Ecomodernism and de-growth approach: Two approaches for a world under pressure – a comparative welfare economic analysis

Two socio-economic-ecological narratives are currently being discussed to transform current policies and achieve the goals of the Paris Agreement, avoid biodiversity loss, and not jeopardize human welfare: Eco-modernism and de-growth. • The philosophy of ecomodernism aims to shape the Anthropocene by decoupling economic growth and consumption of nature from consumption and production through technological means. • The de-growth approach, on the other hand, expresses doubt that the current economic system can reduce emissions and resource consumption to levels that meet the Paris Agreement. Using a dynamic two-country CGE model, we analyse the effects of the two approaches. Every country has three sectors: Food-Energy-Water, Industry, Service. As a result, the sectors have distinct levels of technology. It is assumed that country A has a traditional growth rate of 2.5% per year and that country B is on a de-growth path with a decline of 1% per year. The assumption is that the government collects taxes and compensates households by means of various household transfers. In addition, our CGE model has the following standard features: Demand for final goods and factors of production is homogeneous of degree zero in the price vector. Prices are numerically identified up to a degree of freedom as there is a linear dependence among equilibrium allocation vectors, therefore only relative prices matter according to Walras Law. To analyse the socio-economic impacts of the two narratives, the de-growth wedge approach, based on the Harberger triangle concept, was developed to analyse the welfare impacts of the two narratives. Revealing its socioeconomic consequences and its social explosiveness. We present the method here in a stylised economy to illustrate the effects of the two approaches in the absence of disturbances such as the Corona pandemic and the war in Ukraine.