Should we choose between degrowth and green growth?

To understand the different decarbonisation paths available to us, we can refer to the Kaya equation[1] used by the IPCC to establish its emissions scenarios.

Total CO2 emissions = (Population) X (Income per person) X (CO2 emissions per USD of income)

The Kaya equation mathematically expresses the fact that we have three levers to decarbonise:

  1. Reduce population
  2. Reduce per capita income (degrowth)
  3. Reducing energy intensity (green growth)[2]

Reducing population: a forgotten lever

The “population” variable in the equation hardly appears in the public debate. There are two ethical explanations for this. The first is that talking about population reduction is often interpreted as a desire to control births, which is contrary to our vision of our fundamental freedoms. The second is that anyone who ventures into this area runs the risk of being seen as “the rich man who wants the poor to have fewer children”.

These pitfalls prevent a constructive reflection on the subject, and this can only be regretted. In fact, the birth rate is closely linked to the standard of living and education of populations, which means that ambitious policies to combat poverty or education (particularly for women) are excellent ways of reducing future emissions.

Degrowth: an essential, courageous and sensitive lever

Although there are countless definitions, what is commonly called degrowth corresponds to the second lever in our equation: reducing per capita income. For rich countries, this means moving towards a form of sobriety. We have enough indicators[3] to understand that this lever is essential.

Some of the actions that fall under the heading of sobriety are fairly consensual (few people would dispute that they can live an equally fulfilling life with half as many T-shirts in their wardrobes). Others, on the other hand, are much more problematic because they call into question our comfort or our way of life (what percentage of the population is prepared today to give up their car or leisure air travel?)

Because it is difficult to give up an income or an asset, it takes courage to move towards degrowth. A real debate on sobriety seems unlikely today, as it clashes with the debate on inequalities. In the light of the climate, the lifestyles of the elites (who are high emitters) are becoming even more difficult to accept for the working classes. As the exemplarity of the elites is a sine qua non condition, it is difficult to build a consensual society in which everyone would agree to make their share of the effort to move towards sobriety. At the country level, the tensions that arose during the COPs between the “countries of the South” and the “countries of the North” on what constitutes a fair energy transition make things even more complex.

It is because we are not collectively ready to embark on the path of degrowth that the most pessimistic believe that it will be suffered more than chosen.

Green growth: the main lever

Green growth is currently controversial. For some, it is merely an excuse to postpone the efforts required for degrowth. A sort of macroeconomic greenwashing. We believe that this simplistic view is wrong.

Using Kaya’s equation, let us remember that the third lever consists of reducing CO2 emissions per unit of GDP, i.e. “doing as much with less”, in other words: increasing the efficiency of each unit of energy deployed.

In 2021, the IEA[4] for the first time devoted a report to energy efficiency (EE), arguing that improving EE is a necessary step in the transition to a net-zero economy. The report also stressed that 80% of the gains from EE over the next decade would be translated into lower prices for consumers. In other words, investments in energy efficiency can redistribute purchasing power and should be at the forefront of the measures to be taken for a just transition.

Green growth, when it is synonymous with energy efficiency, is therefore not only indispensable in our net zero trajectory, but it is also an effective means of combating emissions and has a short-term impact on consumers’ wallets. Its relevance in the fight against global warming and inequalities would make green growth based on energy efficiency a unifying project for populations with good chances of success.

For investors, it is therefore doubly relevant to identify companies that offer products or technologies that contribute to green growth. On the one hand, these companies are part of the solution for a socially just and efficient energy transition, which makes them excellent “ethical” investments. On the other hand, the prospects for these companies are excellent because of the climate emergency.

Our thematic strategies on renewable energy and energy transition are strongly exposed to companies in the field of energy efficiency in a wide range of sectors, from construction (thermal insulation, heat pumps, etc.) to electronics (new generation chips to reduce consumption).


[1] Named after the Japanese economist Yoichi Kaya.

[2] Energy consumption in relation to GDP is commonly referred to as energy intensity.

[3] For example, Earth Overshoot Day which was 28 July last year.

[4] IEA – International Energy Agency