What impact does economic growth have on our environment?

The global economy has doubled over the last 12 years. Is it surprising that the planet is warming up, the oil is drying up and the waste is piling up?
For this chapter I have to thank Barney Foran (ex CSIRO Sustainable Ecosystems), Manfred Lenzen and Christopher Dey (Sydney University). for the work they did for the Australian Commonwealth Scientific and Research Organisation (CSIRO). In 2005 Barney and his team produced Balancing Act: A triple-bottom-line analysis of the Australian economy It examined over 130 industry sectors and looked at their impacts on 10 social, environmental, and financial indicators. It determined that every $1 of Australian GDP: 1. Produces 38c of Gross Operating Surplus 2. Generates 16c of export revenue 3. Requires 19c of import value 4. Requires 1 min, 45 secs of employment 5. Pays 34c income to employees 6. Produces 21c of government revenue 7. Produces 1.02kg of greenhouse gases 8. Requires 41.32 litres of fresh water 9. Disturbs 3.21 square meters of land and 10. Uses 7.65 megajoules of primary energy (that is the equivalent of 2 kilowatt hours of electricity or half a litre of crude oil) This excellent report (all 700 pages of it!) demonstrates the connection between economic activity and our society at large. In particular, it demonstrates the clear link between economic activity and our environment. Looking at the industry segments individually we see that: Forestry and Brown Coal are the biggest producers of greenhouse gases. Forestry producing 97 kgs of greenhouse gases for every $1 of production and brown coal producing 27 kgs per dollar. The forestry figure is primary driven by the destruction of our native forests. Although the average dollars worth of Australian production required 41 litres of fresh water, sugar cane requires 1,246 litres, cotton 1,613 and rice requires 8407 litres! The greatest disturbers of our land are, not surprisingly, livestock with beef cattle at 187 square meters and sheep (including wool) at 144 sq meters. Our energy hungry industries include Alumina and Aluminium at 61 and 45 megajoules per dollar, respectively and electricity supply at 40 megajoules.

But what of the world? Sadly, Barney has not been given the resources to complete this analysis for the planet, so we have to look at other data. First of all, lets see what global economic growth has been over the last few years. This is a graph showing global GDP for the last 12 years. Courtesy of the International Monetary Fund in October 2010. This is calculated in US dollars adjusted for Purchasing Power Parity which, I hope, you remember from previous articles.

Global GDP (PPP) - IMF October 2010

80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0
19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09

Billion USD

Year

Over that time the global economy has doubled in size and remember, this has nothing to do with inflation, this is a true doubling of economic activity in just 12 years. So what has been the impact of that on our planet? What has been the impact on our greenhouse gases? What has been the impact on our fresh water supplies? What has been the impact on our waste mountains? What has been the impact on our most valuable resource oil? For answers to these questions, let us go to industry leaders themselves: First of all, peak oil world will never be able to increase its output of oil from the current level - Christophe de Margerie, Total CEO after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand. Jeroen van der Veer, Royal Dutch Shell CEO "The next five years will see us face another crunch the oil crunch. Richard Branson, Virgin CEO the world's production of conventional crude oil may have already peaked as long ago as 2006 Dr Fatih Birol, Chief Economist, International Energy Agency

Then fresh water: Water is the oil of the 21st century Andrew Liveris, DOW Chemicals CEO Water consumption doubling every 20 yearsand is unsustainable Goldman Sachs

How about waste? One half to three quarters of annual resource inputs to industrial economies are returned to the environment as wastes within a year. World Resources Institute Finally, what about greenhouse gases? They increased by 20% over that 12 years Climate change poses clear, catastrophic threats. We may not agree on the extent, but we certainly can't afford the risk of inaction Rupert Murdoch, Newscorp CEO, So we have had a booming global economy that has doubled over the last 12 years and that has led us ever closer to resource shortages, the ballooning of waste and the continued pollution of our atmosphere. But what of the future? We have doubled over the last 12 years. How quickly will we double again?

This is the International Monetary Funds projection for global GDP to 2015 by which time the global economy will by US$99 Trillion or some 40% higher than 2009. That growth will add the equivalent of the resource demands, waste and pollution of 10 Chinese economies over just 5 years.
Projected Global GDP (PPP) - IMF October 2010
120,000 100,000 Billion USD 80,000 60,000 40,000 20,000 0 2009 2010 2011 2012 Year 2013 2014 2015

The IMF do not project beyond 5 years but we can extrapolate. The compound annual growth rate for the last 15 years has been approximately 5.75%. If we extrapolate this to 2050 we have:Projected Global GDP @ 5.75% Growth Rate
800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48

Billion USD

Year

Our current global GDP or US$70 Trillion will balloon to US$700 Trillion by 2050. That is a tenfold increase in our economy from todays level within 40 years. What will that do to our oil and other natural resources? Where will the fresh water come from? What impact will all those greenhouse gases have on our climate? And what happens if we project this through to the end of the century?

Projected Global GDP @ 5.75% Growth Rate

14,000,000 12,000,000 Billion USD 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0
20 09 20 16 20 23 20 30 20 37 20 44 20 51 20 58 20 65 20 72 20 79 20 86 20 93 21 00

Year

We have achieved a compound growth rate of approximately 5.75% over the last 15 years. If this economic growth continues to the end of the century our global economy would be US$11,490 Trillion over 160 times larger than it is today. Clearly an economy that demands 160 times the annual resources we use today and pumping 160 times our waste and pollution onto our planet cannot happen. The whole ecology of the planet will collapse well before then as will the global economy itself. So how do we stop this happening? For that we need to look at the changes we need to make to our economic model.