Trade offs between GDP growth and wider well being outcomes across the three recovery pathways

26  COM/ENV/EPOC/IEA/SLT(2020)4/REV2

Trade-offs between GDP growth and wider well-being outcomes across the three recovery pathways

While it is beyond the scope of this paper to provide a quantitative assessment of how different policies may impact GDP growth or well-being indicators, this section provides in Figure 5 an illustration of the potential trade-offs between GDP growth and the achievement of wider-well-being benefits across the Rebound, Decoupling and Wider well-being pathways. In summary, these trade-offs are:  Rebound, while leading to GDP growth (Figure 5, panel A), does not prioritise early climate mitigation or other environmental aspects, nor does it explicitly or coherently aim at well-being improvements. Recovery measures in line with this pathway are likely to lead to increased CO2 emissions over the coming decades, and may lead to the deterioration of well-being indicators (e.g. because GDP growth delivers its benefits unequally, Figure 5, panel B). Moreover, in ensuring GDP growth (Figure 5, Panel A), and considering that not all economic output components resulting in GDP correlate with well-being outcomes (Weitzman, 1976[29]; Van den Bergh, 2011[39]; Stiglitz, Fitoussi and Durand, 2018[30]; Haberl et al., 2020[22]), measures in line with Rebound may not guarantee the achievement of well-being benefits.  Decoupling, by ensuring absolute decoupling between economic activity and CO2 emissions, guarantees that CO2 emissions will decrease over time with growing economic activity. This decoupling however does not ensure CO2 emission reduction rates at the scale and pace needed to achieve internationally agreed climate goals. In ensuring GDP growth (Figure 5, Panel A), through measures that would aim at greening sectors of the economy, measures in line with Decoupling aim at the achievement of some well-being benefits, but not in a systematic manner. Such an approach could lead therefore to the deterioration of some well-being indicators (Figure 5, Panel B), while still resulting in GDP growth (Figure 5, Panel A).  By not targeting GDP growth as such, Wider well-being may yield positive, negative or neutral impacts on GDP, while still having a positive impact on key economic components of well-being such as income and jobs (Figure 5, Panel A). By focusing on exploiting the synergies and managing the trade-offs between early climate mitigation policy and well-being outcomes, Wider-well-being may lead to more rapid CO2 reductions than seen historically (Figure 5, Panel A and B).

Figure 5. Conceptual trade-offs between GDP and wider well-being across the three stylised pathways

Note: The Decoupling pathway, as conceptualised in this discussions document, encompasses measures that envisage the absolute decoupling between GDP and CO2 emissions. Source: Authors.