System Complexity Versus Environmental Sustainability: Theory and Policy

We discuss the relationship between environmental sustainability and system complexity. This is motivated by the fact that solutions to environmental challenges often create additional complexity in the overall socioeconomic system, at local to global levels. This increase in complexity might hamper the ultimate achievement of sustainability. This theme is over utmost importance but is overlooked in studies of environmental sustainability, environmental and climate policy, and sustainability transitions. It merits serious attention as this can provide a general basis and clarification of related topics that are currently studied in isolation—think of energy rebound, carbon leakage, green paradox (fossil fuel market responses to climate policy), circular economy, and environmental problem shifting. The relationship between complexity and sustainability is examined from thermodynamic and systemic perspectives, resulting in identifying a set of mechanisms of complexity increase and clarifying how this potentially creates barriers to meeting sustainability goals. While this issue is pertinent to all economies and countries, it is of high relevance to developing countries as their economies are likely to undergo considerable complexity increases in the near future due to further development. The question is then whether countries will be able to steer their development in a sustainable direction while simultaneously limiting a more roundabout nature of their production structure. We contend that this may require “complexity policy” and outline ideas in this regard. An important role can be played by cap‐and‐trade, but this will work mainly for carbon emission and not for other environmental pressures. Ultimately, a policy mix could guide different subsystem complexities in terms of environmental pressures and welfare impacts—resulting in optimizing system complexity for sustainability.