Abstract
Degrowth is often advocated as a response to the climate crisis, but its consistency with growth theory remains unclear. We develop an endogenous growth model of directed technical change and climate in which the economy relies on both a polluting fossil resource and a clean renewable alternative. We fully characterize the social optimum and show that accounting for climate damages may justify an initial phase of degrowth. Such a phase is more likely when fossil resources are abundant and fossil-oriented research is relatively inefficient. In all cases, long-run optimal growth remains positive.
JEL codes
- O33: Technological Change: Choices and Consequences • Diffusion Processes
- O44: Environment and Growth
- Q32: Exhaustible Resources and Economic Development
- Q54: Climate • Natural Disasters • Global Warming
- Q55: Technological Innovation
Replaces
André Grimaud, Gilles Lafforgue, and Luc Rougé, “Does the climate challenge justify degrowth?”, TSE Working Paper, n. 26-1748, May 2026.
Reference
André Grimaud, Gilles Lafforgue, and Luc Rougé, “Does the climate challenge justify degrowth?”, Economics Letters, vol. 267, n. 113070, August 2026.
Published in
Economics Letters, vol. 267, n. 113070, August 2026