Transcript Philip Sutton Director-Strategy Green Innovations XX MONTH

Ensuring that Asia
Pacific economic
growth is truly
environmentally
sustainable
Philip Sutton
Director-Strategy
Green Innovations
26 March 2005 (Version 1.b-long)
Sections of the presentation
• Mindsets
• Definitions
• Theoretical understandings
• Real world experience
• Strategy for achieving ecologically sustainable economic
growth in Asia Pacific
Methods and mindsets
• Double practicality
• No major trade-offs
• Backcasting from principles of success
• Whole-system design
• Innovation-driven
• Complex system management approach
(think of area of responsibility, & one level above & one level below)
Definitions
Environmental sustainability
• The ability to maintain particular parts or
qualities of the physical environment
(eg. life support & resource ‘infrastructure’, resources,
living species/nature, natural beauty, cultural features,
etc.)
Economic growth
• Economic growth is a measure of the
rate of increase in economic output
ie. the increase in output of product benefits sold in
the market (these days assumed to be exponential)
• Economic growth is NOT physical
growth
(without policy intervention, physical output usually
grows at 1% less than economic output)
Economic growth relates to the
service flow (the ‘whole product’),
not to the physical platform
Theoretical
understandings
Key is to de-link economic growth
from environmental impact / waste
Economic growth
Environmental
impact/waste
This means we need 100%
decoupling between economic
growth and environmental
impact
• but there is more to it than this….
Homeostatic management
Prevention

Safety zone
or mode

Restoration


Using ‘homeostatic management’
to achieve environmental
sustainability
• What needs to be to sustained?
• What is the ‘safety zone or mode’ for each
thing to be sustained?
• To prevent divergences use Natural Step
system conditions
• To overcome overshoot need principles,
specific research and models (eg. climate)
The homeostatic approach needs
to incorporate into its goals:
• The ‘end state’ conditions
• The scale of change
• The speed of change
What should we sustain?
• The community of life – from Earth Charter
• Human life - survival
• Societies/communities/cultures
• The quality of human life
• The realisable potential of each human life
• Nature/ other species/ biodiversity
• Life support infrastructure
• Resource supply infrastructure
• The social/economic value of non-renewable resources
• The ability of society to function, despite resource depletion
Achieving environmental
sustainability does not mean
everything remains static
• Things that need to be sustained will be
maintained
• Fundamental things that need to be
changed will be changed – without
threatening the things that need to be
sustained
Resolution
• The conflict between economic growth and
ecological sustainability can only be resolved if…..
• all future economic development is 100%
decoupled from the generation of environment
impact and resource wastage (prevention)
• and further economic development enables:
- environmental impacts from current economic
activity to be reduced to a sustainable level
(prevention)
- and nature to be restored to sustainable
condition (restoration)
Economic growth is an outcome
not a goal
• If economic output expands, for any
reason, we get economic growth
• We get desirable economic growth if, as
a result of meeting human and
environmental needs (with no major
trade-offs), economic output expands
The problem is physical growth, not
economic growth, due to ….
• Growing scale of physical damage from
resource extraction, processing and disposal
• New types of physical impact (chemicals,
biological agents, radiation, nanotech agents,
etc.)
• Fast change that exceeds the capacity of the
environment or people to adapt
Under what conditions is economic
growth compatible with……
• once-off restoration of the environment?
• perpetual prevention of damage to the
environment and of wastage of
resources?
Near term economic growth is
compatible with a major once-off
restoration of the environment if…..
• the total of all the physical platforms of all economic
output can be changed in character and shrunk small
enough physically to be compatible with the
maintenance of everything that needs to be
sustained, AND
• the real value of economic output does not collapse
in the process of physical adjustment and can keep
rising during the transformation period
Economic growth is compatible
with perpetual prevention of
damage to the environment and of
wastage of resources…….
• if the total of all the physical platforms of all
economic output remains small enough and
of the right character physically to be
compatible with the maintenance of
everything that needs to be sustained, AND
• the total service flow from economic output
can keep increasing within that constraint
This means that once basic human
physical needs are met …
• all future economic growth is
generated through net qualitative
change, not physical expansion,
AND
• all the compatible productivity
boosting mechanisms are tapped
What is the character of the physical
platform shrinkage and change?
•
A Factor 20 or more dematerialisation (for developed countries), and then
maintenance of a capped quantity of materials and energy for all purposes
•
The creation of a virtually closed-loop economy (everything recycled)
•
Stabilisation of population (after gentle shrinkage??)
•
Declining use of oil from now
•
Effectively zero greenhouse gas emissions
•
Full transition to renewable energy
•
Sequestration of past greenhouse gas emissions to stay below or get
below 400 ppm CO2 fast and to trend towards 280 ppm over time
•
Major restoration of habitat for threatened species
•
Move to zero toxic emissions
•
etc.
The conditions under which a truly sustainable
economy could have continuing economic growth
Fixed (or
declining)
stock of
materials
maintained
in a closedcycle (with
minuscule
top up from
nature)
Continually rising service
flow
- to benefit a stable
population at a
sustainable level
Stock enhanced while in use
New
capital
Fixed (or declining)
flow of renewable
energy
Reuse &
recycle
Does all this mean we have too
many things to achieve?
No, win-win possible in 2nd best
world
• Static optimisation theory claims only one
parameter can be optimised …..
• But in a complex world, that is a long way
from ideal, multiple-objective ‘optimisation’ is
possible – with sufficiently profligate
innovation (eg. zero defects with low cost)
• The key to win-win is effective innovation –
beyond incremental change to present
systems.
The barriers to evolving to super
optima
“Global” optimum
Local optima
Economic value
Low
High
Warning: a 3D view opens more options if valleys connect or innovation ‘helicopter’ used
High
Special issue value
Low
“To be able to achieve economic
growth.....
“To be able to achieve economic
growth.....
in a physically constrained world,....
“To be able to achieve economic
growth.....
in a physically constrained world,....
and to be able to get to this condition
really fast and on a huge scale.....
“To be able to achieve economic
growth.....
in a physically constrained world,....
and to be able to get to this condition
really fast and on a huge scale.....
we first have to.....
“To be able to achieve economic
growth.....
in a physically constrained world,....
and to be able to get to this condition
really fast and on a huge scale.....
we first have to.....
be able to imagine economic growth
occurring naturally in a physically
constrained world!”
The barriers to evolving to super
optima
“Global” optimum
Local optima
Economic value
Low
High
Warning: a 3D view opens more options if valleys connect or innovation ‘helicopter’ used
High
Special issue value
Low
How can service flow be boosted in
perpetuity?
• via improved qualities
• via more qualities
that benefit the user and the
environment/community
• achieving this depends on compatible
sources of productivity growth
• and this depends on continuing innovation to
overcome diminishing returns
Major sources of productivity growth that
needn’t drive physical expansion and can co-exist
with physical contraction:
•
Lean production / closed-cycle production
•
Increased knowledge & information intensity / intensified education
•
Internet communications
•
Fast, needs-based leapfrogging-innovation system driven by sustainability
transition
•
Whole-system design
•
Green chemistry / nanotechnology / biotechnology (miniaturisation)
•
Physical proximity (new model of urban form)
•
Reduced scale & therefore opportunity to mass produce/speed up creation of
production capacity & infrastructure
•
Reduced environmental damage / reduced wastage
•
Full employment
•
Artificial intelligence
Sources of productivity
diminished by shift from
physically growing economy
•
•
Cheap physical resources and
abundant supply (materials,
energy, water, land) (But this
source of productivity is being
constrained anyway)
Quick and easy single-purpose
decision-making on most things
Sources of productivity boosted
by shift to environmentally
sustainable economy
•
•
•
•
•
•
•
•
Speed and ease of proximity (in urban
design)
Increased skills in whole-system
design opening up greater access to
leapfrog innovation
Necessarily ubiquitous application of
lean thinking
Necessarily ubiquitous application of
smart technology and AI
Low levels of health/environment
damage
More highly skilled workforce /
community
Reduced real expenditure on raw
materials
Drag on economy released due to low
unemployment / underemployment
Can the necessary short-term
physical shrinkage/change be
achieved without collapsing
economic growth?
• Arguably yes, if there is sufficient innovation to keep
boosting productivity, and
• there is enough time, so that normal investment
levels can cover the restructuring, or
• for a short-duration transition, there is a big enough
increase in investment, with temporary shrinkage of
discretionary consumption, plus really effective
redeployment of sunk capital (cf. WW2 US)
Theoretical support for
environmentally sustainable growth
For example:
• Sustainable Technology Development (2000)
- Factor 20+ innovation possible and designed to be cost
effective
• Sustainable Europe Research Institute 2003-06
- MOSUS econometric modeling showing strong environmental
transition performing better than standard neoclassical base
case
• Azar & Schneider (2002)
- stabilising CO2 had miniscule GDP penalty
• Double dividend research with strategic ecotax income recycling
shows net increases in GDP compared to business as usual
- for Europe and the US (Brinner et al., 1991; DRI et al., 1994;
Jacobs, 1994) and for Australia (Common and Hamilton 1994).
Global GDP
25 0
Tr illi on US D/ yr
20 0
Ba u
15 0
35 0 p pm
45 0 p pm
10 0
55 0 p pm
50
0
19 90
20 00
20 10
20 20
20 30
20 40
20 50
20 60
20 70
20 80
20 90
21 00
Ye ar
Figure 4. The development of global income, with and without climate policies. Climate damages are not quantified
and thus not included in the graph.
Source: Azar & Schneider (2002).
Opportunities for economic growth in a
physically constrained world
Protected slower
zone
Fast changing or accelerating zone
Benefit
Impact
Carefully manage interface
Impact
Expansion
of coverage by service of
the population
(includes
humans)
Benefit
Improvement
of service quality
The
living
world
Carefully manage interface
Zone of intermediation
The
social
world
Protected slower
zone
Further theory/mental models to be
drawn on for the strategy
process.....
Theory of natural capital
• In perpetuity: Natural capital as ‘infrastructure’
with service flow – ecosystem services and
renewable resource flow
• Once-off: draw down / economic take off /
payback: restoration/resequestration is the
payback – those who benefit from the
drawdown (through economic take-off) should
pay for the restoration (eg. fossil energy use >
CO2 resequestration)
Price
(factor cost)
Signals
Financial
imperative
Elasticity
Responsiveness building
(technical, social, financial)
How can we drive the change?
Macroeconomics
Mesoeconomics
Microeconomics
Factor price
Investment flows
• Industry level
lifecycle management
• Industry policy
• Regional economics
• Gross drivers
• Rebound control
• Infrastructure shaping
• Structural innovation
level
• Strategic mobilisation
• Product level lifecycle
management
•Bottom up influence
• Innovation
•Mass mobilisation
• Organisational
capability building
Theory of ecotaxation & related
instruments
• Ecotaxes (& related economic
instruments) are regulatory tools – they
should be managed for regulatory effect
– in innovative system revenue should
fall if ecotaxes are effective
• The way revenue is recycled from
ecotaxes etc. is critical to maximising
productivity and minimising inflation
How can we avoid rebound?
• Through macroeconomic management using:
– ecotaxes
– tradable permits
– regulation
• Rebound is a symptom of the failure of
macroeconomic management.
• Rebound is also a symptom of 300+ year old
institutional arrangements that cause resources to
become systematically cheaper than labour intensive
products (factor price problem).
The eventual relative size of
domestic economies
Europe, US,
Japan, etc.
Innovations in the domestic economy
can be used to give Asia Pacific the
lead in the new economic paradigm
(environmental sustainability/qualitydriven economy)
China, India,
Indonesia,
etc.
Real world
experience
Real world examples of substantial
GDP / environment decoupling
• US, for seven years after the OPEC oil price
shock of 1979 the economy grew by 19%
while energy use fell by 6%
• UK, in last 30 years GDP’s has doubled while
CO2 emissions fell slightly and energy use
has increased by only a few percent.
• The Netherlands, in last 20 years has made
well over 50% reductions in many pollutants
while maintaining normal rates of GDP
increase
UK GDP growth vs energy usage and CO2 emissions from 1970
Annex C: Sustainable development in the UK http://www.number-10.gov.uk/su/resource/annexc.htm
Positive correlations
• In the developed world, generally the
countries and provinces with the
strongest environmental controls have
the strongest economies.
• In the developed world, generally the
countries and provinces with the
strongest environmental controls have
the leading exports of related
technologies
Human-centred development
• Curitiba, Brazil: In 1980’s per capita
GDP was only just 10% above the
national average. By 1996 its per capita
GDP was 65% above the national
average.
Fastest industrial restructuring
• Korea: from agricultural nation to world
competitive manufacturing economy in
20 years (complete infrastructure change)
• US: after Pearl Harbor: from world’s
largest consumer economy to world’s
largest war economy in 1 year
(complete change to how
infrastructure is used)
Strategy
for achieving ecologically
sustainable economic growth in
Asia Pacific
Framing issues
• The more economic development we
want the stronger our environmental
policies need to be (to get 100% decoupling)
• How big and how urgent does the
environmental restructuring program
need to be?
• How do we want to position our
economies within the world economy?
Backcasting strategy methodology
• Where are we now? (judged by success
principles)
• Where do we want to be, when?
(with the least loss along the way)
(based on success principles)
• What do we have to do to get there, in time?
• For an effective start, what should we do
now?
Where are we now?
SWOT analysis of Asia Pacific:
Strengths?
– very high economic growth in many areas
– high levels of investment / lots of new development
– large diverse population (heading to stabilisation)
– poverty decreasing in some areas much more than expected
– growing manufacturing and services industries
– growing domestic market
– rapidly rising education levels / technological sophistication
– low wages that attract foreign investment
– the region is now taken seriously on the world stage
Where are we now?
SWOT analysis of Asia Pacific:
Weaknesses? (in many but not all parts of the region)
– don’t have the same innovation
density as most of the developed
countries
– high population densities and large
overall populations putting pressure
on the environment and leading to
resource shortages
– dependent on low wages as a
major attractor for investment
– high levels of poverty
– shortage of clean water
– congested (sometimes gridlocked)
cities
– agricultural systems are being
overstretched and damaged
– high levels of air pollution
– not yet geared up to be part of an
environmentally sustainable world
– growing oil consumption,
growing releases of greenhouse
gases (apart from oil, China now
uses same resource quantities as
– material from the earth’s crust and
from factories is systematically
building up in the biosphere, and
physical impacts (harvesting,
clearing, fragmentation are
systematically reducing the
viability of biodiversity (ie. the
Natural Step system conditions
are being violated)
Where are we now?
SWOT analysis of Asia Pacific:
Opportunities?
–to build up the economies of all the region’s societies so that they
are equal to the best anywhere
–to eliminate poverty within 30 years
–to build the local market so that desperate dependence on
exporting to developed economies is eliminated
–to be the region in the world where the new “sustainable economy”
– because this
paradigm emerges first in its fullest form
region has the fastest rate of development (so the need and the
opportunity is the greatest) (Concept: David Wallace, (1996). Sustainable
Industrialization. Earthscan/RIIA.)
Where are we now?
SWOT analysis of Asia Pacific:
Threats?
– social instability due to rapid change
– damage to agriculture, water supply from climate change
– large oil price rises due to demand/supply imbalance
– post-Kyoto demands to contain greenhouse gas emissions
– trends in developed countries that might lead to the
relocalisation of manufacturing in developed countries – or
perhaps all countries (lean production, material recycling)
– in the next couple of decades development of advanced
general artificial intelligence could remove cheap labour
advantage
Where do we want to be, when?
Peak in discovery of giant oil fields
Production peak in cheap oil
We are probably near the peak of
world oil production
• The price rises prompted by the Iraq
war, may be masking the peaking of
world oil supply ie. once we get out of
supply limits induced by the Iraq war we
might find that world oil production is not
able to be increased in total – prices may
well stay high until demand tracks falling
supply
Global average surface equilibrium temperature change for various stabilization targets.
Source: Azar & Rodhe (1997). Dashed line a) refers to an estimate of the maximum natural variability of the global
temperature over the past millennium, and dashed line b) shows the 2oC temperature target.
Per capita emissions under contraction and
convergence by 2050
2.5
tC/cap/year
2
1.5
The European
Union
550 ppm
1
450 ppm
0.5
China
0
2000
350 ppm
2010
2020
2030
2040
2050
Per capita emission trajectories for China and the EU towards 350 ppm, 450 ppm and 550 ppm, under contraction and convergence by
2050. Azar, 2005
Dangerous climate change
• UK Met Bureau: http://www.stabilisation2005.com/
• There is a strong hypothesis that:
– heating of 2ºC or more over pre-industrial level will cause
impacts that are even more dangerous than those in train
already
– there is about a 30% chance (according to one estimate) that
400 parts per million (ppm) CO2 will, after some years, cause
2ºC warming
– at current rates of increase of CO2 in the air (ie. at least 2
ppm per year) we will get to 400 ppm CO2 in less than 10
years.
http://news.independent.co.uk/world/environment/story.jsp?story=603975
If we take global warming seriously
there is a need to ….
• bring CO2 emissions down to very low levels
(zero?)
• take large amounts of CO2 out of the
atmosphere so that we can get down to
tolerable levels (280 ppm through to 330 ppm
at the most?) (if biomass capture used will have big effect
on land use policy and energy supply strategy)
• have major results on the ground in a very
few years (ten?)
How big is the challenge?
Sustain
Less
Scale of
change
More
Speed of
change
100% New
100% Old
Industry mix
needed to deliver
preferred end
state
So, where do we want to be,
when?
Pulling all the issues together……
•
we want to be in an environmentally sustainable state as soon as possible,
with the least loss (to people and nature) along the way
•
exactly what that means should be determined by careful assessment –
the ideas in this paper are merely a crude illustration of such an
assessment process
•
the assessment process in this paper suggests that:
–
possibly we have an immediate issue to deal with the peaking of world oil supply
– requiring major and continuing demand reductions to rebalance
supply/demand
–
at the same time we need to make massively deep cuts in greenhouse emissions
(down to zero?) and begin sequestration of past emissions
–
at the same time as these transitions are made, solutions to other pressing
environmental, social and economic issues should be built in
– so that timely solutions are not pre-empted and opportunities for ‘economies of
renewal’ are not lost – this is comparable to the advantages that have accrued to
economies rebuilding after the devastation of major wars
Major end-state integrated goals
• To create an environmentally sustainable economy
very fast
• To be the global pioneer of the full “environmentally
sustainable economy” paradigm
• To create economies based on the new quality-driven
paradigm
• Having used the low wage strategy to kick start
economic take-off, to end the dependence on this
strategy for driving economic growth
• To spread the benefits of the new economy through
the whole of society
What do we have to do to get
there, in time? 1
• Educate decision-makers and innovators in areas of society
about the need for change, the possibilities for change and the
methods/technologies for change
• Build institutional capability to drive fast structural change to
achieve an environmentally sustainable economy
• Proactively seek the most environmentally demanding
customers in the global economy
• Preferentially encourage the most creative environmentally
minded investors to be active in the region
• Develop very strong sustainability R&D and innovation programs
• Make sure that all long-lived investments are compatible with an
environmentally sustainable economy
What do we have to do to get
there, in time? 2
• Try to shorten the lifecycle of traditionally very long-lived
infrastructure
• Lobby to establish international treaty obligations to mandate the
adoption of production systems that are compatible with an
environmentally-sustainable economy
• Build the most advanced environmentally sustainable urban
systems
• Expand the domestic and regional economy – and build it on
environmental sustainability principles
• Build a social movement to promote the rapid achievement of an
environmentally-sustainable economy
For an effective start, what should
we do now?
Catalyse change
• create methods and scenarios for the fast
achievement of an environmentally sustainable
economy – use these for discussion (& then action)
• create a network of professionals to build skills and
promote the idea, within mainstream society, of
creating an environmentally sustainable economy
• Promote the “Race to Sustainability” program as a
way of engaging societies
http://www.green-innovations.asn.au/Race-to-Sustainability.htm
Possible additional
business opportunities
SCOPE OF
BUSINESS
OPPORTUNITIES ARISING FROM THE
RESPONSE TO
ENVIRONMENTAL
ISSUES
A
C
E
C
Certain business
opportunities
D
E
A
B
Double-dividend economic
performance
Pessimistic view of economic
performance under the influence of
green measures
Economic growth curve traditionally
correlated with resource use
F
B
D
F
Trend line of economic
performance - not a prediction
Economic growth begins to be
decoupled from resource use
Material resource use ‘bell curve’:
quantity consumed per year
Key ‘take away’ message
Crisis and opportunity
• We have a crisis on our hands – ie. the
need to actually achieve environmental
sustainability, very fast
• But this can be an opportunity to make
the paradigm shift to create a qualitydriven economy, based on compassion,
wisdom and creativity
Thank you
Extra slides
The principle of eco-efficiency
(dematerialisation)
• Aim for Factor ‘x’
improvements in
eco-efficiency
• Don’t lock into
arbitrary Factor 4
or Factor 10
goals
• Calculate afresh
See Dutch “Sustainable
Technology Development”
book
The principle of closed-cycle
• Power with renewable energy
Strategies/initiatives for
zero waste - 1
• Physical products and materials & energy should be
managed to retain their entropic quality as long as
possible: through combined processes such as:
-
Maintenance / containment
-
Repair
-
Reuse (whole systems)
-
Re-manufacture (component reuse plus)
-
Reprocessing / waste warehousing
-
Up-cycling
A new waste hierarchy for a zero
waste society
Transition time:
30 years or
less
Action on
the ground
Cruising
Winding down
the transit ion
#### delayed takeoff
The constipation
stage (partial
action, major
resistance)
Awakening
Imag in ing/
mobilising people
The big leap
- making it
happen on the
ground
Gearing up/
mobilising
resources
Mining
from the
earth's
crust
Processing
Biological
resource
harvesting
and mining
from the
biosphere
Earth’s
crust
Biosphere
(zone of
life)
Biosphere
(zone of
life)
Earth’s
crust
Reprocessing /
resource
stewardship /
closed-cycle
production
Reverse
processing /
reverse
harvesting
Reverse
processing /
reverse mining
(sequestration)
•Closed-cycle
•greenhousefriendly
•biodiversityfriendly,
renewable
Producing the
physical
platform
•Eco-efficiency /
Dematerialisation
(ratio of service
value/materials)
•Product stewardship
(attached to the
dominant brand
managers)
Delivering
services via a
physical
platform
All
powered by
renewable
energy
The new sustainabilityorientated economy
Meeting
individual,
social &
environmental
needs of the
world’s human
population; and
meeting the
needs of nature
Using
services on a
physical
platform
Philip Sutton
Green
Innovations
19 May 2002
Version 2.e
Introducing broad-based
ecotaxation
Introducing broad-based
ecotaxation
$
expand
Wage
supplements
Eliminate payroll taxes
Investment
/subsidy
Research and development
Education
Time
Managing for sustainability-promotion
through the business cycle
Spread new paradigm
Cost saving, risk management &
customer loyalty measures
Peak 1
Peak 2
Early movers
explore
Cost saving, risk management &
customer loyalty measures
Early movers
explore
Reach consensus on new paradigm
Sell new paradigm products
Start new
investments
Start
Lock in initiatives
regulatory
Upswing 1
taxes
Prepare initiatives
Downswing 1
Downswing 2
Trough 2
Trough 1
Year X
Year X+1
Year X+2
Year X+3
Year X+4
Year X+5
Year X+6
Year X+7
Year X+8
Year X+9
Enjoyment / challenge
Poverty elimination
Health
Caring, community
building, family friendliness
Material economy
transformation, env. &
restore
Peace & anti-corruption
Plus:; Knowledge expansion; Wisdom & decision-making; What else?
Attractiveness to
purchaser/investors?
Importance
Scope for
extending
service
provision
Strong boost to
productivity?
Scope for
quality
improvement
Can accelerate?
Opportunity to
develop the
economy
Can accelerate?
Development areas that can grow strongly in physically constrained world
Freedom is knowing the line of least
resistance!
Powerful
knowledge
new
future
Old
paradigm
past
now
New
paradigm
old
future
Cheap
materials
Waves of Innovation. Including proposed 6th wave of innovation driven by the
challenge to achieve ecological sustainability. (Natural advantage of Nations,
2005)
Entraining the necessary with the
highly desirable