Economic growth and development are usually considered primary economic goals of nations across the globe. However, the pursuit of these objectives can often come at the cost of environmental degradation. As such, policymakers must carefully consider stances of economic policy to find a balance between environmental sustainability, and sustained economic growth and development.

Economic Growth and it’s Environmental Impact

Economic growth is facilitated by an increase in the production of goods and services over a given period. This is measured by Gross Domestic Product (GDP). However, increased production of goods and services can be associated with environmentally unsustainable practices. This comes in the form of greenhouse gases, deforestation and biodiversity loss. For example, rapid industrialisation in emerging economies like China and India has been accompanied by significant increases in pollution and resource depletion.

According to the International Energy Agency (IEA), in 2023, global energy-related CO2 emissions grew by 1.1%, increasing by 410 million tonnes to reach a new record high of 37.4 billion tonnes. This growth in emissions is notably slower compared to the increase observed in 2022. This highlights the world's attempt to reduce CO2 emissions in an attempt to preserve the natural resources of our planet. More about global CO2 emissions can be found on the IEA website: IEA Study

The environmental Kuznets curve (EKC) hypothesis suggests that the relationship between economic growth and environmental degradation follows an inverted U-shape.

According to the graph, pollution increases during the early stages of development and then decreases as countries become wealthier and adopt cleaner technologies. However, empirical evidence for the EKC has been mixed, with many pollutants and environmental indicators not following this pattern.

Economic Development and Sustainable Practices

As we know, economic development is a broader measure than economic growth, referring to improvements in the standard of living and quality of life for a population. Problems which governments face is implementing policies that adhere to both maintaining sustainable environmental practices, while also aiding the economic development of the country. These policies often contradict each other. For example, maintaining environmental sustainability often involves adopting green policies. This can make the production of goods and services more expensive, hence limiting economic growth.

A method which allows for both economic growth and development is called decoupling. Decoupling refers to the ability of an economy to grow without a corresponding increase in environmental pressure. Absolute decoupling occurs when economic growth is achieved while reducing environmental impacts in absolute terms. Alternatively, relative decoupling occurs when environmental impacts grow at a slower rate than the economy.

A study by the United Nations Environment Programme (UNEP) found that, while relative decoupling has been achieved in some countries and sectors, absolute decoupling remains a challenge. Between 2000 and 2015, global resource productivity (the amount of economic output generated per unit of resource input) improved by 27%, but total resource use still increased by 65% due to economic growth.

What is Green Growth in the Circular Economy?

Green growth and the circular economy have emerged as potential pathways for achieving sustainable development and decoupling economic growth from environmental degradation. Green growth focuses on promoting economic growth and development while ensuring that human-dependent resources (environmental resources, e.g. food and water) are still provided.

Furthermore, the circular economy is an economic model that aims to decouple growth from resource consumption. It attempts to do this by excluding waste and pollution, keeping products and materials in use (recycling products). According to the Ellen MacArthur Foundation, the adoption of circular economy principles could generate $4.5 trillion in economic benefits by 2030.