n his book Growth for Good: Reshaping Capitalism to Save Humanity from Climate Catastrophe, Alessio Terzi, an economist at the European Commission’s Directorate-General for Economic and Financial Affairs and lecturer at Sciences Po, examines the concerns of the degrowth movement which challenges one of the most fundamental components of a capitalist economy: economic growth. He takes the ideas that are rather idealistic and injects them with a dose of pragmatism to explain how growth once more can be a force for good.
Terzi initially strikes a balance between opposing views. He acknowledges the value of the degrowth movement’s arguments, addresses the parts in which they fall short, and lays out the tools that are effective. Growth for Good emphasizes innovation and how capitalism allows it to thrive; however, it also underlines the parts of a capitalist economy that need adjustment in order to take action to combat climate change now.
What is remarkable about the book is its refreshing approach that encourages the reader to keep an open mind. It offers more than an argumentative and sterilized defense of a point of view: it is a genuine yet refined thought process leading into Terzi’s blueprint for an executable agenda allowing the reader to easily follow and absorb the concepts that he highlights in the book. Growth for Good does not only preach about innovation, it embodies innovation in the way it communicates.
In Growth for Good innovation is the key to solving the climate crisis. How does innovation come into play when addressing the concerns of environmental activists?
In the chapter I have on innovation itself and how innovation comes about, I explain that innovation responds to what is perceived as a need. So, the very definition of innovation itself, how it manifests, why certain innovations develop at certain points in time, and whether they are developed and utilized depends on need.
The invisible hand is an important concept in economics for responding to needs, but we can’t seem to get that response when it comes to the environment. Why is that?
The invisible hand in a capitalist system is the price mechanism. The price mechanism doesn’t work because for a very long time we’ve treated the environment as an endless bucket where we could shove our trash. Therefore, there was no pricing for any of these things, and the invisible hand doesn’t do its job at all.
Why would change happen now?
Why this process of transformation will happen is that luckily, we see growing concern about climate change and environmental awareness in people, which wasn’t the case for a very long time. I think that that is the first step which triggers a domino effect throughout society.
Whereas it’s very important to have pioneers who are environmentally aware at an earlier stage, I’m not waiting for a moment in which the whole of society becomes environmentally driven and thinks that one must prioritize the planet over personal needs. Rather, I am waiting for the moment where the cheap option and the green option coincide, and I think that we’re starting to see this increasingly.
For example, when people and governments are willing to invest in greener modes of transport such as electric cars, companies see opportunities for profits. They respond to the opportunity and scale up their production and the costs for these technologies fall. Then, these technologies can spread across society, including people with fewer financial means.
If we want to look for a spark of optimism, these green technologies will not spread linearly but exponentially. Once we reach tipping points, they will spread very fast. We are seeing these developments with renewable energy sources and with a variety of new technologies which are going to be crucial in a green economy.
In your book you warn of a rebound effect for developing countries. Do you think there is enough time to prevent a tip over that would cause us to lose the climate race?
The climate is changing fast, and we are potentially experiencing the tipping points that you are hinting at from a climate, environmental perspective. We have technology and innovation on the other side of the race, which again will experience positive tipping points in terms of acceleration of deployment – that is the component that we’re trying to define.
I am often asked, “Are we going to win against climate change?” It is a bit of an odd question to me, because the climate is already changing. So, to some extent we will experience some of these changes, such as extreme weather events. Their frequency will increase. That’s a fact because they are already baked into the atmosphere. What we will do is try to use innovation to contrast these effects.
I am often framed as an optimist in the fact that I believe that the innovation push can happen, and it can happen fast, but I don’t want to overplay my optimism in the sense that all our problems will magically be solved equally and everywhere. I think that the decades ahead will be a rough period of transition and adjustment.
What is the blueprint that Growth for Good offers?
Economic growth as it is right now leads to CO2 emissions, a linear way of consumption, and therefore pollution of various sorts, but this doesn’t have to be the case. Economic growth can once again be a force for good – that’s where the blueprint comes into play. It requires action from a variety of actors in society.
There is a lot that governments can do in terms of regulation such as taxing carbon, carbon pricing, and penalizing certain behaviors like bans on single-use plastic. Furthermore, governments should put together big plans and invest in infrastructure for a green economy. With respect to industrial policy, governments should invest in research and development for new ways to decarbonize industry. Meanwhile, there is also a lot businesses and consumers can and should do. The blueprint comes together only if all these actors act at the same time, and no single one can work it out on its own.
What would be the most defining factor for saving humanity from a climate catastrophe?
My view rests on the idea that green technologies can be made cheaper. It is not a potential abstract concept, but something that you can see and measure. The degree and speed in which this happens is going to be the most crucial factor. So, observing how fast these technologies develop and cost curves go down will be defining whether we end up on the winning or the losing side of the race with climate change.