Assessment of the interaction between economic and physical growth

Computer model results of possible future greenhouse gas (GHG) emissions represent an important starting point for climate policy. This is especially true for medium and long term emission scenarios such as those published by the Intergovernmental Panel on Climate Change (IPCC). In such scenarios, economic growth is a crucial input parameter because even moderate growth rates - if sustained over several decades – typically lead to high GDP values. For the discussion about future GHG emissions key questions are therefore whether the economic projections are realistic at all and, if so, whether they will show similar dynamics as observed in the past and also lead to an increase of activity in physical terms. The central question for this project therefore was: To what extent does increased economic activity lead to increased activity in physical terms? The so-called “saturation hypothesis” assumes that with increasing GDP, human activity in physical terms will initially grow on a per capita basis, and then level off to a constant level per capita. The project focused on three main sectors: industry, transport and households.

One of the main findings of this Scientific Assessement and Policy Analysis for Climate Change (WAB) project is that the saturation hypothesis holds in specific sectors, but in general does not hold. There is a levelling-off for some types of human activity, e.g. for steel consumption, cement consumption, and household living area. But in other cases, there is a development where the level of human activity continues to grow with GDP growth, e.g. for freight transport, and for the consumption of plastics and paper. It should be mentioned, though, that in most cases time series of 30 to 40 years in the past have been studied, and that saturation still may occur in the future.

Given these results two different ways forward are proposed. The first approach is to deepen the current analysis by gathering more data for more countries and for more categories, and to find a theoretical basis for the developments observed. The second and more extended approach would take into account the intersectoral interactions, because it is clear that the three sectors studies are interrelated.