Hitting the 'non-existent' limits

To those of a greenish disposition, all the news we get of the rapid economic growth occurring in China, and now India, raises feelings of ambivalence. On one hand, how could you be anything but pleased that such a large proportion of the world's poor are becoming less so?

But on the other, it makes you wonder how the natural environment could possibly cope with the citizens of our two most populous countries - accounting for almost 40 per cent of the world's population - attaining standards of living even remotely approaching those we've long enjoyed in the developed world.

Among right-thinking economists, any suggestion there may be "limits to growth" is verboten. It's an article of faith that the entire world can keep pursuing and achieving unending improvement in its material standard of living. Any apparent limits will be swept away by the magic of market forces and technological advance.

Yet my reading of last week's interim report on climate change from Professor Ross Garnaut, an economist of impeccable respectability, makes me wonder if the world isn't perilously close to those non-existent limits to growth.

The big news from the report was that global greenhouse gas emissions are increasing at a rate much faster than expected just two years ago, thus making the need for action even greater and more urgent (and harder to see eventuating).

And why is the position worse than we thought? In three words: China and India.

Let's start at the beginning. Many human activities - but particularly the burning of fossil fuels - lead to emissions of carbon dioxide and other greenhouse gases which concentrate in the atmosphere.

There are, however, various natural processes by which carbon dioxide is removed from the atmosphere. For much of human existence, the rate of emissions didn't exceed the rate of removal.

Since about 1750, however, the emission rate has exceeded the removal rate, thus causing the steady build-up of a stock of greenhouse gases in the atmosphere. The majority opinion among scientists is that this largely man-made stock of gases has now built to a size that's causing global average temperatures to rise and so lead to changes in the climate.

Though there's much uncertainty about the accuracy of the figures involved, there's a common view that if we allow the build-up to exceed a concentration of about 450 parts per million of carbon dioxide equivalent we pass the point where global warming produces "dangerous" and irreversible climate change.

According to simulations carried out for the Garnaut report, to stabilise the stock of gases in the atmosphere at the 450ppm level would require annual global emissions to reach a peak in 2010, fall to 2000 emission levels by 2020 and then fall to less than half of 2000 levels by 2050 and less than a quarter by 2100.

Achieving such a remarkably tough set of targets would require an unprecedented degree of international co-operation and economic pain, particularly for the developed countries. It would also require us to have started doing all that some years ago.

In the meantime, however, annual global emissions aren't falling or even reaching a peak, they're growing faster than we'd expected just two years ago.

The three main drivers of global emissions are population growth, economic growth and technological change.

"Growth in carbon dioxide emissions from fossil fuel burning and industrial processes has lifted markedly in the early 21st century," Garnaut says. In the 1990s, these global emissions grew at an average rate of 1.1 per cent a year. Between 2000 and 2006 the rate increased to 3.1 per cent a year. Ominously, this rise occurred despite the dampening effect of "extraordinarily large increases" in the prices of petroleum and substitute fuels such as coal.

The recent surge in emissions has three causes. First, global production of goods and services has been growing at the rate of 5 per cent a year (measured correctly), compared with the expected 3.3 per cent (using the wrong basis).

Second, the late 20th century saw this economic growth becoming less energy-intensive. In the 1990s, the energy intensity of global gross domestic product fell by 1.4 per cent a year. This trend was expected to continue. From 2000 to 2005, however, energy intensity fell by just 0.2 per cent a year.

Third, the 1990s saw the emissions-intensity of energy use fall by 0.2 per cent a year as a higher proportion of cleaner fuels were used. From 2000 to 2005, however, the emissions-intensity of energy use increased by 0.4 per cent a year as the higher price of oil encouraged more use of coal and synthetic liquid hydro-carbons derived from natural gas, coal, tar sands and shale.

Get this: each of these three reversals is explained by the faster economic growth of the developing countries, particularly China and India.

The acceleration in global economic growth has been led by growth rates of 10 to 12 per cent a year in China and 8 to 9 per cent in India. Garnaut says evidence is accumulating that these high rates aren't temporary. "In China, there are reasonable prospects for growth rates in the vicinity of 10 per cent per annum - higher still for a while - to continue for some time, and for high growth to continue until average Chinese productivity levels and living standards are approaching the range of developed countries in the late 2020s," he says.

"In India, the new, higher growth trajectory is soundly based and has strong momentum."

Garnaut implies that China will soon become the greatest single contributor to annual global emissions. Remember, however, that this annual flow is a problem solely because of the huge stock of greenhouse gases already accumulated in the atmosphere. The dominant contributors to that stock, of course, were the developed countries, led by the United States.

Garnaut says it is "neither desirable nor remotely feasible to seek to remove environmental pressures through diminution of the aspirations of the world's people for higher material standards of living … The challenge is to end the linkage between economic growth and emissions of greenhouse gasses."

If the world can achieve such a feat it will rival the Seven Wonders of the World combined. If we can't, the globe will have hit its limits to growth.