Feasible alternatives to green growth

Can job creation and sustainability coexist in a post-growth economy?

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Environmental policies are considered successful inasmuch as they reduce environmental damage. By the same token, direct labor market interventions are judged based on their effect on employment and wages. Increasing specialization in research and policy design have contributed to develop accurate and effective strategies to solve specific problems. The indirect effects of environmental policies on the socio-economic system and of social policies on the environment are often overlooked. This separation extends to the models employed to evaluate the viability of energy and economic policies for low-carbon transition. Our main goal in this study was to consider energy use and income distribution in a unified framework. This holistic perspective allows us to shed a light on how established policies - such as incentives to innovation, efficiency and carbon taxes - can affect inequality and employment.   

This work started from a more well-known story of separation, or lack thereof: the unobserved divorce between GDP growth and greenhouse gas emissions. If, indeed, growth and the necessary curtailment of emissions set by the Paris Agreement can’t be reconciled, is it possible to scale-down production while maintaining or (even) improving income distribution and employment? This was the initial challenge that led Simone D'Alessandro, Kristofer Dittmer, Claudio Cattaneo and Greens|EFA MEP Philippe Lamberts to start this project back in 2016. Recently this project has been enriched within the REMARC, an inter-disciplinary research center on responsible management practices and sustainable development policies of the University of Pisa.

During the development of the Eurogreen model additional questions came along. These include the evaluation of recently proposed radical social interventions (such as a job guarantee programme and a reduction of working time) that are currently underrepresented in the scientific literature. Over the past few years, media outlets and grassroots movements have had a greater role than academics in the development and dissemination of the American Green New Deal and of Degrowth. Thus, we shifted our goal, from the study of policies to sustain employment and well-being in a post-growth economy, to the combination of policies or policy-mixes that reflect these two current alternatives to Green Growth.   

Green Growth – a combination of technological progress and market incentives to energy efficiency – remains the prime strategy advocated by governments and international institutions to face the contemporary ecological crisis. However, once we account for the distributional effects of these policies, our results indicate a contradiction between its two objectives. We have termed this the “Green Growth paradox”: the environmental success of these policies depends on their failure to boost growth. In other words, part of the fall in emissions that follows green growth policies is not a direct consequence of renewable energy expansion or energy efficiency, but follows a reduction in aggregate demand and production due to increase unemployment.  

Further results, from our study published in Nature Sustainability, suggest that alternative paths towards a low-carbon economy are viable and may be achieved with improvements in both income distribution and employment, although at the cost of higher public deficits. The study also answers the original question it was set to explore. Radical social policies are able to sustain employment and distribute income even in absence of growth. We hope our research will encourage others to explore how the interconnections between environment and society can affect our evaluation and implementation of economic and environmental policies.

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Go to the profile of Simone D'Alessandro

Simone D'Alessandro

Associate Professor of Economics, University of Pisa

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