The Bertelsmann Stiftung and the ZOE Institute for Future-Fit-Economies hosted a virtual seminar in September of 2022 with speakers Alessio Terzi and Jonathan Barth. Moderated by Katharina Gnath, they considered whether green growth could pave the way toward a net-zero future.

Watch a recording of the event here:

Green growth: making capitalism an ally in the challenge for decarbonisation 

Katherina Gnath started the event by asking the speakers to present their arguments about whether or not green growth is possible.

For Alessio Terzi, there would be no viable alternative to growth because settling for zero growth to contain emissions in an economy built around fossil fuels would mean opting for a state of voluntary scarcity – a scenario that would be met with resistance from societies.

He argued that we should rely on our ingenuity in the same way we have done throughout history. It would be unrealistic to ask people to reduce their consumption of services and products to which they became accustomed. Instead, we should replace these services and products with cleaner options.

In this regard, he highlighted the importance of the role of technology and innovation in substituting fossil-driven with carbon-neutral production. In fact, Terzi argued, substitution was how humanity has always dealt with challenges in the past.

Accelerating the development and deployment of sustainable technologies would be key to mastering the green transition. Under a capitalist economic system, one should find the best conditions for this to succeed. In this context, Terzi mentioned that historically the fastest acceleration of technological revolution has always taken place in capitalist societies.

In this regard, Terzi argues that technological innovation fuelled by the expectations of increasing returns would be the main driver in turning the global economy into an engine of decarbonisation.

Terzi further took aim at the perception of degrowth proponents that economic growth is an obsession of capitalist societies. He also refuted the argument that we devote all policies toward the compulsive pursuit of growth. Again, taking a historical perspective, he claimed that the desire for growth is a human trait and not merely inherent to capitalist societies.

Capitalism has, however, provided the perfect playing field for innovation and technology to thrive, generating more added value than under every other economic order. Therefore, by fostering innovation and technological progress, humanity could make capitalism an ally and turn its tools into drivers of green growth in the quest for a net-zero future.

Post-growth: preparing for a future where resources and growth are finite

Jonathan Barth began by mentioning the common ground between green growth and post-growth ideas. Both sides acknowledge the pressing need for faster decarbonisation and that GDP growth measurements must also be accompanied by qualitative indicators that deal with environmental and social well-being.

Further, both would agree that decarbonisation and social cohesion are intrinsically connected. And while economic growth would make it easier to accelerate innovation and reduce distributional conflicts, the implications of what follows from the pursuit of a growth paradigm will be where both ideas collide.

According to Barth, the global economic model is highly dependent on the prospect of continuous future growth to remain functional. However, measures to green our economy, limit emissions and attain a net zero future could possibly disturb our economy’s status quo, thereby initiating an era of stagnation followed by unemployment, inequality and social unrest.

Post-growth theory could provide ideas for dealing with such a drastic scenario. And Barth identified various indicators hinting at a future of economic stagnation. A mismatch between the speed in which the green economy is phased in and the fossil economy phased out could cause economic prospects to decline.

And for a green transition to be successful, the supply of green alternatives for “dirty” services and consumption goods would have to meet the demand, or inevitably there would be either resource overshooting or suboptimal economic outcomes. We would then have to make the poisonous choice between sacrificing social stability or damaging our climate and environment beyond the planet’s ability to cope.

Only if we prepare for such a dilemma can we find a solution for how to escape it. Preparing for a carbon net-zero future will also mean finding a way of resolving distributional conflicts without relying on economic growth.

Against this backdrop, Barth identified the inequality-decarbonization nexus as the major challenge to address in a post-growth world. Current stratification levels in wealth and income could not be sustained without relying on growth. Therefore, a comprehensive set of policies to reduce economic disparities will be critically important in the post-growth challenge.

About the Speakers:

Alessio Terzi is an economist at the European Commission and a lecturer at Sciences Po Lille. Prior to this, he was a Fellow at Bruegel, a leading European think-tank, and a Fulbright Scholar at the Harvard Kennedy School. He is the author of Growth for Good – Reshaping Capitalism to Save Humanity from Climate Catastrophe.

Jonathan Barth is the policy director of the ZOE Institute and an expert on the economics of the green transition. He recently advocated for a new consensus between green growth and degrowth proponents.