Transcript UCL ENERGY INSTITUTE UCL ENERGY INSTITUTE

UCL ENERGY INSTITUTE
Resource efficiency: the challenge and
opportunity
A presentation to the ENWORKS Conference:
‘Obvious in Hindsight: a strategic insight into
successful environmental business support’
Paul Ekins
Professor of Energy and Environment Policy
UCL Energy Institute, University College London
Manchester
March 25th 2010
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Principles of sustainable growth
• Borrow systematically only to invest, not to consume
• Keep money sound: control inflation, public borrowing, trade
deficits, indebtedness
• Establish transparent accounting systems that give realistic
asset values
• Maintain or increase stocks of capital (manufactured, human,
social, natural)
• As has become apparent every one of these principles has
been spectacularly broken over the last few years, even in the
financial sector and mainstream money economy
• What prospect then for the big one, maintaining and rebuilding
ecosystems/natural capital for environmental sustainability?
• We must start by getting right the basic conception of how the
human economy relates to the natural environment
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The ecological cycle
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BIOSPHERE
ENVIRONMENTAL
FUNCTIONS
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Resources (Source)
Waste absorption (Sink)
Ecosystem services (lifesupport, amenity etc.)
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The ecological cycle and human wellbeing
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BIOSPHERE
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ENVIRONMENTAL
FUNCTIONS
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Resources (Source)
Waste absorption (Sink)
Ecosystem services (lifesupport, amenity etc.)
HUMAN
BENEFITS
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Economy
Health
Welfare
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The economy as a sub-system of the
biosphere
SOLAR ENERGY
HEAT
BIOSPHERE
Eco-system services
Energy
Source
functions
Materials
Energy
HUMAN POPULATION
AND
ECONOMIC ACTIVITY
Materially growing economic sub-system,
leaving less space for nature
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Sink
functions
Wastes
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The challenge of environmental
sustainability
• Climate science and the Millennium Ecosystem Assessment
make clear that without a radical reform of the human-nature
relation – in favour of nature – human civilisation is at grave
threat
• Specifically, nine billion humans cannot live current Western
lifestyles and maintain a habitable planet: the first thing to go
will be climate stability, the whole biosphere may then start to
unravel. Issue is saving the human, not the planet.
• Any aspiration for a sustainable economy must start from the
recognition of the need for the sustainable use of resources
and ecosystems, rooted in basic laws of physical science
• The first priority is to reduce emissions of greenhouse gases to
keep global average warming below 2oC
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The imperative of decoupling
physical from financial growth
• Decoupling: a decline in the ratio of the amount used of a
certain resource, or of the environmental impact, to the value
generated or otherwise involved in the resource use or
environmental impact. The unit of decoupling is therefore a
weight per unit of value.
• Relative decoupling: in a growing economy, the ratio of
resource use (e.g. energy consumption) or environmental
impact (e.g. carbon emissions) to GDP decreases
• Absolute decoupling: in a growing economy, the resource
use or environmental impact falls in absolute terms
• If GDP growth continues, climate stabilisation at levels of CO2
concentration that limit global average temperature increases
to 2oC will require a degree of absolute decoupling of GDP
from carbon emissions that is outside all previous experience
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The necessary improvements in
resource and carbon productivity
•
To achieve 450ppmv atmospheric concentration of CO2, assuming
ongoing economic and population growth (3.1% p.a. real), need to
increase carbon productivity by a factor of 10-15 by 2050, or approx.
6% p.a.
•
Compare current increase in carbon productivity of 0% p.a. over
2000-2006, i.e. global carbon emissions rose at 3.1% p.a.; also
Compare 10-fold improvement in labour productivity in US over 18301955, must achieve the same factor increase in carbon in 42 years
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A similar increase in resource productivity is required
Focusing only on carbon may increase other kinds of resource use
A systematic focus on ALL resource extraction is required: make
transparent and accountable the physical basis of the economy
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An unprecedented policy challenge
The Stern Review Policy Prescription for climate
change
•
Carbon pricing: carbon taxes; emission trading
•
Technology policy: low-carbon energy sources; high-efficiency end-use
appliances/buildings; incentivisation of a huge investment programme
•
Remove other barriers and promote behaviour change: take-up of new technologies
and high-efficiency end-use options; low-energy (carbon) behaviours (i.e. Less
driving/flying/meat-eating/lower building temperatures in winter, higher in summer)
•
The basic insights from the Stern Review need to be applied to the use of other
environmental resources (water, materials, biodiversity [space])
•
In a market economy, pricing is the key to resource efficiency, investment and
behaviour change
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The benefits of resource productivity
• Savings to business: £6.4 billion from
measures that ‘cost little or nothing’
• Innovation: new technology, economic
activity, exports
• Increased resource security (reduced
vulnerability): food, water, energy, rare
materials
• Environmental improvement: reduced GHG
emissions, waste to landfill, extraction of
virgin materials
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…. And an extraordinary opportunity:
NISP outputs (investment £28m over 5 years)
Net (Gross) 1 = 60% (100%) attribution and 20% annual persistence decay
Net (Gross) 2 = 60% (100%) attribution with no persistence decay
Output Metric
Scenario
Net 1
Scenario
Net 2
Scenario
Gross 1
Scenario
Gross 2
Landfill diverted (t million)
12.64
21.07
21.07
35.11
CO2 reduction (t million)
10.87
18.11
18.11
30.19
Virgin materials (t million)
17.47
29.11
29.11
48.52
Hazardous Mat. (t million)
0.65
1.09
1.09
1.82
Water (t million)
17.23
28.71
28.71
47.85
Sales (£ million)
316.98
528.29
528.29
880.49
Cost savings (£ million)
280.95
468.25
468.25
780.41
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…. And an extraordinary business
opportunity: NISP value for money (1)
Net (Gross) 1 = 60% (100%) attribution and 20% annual persistence decay
Net (Gross) 2 = 60% (100%) attribution with no persistence decay
£ per Unit Output
Scenario
Net 1
Scenario
Net 2
Scenario
Gross 1
Scenario
Gross 2
Landfill diverted (£/t)
0.31
0.19
0.19
0.11
CO2 reduction (£/t)
0.36
0.22
0.22
0.13
Virgin materials (£/t)
0.23
0.14
0.14
0.08
Hazardous Materials (£/t)
6.04
3.62
3.62
2.17
Water (£/t)
0.23
0.14
0.14
0.08
Sales (£/£)
0.012
0.007
0.007
0.004
Cost savings (£/£)
0.014
0.008
0.008
0.005
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NISP value for money (2)
NISP outputs (investment £28m over 5 years)
5-year figures = 60% attribution and 20% annual persistence decay
Actual
5 years
Public investment/
unit output
Landfill diverted (mt)
CO2 reduction (mt)
Virgin materials saved (mt)
Hazardous materials reduced (mt)
7.0
6.0
9.7
0.36
12.6
18.1
29.1
1.1
0.31 (£/t)
0.36 (£/t)
0.23 (£/t)
6.04 (£/t)
Water saved (mt)
Extra sales (£m)
Costs saved (£m)
PLUS
Extra Government revenue (£m)
9.6
176
156
28.7
317
281
0.23 (£/t)
0.012 (£/£)
0.014 (£/£)
89
0.31 (£/£)
Fiscal multiplier: 3.2 (£/£)
Private investment (£m)
Jobs created
Jobs saved
131
3683
5087
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Policies for resource productivity
• Importance of prices to drive productivity improvement
– Landfill tax in 2013 will drive out landfill
– Carbon price to drive energy from waste, CHP, biogas, recycling
– Green fiscal reform (Green Fiscal Commission) can meet 2020 carbon
reduction targets
• Prices not enough: need for regulation, information
– Pricing too difficult: land use, planning, biodiversity, Water Framework
Directive, product design/performance (e.g. buildings, vehicles,
appliances)
– Prices don’t work: information failure (main NISP innovation)
• Culture, habits, institutional structure (attention/job description)
• Businesses won’t pay even though very profitable – rationale for public
intervention (Landfill Tax – businesses pay for disposal; NISP – businesses
improve resource and economic efficiency; businesses and government
better off)
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Back to NISP
• Rising resource prices support technology,
knowledge and innovation
• Complementary policy (e.g. through Knowledge
Transfer Networks) can magnify resource-price
impacts and accelerate innovation
– Developing collaborative research
– Sophisticated nation-wide information system
– Reducing time lag between invention and implementation, accelerating
diffusion
– Helping industry identify and overcome current market barriers
– Meeting R&D and technology innovation needs of industry
– Research found that 75% of all NISP-inspired projects (‘synergies’)
included innovation
• 50% involved best available practice
• 20% involved new research
• Realistic resource and waste prices are not
the whole story, but an essential part of the
mix
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Final thoughts
• Take physical basis of the economy as seriously as monetary
basis: physical (resource flow) accounts to match National
(money flow) Accounts
• Use prices to increase resource productivity, reduce waste/loss
of potentially valuable materials
• Use information to increase effectiveness of price signals
• Use regulation to secure environmental services/ecosystem
functions, set framework within which markets/prices operate,
achieve defined environmental outcomes when more effective
than price signals
• Low-Carbon Industrial Strategy, Carbon Trust, Technology
Strategy Board, WRAP, NISP, ENWORKS – UK has made a
start, well behind some other EU countries (e.g. Germany,
Sweden), long way to go but prize is very great
Thank You
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