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Growth theory and ‘green growth’

Author

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  • Sjak Smulders
  • Michael Toman
  • Cees Withagen

Abstract

The relatively new and still amorphous concept of ‘green growth’ can be understood as a call for balancing longer-term investments in sustaining environmental wealth with nearer-term income growth to reduce poverty. We draw on a large body of economic theory available for providing insights on such balancing of income growth and environmental sustainability. We show that there is no a priori assurance of substantial positive spillovers from environmental policies to income growth, or for a monotonic transition to a ‘green steady state’ along an optimal path. The greenness of an optimal growth path can depend heavily on initial conditions, with a variety of different adjustments occurring concurrently along an optimal path. Factor-augmenting technical-change targeting at offsetting resource depletion is critical to sustaining long-term growth within natural limits on the availability of natural resources and environmental services.

Suggested Citation

  • Sjak Smulders & Michael Toman & Cees Withagen, 2014. "Growth theory and ‘green growth’," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 30(3), pages 423-446.
    • Handle: RePEc:oup:oxford:v:30:y:2014:i:3:p:423-446.
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    File URL: http://hdl.handle.net/10.1093/oxrep/gru027
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    Cited by:

    1. Wei Jin & ZhongXiang Zhang, 2016. "China's pursuit of environmentally sustainable development: Harnessing the new engine of technological innovation," CCEP Working Papers 1601, Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University.
    2. John Sherwood & Anthony Ditta & Becky Haney & Loren Haarsma & Michael Carbajales-Dale, 2017. "Resource Criticality in Modern Economies: Agent-Based Model Demonstrates Vulnerabilities from Technological Interdependence," Biophysical Economics and Resource Quality, Springer, vol. 2(3), pages 1-22, September.
    3. Bretschger, Lucas, 2017. "Climate policy and economic growth," Resource and Energy Economics, Elsevier, vol. 49(C), pages 1-15.
    4. Jean‐François Fagnart & Marc Germain & Bruno Van der Linden, 2023. "Working time reduction and employment in a finite world," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(1), pages 170-207, January.
    5. Saltari, Enrico & Travaglini, Giuseppe, 2016. "Pollution control under emission constraints: Switching between regimes," Energy Economics, Elsevier, vol. 53(C), pages 212-219.
    6. Mealy, Penny & Teytelboym, Alexander, 2022. "Economic complexity and the green economy," Research Policy, Elsevier, vol. 51(8).
    7. Guy Meunier & Jean-Pierre Ponssard, 2021. "Designing Conditional Schemes for Green Industrial Policy under Different Information Structures," CESifo Working Paper Series 8881, CESifo.
    8. Salvador Pueyo, 2019. "Limits to green growth and the dynamics of innovation," Papers 1904.09586, arXiv.org, revised May 2019.
    9. Crettez, Bertrand & Hayek, Naila & Zaccour, Georges, 2023. "When is frugality optimal?," Mathematical Social Sciences, Elsevier, vol. 125(C), pages 65-75.
    10. Siedschlag, Iulia & Meneto, Stefano & Tong Koecklin, Manuel, 2019. "Determinants of green innovations: Firm-level evidence," Papers WP643, Economic and Social Research Institute (ESRI).
    11. Eriksson, Clas, 2018. "Phasing out a polluting input in a growth model with directed technological change," Economic Modelling, Elsevier, vol. 68(C), pages 461-474.
    12. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    13. Zhaohui Chong & Chenglin Qin & Xinyue Ye, 2016. "Environmental Regulation, Economic Network and Sustainable Growth of Urban Agglomerations in China," Sustainability, MDPI, vol. 8(5), pages 1-21, May.
    14. Quaas, Martin F. & Bröcker, Johannes, 2016. "Substitutability and the social cost of carbon in a solvable growth model with irreversible climate change," Economics Working Papers 2016-09, Christian-Albrechts-University of Kiel, Department of Economics.
    15. Chaofan Chen & Jing Han & Peilei Fan, 2016. "Measuring the Level of Industrial Green Development and Exploring Its Influencing Factors: Empirical Evidence from China’s 30 Provinces," Sustainability, MDPI, vol. 8(2), pages 1-20, February.
    16. Eckehard Rosenbaum, 2017. "Green Growth—Magic Bullet or Damp Squib?," Sustainability, MDPI, vol. 9(7), pages 1-18, June.
    17. Capasso, Marco & Hansen, Teis & Heiberg, Jonas & Klitkou, Antje & Steen, Markus, 2019. "Green growth – A synthesis of scientific findings," Technological Forecasting and Social Change, Elsevier, vol. 146(C), pages 390-402.
    18. Chuku Chuku & Victor Ajayi, 2022. "Working Paper 363 - Growing Green: Enablers and Barriers for Africa," Working Paper Series 2489, African Development Bank.
    19. Elena Cigu & Mihai-Bogdan Petrișor & Alina-Cristina Nuță & Florian-Marcel Nuță & Ionel Bostan, 2020. "The Nexus between Financial Regulation and Green Sustainable Economy," Sustainability, MDPI, vol. 12(21), pages 1-15, October.
    20. Baofeng Shi & Hufeng Yang & Jing Wang & Jingxu Zhao, 2016. "City Green Economy Evaluation: Empirical Evidence from 15 Sub-Provincial Cities in China," Sustainability, MDPI, vol. 8(6), pages 1-39, June.
    21. Mignamissi, Dieudonné, 2020. "Pollution emission and institutions nexus in Africa," MPRA Paper 99017, University Library of Munich, Germany.

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