Growth is needed for mitigating climate change

Germany’s most famous climate activists Luisa Neubauer and Carla Reemtsma recently stated in an interview that ‘everything is not based on economic growth – but on an intact planet’. Reemtsma further claimed that, in three years of studying economics, nobody had yet been able to explain to her why we need growth at all. That is regrettable, because understanding growth in the macroeconomic context might lead to an awareness that should be of great interest to ‘Fridays for Future’ activists: without growth, there can be no mitigating climate change. At least, not in a way effective enough to limit global warming to below two degrees, as required by the Paris Agreement. On the contrary, economic contraction could be counterproductive for mitigating climate change.

We must find ways to reduce emissions while ensuring sustainable economic growth.

Prof Karl-Heinz Paqué

Economic growth was laid down as an objective by the European Union – with good reason: Growth creates wealth available for distribution, which in a market economy raises living standards, promotes social mobility, and makes political reforms possible. The revenue from a growing economy serves to maintain infrastructure, to provide education, and to guarantee social security. In the case of a contracting economy, in contrast, there is a lack of necessary investment, regions become deserted, whole generations are given up for ‘lost’. Such adverse socio-economic developments encourage the rise of radical political movements. We are thus faced with a paradox: on the one hand, we need growth to ensure political, economic and social stability. On the other hand, there is no greater threat to this stability than climate change. Our objective must therefore be to find ways to reduce emissions to the extent necessary while at the same time ensuring sustainable economic growth. We can succeed in this: technologies for effectively combating climate change must be developed through innovation and competition. To ensure development of these technologies by businesses causing emissions, policy-makers must lay down fixed limits for emissions but at the same time be open to all kinds of climate-friendly technologies. We know how to get there: by emission allowance trading. There is no more effective method for achieving the objectives of the Paris Agreement on Climate Change.

The full article was published as a guest commentary in Frankfurter Allgemeine Zeitung on 16 September 2019.