In December 2009, the 15th Annual UN Climate Change Conference ended without a globally binding agreement to reduce greenhouse gas emissions. The outcomes from the 2010 talks in Cancún were equally non-committing, and not too much is expected from the 2011 summit in Durban. Among the reasons for these failures were concerns of emerging nations such as India and China that limits on carbon-dioxide emissions would impair their ability to further grow their economies. Given the evidence we outline below, they probably have a valid point.

In July 2011, IIER concluded a report sponsored by the U.K. Department for International Development (DFID), which looked at the question as to whether it will be possible for emerging economies to simultaneously go green and still grow economically. Our answer, which also applies to advanced societies, is that the traditional path of urbanizing and industrializing is most likely incompatible with the reduction of carbon emissions, as long as economies don't find someone else to do the "dirty" part of the work.

This "dirty" work is currently to a large extent conducted by China, a country which consumes about 40% of all natural resources and produces about 40% of all industrial outputs, while its own GDP share only amounts to a little more than 10% of the world total. Shifting all the "heavy lifting" away from advanced economies has made it possible for them to become less energy-intensive over time, thus reducing their carbon emissions - while carbon dioxide output skyrocketed in other places.

Unfortunately, this model isn’t scalable globally, as in the end, when China tries to copy that Western success story, there won’t be another place to go where cheap energy and labor is available.

The report looks at the context of past productivity gains and at the reasons why it won’t be possible to extrapolate them into the future, because traditional economics look at past successes by omitting the role of (cheap) energy. It concludes that while it is possible for emerging economies to improve the well-being of their populations without growing greenhouse gas emissions, it won’t be feasible to industrialize them in the “green” way everybody hopes for.

Please find below a short 2-page executive summary and the full 66 page report as PDF documents. Feedback is always highly appreciated.