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ABSTRACT
Several scholars and policy-makers have claimed that Europe, and Western Europe in particular, has managed to ‘decouple’ economic growth from material use. We identify and address one major limitation in the existing literature – failure to take the endogeneity of economic growth into account. Based on a panel data-set of 32 European countries from 2000 to 2014, we estimate the causal impact of gross domestic product (GDP) on domestic material consumption (DMC) applying an instrumental variable approach. We use the number of storm occurrences as an instrument for GDP, which we show is both relevant and valid. Our results provide new evidence that increasing the GDP growth rate causes the DMC growth rate to increase for Western Europe, whereas the effect is insignificant for the Eastern European economies and Europe as a whole. As our results partly question current wisdom on the achievements of ‘decoupling’, especially among European policy-makers, we offer two explanations that are consistent with these results.
Acknowledgments
The authors would like to thank Raimund Bleischwitz, Matthieu Glachant, Frank Pothen, Sandy Skelton, Simone Cooper, Manfred Rosentock, Jun Rentschler, and all participants of the Sino-European Circular Economy and Resource Efficiency (SINCERE) project seminars in October 2015 in Shanghai and September 2016 in Paris for their valuable contributions and suggestions. The comments of two anonymous reviewers significantly improved the paper. All remaining errors are entirely ours. Söderberg acknowledges financial support from ANR [ANR-14-ORAR-0001]. Agnolucci acknowledges financial support from ESRC [ES/L015838/1].
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. Other researchers, however, oppose this view since materials are typically measured in weight and aggregated across material types, leading to a biased and imprecise measure of specific environmental pressures (Cleveland and Ruth Citation1998; Voet, Oers and Nikolic Citation2005a). These considerations do not limit the significance of our analysis, because such studies (1) fail to include the temporal effect of material use on the environmental across time, (2) the composition of material use is unlikely to change substantially across our sample, thus not significantly affecting the results of our model which includes country fixed effects, and (3) are often interested in specific environmental pressures, whereas our analysis considers general effects.
2. DMC measures the total amount of materials directly used within an economy. It comprises biomass, metals, minerals, and fossil fuels and is defined as the quantity (in terms of weight) of domestically extracted raw materials, plus direct material imports minus direct material exports (EC Citation2015a).
3. A list of the countries can be found in .
4. Such measures include total deaths, number of people affected, damages in dollars, and a count variable on the number of storm occurrences.
5. Some studies find a positive relationship between natural hazards and economic activity which is often linked to reconstruction efforts and the long term (Cavallo et al. Citation2013; Noy and DuPont Citation2016).
6. The storm killed 53 people, affected more than 500,000 people nation-wide, and caused more than USD 4.2 billion worth of damages (EM-DAT database). Approximately half of the damages were insured, the rest had to be borne privately, suggesting a reduction in long-term consumption of affected households assuming Modigliani's life-time consumption smoothing hypothesis. Workers were prevented from going to work, electricity supply was cut for over a million homes and the train infrastructure was damaged. The storm triggered a major flood in Charente-Maritime, which had a number of impacts: oyster farms (a major employer in the area) were destroyed, the tourism sector suffered, and productivity of agricultural land (including wine production) was affected by salty sea water (Lumbroso and Vinet Citation2011; Genovese and Przyluski Citation2013).
7. In the case of the number of storm occurrences, we take the natural logarithm after adding one to avoid missing values caused by this transformation.
8. Alternative indicators, for instance, Raw Material Consumption, are only available for the EU-aggregate and a few individual countries for a limited time period and without a standardised calculation method. Similar limitations apply to the indicator Total Material Requirement or comparable material footprint data.
9. An overview of the country groupings is shown in . There is no universally agreed definition of Western Europe. We consider Western Europe to be those countries that neither have been part of the Soviet Union nor Yugoslavia, as those countries have not been integrated into the free-market economies of the West. Turkey is considered part of Eastern Europe. Finland, Malta, and Cyprus are considered more closely connected to the Western European economies, in particular during our sample period, and we acknowledge that Malta and Cyprus have strong historic links to the United Kingdom.
10. http://www.consilium.europa.eu/en/meetings/international-summit/2015/06/02_2015-06-08-ANNEX_FINAL_CLEAN_pdf (last accessed on 28 June 2016).
11. Material use here is measured as Domestic Material Input (DMI) which is equivalent to DMC plus material exports.
12. Out of the 21 European countries, 15 are Western European (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom) and 6 are Eastern European countries (Czech Republic, Estonia, Hungary, Poland, Slovak Republic, and Slovenia).
13. All countries in are considered with the exception of Norway, Switzerland, Serbia, and Turkey.