Doing Well in Tough Times
The working paper for this discussion outlined a multitude of global environmental and sustainability problems that had worsened over the past 12 months and which collectively posed a challenge to world leaders on a scale never before encountered.
Rapidly rising energy and food prices, global food shortages, scarcities of clean water - problems long in the making - have been exacerbated by a financial crisis the magnitude and duration of which is still unknown. If that were not enough, climate change impacts were compounding already crisis conditions in many parts of the world.
The need to stem the chaos arising from the near collapse of the global banking system has dominated the attention of governments and the international financial community in recent months. However, the economic recovery measures now being developed could bear directly on the resolution of the other environmental and sustainability challenges.
There are two basic truths to keep in mind with respect to the current economic situation: first, it will not last - things will get better; second, the old way of doing things (i.e. the ways that led to this predicament) are not the tools needed to navigate through and beyond our recovery. (Einstein said it best: “We can’t solve problems by using the same kind of thinking we used when we created them.”)
What this means with respect to surviving and doing well in hard times is that continued dependence upon ’business as usual’ approaches cannot and must not prevail both during and following our recovery period.
On a global scale, the United Nations Environment Programme (UNEP) predicts that once a business-as-usual growth path resumes:
- Global energy demand will rise by 45 per cent by 2030, and the price of oil is expected to rise to US$180 per barrel.
- Greenhouse gas (GHG) emissions will increase by 45 per cent by 2030, leading to an increase in the global average temperature up to 6oC.
- The world economy will sustain losses equivalent to 5-10 per cent of global gross domestic product (GDP) and poor countries suffer costs in excess of 10 per cent of GDP.
- Ecological degradation and water scarcity will increase.
- There will be over 1 billion people living on less than US$1 a day and 3 billion living on less than US$2 a day by 2015.
The same general truths hold on a national or regional scale and that is why such emphasis is being placed on the development of renewable energy sources and technologies within the context of national and regional economic recovery strategies.
Reviving growth, ensuring financial stability and creating jobs rightly are the immediate objectives of these strategies. But unless the massive sums being spent address other challenges such as reducing our carbon dependency and lowering greenhouse gas emissions, or dealing with the threats posed by climate change, energy insecurity, freshwater scarcity, deteriorating ecosystems, or alleviating the economic disparities that keeps so many millions locked in endless despair and poverty, their impact on averting future crises could be short-lived.
Reducing carbon dependency and reversing ecological deterioration are not just environmental concerns; they are the only way to revitalize both national and the global economies on a more sustained basis.
The $827 billion fiscal stimulus plan of U.S. President Obama’s Administration contains significant “green economic recovery” funding elements. Over $100 billion has been targeted to create 2 million long term jobs through investments in energy efficiency and renewable energy strategies such as:
- Retrofitting buildings to improve energy efficiency
- Expanding mass transit and freight rail
- Constructing a “smart” electrical grid transmission system
- Developing renewable energy, i.e. wind power, solar power, next-generation biofuels and other bio-based energy sources.
The economic and employment implications of these greening initiatives will save the US economy an average of US$450 million per year for every US$1 billion invested. In addition, every $1 billion in government spending will lead to approximately 30,000 job-years and reduce annual US greenhouse gas (GHG) emissions by 592,600 tons between 2012 and 2020 - a 20 per cent increase in job creation over more traditional fiscal stimulus measures.
The same benefits are possible on a global scale according to UNEP. A massive study published last year on ’green jobs’ estimates that the impact of an emerging global “green economy” on the world of work could create millions of new “green jobs” in the coming decades. The report - Green Jobs: Towards Decent work in a Sustainable, Low-Carbon World, says changing patterns of employment and investment resulting from efforts to reduce climate change and its effects are already generating new jobs in many sectors and economies, and could create millions more in both developed and developing countries.
But as noted in an earlier GLOBE-Net article many of these new jobs can be “dirty, dangerous and difficult” and in sectors especially but not exclusively in developing economies such as agriculture and recycling where all too often low pay, employment insecurity and exposure to hazardous materials is the norm. The report says that climate change itself, adaptation to it and have far-reaching implications for economic and social development, for production and consumption patterns and thus for employment, incomes and poverty reduction.
The inevitable impacts of the massive recovery expenditures that are in the works is that some industry sectors will do well, while others will fare badly during the recovery period. A report published this month by investment analysts The McIlvaine Company notes many traditional environmental markets will grow despite the recession. It forecasts that air and water pollution control companies, which have been reporting record profits, will continue to be profitable throughout the recession despite lower sales, as will companies in the power plant scrubber market and the market for catalytic reduction systems for coal-fired power plants. Stimulus package spending will offset some of the declines previously expected in the cement markets and the wastewater treatment sector will grow substantially in most markets due to the cash infusion for ’shovel ready’ infrastructure projects.
It is in the non-traditional environmental and clean energy markets where substantial growth is expected, both during and beyond the current downturn period. This is particularly so in the wind energy market.
“Wind is the only energy source that, in the future, will be on par with oil and gas,” said Ditlev Engel, CEO of Vestas, the world’s biggest wind power company in a recent interview, “The value proposition for wind is that wind power is clean, competitive in price, a source of energy security, predictable in its output and quick to install.”
Denmark-based Vestas has installed over 33,500 wind turbines in 63 countries, on average a new turbine every five hours. Engel predicts wind power can account for 10 percent of the world’s electricity supply by 2020, because not only does wind generate fewer greenhouse gases than fossil fuels, it uses dramatically less water than other forms of energy. Says Engel: “Green energy and greenbacks go hand in hand.”
Between now and 2015 the countries seen as offering the most potential for wind growth are the USA, the UK and China (all far out in front), with Germany, Spain and the Scandinavian countries (dominated by Denmark) also featuring strongly according to survey just published by Renewable Energy World. The global growth potential would be even higher were it not for poor policy leadership according to survey respondents - even though many were from EU countries with aggressive renewable energy targets.
The wind sector is but one example. Smartening up the North American electricity grid, developing and deploying efficient carbon capture and storage technologies, accelerating research in sustainable biofuels, and reining in subsidies and market distorting supports for industries tied to fossil fuels can have equally impressive gains.
There will be boondoggles and short term profit taking during the recovery period. With the vast sums involved, it is inevitable that special interest groups will seek to benefit from the government funded largess.
But in the final analysis, the key determining factor separating winners from losers at the national and corporate level will be the quality of the commitment to true sustainability policies and programs. As reported in an earlier GLOBE-Net article, an analysis by A.T. Kearney, Inc, found that in 16 of the 18 industries studied, companies committed to sustainability outperformed industry averages by 15%. Dr. Daniel Mahler, author of the study, said “We find common characteristics among the leading companies that show that sustainability goes far beyond the narrow definition of being environmentally friendly.”
These characteristics include:
- A focus on long-term strategy, not just short-term gains
- Strong corporate governance
- Sound risk-management practices
- A history of investment in green innovations
This recipe for success at the corporate level has relevance at the broader national and global level.
Summing up, reviving the world economy is an essential and immediate priority, but recovery measures that focus solely on short term job creation will not achieve lasting success. Only through the national actions and global cooperation to end our dependency upon fossil fuels and address the challenges posed by climate change, energy insecurity, growing freshwater scarcity, deteriorating ecosystems and worsening global poverty will we achieve lasting sustainability.