Ralf Fuecks on Green Growth, Smart Growth – A New Approach to Economics, Environment & Innovation at the 37th Vikram Sarabhai Memorial Lecture in Ahmedabad, October 7th, 2015.
We are facing a very important moment in environmental diplomacy. China and United States – the two biggest emitters of Greenhouse gases have started to move to change their energy policies and also to develop more commitment to the international process, to the needs to reach global agreement on limiting first and then reducing Greenhouse gas emissions on a global scale. This is not only driven by political consideration or by environmental concerns but mainly driven by economics that renewable energies are becoming cheaper, cost efficient, economically viable and attractive. This creates an opportunity to overcome the old fashioned contradiction between economic development and environment protection.
Economic Growth: The Industrial Revolution propelled the exponential rocket growth in terms of GDP – Production and Consumption, along with the growth of population. But there was third aspect or outcome which was Environmental Consumption – Degradation of our Natural environment and development of CO2 emissions going hand-in-hand with growth of economy and population. As we are aware now, there is problem with Co2 emissions, methane and other greenhouse gases contributing to global warming and endangering our natural preconditions of human civilization on earth.
The parallelism between growth, economies, population and CO2 is about Fossil Fuels. It was the fuel of the enormous industrial and social progress- first by coal, then by oil and now gas. So what could we expect for the next decades? Will no growth be the solution to the environmental challenges? So let us first take into account the drivers for economic growth
Globalization: It’s essentially about growth of global trade and of global investment – exchange of capital. Over the last decades since 1960, global trade grew by almost 1600% which was a major driver for the growth of GDP, which grew about 600%, six times more within 50 years. Even if global trade will not return to the outstanding growth rates before the financial crisis in 2008, global economic output will for sure continue to grow over next decades due to growing world population itself. Today there are about 7 billion people living on planet. Until 2050, there will be 9-10 billion people on globe, so at least 2 billion more humans with their material needs, aspirations and their productive potentials. These are not only consumers but they are also people who will produce goods and services.
Growth of Global Middle Class: Inspite all criticism of globalization and unequal distribution of benefits of globalization, the number of people living in absolute poverty has been diminished by more than 50% over the last 15 years. Down from approximately 2 billion to 800 million today and at the same time, population itself is growing. Global middle-class is economically defined by an annual per capita income of $10,000. There is significant rise of people from poverty to modern lifestyles, modern communication devices, and mobility and at the same time, rising education standards, illiteracy going down, life expectancy rising etc. which all accounts to social progress.
Urbanization: We are now living in a period where half of the global population is living in cities. The UN has estimated that until 2050, 70-80% of people will live in cities. This in turn will create huge amount of construction, housing, work place, public institutions, infrastructure, mobility, energy etc. This is about material growth, so it is not at all risky to predict that over 20 years the global economic product will simply double.
Planetary Boundaries: Unfortunately, economic growth comes with a price which is a challenge from Environmental perspective. The price is overshooting the ecosystems, the capacity of the ecosystems the human society is depending from.
Climate change is probably the most traumatic symptom along with degradation and loss of fertile soil in huge dimensions, desertification, acidification of soil, erosion, putting at risk food security for billions of people etc. Another threat is the undermining of the Maritime lifecycle by pollution of oceans, using them as waste-dumps especially for plastics, overfishing, acidification which is a result of growing CO2 emissions, the escalating water crisis by overuse of ground water or by pollution of rivers and lakes etc.
So we are really facing dramatic challenges which are putting not only the environmental security but also the economic and social security of billions of people at risk. And when referring to environmental issues, it’s always also about social challenges. Ecology is not just about nature but also about human life on the planet and the interdependence between ecosystems and civilization.
So if it’s true that business as usual, growth as usual, will lead us into chaos – environmental, political and social chaos, and at the same time the global economy will continue to grow- What is then the answer to that dilemma? The answer is:
Reinvention of the Economy and changing the nature of growth itself.
- “Growing with Nature” instead of “on the expense of nature”.
- Going from exploitation of natural resources to Co-evolution with the natural system.
- Learning from Nature – the fantastic inventions which have been made by biological evolutions over millions of years – which we have to study and learn from.
- Creating not only an economy but a society which is based on Renewable Resources.
- Growth within planetary boundaries – transition to change our economies, technologies and urban systems in a way that they are no longer destructive to ecology.
This transition can be named as Green Revolution which essentially has three major processes leading to a sustainable economy:
- Efficiency Revolution: Improving resource productivity in big steps. For e.g. changing traditional light bulbs and replacing them by LED, thereby saving 80% of electricity at once without loss of comfort.
- Energy Revolution: Making use of Renewable energies- Sun energy, wind energy, geothermal energy, wave power, photosynthetics and departing from fossil fuels.
- Moving towards Circular Economy: (Zero waste) Every substance is reprocessed either in the agricultural circle or in the industrial circle, which means phasing out all substances which inherently are not able to be recycled or reused.
Meanwhile, the energy revolution is going global, where not only developed countries like US or Germany but also emerging countries like China are taking leap. Last year China built new solar energy capacities of 14 GHW, equivalent to 14 huge nuclear power plants, which is double the amount of new solar instillations in Europe. So China is not only champion in producing technical competence of solar modules but it is also applying these technologies in large scale. They are forced to change the direction of growth due to their fossil fuel driven industrialization resulting in massive air pollution, contamination of soil with heavy metals, contamination of water resources etc. So this is not simply the matter of choice but at same time it has become highly economically feasible.
The next big thing probably will be Technical Photosynthetics – making use of the fundamental process, the entire biological life cycle on earth is depending from by the transformation of solar light, water and CO2 – 3 very simple elements into biochemical energy. This is essentially what plants and microorganisms do every day and we also know how it works as well. To make it feasible on industrial scale, thousands of scientific and engineering projects all over the world are being conducted.
Mobility is one of the fastest growing sectors worldwide. Transport on ground and air transport are exponentially growing. Of course it is insane to fly to Singapore, Tokyo or London for shopping purpose. But even if we restrict ourselves, mobility will grow rapidly over next decades. Therefore we have to look for environment friendly solutions and alternatives like moving from oil- as main resource of mobility- to either electrical mobility powered by renewable energies- battery technologies, fuel cell technologies. Or to replace fossil fuels by bio fuels but in much more sophisticated way than it was done over the last 10 years, when we simply used food to produce energy which is perverse and also is in contradiction with food security of billions of people.
So we have to use organic waste, celluloses and microorganisms or algae as the resource for Organic fuels or Bio fuels. But it is more than that. It’s not just changing the feed stock of fuels, it is also about a different mobility system, no longer based primarily on a private car but based on a modern, attractive and secure public transport and making cities friendlier for walking and bicycling.
This eventually demands change in philosophy of urban development. No longer dividing cities into working areas, sleeping areas, shopping areas, culture areas but reintegrating these basic functions of a city and create short distances for people living in the city.
If we are talking about Smart Cities, it is not only about data management. It’s about public transport, energy efficient buildings, self-sufficiency in terms of energy production with solar energy and small scale wind energy, recycling of waste, affordable housing for the poor and urban farming- the return of agriculture to the cities. But not in large scale traditional way due to lack of area in city, but in modern green houses, be it on roof tops or in vertical high rise buildings powered by solar energy with closed water cycles, no fertilizers, no pesticides, using hydroponics. This shall facilitate production of vegetables and fruits all around year as well as offer jobs for citizens and reduce transport for agriculture, thereby be a win-win story.
This transition requires huge amounts of investments and this is very critical for developing countries like India. How to raise these investments- domestic and foreign? For this we need to rebuild the infrastructure, invest in R&D to reconstruct the industries. Higher investment will stimulate growth and innovation. For this we need new Finance Mechanism which can consider the following:
- Green Taxes- taxing on resource consumption.
- CO2 Taxes – or an emission trading system based on auctioning of emission allowances which will create revenue that the state could use to finance these investments.
- International transfers- from rich world to the developing world.
In nutshell, it is not only about technologies or only about finance, but is also about changing the value system of our economies. Not short term profits but long term benefit should be the guiding principle. There are some very interesting developments going on in that area already. In Germany, Fair Trade – paying the producers a fair price is the fastest growing sector in the consumer business along with introducing social and environmental standards in the value chain, new management systems for companies, environmental accounting, sharing economy, for instance car sharing etc.
This transformation essentially requires forward looking and courageous policies, beginning with the global level- establishing regulatory systems for the global common goods like oceans or atmosphere and protecting them from the overuse and on the national and regional level- establishing efficiency standards for cars, building, electronic devices etc.
Public procurement: States are the most powerful consumers of goods and services of all kinds. If they establish sustainable standards, that will have a huge impact on the supply side too. Civil societies or NGO’s showcase the power of consumers which is the demand side and propels creation of important innovations. At the same time democracy matters in environmental terms as well. Civil society needs some democratic space, transparency, consumer rights, rights to protest, checks and balances between the political, economic and civil societies.
Businesses: Today they require innovative and responsible companies and entrepreneurs. Most of the innovation comes from companies itself approximately around 70-80%, and not by the state or public sector. So we have to make use of the know-how of the companies as an important source for this kind of change. We can also make optimum use of Science by developing and advancing technology or green idea, green IT as promising new opportunities to match economic and environmental goals.
This kind of great green transition is not only about climate change or the environment. It’s about improving human lives and even more about improving the lives of the poor which are heavily depending from the environmental conditions – air quality, water quality, access to sustainable electricity, green jobs, livable cities, renewables, energy independence, and healthy children.