Building a true green economy

June 5, the World Environment Day, is meant to celebrate the idea of the environment and put it into practice. It is a day to take stock of where we stand and where we should be headed in future.

The theme for Environment Day 2012 is green economy. Unfortunately, “green economy”, which is fast replacing “sustainable development”, means different things to different people. Put on a little green colour and hope that the delusion of a lasting solution to the problems of the world is maintained. In this approach there is a belief that the current market-based, capitalist-enterprise system will find answers as we go along. That the answers will lie in doing more of what is being done today—growth, based on consumption, which will stimulate technology innovation for the future green economy.

But this misses the point that the world is creaking under its own weight. It faces new challenges, all of which are potentially devastating and inter-related. On the one hand, is the nightmare of financial meltdown, which in spite of public investments and increasingly stringent financial regulations, is not going away. On the other hand, each year, with seemingly increased intensity and ferocity, different regions of the globe are lashed by natural disasters and freak and extreme weather conditions. It is clear that these extreme weather events are devastating large parts of the world and are combining to make the poor even more poor and vulnerable. It is difficult to say if each event can be directly attributed to climate change. But it is easy to conclude that something is afoot in the world, and that, maybe, this is the beginning of the impacts of climate change, which science has so surely predicted will occur exactly in this manner.

The challenge of green economy is that the world has to reinvent the growth paradigm because it is costing it growth itself. Indeed, it is costing it the Earth.

Public debt crisis and nature's debt crisis

The search for answers must take a close look at the interconnections between the current growth model, which is built on consumption for wealth creation, and the challenge it poses to sustainability. We know today that an underlying cause of the financial strain is the dependence on cheap loans or cheap production to induce consumption, which, in turn, is needed to fuel economic growth. The world has not being able to design  an affordable or equitable growth model, which would meet the aspirations and purchasing abilities of people across the world, or indeed the needs of all across the world. There are limits to this growth model, as a fast-growing planet is learning. It is not possible to emulate the lifestyle of the already industrialised without compromising the survival of the planet.

What is not understood is that the current global debt crisis is a mere symptom of a deeper malaise. The fact of the matter is that countries, private companies and individual households can run only if they can borrow against their assets and hope that the debt will grow slower than the value of their asset. Most financial analysts will now tell you that this business is doomed because of the Ponzi scheme nature of the loan business, where borrowing is used to speculate to get more loans, and so repayment becomes difficult and over time impossible. But this analysis is myopic as it misses the real nature of the problem: economic growth means living beyond one’s means. The cost of development has risen to such an extent that nothing is possible without loans or subsidy.

The fact is that the cost of development is high. It makes money for a few, but is unaffordable for most because it is the exchequer that has to subsidise this development. This, in turn, increases public debt to crippling levels.



What is not even discussed in the context of the current debt crisis is the other debt, which has been accumulated for growth. Each country’s release of carbon dioxide and other greenhouse gases into the atmosphere has reduced the cost of its growth. It is a loan from nature for economic development. But the cumulative emissions of a country—one country, the US, has contributed 26 per cent to the stock of emissions between 1950 and 2007—must be added to the cost of growth. In the case of natural debt, economies borrow the assimilative capacity of the environment by releasing waste gases faster than they can be removed naturally. This natural debt is similar to the financial debt of a nation, because it is a loan from nature taken to grow faster and at lower costs.

The combined cost of growth is evident for all to see. The financial debt is leading banks and economies to collapse, while the natural debt is leading to climate catastrophe, adding to costs of economic repair and increasing the costs of growth itself.

It is now increasingly evident that the only way to break this vicious cycle—growth-consumption-wealth-waste—is to change our fundamental understanding of what constitutes growth. Instead, we must understand what leads to happiness and what results in employment and well being of all. It would mean changes in how we measure economic growth—discarding or going beyond the gross domestic product (GDP) indicator to one that is much more comprehensive in assessment of these needs. It would also mean changing the business of business so that the pathways to growth are reinvented.

Changing growth but why?

Years before India became independent, Mahatma Gandhi was asked a simple question: would he like free India to be as “developed” as the country of its colonial masters—Britain? “No,” said Gandhi, stunning his interrogator who argued that Britain was the model to emulate. He replied: “If it took Britain half the world to be where it is, how many worlds would India need?”

Gandhi’s wisdom confronts us today as economic growth of the old and the new emerging world threatens our future. But it is here that the world must realise the limits of the existing economic growth models in terms of future sustainability.

One, the current economic growth model, based on capital and resource intensity, is intrinsically polluting. Its use of material and energy leads to waste and pollution. Over the past years, the world has struggled to keep pace with the toxic fallout of its wealth creation. But it is finding it has never succeeded in containing the problem; in fact, it always remains many steps behind the problems that the current economic growth paradigm continues to throw up.

Two, it is clear that as yet the world has not been able to settle the question of what a low-carbon growth trajectory can and must be for the future. This is critical to resolve. In the current economic model, technology pathways are constrained. The emission-efficiency technology threshold of the current growth model gives each country only limited opportunities to cut emissions. This is when the world needs an energy transformation. We know the challenge is to drastically cut greenhouse gas emissions in an increasingly carbon-constrained world. It is also increasingly evident that improving efficiency in the use of energy and material is one part of the solution for the future. But this efficiency revolution is meaningless without a sufficiency revolution.

The fact is that all developing countries are today at the bottom of the development trajectory. Their pathway to the future will only add to global pollution. It is also clear that the current options for drastic and long-term emission reduction are limited in the current industrial model of the already developed countries. This is the most inconvenient of all truths. The world has to find new growth models, which will need changes in behaviour and lifestyle, to cut emissions. The world also needs new drivers like drastic emission reduction targets in the rich world to stimulate quick and aggressive technology innovation.

Three, the challenge is to build resilient economies, which will eradicate poverty and also ensure that the poor, already living on the margins of survival, are not made even more vulnerable because of climate change. This requires a global growth model, which is inclusive and sustainable.

The imperative for the future is clear. The world has to seriously rethink and rework its development paradigm for the future to make itself less economically vulnerable and more climate-secure.

In the past decades, the world has built an integrated economic growth model, which extends beyond national boundaries. It is time to consider the need for localisation of economies. This localisation agenda does not require the disintegration of the globalised economies of the world. It does, however, need direct investment and policy and fiscal incentives for local production and local consumption. This focus on localisation will also be the new development paradigm’s biggest opportunity to invest in the economies and businesses of the future—from decentralised renewable energy technologies to smart grids and green enterprises based on local production. The cell phone revolution, which transformed mobile communications, came because the world reinvented the pathway for technology introduction—moving from centralised, land- and capital-based infrastructure to decentralised, disaggregated and affordable systems. This small revolution is the next big opportunity for change.

Environmentalism of poor v environmentalism of rich

It is here that we must understand the nature of the protests we see across India. This decade has seen a million pollution mutinies. In India, vast numbers—and it is vast numbers—depend on the land, the forests and the water they have in their vicinity for their livelihood. They know that once these resources are gone or degraded, they have no way ahead.

This is the environmental movement of the very poor. Here, there are no quick-fix techno solutions in which the real problems can be fobbed off for later. This environmentalism has only one answer: changing the way we do business, with them and with their environment. It will demand we reduce our need and increase our efficiency for every inch of land we need, every tonne of mineral we dig and every drop of water we use. It will demand new arrangements to share benefits with communities so that they are persuaded to part with their resources for a common development.

If we can listen and learn, maybe this environmentalism of the poor may teach not just us, but the entire world, how to walk lightly on earth. Maybe. Just maybe.

These are the same choices the environmental movement of the rich countries asked their countries to make some two generations ago. They failed. This is why the challenge of climate change remains a challenge. Today, these societies are rich, they have cleaned up their streams and their black smoke. But their economic growth and their lifestyle is putting the entire world at risk because of climate change. They have no real answers to the future because they want to keep tinkering with the present. They are looking to find small solutions to the massive problem of increased emissions, linked to growth.

The western environmental movement also has a different history from ours. It began after these societies had acquired wealth. So, the movement was a response to the garbage, the toxic air or the polluted water, resulting from the growth of their economies. They had the money to invest in cleaning and they did. But because they never looked for big solutions, they always stayed behind the problem—local air pollution is still a problem in most western cities, even if the air is not as black as ours. It is just that the toxin is smaller, more difficult to find or to smell. They keep spending and keep investing in technology to deal with the present. As such, the rich world’s environmentalists are garbage managers, nothing more.

But the challenge is to do more with less. Frugality and innovation will have to be our way to growth. The challenge is to provide the gains of development to vast numbers of people. This requires inventing growth that is both affordable and sustainable.

In my view all this adds up to define a new chapter of environmentalism in the world. I say this because it is only now that we are being forced to confront some tough questions on how to be or not to be an environmentalist. We are learning that techno-fix solutions of cleaning up pollution even as we continue to emit more are not good enough. The rich world has failed to reduce its greenhouse gas emissions through its investment in efficiency. It now needs to find ways to reinvent growth without fossil fuels and to grow within limits. There are limits to growth, unless we can grow differently.

We in urban and middle-class India must learn this lesson quickly. We cannot afford this environmentalism of costly solutions that put band-aids on what is so badly broken. We must understand that our future lies in being part of the environmentalism of the poor, as this movement will force us to seek new answers to old problems. So, let's embrace a true green economy on this World Environment Day.


 

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