I always squirm a little when I hear the term “decoupling”, so I thought it would be useful to explain decoupling and why it can be misleading.
Definitions are important
Relative decoupling happens when emissions per unit economic activity go down, each dollar of economic activity requires less emissions. Relative decoupling is the norm, it happens almost everywhere, and is a consequence of the steady upward march of economic growth, and its relationship with productivity growth (efficiency gains) and structural change (more services).
Absolute decoupling is when emissions go down, while the economy grows. This is currently happening in many developed countries. Absolute decoupling is a subset of relative decoupling, and it indicates emissions are declining.
The problem with relative decoupling is that emissions can still grow strongly depending on the level of economic activity.
China has also had relative decoupling for decades, while maintaining strong emissions growth. The only significant exception is in the early 2000’s the coal renaissance). If China maintains the same relative decoupling it may lead to a peak in emissions (absolute decoupling) simply because of slower GDP growth.
Absolute decoupling is the more relevant and interesting, but when people say “decoupling” it is hard to know what they mean.
Are you a tad confused?
The Kaya Identity
I have discussed the Kaya Identity before, and in the context of decoupling it is a very important concept. It is like a physical law, you can’t escape its realities.
The Kaya identity relates CO₂ emissions, economic activity (Gross Domestic Product, GDP), and their ratio the emission intensity (CO₂/GDP), in one simple equation:
CO₂ = GDP × Intensity
In terms of growth rates or percentage changes (Δ), you can just add them together:
ΔCO₂ = ΔGDP + ΔIntensity
When we discuss relative decoupling, we are talking about the emission intensity, and as shown above, it generally gets smaller over time (negative growth rate).
Despite the simplicity of this equation, it is a little tricky to explain as there are basically three moving parts (CO₂, GDP, Intensity). A bit like the three-body problem in physics, but not as complex…
To simplify things, I will consider two cases.
Constant GDP growth of 2% per year
If GDP growth is constant, 2% per year, then the emission intensity will determine the emissions. The numbers in the following list refer to specific lines in the following figure.
- If the intensity does not change at all (zero growth rate), then the CO₂ will grow at 2% per year (the same as GDP). Above this line (red area) would mean the emission intensity is increasing and we are coupling.
- If the emission intensity declines at 2% per year, then the emissions will be flat. If the emission intensity declines are between 0% per year and 2% per year (yellow area), then emissions will continue to grow. We have relative decoupling, but not absolute decoupling.
- If the emission intensity declines at 4% per year, then emissions decline at 2% per year. If the emission intensity declines are between 2% per year and 4% per year (green area) or above (white area) then we have relative and absolute decoupling. This is our goal.
Constant emission intensity declines of 2% per year
If emission intensity declines are constant at 2% per year, we always have relative decoupling, then the economic activity (GDP) will determine the emissions. The numbers in the following list refer to specific lines in the following figure.
- If the GDP grows at 4% per year then emissions grow at 2% per year. Above this line (red area) we still have relative decoupling, but we have strong emission growth.
- If the GDP grows at 2% per year, then the emissions will be flat. This means that growth in GDP is balanced with improvements in emission intensity, the situation we have today! For GDP growth between 2% per year and 4% per year (yellow area), emissions will grow between 0% per year and 2% per year. We have relative, but not absolute decoupling.
- If the GDP growth is 0% per year (no growth), then we have declining emissions. If the GDP grows between 0% per year and 2% per year (green region), then emissions decline at between 0% per year and 2% per year. This is relative and absolute decoupling.
What does this all mean in the real world?
The examples are somewhat abstract, but represent typical numbers in the real world.
The Kaya Identity shows the empirical trade-off between economic (GDP) growth and emission reductions. The higher your GDP growth, the harder it is to reduce emissions (for a given relative decoupling). The higher your emission reductions, the harder it is to grow the economy (for a given relative decoupling). The trade-off can be reduced, by increasing the relative decoupling.
What is happening in the real world?
Using this approach, we can look at the recent slowdown in global CO2 emissions using the Kaya Identity in the following figure.
Carbon dioxide emissions have been growing the last decades because GDP growth (green) has exceeded the relative decoupling from declines in emission intensity (purple), apart from the global financial crisis.
In the last three years, we have had lower GDP growth (green) compared to the last decade (except the financial crisis) and a return to stronger relative decoupling (purple), and combined, this has helped lower emissions growth.
We now have near zero growth in emissions, meaning that the growth in GDP is balanced by the declines in emission intensity.
If the global economy grew at 5% per year as in the 2000’s, then emissions would still be growing today (all else equal).
It is important to remember the role that weaker GDP growth has played in the current slowdown in emissions growth, even though we have had some positive progress on relative decoupling.
I have a much more detailed discussion on recent changes in emissions here, including discussion on key countries.