Will the world be able to sustain economic growth indefinitely without running into resource constraints or despoiling the environment beyond repair? What is the relationship between a steady increase in incomes and environmental quality? Are there trade-offs between the goals of achieving high and sustainable rates of economic growth and attaining high standards of environmental quality. For some social and physical scientists, growing economic activity (production and consumption) requires larger inputs of energy and material, and generates larger quantities of waste byproducts. Increased extraction of natural resources, accumulation of waste, and concentration of pollutants would overwhelm the carrying capacity of the biosphere and result in the degradation of environmental quality and a decline in human welfare, despite rising incomes. Furthermore, it is argued that degradation of the resource base would eventually put economic activity itself at risk. To save the environment and even economic activity from itself, economic growth must cease and the world must make a transition to a steady-state economy.

At the other extreme, are those who argue that the fastest road to environmental improvement is along the path of economic growth: with higher incomes comes increased demand for goods and services that are less material-intensive, as well as demand for improved environmental quality that leads to the adoption of environmental protection measures. The strong correlation between incomes, and the extent to which environmental protection measures are adopted, demonstrates that in the longer run, the surest way to improve your environment is to become rich, Some went as far as claiming that environmental regulation, by reducing economic growth, may actually reduce environmental quality.

As agriculture and resource extraction intensify and industrialization takes off, both resource depletion and waste generation accelerate. At higher levels of development, structural change towards information-based industries and services, more efficient technologies, and increased demand for environmental quality result in leveling-off and a steady decline of environmental degradation (Panayotou 1993), as seen in the Figure 1 below: