Why the North Must Act First

UNCED is over. It has been a great success. In which sense? There are, of course, the two major Conventions; there is the Rio Declaration; and there is the huge Agenda 21, accompanied by some rather modest commitments regarding funds and technology. And there is the new Commission for Sustainable Development. But the most important step, in my view, is rather not any of these concrete achievements. It is a change of mind with regard to the environment or rather what we mean by "the environment."

Imagine three years ago people in Switzerland, Japan or California being asked what they thought about the environment and who was handling it well. Our imagined interlocutor would have replied "Well, hereabouts we are doing reasonably well regarding pollution control, but out there in the communist states, they are a dirty lot. And the Third World isn't any better. To begin with, they are too many, and they have too many children. They are burning and cutting their forests which are also our forests, and there is no sewage treatment, no air pollution control, no orderly waste disposal, just no environmental consciousness."

After the Earth Summit such nonsense would no longer be tolerable. Everybody now knows, and even the London Times said it in a headline that "The North is the Polluter." Figure I below shows what I mean by this. A thousand Germans consume more of Nature than a thousand people from the South.

wpe3.jpg (29529 bytes) Figure 1

At the Earth Summit and on the road towards UNCED it was made abundantly clear that Northern life styles were not sustainable, if sustainability also meant that the respective life styles and consumption rates could be copied by 5 or more billion people. "Sustainable development," the central expression of the Brundtland Report, is sometimes understood as an admonition to the South to shape its development course a little more in the direction of low resource use and perhaps also to stop population growth. Well, in my humble view, this is all a misconception. Never in history have admonitions worked which told underprivileged not to follow the path of the privileged.

There are only two ways of preventing the South from further developing unsustainably: Either use force and the physical limits to prevent the South from emulating the North. Or change the North, i.e. change the model of prosperity of the North such as it can be copied. Because I find the first alternative both immoral and unrealistic I am coming to the conclusion that sustainability is primarily a task for the North.

The challenge to the North is formidable. Figure 2 may give an indication of the magnitude of the task. The Intergovernmental Panel on Climate Change demands halving CO₂ emissions within some forty years, while the forecast at the World Energy Conference suggests a doubling of energy demand within that period. The biggest part of this demand will in all likelihood be met by fossil fuels. The nuclear option will remain a limited one because of still persisting major problems. Imagine purposeful abuse of fissionable material which will become available in ever larger quantities; and imagine the vulnerability of all nuclear installations to sabotage, war action and blackmailing.

Figure 2

At first glance it may sound completely illusory to close this gap and arrive at a model of prosperity, not austerity, that can be copied by eight billion people.

However, here I am optimistic. Why?

First because technologies and social innovations are available -- or can evolve -- which can gradually lead us into prosperity with virtually no destruction of depletable resources. The key word for the new technological revolution is resource productivity. We should be able at least to quadruple energy productivity -- which would solve the problem indicated in Figure. 1.

Second because I feel that our present perception of environmental protection as costs is not necessarily correct. Using better policy instruments and correcting certain preoccupations, we can turn environmental protection into economic benefits. That should then make it easy for poorer countries to join in the environmental protection efforts.

Third because enough pressure is building up from the South and from the young generation in the North forcing us to actually do what is theoretically possible. UNCED has greatly helped to create a global awareness and to increase the pressure in the necessary direction.

Let us begin with the second point. People believe environmental protection is costs by definition. True, pollution control involves costs without immediate benefits. This is because pollution control usually works at the end of the pipe which means add-on costs. Countries or companies evading such costs will usually maintain competitive advantages over those applying pollution control technologies.

Small wonder that the less affluent countries show little enthusiasm inadopting -- and enforcing -- high standards in pollution control.

But how can we make environmental protection a win-win game (win for the environment, win for the economy)? Chiefly, I suggest, by switching emphasis from the end of the pipe to the ecologically important input factors such as energy, water, minerals, and land. Consuming less energy while achieving -- more or less -- the same results should be good for the economy. Energy productivity (not energy efficiency) can be increased by a factor four at least. Energy productivity can be defined as GDP units per gigajoule. A factor four in increased energy productivity would result from efficiency increases and substitutions. Larger increases than 400% are thinkable, and switches to environmentally benign sources of energy -- chiefly the decentralised use of renewables -- give further relief.

Labour productivity in OECD countries may be twenty times higher today than it was 150 years ago. Technological progress was almost identical with the increase of labour productivity during those 150 years. Energy productivity, by contrast, increased only very slowly, as can be seen from the fact that energy consumption was almost in parallel with economic growth. As a tragic result, economists began to believe that energy consumption was actually an indicator of the wealth of a nation.

Today, labour shortage is hardly a problem -- at least not in the segment of the economy where more energy consumption is used to substitute human muscle labour. By contrast, energy consumption is a problem, and so are water shortages, the avalanche of wastes and biodiversity losses. Any productivity increases in the use of energy, water, minerals or biomass could mean less mining, less transport, less waste and less habitat destruction. Increasing energy productivity and other resource productivities should become a very important element of prosperity. As a comparison among different nations shows, high energy productivity is a better indicator than energy consumption for macroeconomic performance.

But what is true on the macroeconomic level is not automatically true on the business or microeconomic level. In fact, resource efficiency is absolutely secondary for most players in our economies. Why this? The answer is simple. Energy, water minerals, etc. are underpriced. We don't pay any price for resource depletion, the greenhouse effect, landscape destruction or biodiversity losses. And we pay an insufficient price for pollution and waste disposal. Prices tell us at the microeconomic level that wasting the treasures of nature is reasonable. Prices don't tell the truth -- which according to economic theory is bad for our health.

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			*Table of Figures*
	Introduction		Fig.1 People Polluting the Environment
	"The North is the Polluter"		Fig.2 CO2 Emissions
	Halving CO2 emmisions		Fig.3 Pollution costs, what polluters pay

	Switching policy emphasis, pricing input		Fig.4 Economic performance v. energy prices
	Costs of pollution		Fig.5 Fossil & nuclear energy prices
	Revenue neutral energy taxes		Fig. 6 Impact of energy tax on profits
	Systemic energy productivity gains		Fig.7 Fuel consumption v. price