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The price is right: Modeling economic growth in a zero-emission society

Pollution from manufacturing is now widespread, affecting all regions in the world, with serious ecological, economic, and political consequences. Heightened public concern and scrutiny have led to numerous governments considering policies that aim to lower pollution and improve environmental qualities. Inter-governmental agreements such as the Paris Agreement and the United Nations’ Sustainable Development Goals all focus on lowering emissions of pollution. Specifically, they aim to achieve a “zero-emission society,” which means that pollution is cleaned up as it is produced, while also reducing pollution (This idea of dealing with pollution is referred to as the “kindergarten rule.”)

Of course, any efforts to achieve this goal require monetary investment and changes to manufacturing strategies, which, many worry, could hurt the economy. Now, a modeling study conducted by researchers from Tokyo University of Science and The Shoko Chukin Bank, Japan, published in the Journal of Cleaner Production, shows that it is possible to achieve economic growth simultaneously with environmental preservation. “There are existing models that look at how economies fluctuate under various conditions, such as differing environmental quality or tax rates, but these models haven’t examined the effects of implementing the kindergarten rule,” Prof. Hideo Noda, the study’s lead author, explained. “So we thought it was important to extend the model and include a condition where the hypothetical society spends a part of its GDP to achieve zero emissions. Looking at emissions is also more tangible and easier to grasp than a vaguer concept of ‘environmental quality.'”

The researchers used an economic model that allows for movement back and forth between two stages: a no-innovation phase and an innovation phase. The key to this model is the importance of innovation; previous models that focus on the environment and the economy did not account for innovation (e.g., research and development) as a major driver of economic growth in most developed nations. Acknowledging this connection is essential for improving our knowledge regarding how environmental problems and economic growth are linked.

When researchers included rules for the zero-emission society, the model indicated that it was compatible with economic growth (i.e., a sustained GDP growth), despite a portion of the GDP being dedicated to reducing pollution. For this to work, however, the model says that the GDP needs to be above a certain level. Additionally, the amount of GDP allocated to lowering pollution must be flexible. Researchers also observed that under the no-innovation phase, GDP growth is higher and the amount spent on pollution reduction decreases faster. In contrast, under the innovation phase, GDP growth is lower and the decrease in amount spent combating pollution is also slower.

According to Prof. Noda, this work provides important theoretical groundwork for policy, because currently, the relationship between zero emissions and economic growth isn’t well understood. “Yet, this topic is extremely relevant to any policy push for sustainability–for example, one section of the UN’s Sustainable Development Goals explicitly focuses on economic growth,” he explains. “Our model should help persuade the leaders of some countries that it is feasible to reduce emissions without tanking the economy.”

That, Prof. Noda hopes, may in turn make leaders more eager to implement the changes that are urgently needed to address global environmental crises like climate change.

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About The Tokyo University of Science

Tokyo University of Science (TUS) is a well-known and respected university, and the largest science-specialized private research university in Japan, with four campuses in central Tokyo and its suburbs and in Hokkaido. Established in 1881, the university has continually contributed to Japan’s development in science through inculcating the love for science in researchers, technicians, and educators.

With a mission of “Creating science and technology for the harmonious development of nature, human beings, and society”, TUS has undertaken a wide range of research from basic to applied science. TUS has embraced a multidisciplinary approach to research and undertaken intensive study in some of today’s most vital fields. TUS is a meritocracy where the best in science is recognized and nurtured. It is the only private university in Japan that has produced a Nobel Prize winner and the only private university in Asia to produce Nobel Prize winners within the natural sciences field.

Website: https://www.tus.ac.jp/en/mediarelations/

About Professor Hideo Noda from Tokyo University of Science

Dr. Hideo Noda is a Professor at the Department of Business Economics, School of Management at Tokyo University of Science. Prof. Noda has a PhD in Economics from Kyushu University, Japan. He is the sole author of this paper, and has over 40 research publications to his credit. His chief research areas include economic growth, infrastructure management, and work-life balance.

Funding information

This study was supported in part by a Grant-in-Aid for Scientific Research (C) (20K01639) from the Japan Society for the Promotion of Science.

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