Intelligent Growth: A Vision for a New Low-Energy Economy

Stephan Harding, coordinator of the MSc in Holistic Science at Schumacher College, explains why standard economic growth is not the answer, and why personal Tradable Energy Quotas are.

At last, mainstream economists are waking up to the fact that climate change is going to cost a lot of money. Recently, the U.K. government's Stern Review proposed a series of measures we must implement immediately to "decarbonize" the global economy, including emissions trading, technological cooperation and the reduction of deforestation. Stern concluded that "with strong and deliberate policy choices, it is possible to reduce the emissions in both developed and developing economies on the scale necessary for stabilization while continuing to grow."

While I was persuaded by some of the recommendations made by the Stern Review, this is where I believe he misses something vitally important. Simply put, growth of the wrong kind, no matter how decarbonized, will wreck the planet.

I think that we need to distinguish between two fundamentally distinct kinds of growth. There is the suicidal growth that our mainstream culture is so hell-bent on pursuing, predicated on the limitless extraction of our Earth's wild resources and the continual disabling of her ability to absorb pollution, stabilize soils, regulate the world's climate and operate a whole gamut of "ecosystem services." The alternative is "intelligent growth," which recognizes that we must move towards a global steady-state economy in which the living standards in the south would grow while those of the north decline until both converge on a steady and equitable per capita share of whatever benefits the Earth can spare us.

But how to move the global economy from growth to steady state? For many years I thought that this issue was insoluble, for at least two reasons. Firstly, it would clearly be impossible to decide upon and monitor steady state exploitation rates for every single resource needed by society. Secondly, any nation that had made a unilateral decision to implement a steady state economy would immediately be wiped out by competitors that hadn't.

So are there any feasible means for making the shift happen? After spending time with David Fleming, who recently taught here at Schumacher College, I'm now beginning to think that it can be done. The answer is for a national government -- any government in the rich world would do -- to adopt David's ingenious concept of Tradable Energy Quotas (TEQs), which is essentially a system for rationing our use of fossil fuels, currently our major source of energy.

TEQs includes every energy user and every energy provider in the national economy. They are measured in units, and every adult is given an equal annual allocation. Industry and government bid for their units at a weekly tender. Units can be traded. Anyone who uses less than their entitlement can sell their surplus, and anyone can buy more units if they need them. The total number of TEQs available is set out in a TEQS budget (set by an independent Energy Policy Committee) that looks 20 years ahead. The size of the budget goes down week by week, step by step, like a staircase.

By rationing energy, the TEQs scheme automatically places limits on our exploitation of nature, since without energy, resources cannot be extracted or processed. So, with TEQS, we eliminate, at a stroke, the need to separately monitor our use of a plethora of resources. The final amount of energy available to the nation -- the lowest rung of the energy step -- is set at a level low enough to ensure that the economy does as little harm to the natural world as possible while ensuring that citizens enjoy a simple but comfortable standard of living. For the time being, while we still have fossil fuels, TEQs units would be carbon-linked, but if we do one day manage to develop climate-neutral energy sources (such as widespread renewables) the units would be energy-linked -- to joules or kilowatt hours.