development leads to poverty reduction, albeit with certain qualifying conditions.

But economic growth and development are usually associated with increases in energy consumption, directly linked to carbon emissions. So conventional growth paths may well increase the impacts of climate change. This may undo the positive benefits that growth has generated in poorer countries. The UN has reflected this concern, showing that climate change is a direct threat  to the achievement of the Millennium Development Goals (MDGs). A study by colleagues at ODI highlights the links between climate change and reduced agricultural production -- production on which most of the global poor depend. As we know, developing countries have contributed least to these carbon emissions but are the most vulnerable to their impacts. So how can we deal with the problem of needing economic growth, but suffering, potentially, from the carbon emissions that may accompany this growth?

The elegant solution to this issue is ‘low carbon growth’, a concept that has recently gained much traction from applied academics such as Nick Stern to government policy makers to development banks to multinational businesses such as Shell and McKinsey. However, the definition of this principle remains woolly. Where, precisely, does it fit between business-as-usual and zero carbon approaches, for example? The philosophy, practice, and the instruments proposed to achieve this, are hugely varied.

A cocktail of approaches is often proposed to achieve low carbon status while stimulating (or at least not inhibiting) growth. These can include any number of initiatives: increased nuclear power; cleaner coal technologies; carbon capture and storage; renewable energy; low-carbon agricultural techniques and avoiding deforestation. In addition a number of policy techniques can generate financial revenue for these initiatives, such as the Clean Development Mechanism (CDM), which may provide avenues for achieving green growth in a carbon-constrained world. Some critics of these approaches, such as Jeremy Rifkin, suggest that nothing short of a third industrial revolution, based around decentralised energy sources, will set us on the right path to a global low carbon economy. Others, such as Kevin Anderson, suggest that what we are currently doing falls well short of what is needed to avoid global catastrophe.

In all of this urgent and pressing discussion, the poor are often overlooked.

For example, increased taxes proposed on long haul air transport may have significant implications for countries where growth is heavily dependent on tourism, according to an initial analysis by Richard Tol. Many of these are poorer developing countries.

And investigations by the International Institute for Environment and Development (IIED) and ODI showed that reducing air freighted imports (of fruit and vegetables for example) could jeopardise many agricultural livelihoods in the developing world, hitting poor farmers hard. 

But poorer countries may also benefit if a generous post-Kyoto deal allows increases in emissions or provides payments for carbon lock-in from their natural resources.

Three important questions are outstanding in tacking this issue in the run up to the Copenhagen discussions. These will be discussed at the next event in the ODI series on climate change and international development.

  • What might pro-poor, low carbon growth strategies, look like in non-industrialised, and industrialising, countries? And through what mechanisms can they be encouraged?
  • What are the implications of the international policy response to climate change for developing countries’ growth strategies?
  • And how can the necessary innovation and technology transfer for low-carbon technologies be facilitated in a pro-poor manner?

We look forward to your views and opinions.