Thumbnail Image

Digitalization and Growth Independence: Utilizing Technologies for Environmental and Economic Resilience

Lange, Steffen

ECDF Working Paper Series

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.