A steady state economy is the ecological economist’s vision for sustainability.  The economy is limited in physical scale relative to the size of the eco-system and throughput of matter and energy are kept within ecological limits.  Economic growth and the policies required to promote it are seen as intrinsically harmful (at least in the developed world) entailing greater social and environmental costs than the benefit economic growth.  This idea has not caught on in policy circles and those who advocate them are generally seen either as quaint idealist or dangerous revolutionaries.

The outcome of the 15th Convention of Parties (COP15) in Copenhagen this month is far from certain but, ignoring political realities for a moment, would a serious (and upheld) agreement to limit carbon emissions to the level that scientist are claiming is necessary actually result in the first steps towards a steady state economy?

If carbon emissions are to be limited this will require fossil fuel use to be limited.  A binding agreement on carbon is a de facto limit on energy throughput.  This would result in a huge cut in the world economy’s energy budget.  Since all systems, and the economy is no exception, grow or shrink due to available energy this would result in economic growth stagnating.  A sustained contraction in the size of the economy, known by those still thinking in a growth paradigm as a recession or depression, would be a likely and quite possibly necessary result of a binding and ambitious agreement at Copenhagen.

With an energy limit in place there is probably no need for further global regulation on matter throughput.  Matter moving through the economy is refined and altered by energy inputs.  Thus a limit on energy also acts to limit matter throughput.  With these two limits in place and the world economy readjusting in scale we are well on our way to achieving a steady state.

The problem is in the transition to this stable state may be through severe instability.  Prolonged economic contraction is a serious, and possibly mortal, threat to the continuation of the world financial system.  Furthermore the inequalities of the rich and the poor in the world means that distribution of a limited flow of wealth becomes essential.  The poor are quite rightly not going to sit idly by whilst they are condemned to eternal poverty in a steady state economy.

Unless these transitional problems are highlighted, and debated a sustainable climate agreement is not possible.  Social and economic instability during transition will represent a huge temptation for governments to renege on the deal, increase their energy budget and gain some short term relief from the pains of transition.  Capping our energy is required and will cause significant economic and social upheaval but governments have a duty beyond “sealing the deal” to consider how they will protect the basic access to resources for everyone during transition in some form of rationing to prevent the poor being trampled as the rich adjust.

Copenhagen could (though I doubt it will) be the first step towards a steady state economy.  Recognising that this is the implication is important to prevent disaster during the transition and to maintain the required agreement.  Sleepwalking into the social and economic implications of transition will likely be more harmful than confronting them consciously.  For Copenhagen to be successful governments really need to wake up.

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