The Impact of Entropy Production and Emission Mitigation on Economic Growth

Entropy production in industrial economies involves heat currents, driven by gradients of temperature, and particle currents, driven by specific external forces and gradients of temperature and chemical potentials. Pollution functions are constructed for the associated emissions. They reduce the output elasticities of the production factors capital, labor, and energy in the growth equation of the capital-labor-energy-creativity model, when the emissions approach their critical limits. These are drawn by, e.g., health hazards or threats to ecological and climate stability. By definition, the limits oblige the economic actors to dedicate shares of the available production factors to emission mitigation, or to adjustments to the emission-induced changes in the biosphere. Since these shares are missing for the production of the quantity of goods and services that would be available to consumers and investors without emission mitigation, the “conventional” output of the economy shrinks. The resulting losses of conventional output are estimated for two classes of scenarios: (1) energy conservation; and (2) nuclear exit and subsidies to photovoltaics. The data of the scenarios refer to Germany in the 1980s and after 11 March 2011. For the energy-conservation scenarios, a method of computing the reduction of output elasticities by emission abatement is proposed.