2 Ecological constraints of production opportunities and the growth path achievable by managing them

Up to now, the growth prospects of the global economy have not been hindered by the deteriorating condition of environmental components. Our ecological footprint 1.7 times the size of the Earth implies that either the capacities of the ecosphere and the level of non-renewable resource have not been assessed correctly, or that the unfavourable effects will appear later in time, thereby making the lives of our children and grandchildren more difficult. In such an ecological, social and economic system, in which human (economic) activity functions on Earth, the time required for feedback is long, and thus in the near future the decline in natural capital will represent an increasingly more significant constraint for production. Environmental factors not only may represent scarce resource as directly used inputs, the degradation (air pollution, extreme weather conditions resulting from global warming) of such factors may also reduce the available volume and quality of the other factors of production.

Looking ahead, according to an optimistic school, on the path of economic growth the degree of pollution follows an inverted U curve, referred to by the literature as the environmental Kuznets curve. This is essentially caused by three factors: production in larger volume alone increases pollution; however, in theory the process is sooner or later offset by the transformation of the structure of the economy, i.e. progress in the services sector and the pollutant emission rate will decrease as a result of innovations. Unfortunately, the data show that although in certain countries (including Hungary) the degree of pollution is declining in parallel with progress in development, this is mostly attributable to the cross-border outsourcing of polluting activities, i.e. the environmental Kuznets curve is not a global phenomenon.

Based on the literature and available estimates, the current economic growth path observed globally is not sustainable ecologically, since it takes place in conjunction with a drastic degradation of nature. With materialisation of the green scenario, a sustainable green economic pattern will become feasible, which does not necessitate curbing the economy. However, one essential condition for this is a boom in significant investments in clean technologies, reaching at least 2 percent of GDP. In the green growth scenario, real GDP may grow at an average annual rate of 4 percent until 2050. Such growth scenario may be supported by a productivity growth of around 2 percent. Meanwhile, due to the development of green industries, the CO2 emissions of the economy may decline from the present level of almost 37 billion tonnes to 20 billion tonnes. In the green growth scenario, by 2050, the ecological footprint will decline to 1.2 Earths, from the current 1.7. Thus, although the ecological needs of mankind still exceed the Earth’s capacity, substantial improvement could be achieved by taking the right steps.