Sustainability Dynamics of Resource Use and Economic Growth

All economies of the world depend upon the use of renewable natural resources1 for their growth. This relationship inherently reflects that continued increase in extraction of resources is a must to sustain economic growth. Inevitably, a tipping point is reached from where the regeneration rates of the resources diminish due to depletion of the resource stock. The resource production peaks and declines which lead to a delayed feedback on the economy, ultimately restricting its ability to grow and sustain its level of output. This discussion paper demonstrates, with the help of system dynamics model, that this feedback from the decline of natural resources into the economic system would lead to economic contraction much before the resources are completely exhausted. The paper provides useful insights through the modelling exercise by testing three of the most popular policy choices to sustain economic growth: (i) Improving resource efficiency of the economy, i.e., dematerialization, (ii) Green Growth, represented here as conserving/Restoring the resources, and (iii) Resource expansion due to technological advancements or new discoveries. Simulation runs show that none of the policies are able to avoid overshoot of the economy although they are successful in delaying the overshoot and fall. The model demonstrates the counter intuitive outcomes of the above policy choices and makes a strong case to promote empirical research on this subject using system dynamics.