Growth is good for the environment. At least that’s the headline from The Economist special issue on biodiversity.
The magazine argues that, in the long run, economic growth allows countries to invest in governance and technological innovation that improve environmental conservation. This is the idea behind the environmental Kuznets curve (EKC), which says that there is an inverse U-shaped relationship between income and environmental degradation. The argument goes that, early on in a country’s development, it exploits its natural resources to grow. However, at some tipping point, the country stops degrading its resources as growth continues.
It’s a popular argument since everyone likes growth. If only it were so easy! We could just focus on growth and the rest would sort itself out. Unfortunately, there are a lot of reasons to be skeptical.
The statistical, empirical case for EKC is questionable. Some indicators of environmental degradation have peaked in developed countries, but others have not. After a tipping point, deforestation does tend to decrease as a country grows, but greenhouse gas emissions have not. Given the projected impact of climate change on biodiversity, it’s hard to “leave aside the huge unknown of climate change,” as The Economist suggests.
Any time scientific research gets condensed into a magazine headline, a lot of important nuance is lost. The nuance here is that growth itself is not the reason that some environmental indicators have improved in rich countries. Political, social, and technological changes – which often accompany growth – tend to be the reason that environmental outcomes improve. The Economist brings up agricultural intensification as one technological change that reduces pressure on biodiversity. In this case, it is not growth that results in better environmental outcomes, but changing technology that leads to increased growth and reduced pressure on the environment. This is a mistake of confusing correlation with causation – growth itself is not the mechanism of change.
Another issue is that wealthy countries are able to “export” their environmental production. A good example is Japan, which banned timber harvest, resulting in a dramatic revival of the country’s forests. However, Japan remains a major consumer and producer of timber goods. It pulls this trick off by importing timber products from Southeast Asia, where deforestation rates are amongst the highest in the world. Wealthier countries tend to have higher per capita environmental footprints. While developed countries have been able to export some of their environmental degradation oversees. Clearly this won’t work for every country on earth.
Last, the EKC theory does not account for the importance of the environment in enabling growth. Ecosystem services are a major determinant of a country’s productive capacity. If short-term growth leads to significant environmental degradation, per capita income will stagnate and the tipping point envisioned in the EKC will never be reached. The Economist is saying: growth leads to biodiversity protection, but I think they have it backwards. Managing natural resources responsibly can enable and protect growth.