Does the climate challenge justify degrowth?

André Grimaud, Gilles Lafforgue and Luc Rougé

No 26-1748, TSE Working Papers from Toulouse School of Economics (TSE)

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.

Keywords: degrowth; directed technical change; endogenous growth; social optimum; climate change. (search for similar items in EconPapers)
JEL-codes: O33 O44 Q32 Q55 (search for similar items in EconPapers)
Date: 2026-05, Revised 2026-06-10
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:131735

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