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sustainable development

Circular Economy is one of the phrases that you’ll nowadays most often hear at any sustainable development debate. It is basically a new catch phrase for anything that was previously associated with sustainable development. Since still nobody really knows how to make an economy sustainable, circular, square or rectangular, now, for yours truly, the EEA managed to come up with a very simple solution to the problem.

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My article entitled “An Empirical Study of the Determinants of Green Party Voting” is now forthcoming in the journal Ecological Economics. In this article I show the following:

I empirically study the determinants of individuals’ green voting behavior. For this I make use of three datasets from Germany, a panel dataset and two cross-sectional datasets. The empirically strongest determinants are the voters’ attitude or distance to nuclear sites, the level of schooling and net income. I show that those voters with deviant attitudes or alternative world views are more likely to vote green, a result of the fact that the green party has always had the position of a protest party. I nd little role for demographic variables like gender, marital status or the number of children. This is in contrast to the stated preference literature. Age plays a role for explaining voting behavior only insofar
as it proxies for health.

You can find the version that is forthcoming HERE.

Saṃsāra means “to perpetually wander”.

 

Earthlings means “those that inhabit the planet Earth”.

(or slightly better quality the original: http://earthlings.com/?page_id=32)

By choosing what you do,
You choose who you are,
And what you will be.

So today I got this in my inbox : Mohamed A. El-Erian is CEO and co-Chief Investment Officer of the global investment company PIMCO, with approximately $2 trillion in assets under management, writes that “[i]t is not often that one can confidently claim that a single remedy could make billions of people around the world significantly better off; do so in a durable and mutually supportive manner; and thus improve the well-being of both current and future generations. Yet that is the case today. The remedy I have in mind, of course, is faster economic growth…”

And then I got also a piece by Klaus Schwab, Founder and Executive Chairman, World Economic Forum, who was also a member of the UN High-Level Advisory Board on Sustainable Development. He writes that “At the dawn of a new year, the world is in the midst of several epic transitions. Economic growth patterns, the geopolitical landscape, the social contract that binds people together, and our planet’s ecosystem are all undergoing radical, simultaneous transformations, generating anxiety and, in many places, turmoil. From an economic standpoint, we are entering an era of diminished expectations and increased uncertainty. In terms of growth, the world will have to live with less.”

And finally I received this new paper published in Nature, by Robert Costanza and his co-authors, entitled “Development: Time to leave GDP behind”.  They re-iterate the point that GDP is a faulty measure of progress by ignoring “social costs, environmental impacts and income inequality.” In addition, the authors write that “ [i]ncreased crime rates do not raise living standards, but they can lift GDP by raising expenditures on security systems. Despite the destruction wrought by the Deepwater Horizon oil spill in 2010 and Hurricane Sandy in 2012, both events boosted US GDP because they stimulated rebuilding.”

The authors discuss that “[t]he successor to GDP should be a new set of metrics that integrates current knowledge of how ecology, economics, psychology and sociology collectively contribute to establishing and measuring sustainable well-being.”

This article in Nature gives a nice overview of the different ways in which we can measure more inclusive measures of progress and discusses advantages and also some disadvantages. Worthwhile the read! Enjoy.

I also refer interested reader to similar points that I discussed HERE and HERE. In any case, to me – still – the surprising thing is that it is so difficult to change the mainstream focus on GDP… After all, it is not like trying to convince the Sahelanthropus Tchadensis to start walking upright, or?

evolution_of_man

In the year 1967, Robert Oppenheimer, the father of the atomic bomb and subsequently one of its most vicious opponents and toughest nuclear power regulators, died of thyroid cancer. That same year also saw one of the most far-sighted, ingenious lectures on the topic of nuclear power in front of the National Society for Clean Air in London. The speaker, none other than Ernst Friedrich Schumacher, subsequently published a slightly re-written version of that lecture in his “book of heart and hope and downright common sense about the future”, entitled small is beautiful. In 1995, The Times Literary Supplement ranked this book among the 100 most influential books since World War II.

So what were the main insights by E.F. Schumacher already in the year 1967? He wrote that “[o]f all the changes introduced by man into the household of nature, large-scale nuclear fission is undoubtedly the most dangerous and profound… The point is that very serious hazards have already been created by the `peaceful use of atomic energy’, affecting not merely the people alive today but all future generations, although so far nuclear energy is being used only on a statistically insignificant scale. The real development is yet to come, on a scale which few people are capable of imagining… A serious accident, whether during transport or production, can cause a major catastrophe; and the radiation levels throughout the world will rise relentlessly from generation to generation. Unless all living geneticists are in error, there will be an equally relentless, though no doubt somewhat delayed, increase in the number of harmful mutations… Yet all these weighty opinions play no part in the debate on whether we should go immediately for a large `second nuclear programme’ or stick a bit longer to the conventional fuels which, whatever may be said for or against them, do not involve us in entirely novel and admittedly incalculable risks.”

Now, where does the unbelievable twist to world’s fate come in? Remember that E.F. Schumacher gave the lecture when nuclear energy produced only roughly one percent of total electricity. Today, nuclear energy not only accounts for around 10% of world’s energy production, with a share of more than 50% in some countries, like France or Slovakia. However, it also more and more gets viewed as a necessary aid for reducing our man-made climate change problem. So, while in 1967 E.F. Schumacher believed that “[r]adioactive pollution is an evil of an incomparably greater `dimension’ than anything mankind has known before”, we now know that our consumption lifestyles and consequently energy demands have created an evil that is even greater than the “evil of an incomparably greater `dimension’ than anything mankind has known before”. Even more incomprehensible, we now seem to prefer the lesser “evil of an incomparably greater dimension”, and want to make increasing use of it in the future. This is a sentiment that is widely shared across the world. At the end of 2011, the European Parliament has put this most bluntly in its Energy Roadmap 2050: “Nuclear energy will be needed to provide a significant contribution in the energy transformation process… It remains a key source of low carbon electricity generation. As a large scale low-carbon option, nuclear energy will remain in the EU power generation mix.” This, indeed, is something that one should call an unbelievable twist to world’s fate.

So what are our main lessons that we should take away from this venture in the not-so-distant past? Firstly, it seems we way too easily forget about what we should have learnt from past disasters, like Chernobyl or Fukushima. The direct costs of Fukushima run into several hundred billions, while the most serious indirect costs may only arise in the more distant future. For example, recently every single bluefin tuna caught in California was radioactively polluted. How effects like these are accumulating in the food chain is impossible to predict. Similarly, the rate of thyroid cancer in Europeans, Ukrainians and White Russians increased, depending on the region, between threefold to tenfold, believed to be directly linked to the nuclear disaster in Chernobyl around 30 years ago.  If this disaster trend is to continue, with a serious incident every 25 years, we will soon be living in a world where radioactive contamination may be the rule rather than the exception. Nevertheless, directly in the aftermath of Fukushima, a large number of nuclear power plants have been shut down, while they are now, step by step, being re-connected to the electricity grid. Economic, short-term considerations, nuclear lobbies, and the unwillingness to opt for a small yet beautiful option may very well turn out to be the downfall of mankind.

Secondly, with each passing generation, we seem to get hold of more and more evidence that our way of using nature, of living off nature, to our own benefit, involves risks that are extremely difficult to calculate and to predict. All our large-scale solutions have turned out to be problematic in some way, from environmental pollutants like coal, oil or nuclear for our energy needs, to taking the joy out of work by big mechanical aids like assembly lines. And this is not surprising, for our planet needed millions of years to evolve into a well-balanced ecosystem, in which species were able to live in a neat symbiosis. It is the impatience of mankind on which disastrous new scientific `solutions’ that support our insatiable lifestyle thrive. One may only wonder what further concerns may arise with the advent of the wicked wonders brought about nanotechnology or genetic engineering, which meddle with genetic codes that have suited the planet’s needs just perfectly for thousands of years.

Thirdly, we seem to be able to get used to living with risks and trying to trade-off these self-created dangers to an extent that, time and again, requires us to question where exactly we would like to take this planet. If yesterday we bedevilled one source of energy for being mankind’s most dangerous energy solution yet, and today we decide to increasingly rely on this source of energy to reduce another problem that we created ourselves, then this is an unmistakably dangerous journey that we are taking. Yes, it is true that we get used to risks, that our future generations will learn to accept radioactivity or climate tippings as part of their lives, but we have to continuously ask ourselves whether this is what we really want for them.

Let me conclude with E.F. Schumacher’s own words. “Man cannot live without science and technology any more than he can live against nature… What matters… is the direction of research, that the direction should be towards non-violence rather than violence; towards an harmonious co-operation with nature rather than a warfare against nature; towards the noiseless, low-energy, elegant, and economical solutions normally applied in nature rather than the noisy, high-energy, brutal, wasteful, and clumsy solutions of our present-day sciences.” These words, although spoken roughly half a century ago, remain today as true as ever.

In 2011, the European Environmental Agency published a report entitled: “The European environment — state and outlook 2010: assessment of global megatrends.

AIM
Five groups of megatrends were investigated for their potential impact on the development in Europe: Social, technological, economic, environmental and political. The study aims to set out those trends that may influence Europe’s future and prompt questions, such as:

  1. How can we avoid urgent and critical global feedbacks in resource-using systems with limited knowledge?
  2. To what extent should we invoke the precautionary principle given our limited knowledge of environmental risks?
  3. How should we ensure that lack of knowledge does not become a reason for inaction?

This report is rather well-done, concise (which is generally not the case for EU reports), and provides an interesting perspective and insight into how the EEA views the various challenges to come.

While the report might have benefited from more clearly differing between European megatrends and those from the rest of the world (ROW) as well as a sterner analysis of their interactions and feedbacks, the report is a good first step in that direction.

Let’s go through the main points.

MAIN RESULTS AND DISCUSSION

SOCIAL MEGATRENDS

1.     population changes
Population is expected to peak in 2050 at 9 billion and then slowly decline to 8.4 billion by 2100. The 95% confidence interval ranges for 2050 ranges from 7 to 10.5 billion. The report falls short here by simply stating that population growth affects all global megatrends. What is important here is to understand that Europe stands in front of a severe policy dilemma. Europe’s population is expected to slowly start decreasing around 2030, while its population will become older. This has two impacts: a slowdown or decrease in population will ease urban sprawl and help reduce environmental impacts. On the other hand, it will also impose difficulties for the social security systems. Thus, Europe has an incentive to allow for a population inflow in order to reduce stress on its social security, but at the same it would want to reduce population inflow in order to minimize impacts of population growth on local environments. Limited migration into Europe may lead to inter-European competition for European population. For example, Luxembourg wants to significantly increase its population until 2050 in order to help its social security. Poorer countries will lose out in this potential inter-European battle for labour, thus potentially inducing conflicts and stress on the stability in Europe. Consequently, this is a problem that needs to be solved with careful European-wide cooperation and interaction. Better to start early on this rather than late…

2.     Urbanization
Urbanization is expected to increase and by 2050 around 70% of the world population may live in urban centres. Here the report suggests that urbanization increases consumption, social and political unrest if governance structures are weak, and diseases may spread more easily. Apart from the potential disease (see point 3) spread, it is hard to see inhowfar a greater rate of urbanization will significantly impact Europe in the future. Some thoughts on urbanization and ecosystems can be found HERE.

3.     Diseases and pandemics

This has been raised in point 2 and will undoubtedly turn out to be a problem during some point in the future. For the case of communicable diseases like bacterial infections or viral ones, the only thing that one can do against potential disease spread is to establish international cooperation, early warning mechanisms, intervention centres close to airports and large urban centres, and backup plans in case all approaches fail. Oh yes, and stock up on those rare antibiotics of course.

Apart from communicable diseases like bacterial infections or viral ones, there exist non-communicable (NCD) ones like diabetes and obesity. These have seen a significant increase lately and are mostly associated with intermediate stages of economic prosperity. This is mostly a cultural problem though and can be addressed through educational measures. Another approach has been suggested by Catarina Goulao and Agustin Perez-Barahona in their article “Intergenerational transmission of non-communicable chronic diseases”. They suggest that people underinvest in health since these NCDs are still transmitted through society via culture, and therefore the government should tax those activities that increase NCDs. For example, this would turn out to be a tax on alcohol, fast food, etc…

TECHNOLOGICAL MEGATRENDS

4.     Accelerating technical change

“Approving new technologies in regions with weaker risk assessment and governance structures can create risks that could easily spread across our highly interlinked world. Unclear delineation of public and private responsibilities is likely to magnify controversies about risk control and associated costs.”

This is definitely an important point here, see e.g. Fukushima in Japan, nanotechnology in general, etc. How can Europe reduce its risk exposure to potentially dangerous technologies? Quite easily through huge investments in R&D and becoming the world leader in those technologies itself, thereby being able to more explicitly control the producers. This kind of leadership role may diminish in the future if other regions turn out to be technology leaders and more innovative, but there is nothing that stops Europe from furthering and developing its technology leadership, investing more money in R&D, etc. Nevertheless, currently Europe as a whole is still a fair step away from spending significant sums on R&D.  Plus, there does not seem to be a Europe-wide cooperation on R&D spending, with only Sweden and Finland spending more on R&D /GDP than the US, while many European countries spend less than 2% of their GDP on R&D.

ECONOMIC MEGATRENDS

5.     Economic growth

“Rapid growth accelerates consumption and resource use. But it also creates economic dynamism that fuels technological innovation, potentially offering new approaches to addressing environmental problems and increasing resource efficiency.”

It goes without saying that economic growth affects every aspect and every other global megatrend. What is missing in the report is a clearer picture of whether and how it would make sense to turn to alternative approaches to measure wellbeing, and thereby giving economic growth less of a headline than is generally being done.

6.     From a unipolar to a multipolar world

“Global power is shifting. One superpower no longer holds sway and regional power blocs are increasingly important, economically and diplomatically. As global interdependence and trade expands, Europe may benefit from improving its resource efficiency and knowledge-based economy.”

Furthermore, ” [w]hen countries grow relatively fast they gain in economic power through their enlarging production and consumption markets. They are able to exercise that power at international negotiations on economic matters (such as trade barriers and product standards) but also in a wider sense, including participation in climate change and other environmental negotiations.”

Although this is an understandable assessment from the European perspective, it is an unfortunate and absolutely non-cooperative approach or worldview. More on this below.

7.     Intensified global competition for resources

“How will Europe survive in the intensifying scramble for scarce resources? The answer may lie in more efficient production and resource use, new technologies, innovation and increasing cooperation with foreign partners.”

Nothing to add here apart from the question of why the report did not think of the possibility of opting/pushing for a self-sufficient Europe? More on this below.

ENVIRONMENTAL MEGATRENDS

8.     Decreasing stocks of natural resources

Here we are still talking about deforestation (though less so in Europe), biodiversity loss, urban sprawl, soil degradation, etc. While there is a relative stability of natural resources in Europe, this is less so the case for the other parts of the planet. To prevent spillovers from these regions to Europe, through e.g. also climate change or inter-regional pollution, only a changing consumption habit and international cooperation will work. See below.

9.     Increasingly severe consequences of climate change

“Accelerating climate change impacts will threaten food and water supplies, human health, and terrestrial and marine life. Europe may also see more human migration and aggravated pressure on resources supplies.” While this is likely to be true, it must also be said that the expected human migration from e.g. sub-Saharan Africa, one of the regions that is currently and is expected to be impacted the most, will not be too large and manageable. For example, estimates by Marchiori, Maystadt and Schumacher (2012) suggest that by the end of the century, we might see 12 million migrants from sub-Saharan Africa to the rest of the world. Not all of these will migrate to Europe of course, and if they would, it would be roughly 1.7% of Europe’s population in 2100.

10. Increasing environmental pollution load

In contrast to e.g. CO2, pollutants like ground-level ozone, or particulate matter tend to be mostly local pollutants. Most of these are still expected to increase as they are a by-product of production. However, since they are local pollutants, it is unlikely that their production in the rest of the world will have a significant impact on Europe in the future.

POLITICAL MEGATRENDS

11. Environmental regulation and governance: increasing fragmentation and convergence

“The world is devising new governance models, including multilateral agreements on numerous issues and public-private ventures. In the absence of global regulation, advanced European standards and procedures have often been adopted worldwide.”

Here the report starts to develop into the direction that I would have liked to see from the start. As seen in GMT 11, Europe has been and still is a role-model, especially in terms of setting standards and procedures that other countries eventually follow.

SUGGESTED FURTHER THOUGHTS

So these global megatrends bring about three important potential ways in which Europe could/should develop in the future. These three ways have synergies and are not mutually exclusive.

Firstly, Europe should try to become more self-sufficient, or as independent as possible from other regions. The much-discussed Common Agricultural Policy is an important step in that direction. One problem for self-sufficiency is that Europe has very little or no stocks of several critical resources, like coal or oil, at least at competitive market prices. For this reason, R&D in alternative energy resources, or raw material inputs, should be more strongly supported. Naturally, the more independent Europe is from other regions, the less will the GMTs (especially GMT 4-8) from these regions affect Europe.

Secondly, Europe should start a better cooperation internally. This would give it some leeway in international treaties (GMT 6 and 11). At the same time, it would ease on those population dynamics, and thereby help a more coordinated and socially optimal approach to reduce stress on its aging social security systems (GMT 1).

Thirdly, Europe should move towards a more integrated measure of wellbeing, or progress, than is being represented by GDP. This will take into account effects related to GMT 7-10, since then more importance will be placed on environmental effects that affect wellbeing than in the traditional approach to GDP. While it is well-known that alternative measures of wellbeing have shortcomings of their own (https://ingmarschumacher.wordpress.com/category/sustainable-development-goals/, or www.oecd.org/std/na/36967254.pdf‎), it is important to recognize that only one dimension of wellbeing is being captured with GDP, namely that of consumption. While it is true that other measures are strongly positively correlated with GDP, like health or even happiness, it is also important to recognize that other measures are negatively related to GDP, like biodiversity, urban sprawl, resource use and several types of pollutant. Similar, other social indicators, like personal stress, or number of divorces, social care, tend to be negatively associated with GDP. Consequently, it would be useful to address these with a more inclusive measure of wellbeing.

UPDATE: The EEA is now updating the various chapters of this report. Stay tuned!

Germany’s biggest solar energy producer, Conergy, is bankcrupt, and currently undertaking procedures for insolvency. Though the newspapers present this as a surprise, l present you a graph with its share price evolution from 2006 onwards:

Präsentation1

Are you surprised now? Well, with that kind of evolution in the share price, this was to be expected. Now, Conergy had problems with its managers, claims of accounting `problems’, unfortunate management decisions which led to a fixed price of some supplies that drastically fell in price quickly after the fixing, etc. But is that the main reason?

So here is the evolution of the share price of Germany’s second largest solar energy producer, Solarworld.

2

Wait one more year, or two, and with that kind of evolution you will see another bankcruptcy… Though a big investor from Katar last month stepped in to give funding to Solarworld, it apparently didn’t help the share price. So we may say that the German solar energy production in general is in a bad state.

But then again these companies don’t even make it in the Top 10 of world’s solar energy producer (if one accepts Wikipedia as a sufficiently credible source…).  So let’s go to the Top 10. Number one is a Chinese company, called Suntech, number two is a US-based one, called First Solar. Let’s look at First Solar:

3

Though we see that there was a crisis effect in 2008, and the share price fell considerably until the beginning of 2012, it has since picked up. This is a main difference to Germany. Is this due to better management? Difficult to say. Is it due to subsidies? Well, subsidies in Germany for solar energy have been really large. If subsidies play a role here, then Germany’s companies should look much more solid instead of bankcrupt…

So there is another claim out there, namely that cheap Chinese solar panels flood the markets, produced more cheaply because of cheaper labor and lower environmental standards. Let’s see whether that picks up in the share price of China’s largest solar energy producer, Suntech Power:

4

Hohohoho – unexpected, no?

Looking at this, I doubt really that the international competition argument pulls here. It looks to me that in general solar energy is in a crisis – at least if you trust the predictive power of the share prices. I also looked at other solar energy producers, and those that I took a look at all had a similar evolution. My guess is: the increase in share price was around 2008 was mostly speculation that went hand in hand with the oil price boom and extensive governmental subsidies. When the subsidies worldwide started to be reduced due to the austerity programmes we also saw a reduction in solar demand growth, investors got scared, moved their money to gold/silver or under the mattress.

The question is: if these solar energy producers really are in such a bad state as their share price suggests, what is going to happen to solar energy in the future? What would be a good governmental policy? Solar energy is already approximately competitive to traditional non-renewable energy sources. They are simply bought less because they are only profitable for consumers after several years. Discounting matters.

Governments should take that into account – one way to provide a good policy is to shift benefits for consumers forward or costs backwards. Thus, there could be special loans e.g. for solar energy so that consumers do not need to put all money up front, which thus shift the costs backwards in time.

In any case the quick study above suggests that world solar energy producers are at a cross-road. The question is what will happen next?

UPDATE (16. July 2013): China is buying tons of solar panels from its nearly bankcrupt solar giants. Hard to understand why the EU does not do something similar in order to meet/exceed emission targets AND move away from austerity at the same time AND save its failing solar giants which it subsidised for so long only to allow them go bankcrupt eventually…

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