Author: James Curran
Straight off, let’s remember that the World Economic Forum (WEF) in 2020 stated that “$44 trillion of economic value generation – over half the world’s total GDP – is moderately or highly dependent on nature and its services and, as a result, exposed to risks from nature loss.”
The UK is currently deep in political debate about its economic performance so you might think the WEF analysis would be pertinent and politicians would focus, at least in part, on stabilising and rebuilding our national ecosystem services. But, no, we get the UK Chancellor, in January 2025, urging the CEOs of key regulators to ‘tear down regulatory barriers’ that hold back economic growth, while the Business & Trade Secretary says “We will make it simpler and faster for projects to agree environmental permits, in some cases removing them altogether ..”
Meanwhile, the front-runner Reform UK Party wants to scrap all retained EU environmental regulations and its 2024 manifesto claims that “the economy is being wrecked by … nanny state regulations” and “net zero is crippling our economy”.
Much of this rhetoric is influenced by the mood in the USA where, for example, President Trump has described ESG (environment, social & governance) investment as a way to attack American business.
Perhaps it’s time to ask the simple question; “What’s the evidence?”
Let’s start with the OECD Environmental Policy Stringency (EPS) Index , published annually for 40 countries including both large and small (eg USA & China through to Iceland & Estonia). It is based on an assessment of market and non-market policy instruments targeted on climate change and air quality (eg CO2 trading, NOx tax, fuel taxes, emission limits on particulates, sulphur controls, support for solar & wind energy). The index can’t assess other instruments, such as nature protection and waste minimisation, since there are no comparable international data and many of these controls are determined, and imposed, at sub-national level. The Index has a scale from 0 to 6, with most countries falling between 2 and 4.
Many of us don’t like it – but the traditional measure of economic performance remains GDP per capita. Gross Domestic Product (GDP) per head is a measure of average economic output per person.
To test the current political rhetoric, it is instructive to look at the change in EPS for each of the 40 nations against that nation’s change in GDP per capita. If environmental regulation is tightened – you might expect economic growth to weaken. Conversely, as advocated by an increasing number of politicians, if environmental policy is weakened – then economic growth might accelerate. Let’s choose the 10-year period from 2010 to 2019, shortly after the 2008 financial crash and before the Covid crisis – both of which battered GDP worldwide.
Here’s the result:
There is no statistically significant difference between the mean GDP change, over those 10 years, for those countries with an EPS that declined and those countries with an EPS that increased. There is no evidence, from this analysis, that strengthening environmental controls undermines economic growth and, equally, there is no evidence that weakening environmental controls increases economic growth.
Just one example from the USA, the world’s largest economy at the time, which increased its EPS Index from 2.03 to 2.92 and also increased its GDP per capita by +16%. From 2010 to 2019 President Obama was in the White House, handing over to President Trump for the final two years.
So, that’s one pretty convincing answer to the question “What’s the evidence?”. As Aldous Huxley said “Facts do not cease to exist because they are ignored”.
What then is reckoned to improve national economies? Well, it’s often quoted to be business innovation. The Porter Hypothesis actually suggests that good environmental regulation stimulates business innovation and, ultimately, benefits the bottom line. There is certainly plenty of evidence that regulation stimulates innovation in clean technologies but there is mixed evidence of any significant impact on the overall national economy. The other big influences on economic performance are thought to be related to available financial investment, and the workforce skill set.
It’s instructive to learn that the Scottish Government itself recognises that Nature supports £40 Billion per year to the Scottish economy and 260,000 jobs; that’s 20% of GDP and 10% of jobs. Clearly it’s time that the Cabinet Secretary for the Economy, and the enterprise agencies, as well as Skills Development Scotland, put priority on, and investment into, growing the environment.
So, the bottom line – environmental controls are blameless in the UK’s and Scotland’s economic challenges and, as the old Gershwin song might go: “You need ecology and I need economy. We need each other. Let’s call the whole feuding off”.