Low-carbon sector growth key to boosting national economies, study finds

Countries reliant on high carbon intensity (HCI) sectors such as utilities, manufacturing and transport will struggle to boost economic activity while reducing emissions, a new report has claimed.

Research conducted by Dr Baran Doda of the Grantham Research Institute on Climate Change and the Environment analysed data from 34 different sectors across 39 different rich and developing nations – including the UK, China, Brazil and the US – between 1995-2009.

It found that emission reductions in line with the global ambitions set through the Paris Agreement will be achieved by shrinking the size of HCI economies.


“The Paris Agreement means that sectors of the economy that have high carbon intensities will need to lower their emissions or shrink in size,” Doda said. “But the evidence is that economic sectors with low carbon intensities are more dynamic and growing, particularly in developing countries, and so have the potential to make up for the impacts on high-carbon-intensity sectors.”

According to Doda’s Tales from the tails report, emission reductions consistent with the Paris Agreement could be met by reducing economic activities across the globe. The study found that economic growth has pushed up emissions in all countries, but that recent changes from many big businesses has helped to constrain this increase.

However, the report notes that shrinking the economy isn’t a “viable option” for developing countries attempting to meet global climate goals. With this in mind, the report recommends that developing nations – which often have higher sector carbon intensities – should turn to the “high achievers” of the developed world to see what “lessons” can be adapted.

According to the study, business sectors with low carbon intensities (LCI) per output – such as finance, real estate and telecoms – are growing faster than the rest of the general economy of the 39 countries, and this should be used as evidence to kick-start a transition for developing countries dependent on HCI industries.

Developing countries face greater challenges in decoupling emissions and economic growth due to limiting – often geographical and resource-based – factors, but switching to a reliance on LCI’s would open new avenues to source higher-skilled workers to boost economies.

Doda noted that in countries such as Finland and Sweden, economic activity has “shifted towards business sectors that have low carbon intensities”, and that the use of a carbon price had led to a swifter decline of HCI reliance. During the timeframe of the study, both Finland and Sweden recorded “robust economic growth”.

“Climate change policies are unlikely to have been the prime reason for the trends identified in this study in all but a few northern European countries,” Doda added. “This is good news in the sense that climate change policies need only to help rather than reverse the profound economic changes that are occurring.”

Decoupling the UK

Various countries are making steady progress in achieving national carbon reductions whilst growing economies. The UK is among one of the 21 countries that has experience greenhouse gas (GHG) emission reductions whilst continually growing GDP, according to analysis in April.

Those figures for 2015 mark the first time that emissions have stalled while economic growth has increased, while data from the International Energy Agency (IEA) revealing that international energy-related emissions stalled for the second year running in 2015.

British construction firm Interserve is a prime example of an HCI sector business that is adapting to a low-carbon future by reducing absolute carbon intensity by an impressive 19% whilst simultaneously increasing revenue.

Alex Baldwin & Matt Mace

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