Page 7 - Discussion Paper: Sustainability Dynamics of Resource Use and Economic Growth
P. 7
Discussion Paper
Base run outcomes confirm our postulates that resources Policy Testing
with a defined carrying capacity pose binding constraints on
economy’s growth, once these constraints are reached the Policies which often surface as popular solutions to sustain
GDP will peak and decline and that this decline would happen economic growth and conserve the environment are tested
much after the resources have crossed their irreversible and enumerated in Figures 5, 6, 7, 8, and 9. They are:
threshold. 1) Improving resource efficiencies i.e. more economic
Inflationary Pressure and Demand Correction output per unit of resource
2) Improving resource efficiency and Restoration of
As shown in Figure 4 the demand for goods in the economy
keeps growing even while the production of goods falls. resources, i.e., green growth
This creates a gap between demand and supply of goods 3) Green growth and expansion of resource base due
due to which inflationary pressure starts to build up.
This results in growing GDP due to rising prices, despite to technology advancements or new discoveries, i.e.,
decreasing production. This is depicted in Figure 3 through increase in the stock of resources
the spike in GDP. A persistent rise in prices would result in
demand correction. This results in an overall contraction in Policy 1: Improved Resource Efficiency
the GDP due to demand correction and falling production.
The economy then moves to a state of reduced demand, Model Parameters for Testing Resource Efficiency Policy
reduced production, and a depleted resource stock. This Economy’s Growth Rate = 1% to 7%
is a situation where the enterprises become unprofitable, Resource Intensity of Economy = reduced to 0.5 kg/rupee
unemployment increases, and resources are in their degraded from 1 kg/rupee
state. It is not a desirable state for any economic and Natural Resource Regeneration Rate = 2%
social system.
The scenario models outcomes of an intervention which
While there exist policies which aim at preventing such results into increase in resource efficiency of the economy by
a situation, this paper tests the potential of three key policy 50%. This implies that the economy will consume half the
measures and analyses if they are able to avoid the overshoot resources compared to the base case. The result shows that the
and fall of economy and resources. economy would grow more and for a relatively longer duration
as compared to the base case (Figures 5 and 6). The GDP of
the economy nearly doubles against the base case scenario
while its peaking gets delayed. However, the four phases of
growth and collapse remains the same. This shows that while
Figure 4: Demand Supply Gap and Demand Correction
Source: TERI Research
AUGUST 2015 7
Base run outcomes confirm our postulates that resources Policy Testing
with a defined carrying capacity pose binding constraints on
economy’s growth, once these constraints are reached the Policies which often surface as popular solutions to sustain
GDP will peak and decline and that this decline would happen economic growth and conserve the environment are tested
much after the resources have crossed their irreversible and enumerated in Figures 5, 6, 7, 8, and 9. They are:
threshold. 1) Improving resource efficiencies i.e. more economic
Inflationary Pressure and Demand Correction output per unit of resource
2) Improving resource efficiency and Restoration of
As shown in Figure 4 the demand for goods in the economy
keeps growing even while the production of goods falls. resources, i.e., green growth
This creates a gap between demand and supply of goods 3) Green growth and expansion of resource base due
due to which inflationary pressure starts to build up.
This results in growing GDP due to rising prices, despite to technology advancements or new discoveries, i.e.,
decreasing production. This is depicted in Figure 3 through increase in the stock of resources
the spike in GDP. A persistent rise in prices would result in
demand correction. This results in an overall contraction in Policy 1: Improved Resource Efficiency
the GDP due to demand correction and falling production.
The economy then moves to a state of reduced demand, Model Parameters for Testing Resource Efficiency Policy
reduced production, and a depleted resource stock. This Economy’s Growth Rate = 1% to 7%
is a situation where the enterprises become unprofitable, Resource Intensity of Economy = reduced to 0.5 kg/rupee
unemployment increases, and resources are in their degraded from 1 kg/rupee
state. It is not a desirable state for any economic and Natural Resource Regeneration Rate = 2%
social system.
The scenario models outcomes of an intervention which
While there exist policies which aim at preventing such results into increase in resource efficiency of the economy by
a situation, this paper tests the potential of three key policy 50%. This implies that the economy will consume half the
measures and analyses if they are able to avoid the overshoot resources compared to the base case. The result shows that the
and fall of economy and resources. economy would grow more and for a relatively longer duration
as compared to the base case (Figures 5 and 6). The GDP of
the economy nearly doubles against the base case scenario
while its peaking gets delayed. However, the four phases of
growth and collapse remains the same. This shows that while
Figure 4: Demand Supply Gap and Demand Correction
Source: TERI Research
AUGUST 2015 7
