The More Complex the Economy, the Smaller the Ecological Footprint, Economists Have Found Out

11:22, December 14, 2023

According to scientists, a 1% increase in the first indicator leads to a 0.017-0.021% decrease in the second one

Economists have found out that the more complex the economy of a country is (depending on the diversity of products and the development of the state's production potential), the higher the consumption of clean energy and the better the state of the environment are. Experts from Russia, Lebanon, India, Malaysia and Turkey reached this conclusion in the result of analyzing various factors affecting the ecological footprint. Data from the world's 50 largest economies for 1990-2018 were studied. The results of the study were published in the journal Environment, Development and Sustainability. The work was financially supported by the Russian Science Foundation (project No. 23-18-01065).

"Countries with large production potential heavily rely on the use of traditional energy sources in pursuit of inclusive growth, which leads to faster depletion of natural resources, environmental degradation and an increased ecological footprint. Policies aimed at maintaining sustainable economic growth can solve these problems," believes Shujaat Abbas, co-author of the study and researcher at the UrFU School of Economics and Management. 

The researchers believe that the increasing complexity of the production process, respectively the economy, plays an important role in the structural transformation, development, and introduction of new technologies. This, along with the use of renewable energy sources, ensures the transition to a "green economy" and reduces the harmful effects of anthropogenic activities (including the effects of mining, and accumulation of industrial waste) on the environment. In addition, the authors linked environmental degradation to the Ecological Footprint Index, which is a comprehensive definition of environmental quality. 

"A 1% increase in a country's economic complexity score leads to a 0.017-0.021% decrease in its ecological footprint. Consequently, the higher the level of economic complexity of a country is, the greater the prospects for improving environmental quality is. This is because a country's economic sophistication indicator implies the development and use of environmentally friendly technologies and the production of environmentally friendly goods," explains Shujaat Abbas.

Experts also highlighted renewable energy, economic growth, and population growth among the main factors influencing environmental sustainability in countries with complex economies. Thus, the use of renewable energy sources helps to reduce the ecological footprint and ensure environmental sustainability. Population growth in high-income countries together with the development of technology can have a favorable impact on the environment due to a more conscious attitude of people to environmental issues.

"The results also confirmed the Kuznets environmental curve and showed that the reduction of the ecological footprint is facilitated by the growth of the economy from a certain level - reaching the GDP per capita threshold. This indicates that a sufficiently high level of economic development leads to a reorientation of countries in favor of using low-carbon energy sources and the development of the service sector, which consumes less energy compared to other sectors, such as agriculture and manufacturing," adds Oleg Mariev, co-author of the study and Head of the Department of Economics at UrFU. 

The researchers believe that it is necessary to tighten legislative measures in the field of environmental regulation, stimulate an increase in the economic complexity and sophistication of production, as well as the use of renewable energy sources to minimize the negative impact on the environment. This could not only help meet the population's growing demand for energy but also reduce the ecological footprint worldwide. 

Reference

Economic complexity is the degree of product diversity and the sophistication of a country's productive capacity. Countries with high levels of complexity have a range of capabilities and are therefore able to produce a highly diversified set of products.

Ecological footprint is a measure of human impact on the environment that calculates the amount of natural resources used by a country's population to produce products and eliminate waste under existing management schemes and extraction technologies. A high ecological footprint indicates a low level of environmental conditions.

Anna Marinovich