Stop nature?s decline – save the economy!

Jan 9 2013

Anders Wijkman /Johan Rockstr?m*

The economic crisis in Europe is portrayed and discussed primarily as a problem of the euro. But alongside the currency crisis, we are experiencing a number of serious problems to which conventional economics ? and politics ? seem to have little to offer in way of solutions.

More than four years after the collapse of Lehman Brothers, the financial sector is still exceedingly concerned with short-term profits as well as being oblivious to the serious disconnect between the financial and the real economy. Moreover, there are practices today within the financial sector that totally disregard the impact they will have on people and the planet.

In the words of Otto Scharmer at MIT ?we have a system that accumulates oversupply of money in areas that produce high financial and low environmental and social returns, while at the same time an undersupply of money in areas that serve important social investment needs?.

Another serious challenge is unemployment. According to ILO there were 211 million unemployed in 2009. The number is significantly higher today, not least among the young. Over the next decade ILO expects 1, 2 Billion 15-to-30-year-olds will be entering the job market. With conventional job policies at most 300 million will get a job. Few political leaders are ready to address this challenge. But there is no way that ?more of the same?will solve this potential time bomb.

A closely related and equally serious problem is the rapidly increasing threats to the stability of planet earth due mainly to the unsustainable use of its resources. The consequences will be a more unstable climate, the progressive depletion of many important ecosystems – from farmland and tropical forests to freshwater resources and fisheries – as well as increasing difficulties for supply to meet demand for a host of finite resources, like crude oil, phosphorus and rare metals. One thing is clear: the era of cheap energy and commodities is over.

These problems are closely linked and should of course be tackled in tandem. Instead they are dealt with – both at global, EU and national level – as sectoral issues.

Take the debt crisis as a starting point. The austerity measures so far imposed on countries like Greece, Spain, Ireland and Portugal can only aggravate the crisis. In realiy there are only three possible ways out of the debt trap: rapid economic growth, debt relief and/or inflation. Increasingly, analysts advocate a combination of economic growth and debt relief as the only realistic option for the most indebted countries.

We agree with this conclusion, but with one important reservation. Growth in the economy can and should not be of the conventional kind. We need a new type of economy, which breaks the cycle of ever-increasing energy and material throughput. The reasons are mainly three:

First, future welfare and prosperity is in serious danger because of the rapid increase of GHG emissions ? leading to a more unstable climate – and the overuse of many of our most important ecosystems. In a new book, “Bankrupting Nature”, we analyze the situation and provide suggestions for how to move the economy in a more sustainable direction.

The most recent scientific reports indicate that we are in the process of transgressing planetary boundaries that have kept civilization safe for the past ten thousand years. Accelerating human activity is now the most significant driver of global change, propelling the planet into a new geological era – the Anthropocene – defined by our massive impact on the planet.

The concept of ?planetary boundaries? has been developed with the aim to offer a science-based framework that can help guide us through the necessary transition to a more sustainable economy. The starting point is a recognition that the world needs a much more holistic approach to human development It is no longer possible to deal with one issue at a time. The critical interplay between the economy, the atmosphere, the oceans and the land-based ecosystems, must be much better understood and acted upon. We need to develop a properly integrated, solutions-oriented science for global sustainability. The aim should be to strengthen the Earth?s resilience and its ability to continue providing a ?safe space? for human development.

The nine planetary boundary conditions defined – climate change, ozone depletion, ocean acidification, biodiversity, freshwater use, the global nitrogen and phosphorus cycles, air pollution, chemical pollution and changes in land use ? are crucial components in any strategy to strengthen resilience and build prosperous socisties. This is where the critique of conventional growth policy comes in. It is only by radically increasing the efficiency by the way we use resources from nature that we can effectively reduce greenhouse gas emissions and, at the same time, relieve the pressure on and overuse of many important ecosystems.

The second reason for rethinking conventional growth is linked to the rising prices of energy and raw materials. All economic activity arises from nature ? and returns to it. Without natural resources there would be no wealth generation. For more than hundred years mankind benefitted from abundant supplies of fossil energy. But the era of cheap oil is over. The reserves that are easy to access are running out. To exploit deposits at greater depths in the oceans, from tar sands or shale or in the polar regions provide lower yields. In addition, the climate and environmental consequences are serious.

Prices of many key commodities are also on the increase. While the real price of most commodities fell by, on average, seventy percent during the 20th century, prices are now in an upward trend. The reasons are obvious. Productivity increases in agriculture are lower today than during the 1970?s and 80?s, while demand for food is increasing. The richest ores have already been exploited. Further extraction means higher costs. Higher energy costs add to the picture. The same is the case with rapidly growing demand in the emerging economies.

The higher prices for energy and commodities will have an impact on economic growth. The space for other types of consumption will decrease. Growth will be lower. As a consequence, debt restructuring will become more difficult. The obvious conclusion for all countries ? not least those that are heavily indebted ? ought to be to make serious efforts to enhance both energy and resource effciency.

Thirdly, we need to create new jobs. There are no easy answers on how to meet the demand from more than a billion new job-seekers in the next decade. One thing is obvious.. An economy where resources are used far more effectively than today will undoubtedly lead to a net increase in the number of jobs.

The main objective should be to move towards a “circular economy”. Products should be designed to be much more durable and materials should be easy to recycle, reuse and recondition. This would reduce the need for extraction of new resources. Meanwhile, demand for maintenance and repair would increase, thereby providing the basis for a local service economy and many new jobs.

The puzzling fact is that the economic as well as the financial crisis are discussed primarily as if energy and materials did not matter – as if the the crisis was just about money. But confronted as we are by a host of serious environment risks and resource constraints and, in addition, rising price levels for all major commodities, we ought to realize that the way we use resources from nature are of critical importance.

Obviously, we are in need of a more holistic approach to development, rather than just trying to ?return to the convential modus operandi ?. There are boundaries in terms of both natural resources and environmental space. We are starting to feel the consequences of hitting Earth?s ecological ceiling, e.g., in the form of increasingly servere droughts and floods, accelerated melting of ice sheets across the globe and rising prices for many natural resources. Time is running out to make the necessary transition to a sustainable economic system. What is required is a different economic logic, where social and environmental objectives have to be given primary importance.

A trend towards much greater resource efficiency requires, among many things, that business models are revisited. If companies continue to earn revenue merely by selling more stuff, there is no solution in sight. The focus for companies,must be to provide high quality services – such as the leasing of various products – and earn revenue from what has already been produced. For this to happen, product development and design has to be thoroughly revised. A bonus effect would be, that local jobs in the subsequent service industry required would increase.

A shift in the tax system could provide incentives in the right direction. Taxing material and energy use ? instead of labour – would move the economy in the direction of low-carbon and low-resources solutions and a regional circular economy ? as opposed to the ?linear? global economy that has evolved in recent decades. Such a change of direction should be linked to a reform in the global trading system so as to provide benefits for developing countries, not least leading commodity exporters.

By charting out a long-term strategy that takes global sustainability as a non-negotiable entry point, we believe the innovations and deep system changes required for a transition towards a truly sustainable economy would be unleashed. Such an economy would, no doubt, mean lower risks and better prospects for the generation of jobs and human wellbeing in the future.

*Anders Wijkman, co-president of the Club of Rome. Johan Rockstr?m, professor and director of the Stockholm Resilience Centre

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