Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Analysis-Climate change, scarcity chip away at degrowth taboo

Commodities Aug 08, 2022 07:35
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Smoke billows after a wild fire, in Leiria, Portugal July 13, 2022. REUTERS/Rodrigo Antunes/File Photo
 
CFI2Z2
+6.64%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
ICON
-2.50%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Federica Urso and Mark John

(Reuters) - Degrowth - the idea that a finite planet cannot sustain ever-increasing consumption - is about the closest you can get to a heresy in economics, where growth is widely held as the best route to prosperity.

But, as climate change accelerates and supply chain disruptions offer rich-world consumers an unaccustomed taste of scarcity, the theory is becoming less taboo and some have started to ponder what a degrowth world might look like.

After the U.N. climate science agency this year called for cuts in consumer demand - a core degrowth premise - the think tank that runs the Davos forum published a degrowth primer in June and the issue has even begun to crop up in investment notes.

"It is a provocative term," Aniket Shah, Global Head of ESG and Sustainability Strategy at Jefferies said of the New York-based bank's June 13 note on the "Degrowth Opportunity".

"But it's not about going to a low-income country saying 'You can't grow anymore'," he said. "It's saying: We need to look at the entire system and see how do we over time decrease total consumption and production in aggregate."

First coined in its French guise "décroissance" in 1972, the theory gained backers after the "Limits To Growth" report in the same year described a computer simulation by MIT scientists of a world destabilised by growing material consumption.

Controversial from the start, that simulation has been attacked as flawed by some and applauded by others as uncannily prescient in its prediction of accelerating planetary stress.

In recent decades, the world's economy has grown faster than the carbon emissions it generates. But this partial decoupling has been nowhere near enough to halt or reverse those emissions, allowing them to drive global warming further.

In April, the Intergovernmental Panel on Climate Change (IPCC) concluded that outright cuts https://www.reuters.com/business/environment/now-or-never-only-severe-emissions-cuts-will-avoid-climate-extremes-un-report-2022-04-04 to consumer demand were needed to reduce carbon emissions, a shift from a previous focus on the promise of sustainable fuel technology. (Graphic: World GDP and carbon emissions – a partial decoupling, https://graphics.reuters.com/GLOBAL-ENVIRONMENT/znpnerbdjvl/chart.png)

The IPCC's biodiversity counterpart IPBES last month included degrowth among a number of alternative economic models with insights that could help to arrest environmental degradation.

"In the plenary, even the word 'degrowth' wasn't challenged. That's very interesting," IPBES report co-chair Unai Pascual told Reuters of conclusions that won approval from 139 member countries, including China, India, Russia and the United States.

The article on degrowth published in June by Davos-organiser the World Economic Forum hinted at degrowth impacts, suggesting "it might mean people in rich countries changing their diets, living in smaller houses and driving and travelling less".

GUNG-HO ON GROWTH

For Jefferies' Shah, it is such behavioural changes that could inspire a degrowth-aligned investment portfolio.

"Would Zoom for example ever want to be called a degrowth stock? I doubt it. But I can certainly see how a world that uses more web-conferencing ... means less travel, which is a very high-carbon-intensive way of transportation," said Shah.

It is easy to see how other products and services, such as mobility- and fashion-sharing, technologies that allow a transition from fossil fuel to renewable energy, or even just bicycles, could find a place in a hypothetical degrowth fund.

But how far ESG funds and the companies in which they invest are ready to align with degrowth is open to question given how the theory explicitly prioritises societal, environmental and other non-financial values over profit-making.

"Degrowth is really about true sustainability," Jennifer Wilkins, a researcher on emerging business sustainability issues whose work was featured in the Jefferies note, told Reuters.

"It's about delivering what is needed in terms of meeting human needs, within planetary boundaries. And current ESG investors don't really understand planetary boundaries," she said, adding their focus remained "what impacts the business".

That perhaps is not surprising.

Some countries have tried to measure economic outcomes differently - the tiny Himalayan kingdom of Bhutan famously devised a "gross national happiness" index and Japan is looking into developing a "green GDP" measurement.

But still, economic policy and markets overwhelmingly run on the dual track of increasing consumption and production.

Tim Jackson, an economist who has long critiqued that model, said the current debate on growth was "very, very confused", with different strands of thought vying for supremacy.

He pointed to the UK Conservative Party leadership contest - a race that will decide who replaces Boris Johnson as prime minister - as an example of what he called a "gung-ho" focus on economic growth as an unchallenged priority.

On the other hand, he said, more ecologically-minded politicians across Europe and beyond were receptive in private to arguments around limits to growth but "want to find other ways to talk about it that don't scare the horses".

Jackson, author of the 2009 book "Prosperity Without Growth", said the pandemic lockdowns of 2020 and this year's Western sanctions on Russia had both challenged consumption with other priorities, namely health safety or geopolitical goals.

At the same time, some countries - for a variety of reasons ranging from demographic ageing to trade protectionism or lack of reform - could enter something akin to a "post-growth" state where their economies show little if any expansion.

That is a fate Japan has experienced with its "lost decades" and which some analysts see as a risk for Germany unless it quickly revamps its decades-old export-led economic model and shores up its vulnerability to energy shocks.

"Particularly in the advanced economies we are moving into a situation where to all intents and purposes, we're pretty much not looking at continued growth already," said Jackson.

"If we haven't got an economics that will deal with that .. then we've got very little chance of managing it successfully."

Analysis-Climate change, scarcity chip away at degrowth taboo
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email