Page 1 - Discussion Paper: Sustainability Dynamics of Resource Use and Economic Growth
P. 1
August 2015
The Energy and Resources Institute
Sustainability Dynamics
of Resource Use and
Economic Growth
A Discussion on Sustaining the Dynamic
Linkages between Renewable Natural
Resources and the Economic System
CONTENTS 1 Abstract
1
• Abstract 2 All economies of the world depend upon the use of renewable natural resources1
• Introduction 3 for their growth. This relationship inherently reflects that continued increase
• Research Methodology 6 in extraction of resources is a must to sustain economic growth. Inevitably, a
• Model Description 7 tipping point is reached from where the regeneration rates of the resources
• Analysis and Discussion 10 diminish due to depletion of the resource stock. The resource production
• Policy Testing 11 peaks and declines which lead to a delayed feedback on the economy, ultimately
• Conclusion 11 restricting its ability to grow and sustain its level of output. This discussion paper
• The Way Forward 13 demonstrates, with the help of system dynamics model, that this feedback from
• Bibliography 14 the decline of natural resources into the economic system would lead to economic
• Annexure 15 contraction much before the resources are completely exhausted. The paper
Extreme Conditions Test 16 provides useful insights through the modelling exercise by testing three of the
Sensitivity Runs 20 most popular policy choices to sustain economic growth: (i) Improving resource
Model Equations efficiency of the economy, i.e., dematerialization, (ii) Green Growth, represented
Full Model Structure here as Conserving/Restoring the resources, and (iii) Resource expansion due
to technological advancements or new discoveries. Simulation runs show that
Authors none of the policies are able to avoid overshoot of the economy although they
Mihir Mathur, Associate Fellow, TERI are successful in delaying the overshoot and fall. The model demonstrates the
Swati Agarwal, Research Associate, TERI counterintuitive outcomes of the above policy choices and makes a strong case
to promote empirical research on this subject using system dynamics.
Advisors
Dr Prodipto Ghosh, Distinguished Fellow, TERI Key Words: Green Growth, Resource Efficiency, System Dynamics, Sustainability,
Mr S Vijay Kumar, Distinguished Fellow, TERI Economics
The Energy and Resources Institute Introduction
Darbari Seth Block, IHC Complex,
Lodhi Road, New Delhi- 110 003 Sustainability of economic growth in a finite resource environment has long
Tel. 2468 2100 or 4150 4900 been questioned and acknowledged as a complex issue. (Forrester 1971;
Fax. 2468 2144 or 2468 2145 Meadows et al. 1972; Meadows et al. 1974). Complexity arises because of
India +91 Delhi (0) 11 potential non-linearities in the relationships among economic and ecological
variables (Hoffman 2010). Limited understanding of such complex relationships
www.teriin.org
1 Renewable Natural Resources, such as forest, ground water, and fisheries. Energy is excluded
for the purpose of this study.
The Energy and Resources Institute
Sustainability Dynamics
of Resource Use and
Economic Growth
A Discussion on Sustaining the Dynamic
Linkages between Renewable Natural
Resources and the Economic System
CONTENTS 1 Abstract
1
• Abstract 2 All economies of the world depend upon the use of renewable natural resources1
• Introduction 3 for their growth. This relationship inherently reflects that continued increase
• Research Methodology 6 in extraction of resources is a must to sustain economic growth. Inevitably, a
• Model Description 7 tipping point is reached from where the regeneration rates of the resources
• Analysis and Discussion 10 diminish due to depletion of the resource stock. The resource production
• Policy Testing 11 peaks and declines which lead to a delayed feedback on the economy, ultimately
• Conclusion 11 restricting its ability to grow and sustain its level of output. This discussion paper
• The Way Forward 13 demonstrates, with the help of system dynamics model, that this feedback from
• Bibliography 14 the decline of natural resources into the economic system would lead to economic
• Annexure 15 contraction much before the resources are completely exhausted. The paper
Extreme Conditions Test 16 provides useful insights through the modelling exercise by testing three of the
Sensitivity Runs 20 most popular policy choices to sustain economic growth: (i) Improving resource
Model Equations efficiency of the economy, i.e., dematerialization, (ii) Green Growth, represented
Full Model Structure here as Conserving/Restoring the resources, and (iii) Resource expansion due
to technological advancements or new discoveries. Simulation runs show that
Authors none of the policies are able to avoid overshoot of the economy although they
Mihir Mathur, Associate Fellow, TERI are successful in delaying the overshoot and fall. The model demonstrates the
Swati Agarwal, Research Associate, TERI counterintuitive outcomes of the above policy choices and makes a strong case
to promote empirical research on this subject using system dynamics.
Advisors
Dr Prodipto Ghosh, Distinguished Fellow, TERI Key Words: Green Growth, Resource Efficiency, System Dynamics, Sustainability,
Mr S Vijay Kumar, Distinguished Fellow, TERI Economics
The Energy and Resources Institute Introduction
Darbari Seth Block, IHC Complex,
Lodhi Road, New Delhi- 110 003 Sustainability of economic growth in a finite resource environment has long
Tel. 2468 2100 or 4150 4900 been questioned and acknowledged as a complex issue. (Forrester 1971;
Fax. 2468 2144 or 2468 2145 Meadows et al. 1972; Meadows et al. 1974). Complexity arises because of
India +91 Delhi (0) 11 potential non-linearities in the relationships among economic and ecological
variables (Hoffman 2010). Limited understanding of such complex relationships
www.teriin.org
1 Renewable Natural Resources, such as forest, ground water, and fisheries. Energy is excluded
for the purpose of this study.
