Katariina Mustonen

Critical Appraisal of Decoupling Theory

Metropolia University of Applied Sciences

Bachelor of International Business

European Business Administration

Bachelor’s Thesis

23 April 2019

Abstract

Author Title Number of Pages Date

Katariina Mustonen Critical Appraisal of Decoupling Theory 42 pages + 0 appendices 23 April 2019

Degree Bachelor of Business Administration

Degree Programme European Business Administration

Instructor/Tutor Michael Keaney, Senior Lecturer

Economic growth is the leading reason for climate change. Since the 1970’s environmental sociology scholars have debated on the relationships between economic growth, society and nature, and if economic growth can be decoupled from its negative environmental impacts. Decoupling theory believes economic growth is possible to separate from its environmental impacts. This paper bases decoupling to a wider theory of economic modernization, both assuming further modernisation and technological advancements will help societies overcome climate change. Economic modernization theory and its opponent treadmill of production are introduced to provide a base and critique for better analysis of decoupling theory throughout the paper. Decoupling theory hasn’t been introduced in such a straightforward relation with economic modernization theory before, which is one of the ways this paper contributes to the wider discussion on strategies to fight climate change. To establish a critical and thorough overlook of decoupling theory, the paper will introduce the theory by secondary research methods in the light of four essential aspects that are of controversial nature in relation to sustainability: economic growth, rebound effect, resource problem and international trade. Most of the examples included in these sections are ones of natural resources such as rare earth elements that are essential for green technologies. These sections will help the reader to understand the complex nature of decoupling theory, and make the interrelated connections between technology, sustainability, consumption, and growth clearer. Findings of this paper reveal the uneven environmental burdens of the world and the polluting and scarce nature of some of the green solutions the modern society has come up with such as technologies related to renewable energy. According to decoupling, modernization must continue, and a sustainable future can be obtained through circular economy practices with high-income countries executing absolute decoupling with absolute reductions in consumption, while low-income countries must be secured with a solid social base to execute sustainable development by relative decoupling measures and leapfrogging operations. Overall environmental consciousness and better understanding of global value chains and footprints must be promoted so that realistic green innovation can take place. Most importantly, decoupling does not happen spontaneously but requires active work in policy level, consumer level and as resource efficiency gains.

Keywords Decoupling, Ecological Modernization Theory, Sustainability

Contents

Glossary

1 Introduction 1

2 Theoretical framework 3

2.1 Ecological modernization theory 3

2.2 Key Challenges of EMT 5

2.3 Treadmill of Production 7

2.4 Key challenges of TOP and other critique 7

3 Decoupling theory 9

3.1 Decoupling 9

3.2 Resource decoupling 10

3.3 Impact decoupling 11

3.4 Relative and absolute decoupling 12

4 Definition of growth 14

4.1 Gross Domestic Product (GDP) 14

4.2 Other means of measuring 16

5 Rebound effect 17

5.1 Jevon’s paradox and Paperless office 18

6 Resource problem 20

6.1 Renewable energy 20

6.2 Pricing 22

6.3 Rare earth elements 24

7 International trade 25

7.1 Uneven global burdens 26

7.2 Geopolitical tensions 27

7.3 Applying decoupling in different economies 29

8 Evidence on decoupling 31

9 Discussion and conclusion 33

References 36

Glossary

EEA European Environment Agency

EMT Ecological Modernization Theory

EPA Environmental Protection Agency

IMF International Monetary Fund

IPCC Intergovernmental Panel on Climate Change

IRP International Resource Panel

OECD Organisation for Economic Cooperation and Development

REE Rare Earth Elements

TOP Treadmill of Production

UNEP United Nations Environment Programme

UNFCCC United Nations Frame-work Convention on Climate Change

WMO World Meteorological Organization

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1 Introduction

Economic activity has had a devastating impact on our globe as the driving cause of

climate change (IPCC, 2014). Environmental sociology is the study of relationships

between economic growth and environmental impacts and how much has this

relationship either decoupled or intensified. Decoupling of the relationship would mean

a separation between the two, whereas an intensifying relationship would mean an even

denser connection between economic growth and negative environmental impacts

(Jorgenson and Clark, 2012).

Contemporary environmental sociology entails two leading contradicting theories

concerning these relationships; the ecological modernization theory and the treadmill of

production. Ecological modernization theory supports decoupling and further

modernization of technology and assumes the economy ultimately reaches

dematerialization through separating economic growth and environmental impacts,

whereas treadmill of production does not support decoupling as economic growth is

scientifically demonstrated to be the leading reason for global warming and thus

inevitably effects the environment (Jorgenson and Clark, 2012). This paper provides a

critical appraisal of decoupling theory which supports the ideas of ecological

modernization but takes on the critique of treadmill of production in various ways.

The work that follows is divided into various parts for the complex nature of decoupling.

The first section provides a theoretical framework for decoupling through an introduction

to ecological modernization theory and treadmill of production to understand the

background and development of the arguments presented in this paper. After this, the

focus is narrowed down to decoupling theory, which is widely covered by six different

sections. First, we will go through the basic theory of decoupling, and distinguish

resource-, impact-, absolute-, and relative decoupling from one another. After the

theoretical base we continue with issues related to economic growth and GDP, and we’ll

introduce alternative, more inclusive ways of measuring progress. The next section

includes a deeper consideration of the relationship between our consuming habits and

technology through rebound effect. Section number six is devoted to natural resources

with a special attention to renewable energy sources, pricing and rare earth elements,

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as decoupling and climate change are closely related to natural resource usage. Lastly,

we challenge the decoupling theory with global issues related to international trade,

namely the uneven global burdens and geopolitical tensions, and answer these problems

with a closer look on how decoupling is best applied in different economies.

Before the conclusion and discussion, the paper will briefly give real-life examples of

decoupling in policy-making level, consumer-level and as gained resource efficiencies.

The analytical part is spread throughout the paper for the multiple sections it includes,

providing more consistency in the text. For this reason, the last section combines the

discussion and conclusion to one and provides a summary on what we have learned

thorough the paper and how these findings contribute to the current conversation on

climate change.

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2 Theoretical framework

Decoupling can be linked into a wider theoretical framework of environmental

modernization theory (EMT), which is part of contemporary ecological sociology studies

that try to explain the relationship between economy, ecology and society. EMT was

invented in the 1980’s as a result of significant technological advancements of the time

and the increased conversation around environmental problems. Arthur P.J Mol, Gert

Spaargaren and David A. Sonnenfeld may be considered as the most influential authors

of the theory, which assumes that environmental problems can be overcome with further

modernization of society.

As a reaction to these events, another theory called treadmill of production (TOP) was

born in the same mist with EMT in the 1980’s by an environmental sociologist Allan

Schnaiberg. TOP represents an inherent opponent of modernization and is more

suspicious of the nature of technology, economic actors, and the state. Schnaiberg did

not believe decoupling economic growth from environmental impact is possible, as

empirical data shows how economic growth and further modernization have

systematically harmed nature.

2.1 Ecological modernization theory

Ecological modernization theory was the first to challenge the ideologies of the

predominant ecological theories in the 1970’s, supporting deindustrialization and a

complete reorganization of the capitalist society. In contrast, EMT recognized the

position and power of industry in the production and consumption processes and started

studying ways to leash this power to overcome ecological problems. EMT did not

concentrate itself around the idea of capitalism and growth, rather it tried to change the

current economic order into one that serves the modern society’s needs the best

(Jorgenson and Clark, 2012).

EMT describes that economic development happens in two stages. “Economic

rationality” is used to measure the success and development of an economy in the early

stages of development of a country, usually resulting in negative social and

environmental effects. After a certain level of economic prosperity, an “ecological

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rationality” should take place where development of the economy is measured in other

ways than that of monetary values. Postmaterialist values arise as people in developed

societies don’t have to be concerned of survival anymore. Economic actors trigger

innovation towards a more sustainable future, where society pressures these actors to

accomplish “ecological rationality”. Ultimately the economy reaches dematerialization

through decoupling the economic growth of its environmental impacts (Jorgenson and

Clark, 2012).

The early debates of human to- nature relationships helped EMT to develop into its

current form, as the idea of humanity being as part of its environment, instead of

something separate from it, was acknowledged. For example, EMT does not speak about

internalizing environmental costs, rather “rationalizing production and consumption”,

making the link between man and nature definite, not as two separate entities that must

be glued together (Mol and Spaargaren, 2000).

Thus, environmental objectives are not given the one and only priority in the society, they

are integrated and anchored into the heart of the production and consumption processes.

This means EMT also takes into consideration the societal problems, which at times

might clash with the environmental ones. Close linkage of these two aspects is crucial

for avoiding distributional inequalities that often arise from ecological reforms as more

efficient technologies and products are usually a product of the rich whilst the poor are

suffering from higher cost of natural resources, such as water. To be able to fully

implement ecological reform, you must even these inequalities through inclusive

innovation so that the ecological reforms do not fall prey to social inequalities (Mol and

Spaargaren, 2000).

The theory recognizes how the market and industry have a big impact on the success of

any environmental reform. Important players in this reform are economic growth,

technological advancements, and environmental consciousness. Through the usage of

lesser resources, the goal is to dematerialize the economies. Thus, ecological

modernization encourages continued modernization of societies and enforces the

postmaterialist values instead of establishing radical changes in organizational and

societal structures. Change to the greener future occurs within the laws of a capitalist

system, as “economic rationality” slowly gives way to “ecological rationality” and gives

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more space for new green innovations and technologies, opening new markets and

needs for green products that are efficiently decoupled from economic growth. This is

most likely to first happen in developed countries, after which the rationality globalizes

(Jorgenson and Clark, 2012).

2.2 Key Challenges of EMT

One of the core assumptions of EMT is that further modernization will benefit the

environment and lead to a sustainable future. However, critics have questioned if the

modernization has clear benefits for the environment, or if green innovations are just the

society’s response to environmental pressure and reactionary institutional changes. If

modernization truly does lead to more sustainable actions, why are the developed

countries by default polluting more than the developing ones? (York and Eugene, 2003)

For the lack of current, wide empirical evidence supporting the theory, there has also

been critique towards the tendency of EMT scholars to use specific case studies to

emphasize the positive effects of modernization. Even though some nations may show

better ecological progress than others, this doesn’t mean the cause of sustainability is

modernization. The extent to which one analyses modernization greatly effects the

outcome; A study of one developed nation might show a completely different result than

a study including the social and environmental effects of that country’s international trade

(York and Eugene, 2003).

Our climate has warmed up dramatically in a very short medium of time, which raises

questions of the potential of modernization in the name of pace and scope. EMT argues

decoupling is possible by growing efficiency faster than production, but will it outweigh

all the production that comes with modernization? Many developed countries are more

efficient but simultaneously consume the most. The response to technological

improvements is also biased as someone supporting EMT would see even a small

technological advancement as part of something bigger, whereas another would

consider it only as an exception in an unsustainable society (York and Eugene, 2003).

One could divide these opinions to optimistic and pessimistic.

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EMT often gets criticized as a naïve thought of technology magically curing the world

without big societal or institutional changes. This is understandable because green

technology plays a big role in EMT and was part of why the theory was initially created.

The theory provokes much criticism as ecological movements usually go against

capitalist structures and the growth leading them, whereas EMT does not specifically

criticise growth in all its aspects, rather it focuses on industry, production and

consumption which ultimately are the reason for environmental problems (Spaargaren,

2000).

The theory is not as radical as those of treadmill or deindustrialization, but neither is it

just an “efficiency revolution”. EMT tries to organize industrial life and rationalize the

production and consumption process into a sustainable one through internalizing

environmental costs, promoting principles of circular economy and recycling, green

indices that take into account more than just GDP, and so on (Spaargaren, 2000). More

recent literature on EMT shows how powerful the theory has been in mobilizing cross-

disciplined studies, resulting into environmental policies and management,

environmental strategies for NGOs, international alliances and overall green

development. Ecological modernization is said to have two sides: the academic/

analytical and the normative/policy-oriented model of ecological change. (Mol,

Spaargaren, Sonnenfeld, 2013).

Much of the current critique is being received from the more radical green movements

which are unhappy with the pace and scope of the ecological reform. Similar critique

arises from structural human ecologists, who provide mathematical data through

ecological footprint calculations based on increased affluence, growing population and

environmental harms, concluding how ecological modernization has not proven to keep

up with its eco-modernization efforts (Mol, Spaargaren, Sonnenfeld, 2013). In contrast,

economic growth and increased modernization have proven to be the number one

reason for climate change (IPCC, 2014). In response, scholars of EMT can only point

out the enormous political and technological progress made in the last decade and

question if actually working for solutions or pointing out the desperate situation is better.

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2.3 Treadmill of Production

As the biggest opponent of the ecological modernization theory, treadmill of production

states how economic growth and environmental impacts are inherently tied together and

cannot be separated from one another. Decoupling is not possible as capitalist societies

need constant growth, which leads to constant input of natural resources and outputs of

waste and pollution. The state is seen as the responsible actor for its decision-making

power that is often used to boost economic activities (Jorgenson and Clark, 2012).

It is acknowledged that in modern societies innovations in technology are fostered, but

only for the reason of lowering the cost of production. This is achieved by decreasing the

usage of energy or a natural resource per output without having environmental

decoupling of these two as its goal. Opposed to that, these advancements make it

possible to produce more products in the same period of time, using even more natural

resources, and possibly leading to a rebound effect to cannibalize any ecological benefits

created by the technological advancement (Jorgenson and Clark, 2012). Technology has

only boosted the industry while externalizing the environmental costs, revealing the true

goal of these technological advancements; profit maximisation.

Modernization has meant more production and more usage of energy and natural

resources, leading into more pollution and emissions. Idea of the ecological treadmill is

the separation of human and environment, where the industry takes natural resources

and leaves waste, pollution and toxics behind. The social treadmill uses the workers to

create more efficient production facilities that will ultimately remove the workers from the

process (Schnaiberg, Pellow and Weinberg, 2000). Producing these externalities for the

sake of cost-reductions and systematically imposing them on nature and society is one

of the characteristics of a capitalist society. Some have described capitalism as “the

economy of un-paid costs” (Foster, 2012).

2.4 Key challenges of TOP and other critique

The biggest shortcoming of TOP is the lack of concrete solutions and actions that can

be easily applied in today’s societies. The theory often gets stuck in criticising the various

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sides of economic growth without really providing any new tools or options. Specifying

how to make energy usage and production processes green is more efficient and

important in fighting against climate change. As we have built our societies to function

on great amounts of energy, we must change the energy infrastructure built on top of

fossil fuels, or alternatively change the way we live in modern societies to ones that need

dramatically less energy (Pollin, 2018). However, the latter option would require an

unrealistic amount of global cooperation whereas greener technologies have already

been developed.

Even though the scholars supporting TOP are loyal to empirical data, they have their

own methodological shortcomings as most of Schnaiberg’s work is based on data

collected from the United States. The theory is biased by culture and history, which of

course is understandable as every theory is a product of its time and place. However,

capitalism and the treadmill may transform, and depending on how the society is

organized, work in different ways. Nevertheless, the long tradition of the treadmill working

as stated before in the US makes it very unlikely to change. What is more likely is that

the US might use its global financial power to enforce its ways of the treadmill to others

(Schnaiberg, Pellow and Weinberg, 2000). Current example of this is the trade war

between China and the US.

One may fall into the debate of optimism versus pessimism, but as TOP doesn’t really

have any tools to offer, it seems like the theory stays on the level of a devil’s advocate.

Contrary to the treadmill theory, ecological modernization believes in the potential of a

developed economy to overcome this treadmill of production and environmental harm

and thrives for the societies to innovate more. There will always be the ultimate critique

against EMT arguing that ecological rationale is not possible in a capitalist society,

nevertheless scholars from EMT have surpassed this critique on the grounds of

completely different starting points, even labelling the critique as “outdated” (Mol,

Spaargaren, Sonnenfeld, 2013).

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3 Decoupling theory

Ecological modernization theory studies “how various institutions and social actors

attempt to integrate environmental concerns into their everyday functioning,

development, and relations with others and the natural world“ (Mol, Spaargaren,

Sonnenfeld, 2013). Decoupling may be considered as the increasingly popular way of

international institutions attempting to integrate their environmental concerns into their

actions as can be found from a number of reports made by international institutions such

as United Nations, International Resource Panel (IRP), and Organisation for Economic

Cooperation and Development (OECD). United Nations Environmental Programme

(UNEP) has made an extensive report on decoupling on 2011, while the concept as such

was introduced by OECD in 2001. IRP has multiple reports on their website using

decoupling as one of their keywords.

As with EMT, decoupling assumes a sustainable future can be obtained through

intensified modernization and enforcement of postmodern values in the processes of

production and consumption. EMT has received critique on over-looking the reasons

behind climate change (Mol, Spaargaren, Sonnenfeld, 2013), whereas decoupling goes

right to the core of the problem by looking at resource usage and environmental impacts

(UNEP, 2011). A deeper analysis of decoupling with arguments on the basis of EMT

follows.

3.1 Decoupling

The term decoupling is used to explain the relation between resource efficiency and its

impacts on environmental pressure. Its goal is to “decrease the usage of resources per

unit of economic output and thus reduce the environmental impact of any resources that

are used, or economic activities that are undertaken” (UNEP, 2011). OECD has defined

decoupling as the “separation of the economic ‘goods’ from the environmental ‘bads’”

(OECD, 2002).

The United Nations Environment Programme’s report on decoupling in 2011 defines it

more specifically by dividing it into four different categories: resource decoupling, impact

decoupling, relative decoupling and absolute decoupling. The first two describe what is

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being influenced in order to lessen environmental harm that derives from economic

activities, whereas the latter two indicate the real outcome of decoupling efforts (UNEP,

2011). However, decoupling is not only a practical tool that helps you calculate empirical

evidence, rather it applies much of the ideas of “ecological rationality”. Decoupling

includes the ideologies of new ways of thinking about economic growth, it mobilizes

political institutions, it looks at global flows, and it is usually represented not only in the

context of environmental problems, but also of social ones (UNEP, 2011). It is yet to be

seen if the scope of decoupling is too wide for one tool, as it is only in the first stages of

being conceptualized.

3.2 Resource decoupling

Resource decoupling refers to resource efficiency. It is achieved by developing new

technologies that decrease the usage of a given resource or energy. Resource

decoupling takes place when resource usage grows slower, stagnates, or decreases

while economic output increases. Resource efficiency is easily measurable and

encourages innovation of new technologies, which makes resource decoupling in this

way quite an efficient and viable tool to be used. Resource decoupling may be calculated

for a given nation either by dividing GDP by Domestic Material Consumption, or by

looking at the relationship between economic output and resource input in a given time

period (UNEP, 2011). For example, you could divide a nation’s coal usage by the GDP

of that economy and analyse the trend over a period of time.

The measures which improve resource usage deal with the scarcity of resources,

decrease the extraction costs of resources, and decrease the unequal depletion of

resources. Most times, resource decoupling results in impact decoupling as the usage

of resources decreases. These strategies are extremely important when it comes to the

usage of resources that are either very scarce such as oil or rare minerals, or when a

resource such as coal poses high environmental risks that cannot be avoided by mere

better usage of the resource (UNEP, 2011).

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3.3 Impact decoupling

Impact decoupling aims to decrease the environmental impacts of economic activities,

often referred to as externalities. These might include waste, emissions, and land

degradation, just to name a few. These impacts arise from extraction of resources,

production, usage, and ultimately, the disposal of products. The goal of impact

decoupling is to decrease ecological harm while increasing economic value. In

comparison to resource decoupling it isn’t as easy to measure, as impacts on

environment resulting from one unit of economic value added might be various, and the

linkage between some economic activities and environmental impacts are not completely

clear. One conceptual framework to estimate impact decoupling is life cycle analysis,

which might be complicated when scaled up to the scope of a nation. (UNEP, 2011).

The ways to achieve smaller impact on the environment are related to the smarter, more

productive and greener usage of different resources, which do not necessarily help with

the problem of scarcity or decreasing the prices of resource extraction. An example of

this are some technologies which are energy-intensive to use but are designed to

decrease ecologic impacts. In essence, the price doesn’t fall, or the effective usage of

the resource doesn’t improve but the environmental impacts decrease. Impact

decoupling becomes increasingly important when a resource has direct and massive

negative impact on ecosystems or when some technological innovation has high

potential in decreasing the risk of these harms (UNEP, 2011).

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Figure 1. Resource- and impact decoupling (UNEP, 2011)

Figure 1. illustrates the different relationships between the economic activities, resource

decoupling and impact decoupling. The blue line illustrates a situation where resource

usage becomes more efficient and grows more slowly than GDP, demonstrating

resource decoupling in a relative decoupling manner. Resource decoupling may occur

in absolute terms as well. Consequently, the green line demonstrates a situation where

the environmental impacts decrease, causing impact decoupling. Contrary to the figure,

impact decoupling rarely happens in absolute decoupling fashion, as this would indicate

a situation where every increase in economic output would decrease the environmental

impact. Some situations like this do occur when talking about economic activities clearly

directed into decreasing environmental harms, such as reforestation programs (UNEP,

2011).

3.4 Relative and absolute decoupling

In absolute decoupling the environmental pressure or the resource usage decreases or

stays stagnant in relation to the economic activities, whereas relative decoupling refers

to a situation where the environmental pressure or resource usage grows slower than

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the economic activity related to it (EEA, 2015). Whereas relative decoupling occurs

almost every time with resource decoupling, absolute decoupling is extremely rare.

According to Environmental Kuznets Curve and the “ecological rationality”, the

environmental impact of economic activities decreases after a society has reached a

certain level of prosperity (Jorgenson and Clark, 2012; UNEP, 2011). Relative and

absolute decoupling are illustrated in figure 2, where the growth of resource usage is

compared with the growth of economic output. Decoupling occurs where resource usage

grows slower or declines whilst the economic output increases.

Figure 2. Relative and absolute decoupling (EEA, 2016)

Absolute decoupling is where most of the critique towards the theory lies, as the pace

and scope of it have not been great enough. Relative decoupling has been taking place

aggressively since more efficient technologies have come to markets, whereas absolute

decoupling is still very distant. However, decoupling is still a relatively young concept

which requires a network of global green policies and actions to function correctly. As

stated in the latest report of IRP (2019), “decoupling and a sustainable future will not

happen spontaneously”.

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4 Definition of growth

Decoupling means separating economic growth from environmental pressures. In order

to go any further with the theory, one must provide a sound definition of growth, and most

of all a clear separation between physical growth and economic growth (UNEP, 2011).

Separation between the two is one of the core ideas of decoupling, as the theory

assumes absolute decoupling of economic growth and environmental pressure is

possible.

Economic growth means value added, usually calculated through GDP, whereas

physical growth of an economy means increase in physical assets, area, or material

throughput. This material-intensive growth is often harmful for the environment and is

indeed linked to economic growth. However, growth isn’t necessarily physical and

material, but can be a result of cultural, social, or spiritual achievements (UNEP,2011).

Think of a person growing up; after a certain age the physical growth stops, however the

development and growth of a person isn’t limited to this physical milestone.

Other than for the conceptual significance of economic growth to decoupling, it is an

important issue to investigate as growth is a powerful concept in our societies. Growth

has a lot of symbolic meaning and it is many times used as a tool to measure

effectiveness. Growth has become such a standard way of thinking economic progress

that it has almost become the ends rather than the means. Bad definitions or a disturbed

thought of the significance of growth are dangerous, whereas the negative effects of

growth itself can be questioned (The Post-Growth 2018 Conference, 2018a). Thus,

without the separation of physical and economic growth, it couldn’t be conceptually

possible to decouple growth from negative environmental impacts, and with a proper

separation there is no need for ceasing growth for the sake of sustainable development,

rather it might open new opportunities for sustainable growth.

4.1 Gross Domestic Product (GDP)

GDP is probably the most used economic tool in the world that tries to capture the

economic growth of nations, which is why a closer look at this number in the heart of our

economies is important. Additionally, GDP remains highly important to decoupling theory

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as it is included in the formula of calculating possible decoupling effects. By the definition

of International Monetary Fund, GDP measures the monetary value of final goods and

services produced in a country in a given period. It is often used as a reference point for

the health and progress of a country’s economy (Callen, 2018). Thus, namely GDP goes

along with the definition of this paper, however GDP is limited in its ability to measure

qualitative growth and progress in welfare, which is crucial for the conceptual framework

of decoupling.

If we understand progress as improvement in one’s wellbeing and happiness in life, GDP

is a poor indicator for it doesn’t separate products and services as ones that increase

wellbeing and others that do not, and it includes many items that indicate a fall in the

wellbeing of a society. It’s clear how GDP is a product of the “economic rationality”, which

increases material wellbeing at the cost of social and ecologic aspects. For example,

government’s increased spending on security or households’ increased expenditure on

health care all increase GDP, whereas in the reality these expenditures might be a signal

of even a dangerous state of a nation (Victor, 2008).

On the other hand, GDP excludes many important items that are essential for human

wellbeing such as clean air and water (Victor, 2008). Generally, the environmental costs

included in economic activities are referred to as externalities, and are excluded from the

calculations (Callen, 2018). Moreover, GDP describes little about the social structure of

the economy as distribution of wealth is not reflected, nor is all the work executed

counted (Victor, 2008). Feminist economists pinpoint the problem of care work being

excluded from GDP as one of the main weaknesses of the tool, as this systematically

lowers the position of women in comparison to men. This is because what is not included

in GDP tends not to be appreciated or concentrated on as much as those variables that

are (Bauhardt, 2014).

It’s also worth highlighting how many products and services of today’s world are

extremely hard to value as they’re intangible and intrinsic. Thus, the data that is the most

crucial in describing the qualitative value and immaterial progress is not included in GDP

in the same way as those transactions including a physical asset (The Post-Growth 2018

Conference, 2018b). This can be seen in the struggle that tax authorities are facing in

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front of taxing immaterial products of tech companies, which is currently being worked

on under the Base Erosion and Profit Shifting -project (BEPS) (OECD, 2018).

In other words, GDP is not only weaker than usually thought, but also insufficient in

describing the lives of today’s societies and moving on from the economic rationality to

the ecologic one. Products, labour and lifestyles have changed drastically, and the data

being collected does not take it under consideration (The Post-Growth 2018 Conference,

2018b). If the saying “we manage what we measure” holds truth, the shortcomings of

GDP should be taken under serious consideration.

4.2 Other means of measuring

GDP has its pros and cons as a tool; the simplicity and international comparability being

one of the biggest pros, while the insufficient representation of today’s world and the

exclusion of environmental and social aspects being the heaviest cons. These aspects

are recognized and new indices that should be forced into action to complement GDP

have been shaped. Internalizing costs of environmental damage and the benefits of

environmental protection can help to focus policy debate to the extent that our prosperity

and well-being depend on goods and services provided by nature (European

Commission, 2009).

There are different approaches for the measurement of wellbeing. Some establish a set

of indicators which vary in the way that they’re linked to each other. An example of this

is the Human Development Index. Gross National Happiness Index is a subjective and

direct approach which bases on self-reporting questions of happiness or life satisfaction

(Chelli, Ciommi, Gigliarano, 2013). One of the most important indices is that of the Index

of Sustainable Economic Welfare (ISEW) by Daly and Cobb in 1989. What makes it

powerful is how it converts its components into a monetary unit, just like GDP.

Additionally, ISEW fills in those items that are not included into GDP, for example

volunteering and care work, and adds up social and environmental costs to it such as

environmental emissions costs, depreciation of natural capital, crimes, and so on (Chelli,

Ciommi, Gigliarano, 2013). To understand how an alternative index for GDP would be

built up in practice, we shall look at the variables included in ISEW.

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ISEW slightly alters the items currently included in GDP and adds information by other

items calculating social and environmental aspects:

ISEW = C + G + I + W – D – E – N, where

C = Consumption with adjustment for income inequality calculated with the GINI

coefficient.

G = Government expenditure excluding defensive expenditure, as it does not increase

welfare.

I = Investment including consumer durables.

W = Non-market contributions such as unpaid work, effecting positively to the result.

D = Defence expenditure

E = Cost of environmental degradation and

N = Depletion of natural capital (Chelli, Ciommi, Gigliarano, 2013).

The fact that new indices are being made shows movement towards the ecological

rationality, nevertheless implementation of these tools is unsatisfying in the decision-

making level of nations and companies. This is an important step as effective usage of

more inclusive indicators would potentially enforce theories such as decoupling as their

positive environmental and social effects would be more visible. According to EMT,

recognizing the value of environmental and social aspects would open new markets of

green products and services, creating a new sustainable society (Jorgenson and Clark,

2012).

5 Rebound effect

Increasing energy needs push societies to innovate new technologies which will lower

the amount of resources used, and thus decouple energy production from environmental

harms. Rebound effect helps us to better understand the relationships between

technology and consumption as it reveals how mere technological advancements cannot

save our societies from global warming without consciousness of environmental

problems and questioning our ways of consuming.

To comprehend the phenomenon, the paper will introduce two paradoxes related to the

rebound effect. The most known one of the two is called Jevon’s paradox, which

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represents a direct rebound effect. The Paperless Office paradox is a modern example

of indirect rebounds effects related to technological development of substitutes that

intentionally or non-intentionally decrease the negative environmental impact of a given

product (York, 2006).

5.1 Jevon’s paradox and Paperless office

More efficient technologies usually incentivise greater usage of certain resources or

products. At times this increased consumption of the resources creates a rebound effect

that overweighs the environmental benefits gained from the technological advancement

(Maxwell, Owen, McAndrew, Muehmel, and Neubauer, 2011). The phenomenon was

first studied by William Stanley Jevons in the context of England’s 1860’s coal industry,

where Jevons noticed that as the efficiency of coal usage improved, the total usage of

coal increased because the production of one product per one unit of coal was

increasingly efficient (York, 2006). Even though production of one product created less

pollution, the increase in consumption and demand of coal together resulted into more

pollution than before.

The phenomenon can be easily reasoned by classical economic theories; when

efficiency of a resource such as coal goes up, the price of this resource goes down. This

decrease in prices incentivises markets to use coal as an energy source, which ultimately

drives producers to innovate new technologies using coal (York, 2006). New innovations

lead to increased need of essential resources and raw materials. Jevon’s paradox

indicates a direct rebound effect, where the efficiency and reductions in costs result in

greater consumption because of the new, lower price (Maxwell et al., 2011). Another

example of direct effects is the increase in total emissions arising from personal driving

regardless of the increased efficiency of fuel, as people drive cars more (EEA, 2015).

Rebound effect also occurs as indirect effects, which include total increase in

consumption for the greater access or availability of money to other goods (Maxwell et

al., 2011). The Paperless Office Paradox demonstrates indirect rebound effects in the

case of product substitution. Richard York identified this modern paradox related to

computers and the usage of paper, which was expected to decrease dramatically now

that one could easily read, communicate and operate all the documents through screens

19

of computers. Nevertheless, commercialisation of computers enabled greater access to

other products such as printers, which in turn increased the usage of paper for the greater

availability and easiness of printing your own material (York, 2006). This example

demonstrates not only the indirect rebound effects but also the complicated and

unpredictable effects new technologies might have.

Rebound effect may occur directly, indirectly and in an economy-wide macroeconomic

level when the total economic productivity and consumption of a nation grows because

of the gained resource efficiencies (Maxwell et al., 2011). Data interpreted by the EEA

from 2000 to 2007 shows how the total domestic material consumption of the EU-28 area

has increased by 10% regardless of green technological advances (EEA, 2015).

According to IPCC (2014), the total anthropogenic GHG emissions have continued to

increase over 1970 to 2010 with larger absolute increases between 2000 and 2010,

despite a growing number of climate change mitigation policies leading to decoupling.

Environmental benefits of these technological advancements encounter rebound effects

because of changes in life styles, consumption patterns and industry level decisions.

Rebound effects are usually stronger in developing countries as developed countries

have reached a saturation point in their ways of consuming. For example, more efficient

cars wouldn’t necessarily lead into more driven kilometres in a developed country

whereas in a developing country this increase in efficiency could mean much more

kilometres driven (Pollin, 2018).

Linear production and consumption processes create rebound effects. Moving from

linear production to circular material flows where materials are not thrown away after

usage but reused, recycled and remanufactured to something new helps avoiding

rebound effects from taking place (IRP, 2017). Decoupling theory takes advantage of the

critiques EMT has received from structural human ecologists (Mol, Spaargaren,

Sonnenfeld, 2013) by using footprint calculations as a tool to analyse and understand

the flows of resource usage better (IRP, 2017).

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6 Resource problem

Most of the emissions that cause global warming arise from careless usage of natural

resources. Carbon emissions are released in large quantities when fossil fuels are

burned, totalling to 76% of all the greenhouse emissions released (IPCC, 2014), where

only the extraction and processing of natural resources make up for almost 50%. Overall

resource usage has increased threefold since the 1970’s, while global population and

energy needs increase constantly (IRP, 2019). Satisfying these needs will be a global

challenge when energy extraction is increasingly difficult in monetary, physical and

political terms as natural resource reserves continue to diminish (Klare, 2012).

To overcome the problems of scarcity and pollution created by exploitation of natural

resources, effective and inclusive implementation of decoupling is necessary. Concrete

ways of doing this include basing our energy infrastructures on renewable energy

sources, setting prices that reflect the true value of resources, and global cooperation.

To analyse the resource problem more deeply, the paper divides the issue into three

parts; renewable energy, pricing, and rare earth elements.

6.1 Renewable energy

Creating an energy infrastructure based on renewable energy is an important factor in

reducing emissions (EIA, 2018), and is one of the most effective ways of achieving

decoupling as energy collected from biomass, hydro, geothermal, wind or solar sources

creates near zero emissions while increasing economic growth and social welfare.

Currently only 13,6% of all the energy produced in the world is generated by renewables,

whereas petroleum and solid fuels still make up more than 50% of energy production.

However, the trend of using renewables is growing; solar and wind power are the current

leading sources of renewable electricity generation in the European Union (European

Commission, 2018). Renewable energy industry employed 10.3 million people worldwide

in 2017, demonstrating the social benefits that change for renewable energy base holds

(IRENA, 2018).

Renewable energy sources and technologies differ in costs, emissions, availability,

efficiency, land usage and social impacts such as noise and visual disturbances, and the

21

capacity of future employment. In general, renewable energy extraction is costlier than

that of non-renewable energy, however it provides independence from price fluctuations

created by fossil fuels (Evans, Strezov, and Evans, 2008). Renewable energy extraction

also requires a lot of energy. The low Energy Return on Energy Investment ratio (EROI)

of renewable energy sources can be explained with the help of figure 3.

Figure 3. EROI analysis of renewable energy sources (Davey, 2017).

Figure 3 demonstrates the vast amount of energy investment required for energy

extraction from renewable sources. Extraction often requires an extensive infrastructure

around itself, starting from the plants including solar panels or wind mills, to the

connecting infrastructure from the plants to the end users. These distances might be

surprisingly long as many times the fruitful areas of solar, water or wind power are located

far away from the cities (Davey, 2017). Long transmission distances are more usual for

renewable energy sources than non-renewables, especially those of wind farms (Evans

et al., 2008). If some efficient locations would be found nearby cities, Not In My Backyard

-effect usually restricts these projects from happening. The extraction and intermittency

require energy, as the energy gathered must be stored for the equal and consecutive

distribution, because nature doesn’t always provide energy. After deducting all these

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costs related to the extraction of energy, you leave with only a certain percentage of

energy available for usage (Davey, 2017).

Nonetheless, renewable energy outweighs non-renewable energy with its environmental

benefits, which is why investment in green energy is needed. One of the movements

towards clean energy is the Green New Deal, which aims to help economies to shift from

fossil-fuel based economies to renewable, green economies. The global investment

project requires from 1,5 to 2 percent of the global GDP each year, having its focus on

equal distribution of green energy and expansion of green supply chains. The green new

deal has both environmental and social objectives, as it would be efficient enough to cut

emissions whilst creating jobs, as work related to the fossil fuel industries will disappear

(Pollin, 2018). Strong support for people in fossil fuel industries is necessary for avoiding

social inequalities during the ecological reform.

6.2 Pricing

According to conventional economics, price is an important indicator of the value of a

given product in its market. Free market can detect scarcity and quality of any product

or service, as it indicates the relationship between supply and demand (Higgs, 2014).

However, price mechanism is a result of a theory which assumes market actors to have

perfect information and rational utility-maximising behaviour, whereas in reality prices

are a result of interactions between imperfect market actors whose motives can be

anything from immediate satisfaction to speculation for monetary gains.

When a product that is essential for the whole economy to function, such as energy, the

pricing mechanism gets increasingly complicated. In other words, defining the price of a

product in energy markets is completely different from a conventional product, say a can

of beans, as the whole society is dependent on energy (Davey, 2017). Market actors

have very limited and disturbed knowledge on the scarcity, quality or value of energy,

which leads to a malfunctioning price mechanism.

It’s almost impossible for the market to detect what’s going on in terms of resource quality

or scarcity from the visible signal of prices on the market (The Post-Growth 2018

Conference, 2018a). Let us look at a simple figure to illustrate the phenomenon. Figure

23

4 combines big societal events together with oil prices from 1966 to 2016. If the prices

would only demonstrate scarcity of the resource, they would steadily grow as the

resource gets scarcer. Nevertheless, oil prices fluctuate greatly according to societal

events and governmental policies, underlining how the mere scarcity or quality doesn’t

influence the price of an energy resource (Jackson, 2015). Supply chains and markets

of many materials that are strategically important in production processes have become

global, which is one of the reasons their prices reflect world events and global market

structures (IRP, 2019).

Figure 4. Oil prices from 1966 to 2016 (Jackson, 2015).

A study of resource prices made for European Commission (ECORYS, 2012) states the

same problem by saying how completeness of resource price message is distorted as it

does not consider externalities or scarcities of a given resource, thus hiding its true value.

This is partly offset by oligopolistic market structures, financial speculation, and export

restrictions, which increase resource prices (ECORYS, 2012). Internalising

environmental costs could be the first step towards better and realistic resource- and

24

energy prices, pushing economies to innovate more resource efficient products and

helping consumers to better realise the value of natural resources.

6.3 Rare earth elements

Rare earth elements (REE) are essential raw materials especially for clean technologies

that help us to decouple economic growth from environmental pressures, such as wind

turbines and solar panels. REE are used in technologies for their great magnetic,

electronic, catalytic, and optic properties. Catalysts, magnets and other applications are

the largest segments where REE are currently used, and the market is estimated to grow

for higher demand of clean technologies (Chen, 2017).

REE are not that rare in nature but most of the times do not appear in large quantities so

that exploitation of REE would be feasible. REE are difficult to extract cost-effectively

and the exploitation is filled with environmental problems. China represents 85% of all

the REE production, much of it being done illegally. Estimates say 20% of Chinese

mining sites are illegal, meaning neglecting social and environmental rules (Chen, 2017).

Extracting REE require an increasing amount of rock to be extracted and processed,

simultaneously requiring a great amount of energy for the whole process (Davey, 2017).

Even though extraction of REE require a lot of energy and have high environmental

impacts, they’re crucial components of today’s technologies (IRP, 2018). Share of

renewable energy in global energy production is estimated to grow around 10% by 2035.

This includes increasing demand for green power generation technologies and energy-

efficient technologies such as electric vehicles, LED lights, and different batteries (Chen,

2017).

There’s not going to be similar demand for all REE in the future, causing the price to

decrease for most of them. As the exploitation of REE is already barely feasible, this will

create problems in the future markets of REE. Recycling and circular economy are

methods for solving the problem of imbalance (Chen, 2017). Reverse logistics is crucial

for greener supply chains, especially when it comes to electronics which include many

REE that aren’t even nearly recycled to their full potential (Ninlawan, Seksan, Tossapol,

and Pilada, 2010). Less than one third of existing metals is recycled above the rate of

25

50%, and only 1% of REE used in technological appliances are recycled (The Post-

Growth 2018 Conference, 2018a; IRP, 2018).

The relationship between REE and clean technologies is controversial, as mining is an

extremely polluting industry with severe social and environmental issues. Not only the

workers but also the local villages suffer from the toxics released in the process of

extraction as purifying one tonne of REE requires 200 cubic meters of water, after which

the contaminated water is often released into the nature ruining water supplies for

complete villages. The energy reform of clean technology is also being criticised for

blindly switching to another equally problematic dependency from fossil fuels to rare

earth elements (Pitron, 2018).

Indeed, the scarcity and future dependence of REE should be taken into serious

consideration, as REE play a key role in the ecological reform. Many technologies that

generate less emissions require a lot more metals in the manufacturing process. John

Dizard (2019) has made an analysis of the feasibility of the Green New Deal based on

the metal requirements this movement towards green technology and zero emissions

would require. Electronic vehicles are estimated to require from 17 to 109 kilograms more

copper than a vehicle with a fossil-fuel engine. Only to change all the motors of vehicles

to electronic ones we would require more nickel and cobalt than is estimated to exist in

the planet, and most of the copper reserves available. These amounts wouldn’t include

the needed infrastructure for vehicle chargers, and all the infrastructure needed to extract

the green energy these chargers would have to supply (Dizard, 2019). This example

forces us to remember how green technologies also use natural resources and recognise

the physical limits our globe has.

7 International trade

International trade introduces great challenges to decoupling theory, which are exposed

and answered in the following section of this paper. Climate change and problems

related to natural resources are increasingly transboundary, however many of the

problems are divided between developed and developing countries (IRP, 2017). The

reason for this division will be explained through a world-system theory to understand

26

international trade relations and the problems included in it, and further discussion on

geopolitical tensions that resource exploitation creates will be established. How

decoupling theory takes on these international challenges will be discussed the last with

different strategies for establishing decoupling in developed and developing countries.

7.1 Uneven global burdens

Increasing globalisation of supply chains enables more efficient usage of various

resources but divides the world in unethical ways. For decades now, the developing

countries have been responsible for extraction of resources, heavy production, and the

corresponding environmental and social burden of these, while developed countries

enjoy purified resources and ready-made products as imports (IRP, 2017; Pitron, 2018;

UNEP, 2011). High-income nations were the net importers of resources until 2000 and

consumed 10 times more than low-income countries while rest of the world remained as

net exporters (IRP, 2017).

Unequal social and ecological exchange is a central concept to the world-system theory,

which divides the world to core-, semi-periphery-, and periphery nations. Core nations

usually have strong economies with high-tech products, an established military, and

plenty of intellectual property, making them fairly independent from outer pressure.

Periphery nations are the opposite and find themselves stuck at the bottom of the

hierarchy for lack of social and monetary capital, whereas semi-periphery nations are

found in between. International trade deepens the division of labour and commodity

production, whereas unequal ecological exchange highlights uneven flows of energy and

natural resources (Rice, 2007).

Core nations are free of other economies’ influence, but their social organization and

complex infrastructures are dependent on periphery nations’ extraction of natural

resources. Trade of natural resources between these nations enforces a

disproportionate per capita material consumption which is typical of core nations.

Because ecological flows are not valued in monetary terms but excluded as externalities,

the environmental burden of this unequal consumption falls upon the extracting

countries. Moreover, this world system allows core nations to enjoy a disproportionate

27

amount of environment’s carrying and sink capacities that would usually be beyond their

own limits (Rice, 2007).

This theory is embodied in a phenomenon called the resource curse where weak

institutions of periphery nations turn the advantage of having a resource rich land into a

curse, which leads into profound social, ecologic and economic problems. Resource

curse occurs in countries where the abundance of natural resources has overspecialized

the country’s economic activities into mining or resource processing. It tends to increase

the risk of civil conflict, leads into severe ecologic consequences because of bad legal

systems and lack of nature protecting laws, and hampers economic growth. International

trade usually enforces the resource curse by lifting the prices of natural resources and

opening the country to the volatile international markets, which might force the country

to appreciate their currency. Appreciation makes exports more expensive and less

competitive in the international markets, whilst increasing the dependence on cheaper

imports. This volatility in prices and international markets increase economic risks and

hamper the countries from investing into infrastructure or widening their economic

activities (UNEP, 2011; WTO, 2010).

As the usage of natural resources has globalized and includes the problems mentioned

above, national accounts of direct resource usages don’t reflect the reality. Ecological

footprints are used to demonstrate the real resource usage across borders, and they can

be calculated for various types of pressures, for example pollution, emissions, water

usage, or mineral usage (IRP, 2017). In 2017 per capita material footprint for the richest

countries was 27tons, 17tons for the upper-middle income countries, 5tons for lower-

middle income countries and 2tons for the poorest countries. One billion richest persons

on the planet consumed 72% of global resources while 1,2 billion poorest consumed only

1%. Climate impacts of the richest countries are from three to six times greater than

those of low-income countries, however the richest are seen to face the fewest

consequences (IRP, 2019) for their global power and ability to shift ecological burdens.

7.2 Geopolitical tensions

Accessibility to natural resources is increasingly hard in monetary, physical, and political

terms. As all the easily accessible fruitful locations have been emptied for the intensive

28

exploitation that has been taking place after industrialization, the extraction costs are

increasing (Klare, 2012). The remaining reserves are in extremely demanding locations,

requiring vast amounts of energy and even greater investments in sophisticated

technologies to be exploited. Modern societies’ dependence on rapidly diminishing

natural resources creates vast geopolitical tensions as countries that get a hold on

existing reserves simultaneously gain strategic advantage.

Majority of essential raw-materials for clean technologies is produced in politically

unstable countries (ECORYS, 2012). China produces 84% of all the REE in the world

and acknowledges the power that comes with its near monopoly, as global demand

keeps rising at a rate of 3 to 5% a year (Pitron, 2018). At the change of the millennium,

China set demanding restrictions on rare metal exports which caused them to fall from

65,000 tonnes in 2005 to 32,500 in 2018. Chinese don’t want to stay in the raw material

supply but also produce advanced technologies for exports; currently foreign high-tech

companies are allowed free access to Chinese raw materials if the production sites of

these companies are located in China (Pitron, 2018). The world’s largest purified rare

earth minerals area of 470sqkm is expected to be built in Inner Mongolia with special

funding from the Chinese government (Fanbin, 2017).

Whilst satisfying almost 90% of the world’s demand, in 2005 China’s own demand

exceeded 50% of the global needs for the first time. Between 2000 and 2008 China’s

domestic demand tripled, main reason of the exponential growth being the increased

demand and production of clean technologies such as wind turbines and solar panels.

Increasing exploitation has diminished the REE reserves rapidly, and without strict

regulation China’s reserves might disappear in the next 20 to 30 years (Mancheri, 2012).

Rapidly diminishing REE reserves together with the trade restrictions set by China, the

rest of the world has been pressured to explore other locations for REE exploitation as

strategic dependency on Chinese production increases. On April 2018 Japanese

researchers published a report according to which an enormous REE concentration was

found in the Western North-Pacific Ocean of Japanese territory, which could supply the

whole world for hundreds of years (Takaya et al., 2018). However, the concentrations

are 6000m deep in the ocean and current technologies can produce only 1000tons of

29

metal by mining one million tons of mud, making the discovery foreseeably untouchable.

(Kuo, 2018). The Japanese discovery is a perfect example of increasingly hard

accessibility of natural resources by physical and technological means. It is yet to be

seen if these REE concentrations will be exploited in the future as Chinese reserves

diminish and geopolitical tensions increase, and if, on which social and environmental

costs.

7.3 Applying decoupling in different economies

To lay a base to how decoupling should be applied around different economies, we’ll

return to the world-system theory. Let’s look at figure 5 that illustrates four world-system

positions, their average forest footprints per capita in 2000, and their forest cover change

in 1990-2000. Here we see again how the less polluting countries face the biggest

consequences whereas the core countries experience even positive outcomes. It is

unlikely that the low periphery countries’ forest area has degraded on domestic

consumption, rather this must be driven by international trade relations, and by looking

at the forest footprint per capita, core nations are the most likely reason for the

deforestation in low periphery countries (Rice, 2007).

Figure 5. Comparison of four world-system positions in forest footprints and cover change (Rice, 2007).

30

Ecological modernisation theory has been highly criticised as “Ecological Imperialism”,

as the modernisation and dematerialisation are achieved on the social and

environmental cost of others (Foster, 2012). Indeed, it is questionable if core countries

could’ve reached that high level of well-being and increasing dematerialisation without

exploiting others. As we’ve seen with rare metals, green technologies mainly used in the

high-income countries also have a dirty burden over the periphery countries. This unfair

division emphasises the fact how a deeper understanding of value chains and

consequences of consumption must be made more visible and thus, divide the

responsibilities equally to those who have been part of problem.

Current decoupling strategies suggest high-income countries should make absolute

reductions in domestic consumption, aim for absolute decoupling and more equal

distribution of wealth, increase environmental consciousness, and enforce circular

resource flows. This may be done through governmental incentives for research

programmes and business incubators, green regulations and strict environmental

standards, and most importantly including the transborder environmental and social

costs into the products and services (IRP, 2018; UNEP, 2011).

As the position of high-income countries in international trade is dominating, it must be

used as an opportunity to help low-income nations suffering from the resource curse by

adding side notes to international trade agreements that foster the local development of

resource exporting countries, include externalities to the prices of resources and help

the overall direct ecologic impact of international trade by optimizing logistic activities

(UNEP, 2011).

On the other hand, low-income countries must be offered a solid social base with proper

health, educational, and legislative institutions so that there is space for sustainable

development and consideration of decoupling practises. Developing economies are

suggested to follow relative decoupling strategies while they increase well-being and

eliminate poverty as their priority. However, resource efficiency should be supported

even if the net consumption would increase until a decent quality of life is achieved. An

important strategy for developing countries is learning from the mistakes made by

developed economies and leapfrogging straight to the sustainable ways of consuming,

producing and living (UNEP, 2011).

31

To achieve resource efficiency through leapfrogging, developing countries require strong

incentives to decrease their environmental impacts, international assistance and

technology transfers from developed countries. Critics say that leapfrogging’s objecives

are too optimistic and ambiguos in the context of developing countries that are usually

potitically and economically unstable. Additionally, there are doubts if the green

technologies are green enough to be implemented throughout the world. Moreover, one

appliance doesn’t fit every country as there are differences in needs, resources, and

cultures. Overall the requirements of leapfrogging are overlooked, which strengthens the

importance of careful and thorough planning of leapfrog operations (Perkins, 2003).

Appliers of leapfrogging strategies must avoid falling prey to “ecological imperialism” by

enforcing customs or technologies taken from developed countries into the developing

ones (Foster, 2012). Differences in cultures and needs must not be overlooked.

8 Evidence on decoupling

Before entering the discussion part of the paper, some evidence of decoupling that has

taken place recently on a policy level, consumer level and as resource efficiency gains

are demonstrated.

As real life-examples of incentivising decoupling strategies, France, Romania and Africa

have all included tax reductions for R&D activities that promote sustainability. European

Union has set a 2020 strategy that aims for smart, sustainable and inclusive growth, to

which Germany has responded with programmes aimed to improve R&D activities in the

private sector. Belgium in turn offers tax reductions for assets that don’t have an

ecological footprint and/or increases impact decoupling by aiming to minimise

environmental harms. Countries have also introduced greenhouse emission reducing

policies; Canada introduced an exemplary carbon tax in 2008 which not only made the

public organizations carbon free in seven years, but also improved the social situation

by distributing the tax revenues to the low-income families in form of tax reductions (IRP,

2019).

Increase in environmental certifications reflects an increase in the demand for more

sustainable products. Environmental certificates are an efficient way of contributing to

32

the increase in sustainable markets and help consumers make sustainable buying

decisions (IIED, 2013). Report of the state of the sustainable markets in 2018 reveals an

increasing trend of certifications regarding the production of tea, cotton, cocoa,

sugarcane, forestry, and palm-oil and their positive impacts on lowering carbon

emissions and increasing social well-fare in the producing countries. Cotton- and cocoa

certified areas have tripled in past five years, whereas tea- and palm-oil areas with a

certification doubled (Lernoud et al., 2018).

Figure 6. Resource productivity in EU-28 area between 2000-2017 (EEA, 2018)

The development of resource productivity in EU-28 area from 2000 to 2017 is

demonstrated in figure 6. After 2000 there has been positive development of resource

efficiency in the EU. From 2000 to 2008 relative decoupling took place in the EU member

states as the material consumption grew slower than GDP. Absolute decoupling took

place from 2008 to 2013 as material consumption decreased while GDP increased, after

which the development turned back into relative decoupling. European resource

productivity increased 39% from 2000 to 2017, however much of the resource

efficiencies gained during this period were a result of the 2008 crisis which effects

continued to 2013, as material consumption was significantly lower during these years.

It’s also to be mentioned how Domestic Material Consumption doesn’t reflect the reality

33

in its fullest, as it doesn’t include the raw materials extracted from outside EU that are in

the imported products. EU has prepared another index called Raw Material Consumption

(RMC), which presents imports and exports in their raw material equivalents, but it’s still

under development with no published RMC data for EU.

9 Discussion and conclusion

There are two contradicting schools of thought on how modern societies can survive the

challenge of global warming. EMT believes in further modernisation and technological

advancements whereas TOP has very anticapitalistic ideas on what should be done next.

Decoupling is a theory that takes on the base idea of EMT but listens to the criticism of

TOP, resulting into a strategy that truly believes further modernisation will decouple

economic growth from environmental harms, but also understands that the way we

consume and consider well-being and economic growth must change dramatically.

Ecologic modernisation theory and decoupling theory acknowledge that societal and

environmental issues share the number one priority. As seen with the resource curse,

societies cannot make sustainable decisions without good institutions and social

systems. For this, developing countries should be allowed to raise their quality of life on

the basis of decoupling results, as without a good social base there cannot be

environmental change. Adapting decoupling to different cultures, economies and

environments is a necessity for successful implementation. Decoupling strategy

recognises different ecological burdens and adapts according to the income level of the

country.

Environmental consciousness is one of the core necessities for “ecological rationality” to

take place in societies. During the past years there has been a clear shift in attitudes

towards environmental problems but there’s a lack of value chain knowledge that causes

rebound effects and prevents further development. Establishing circular economies

instead of linear helps avoiding rebound effects as circular economies take under

consideration the whole lifespan of products and recycle materials and products

effectively. More knowledge of supply chains in general leads to more consciousness

and less pollution through better buying decisions.

34

High-income countries must face the consequences of their actions to overcome a

psychological barrier that prevents global cooperation and personal awareness in the

fight against global warming. Through that acceptance societies can look forward and

make realistic decisions. Environmental consciousness is not knowing that driving cars

pollutes and taking quicker showers saves water but understanding the world situation,

being aware of those complex global value chains, assimilating what has happened to

the environment in the last fifty years and what does an increase of 2 degrees Celsius

really mean.

After consciousness comes action that requires top-down and bottom-up movement, a

marriage between growth, environment, people and technology. Governments and

policy-makers must be ready when societies are ready to move from the old ways to

new, greener ones, and be able to provide these alternatives. The same idea works both

ways, as people must be ready to embrace and look for the new opportunities that are

available and make conscious buying decisions, even though the new products would

differ greatly in looks, taste, materials, availability, and so on. Humanity as a species is

very good at adapting into new situations, and this quality must be embraced.

The importance of international cooperation grows as natural resources become more

scarce and are only available in certain parts of the world. A common consensus of the

real value of these commodities must be established by internalizing environmental costs

and accounting material footprints on a national level for acquiring realistic decoupling

results. Most importantly, decoupling requires active work as sustainable future won’t

happen spontaneously (IRP, 2018)

Having looked at decoupling from various critical aspects, this paper contributes to the

wider conversation on ways to fight climate change. The objective of this paper was to

make some of the linkages between technology, growth, and natural resources clearer,

as these relationships are extremely complicated and interrelated. Through the analysis

of these linkages we have established further knowledge on the feasibility of decoupling

theory and ecological modernization, respectively. It has been made clear how high-

income nations have the most responsibility in making decisions and taking action

towards a sustainable future for their excessive usage of natural resources, and how

35

circular economy and conscious buying behaviour are necessary to be established in

order to decouple economic growth from environmental pressures.

36

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