The race is on: Growing economy, shrinking resources

The race is on: Growing economy, shrinking resources


The economy and the environment have
always been linked but understanding these linkages has become increasingly
important as economic growth places greater demands on the worlds natural
environment and results in the use of more and more of the world’s natural
resources. One angle to consider relates to climate change and the notion of a
finite carbon budget. To guard against the risks of severe and irreversible
climate change scientists have estimated an all-time budget for global carbon
emissions to have a reasonable chance to limit an increase in average global
temperature to two degrees centigrade. Rewind back to 1700 before the
Industrial Revolution and this budget was virtually unused and the global
economy was tiny compared to today and barely growing. By the time of the first
moon landing in 1969 we had used just under a quarter of this carbon budget. Since
the moon landing as we have experienced significant economic growth we have used
around an additional 50% of the total budget, meanwhile the global economy has
grown more than a hundred times in size since 1700. So while estimates of the
total budget can vary we now only have around one quarter left with an economy
that’s become many times larger. If emissions continue at the same rate
as today our all-time budget may expire within the next 20 years or so
increasing the risk of severe and irreversible changes.
At the Bank of England we have a responsibility to maintain a stable
financial system, so an important part of our role is to better understand how
climate change affects the global economy and you risks to financial
stability and how to support a smooth transition to a greener economy

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