The purpose of this paper is to shed light on the links between economic growth, environment and climate change, as an analytical input to Sida’s (the Swedish International Development Cooperation Agency) strategy on growth in development cooperation. The summary of evidence is primarily based on recent research and focus on issues addressed in the research literature. Some underlying questions and assumptions provide a rationale for studying this issue; particularly interesting ones - addressed in this paper -  include statements and views like: Growth is bad (alternatively: good, necessary) for attaining environmentally sustainable development (growth optimism/pessimism); Natural resource abundance is bad for growth (the resource curse hypothesis); Stringent environmental policies, combined with increased market liberalization and international trade, trigger migration of dirty industries in richer countries to poorer countries with more lax environmental regulation (the pollution haven hypothesis).

Other research issues and hypotheses examined in this paper include:  Environmental improvements will come as a natural effect of stringent environmental policies via innovation, compliance, increased resource efficiency and improved technologies (the Porter hypothesis); Robust economic growth and broad-based poverty reduction must be attained first before more ambitious environmental investments can be made (the growth first-argument); Countries’ environmental situation has to worsen before it can improve (environmental change follows the Environmental Kuznets Curve); Natural resource scarcity implies an unavoidable constraint on countries’ economic growth capacity (limits to growth); It is possible to attain growth and large-scale poverty reduction along with environmental improvements (decoupling).

Although climate change relates to ‘environment’ and is a sub-set of environmental change, the paper addresses climate change, with links to economic growth and poverty reduction, in a separate section.

Author: Anders Ekbom and Emelie Dahlberg

Economic growth Environment and Climate change