Digitalization and Growth Independence: Utilizing Technologies for Environmental and Economic Resilience [original]

ECDF

WORKING PAPER

SERIES

#004

Digitalization and

Growth Independence:

Utilizing Technologies

for Environmental and

Economic Resilience

Steffen Lange

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This discussion paper has been developed within the project “Digitalization for Sustainability

– Science in Dialogue” (D4S), in cooperation with the European Environmental Bureau

(EEB). The D4S project is coordinated by Prof. Dr. Tilman Santarius and his team at the

Einstein Center Digital Future and the Technical University of Berlin, Department of Social

Transformation and Sustainable Digitalization. The research conducted within D4S is

dedicated to develop a progressive vision for a digitalization that fosters environmental and

social sustainability. At the core of the research network stands a group of 15 renowned

experts, consisting of European researchers as well as practitioners representing a variety

of institutions and schools of thought. The D4S project is funded by the Robert Bosch

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More information:

digitalization-for-sustainability.com

Citation: Steffen Lange (2022): Digitalization and Growth Independence: Utilizing

Technologies for Environmental and Economic Resilience. ECDF Working Paper Series

#004, Berlin. https://doi.org/10.14279/depositonce-16550

DOI: 10.14279/depositonce-16550

Author(s) for this issue: Steffen Lange

Reviewer for this issue: Prof. Dr. Tilman Santarius, Prof. Prof. Dr. Philipp Staab

Lizenz:

This work is licensed under a Creative Commons Attribution 4.0 International License.

Digitalization and growth independence: Utilizing technologies for

environmental and economic resilience

Policy Paper for the D4S-Network

November 30th 2022

Steffen Lange

Abstract

The past years have recurrently seen crises linked to economic recessions – prominently the

Covid-19 pandemic, Russia’s war in Ukraine and the impacts of climate change. Economies

need to be made resilient to such recurring turmoils and recessions. In parallel, sustainability

strategies should not rely solely on decoupling emissions and resource consumption from

economic growth. The necessary speed of transformation to limit climate change and

biodiversity loss makes it questionable whether decoupling alone can suffice.

This report shows that digital technologies are no game changer in facilitating sufficient

decoupling and green growth for a combination of reasons: their low energy efficiency

improvements and substantial environmental footprints as well as the limited substitution of

digital services for physical goods and rebound and induction effects.

The report further explores how digitalization can be utilized for sustainability, resilience

and growth independence. Two aspects are of central importance. First, making growth-

dependent institutions independent of economic growth becomes even more essential as digital

technologies put pressure on employment and the financing of the welfare state. Second, digital

technologies can help in realizing sufficiency strategies such as substitution, sharing, second-

hand, repairing and subsistence.

A combination of macroeconomic and sectoral policies could guide digital innovations towards

growth-independent, sufficient and resilient economies. Policies need to include a change in

the relative prices of resources and energy vs. labour, multiple instruments for each economic

sector, a strong welfare state and new actors who develop and design digital technologies.

Steffen Lange is senior researcher at the Technical University Berlin and the University

of Münster, as well as affiliated scholar of the Resource Economics Group at the

Humboldt University. His research focuses on the digital transformation, the relationship

between economic growth and environmental consumption and concepts for sustainable

economies. As an economist he combines quantitative and qualitative empirical research

with theoretical and conceptual methods to address sustainability issues.

TABLE OF CONTENTS

Abstract 3

1 Introduction 5

2 Digital green growth? 6

2.1 Efficiency and substitution smaller than expected 8

2.1.1 Efficiency 8

2.1.2 Substitution and sectoral change 9

2.2 Digital footprint and rebound effects 9

2.2.1 Environmental footprint of digital devices 10

2.2.2 Rebound and induction effects 10

3 Digital economies beyond growth 11

3.1 Growth independent institutions in the digital age 11

3.1.1 Employment 12

3.1.2 Social welfare system 13

3.2 Sufficiency potentials of digitalization 13

3.2.1 Digital substitution 14

3.2.2 Digitally enhanced sharing 15

3.2.3 Online second-hand 15

3.2.4 Know-how for repairing 16

3.2.5 Prosuming and subsistence 16

4 Policies for redirecting digital technologies 17

5 Conclusion 19

6 Acknowledgement 20

7 References 21

5 Introduction

1 INTRODUCTION

In November 2019, the newly elected president of the European Commission, Ursula von

der Leyen, argued in her inaugural speech for a twin transition in Europe. The two twins

are the digital and the sustainability transitions, which need to take place simultaneously

over the coming years.

This twin transition is usually regarded as part of a green growth strategy: “Accelerating the

twin green and digital transitions will be key to building a lasting and prosperous growth, in

line with the EU’s new growth strategy” (European Commission, 2022, p. 7). Green growth

means that economic growth and environmental sustainability can be reconciled (Ekins,

2017). However, achieving sustainability while continuously growing economically in the

countries of the Global North is arguably unlikely to be feasible (Hickel & Kallis, 2019;

Parrique et al., 2019) and the efficiency improvements necessary to reconcile economic

growth with the rapid decline in greenhouse gas emissions are argued to be unrealistic

(Kuhnhenn et al., 2020). In addition, strategies that rely entirely on technological fixes

may solve one environmental problem but induce new ones as, for example, electric cars

reducing greenhouse gas emissions but requiring copious raw materials (Kallis, 2011).

Digital technologies are often regarded as a game changer in facilitating decoupling

and green growth. The central strategy is to improve energy efficiencies by using digital

tools: Supposedly, robots make manufacturing more energy efficient (Riazi et al., 2017),

smart coordination reduces the energy needed in transportation (GeSI & Deloitte, 2019)

and smart farming uses pesticides and fertilizers in a more targeted and, hence, more

efficient way (Balafoutis et al., 2020). In addition, digital possibilities are seen as facilitating

the replacement of environmentally harmful goods by less harmful digital services – e.g.,

replacing travel by video-conferencing (Santarius et al., 2022).

However, the question remains, can digital technologies indeed facilitate green growth?

Section one covers a debate on the empirical insights as well as theoretical explanations

of the relationship between digitalization and sustainability. The result: Empirical evidence

suggests that digitalization has led neither to strong economic growth nor to reduced energy

consumption or substantially less greenhouse gas emissions. The reasons are complex

and manifold. For one, digital tools do not bring about the energy efficiency improvements

hoped for and the substitution of digital services for physical goods has so far been limited.

At the same time, digital technologies bring additional energy consumption due to the

environmental footprint of the digital devices themselves, as well as rebound and induction

effects.

If green growth is not feasible, and digital technologies cannot strengthen its feasibility,

alternative approaches are needed. The Organization for Economic Co-operation and

Development (OECD) has recently published the report Beyond growth, which combines

the goals of environmental sustainability with those of well-being and economic resilience

(Jacobs, 2020). If green growth is unsure or even unlikely (Parrique et al., 2019), European

economies need to be prepared to function without economic growth (Seidl & Zahrnt, 2012;

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