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The Transition to a Sustainable Prosperity—A Stock-Flow-Consistent Ecological Macroeconomic Model for Canada

Sunset over Lake Ontario (CC.0) Lucas George Wendt / Unsplash

Summary

This paper presents a stock-flow consistent (SFC) macroeconomic simulation model for Canada. We use the model to generate three very different stories about the future of the Canadian economy, covering the half century from 2017 to 2067: a Base Case Scenario in which current trends and relationships are projected into the future, a Carbon Reduction Scenario in which measures are introduced specifically designed to reduce Canada’s carbon emissions, and a Sustainable Prosperity Scenario which incorporates additional measures to improve environmental, social and financial conditions across society. The performance of the economy is tracked using two composite indicators constructed especially for this study: an environmental burden index (EBI) which describes the environmental performance of the model; and a composite sustainable prosperity index (SPI) which is based on a weighted average of seven economic, social and environmental performance indicators. Contrary to the widely accepted view, the results suggest that ‘green growth’ (in the Carbon Reduction Scenario) may be slower than ‘brown growth’. More importantly, we show (in the Sustainable Prosperity Scenario) that improved environmental and social outcomes are possible even as the growth rate declines to zero.

1. Introduction

The defining feature of ecological economics is its rigorous attention to the question of ecological scale (Daly and Morgan, 2019). For this reason, perhaps, it has often found itself at worst ignored and at best in outright conflict with conventional economic narratives framed around the assumption of ‘eternal’ economic growth (Liebreich, 2018). The former British prime minister, Margaret Thatcher, once famously declared that ‘there is no alternative’ to growth…

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