A system in crisis: Is eco-innovation enough?


Richard Moore

Bcc: FYI
rkm websitehttp://cyberjournal.org

A system in crisis: Is eco-innovation enough?

The challenge of the 21st century is to align our political, economic, social and technological systems with the science of sustainability and the reality of resource limits, while maintaining wellbeing for citizens. In 2011, we are facing the decade of the ‘turbulent teens’. As the economic system scrambles to save itself from collapse (at the expense of ordinary citizens), we also face the challenges of ‘peak oil’ (total global reserves declining), a slow (or no) growth decennia and increases in the prices of energy, food, and raw materials, which will impact citizens’ buying power, and the stability of our societies.

In Ireland, in essence, a generation of Irish citizens is unjustly being forced to pay back the gambling debts of international bondholders via payments to the IMF/ECB.  GDP growth will be restricted due to resource limits, such as peak oil, and will not be sufficient to meet interest repayments. Default / debt re-structuring is inevitable. The IMF is an international banking cartel and has been heavily criticised for its tendency to force countries to privatise and sell strategic assets and resources to foreign corporations by its ‘conditionalities’ on credit. Economic sovereignty has been compromised, and we are told the country is broke, yet €450 billion worth of oil has been found off the west coast of Ireland, according to the Irish Independent.

These events represent an opportunity for a re-evaluation of the values that our economic system is based on and an opportunity for transition toward a more sustainable, resilient and just society.

Eco-systems and global resources such as arable land, fish stocks, and oil reserves are in decline and Europe is faced with scarcity and access problems in the field of energy (gas and oil), water, and critical raw materials that Europe does not have. In addition, climate change needs to be addressed. These constraints are design challenges and opportunities for innovation. Societies, businesses, and governments that take a systems view and have the foresight to develop strategies in alignment with sustainability principles will avoid hitting the walls of the funnel (‘The Natural Step’ concept of the funnel – see diagram) and in the process capitalise on the strongest long term trend globally. However, Tim Jackson has estimated that the level of innovation and industrial improvement required to de-carbonise our systems sufficiently by 2050 is ten times faster than ever achieved in industrial history. The sustainability U-turn, if it happens at all, has to happen fast.

A flawed economic system Our current economic system, which requires ‘growth’ to pay back ‘interest’ on loans, has failed to create a sustainable society for humanity, and has failed to recognise that we live in a finite world with resource limits and ecological limits. There are physical limits to continuing economic growth based on resource use. The economy is a subsystem of a larger finite system, the biosphere, hence permanent growth is impossible. Thus, the term ‘sustainable growth’ becomes an oxymoron (unless the economic activity is ‘de-coupled from environmental and resource impact).

Without growth this flawed economic system becomes unstable and crashes. Wuppertal Institute has estimated that a total global resource extraction of around 80 billion tonnes in 2020 (200% of the 1980 value) will be necessary to maintain global economic growth. On a planet with finite resources there is obviously a conflict here.

To keep the financial system from crashing civil society has to continually work to pay ‘interest’ on money that banks created from nothing (via fractional reserve banking and sometimes via quantitative easing). People exist to serve a flawed economy, whereas the economy should exist to serve the people. Meanwhile the resources, bio-diversity and eco-systems our species’ relies on, continue to be consumed or destroyed. As Satish Kumar said ‘Humanity is cutting the branch upon which it sits’.

Will GDP growth solve environmental and resource problems?

In the late 20th century ways to decouple resource use from economic growth were hypothesised by environmental economists. A hypothesis, called the environmental Kuznets curve (EKC), predicts increasing decoupling of resource use from GDP/capita as technology improves and material substitution occurs. In some cases, this accurately describes reality. In other cases, the resource flow continues to increase with increasing GDP/capita. An EKC hypothesis has not been validated. If it were validated then it would imply that economic growth is the means to environmental improvement.

Can we rely on the market to solve resource issues?

The market cannot be relied on to solve the problem. According to an Aldersgate report ‘Beyond carbon: Toward a resource efficient Europe’ markets respond to short-term supply restrictions, they do not anticipate constraints in natural resource stocks. Therefore a prudent policy would promote low resource consumption as an important part of securing future competitive advantage, in advance of the market and before resource-constraint shocks force change in the economy. Acting on resource efficiency ahead of the market would support the transition to a low carbon resource efficient economy. Market failures in resource management must be overcome.

The future of resource efficiency and eco-innovation

Technological innovation is one of the main approaches governments emphasise to maintain the growth required to keep this system going, and to address resource constraints governmental policy approaches to date have focused on decoupling GDP growth from resource use. This is an important step in ensuring non-renewable resources are not exhausted. Some relative decoupling of economic growth from materials and energy consumption has been achieved by a number of EU countries during the past 10 years, however ‘business as usual’ has not achieved absolute decoupling of economic growth and resource use in the EU.

As part of the EU 2020 strategy the European Commission is putting forward seven flagship projects. One of these is called “Resource Efficient Europe” to help decouple economic growth from the use of resources. This involves a shift towards a low carbon economy, increasing the use of renewable energy sources, and promoting energy efficiency. In the U.K., a recent WRAP report states that resource efficiency can make a significant contribution to achieving climate change targets for reducing greenhouse gas emissions and that resource efficiency could reduce carbon emissions with no significant negative effect on GDP.

In Ireland, the need to become a low carbon and resource efficient society was explicitly recognised in Comhar Sustainable Development Council’s Green New Deal report. The Irish government’s own high-level group on Green Enterprise also identified a key role for resource efficiency in the green economy. There is a need to assist front-runners and eco-innovators in Ireland. In my opinion the synergies and alignment of resource efficiency priorities, green public procurement and eco-innovation could make a significant contribution to achieving a more environmentally and economically sustainable Ireland. (The public procurement spend is ~€12 billion per annum, so GPP has significant potential to drive innovation. Minister Gormley’s department published a GPP consultation, but the GPP national action plan was not published before the party left office.) According to the Wuppertal Institute the world market for eco-innovation is likely to double by 2020 (market volume estimated at €3,100 billion).

The Irish government will likely need to develop a ‘National Action Plan for Resource-efficiency and Eco- innovation’, that will add value to current initiatives, address priorities, and create new multi-stakeholder initiatives. A policy framework would need to be developed in a co-operative way that increases uptake across all sectors of Irish society and economy. Comhar Sustainable Development Council is currently conducting research to provide recommendations in these areas. Recommendations could include the launch of Irish multi-stakeholder eco-innovation networks or transition platforms; the development of co-operative eco-enterprises (sharing innovation and open-source developments are becoming key ways of achieving sustainability); and developing or acquiring technology (including mid-level technology) that is not reliant on fossil fuels or resources that have a high supply risk.

Tools such as ‘environmental footprint, life-cycle analysis, material flow analysis, sustainable design (such as ‘cradle to cradle’, ‘zero-waste systems’, design for disassembly and longevity), and sustainability planning frameworks, such as ‘The Natural Step’ are relevant. Across the developed world significant resource efficiency developments and eco-innovations are taking place, but…

Is resource efficiency enough to reduce resource use?

It is (in my opinion) unlikely that resource use can be reduced by resource efficiency improvements alone. Relying on resource efficiency will be insufficient to de-couple GDP growth from environmental and resource degradation. Most economists tend to think that greater efficiency enhances sustainability, however many environmental scientists think that it doesn’t. William Jevons stated in 1865: ”an increase in efficiency in using a resource leads, in the medium to long term, to an increased usage of that resource rather than to a reduction in this use”.

This contention has been called the “Jevons paradox”. In many cases, due to increased efficiencies the resource flow per unit of product or service created tends to decrease with increasing GDP/capita. However, this decoupling of resource use from GDP growth is often not sufficient to curb the total flow of resources, because total consumption continues to increase as a result of the consumption of more units. This effect can be explained to some extent by price mechanisms (decreasing price induces growing demand).

The gap between the decreased use of resources that is expected from increased “eco-efficiency” and the actual utilization has been called the “gross rebound effect” (GRB). An example described by the International Energy Agency is that although efficiency in the usage of energy per unit of product or service in the OECD-countries improved by about 30% between 1970 and 1991, the use of energy in these countries increased by about 20%. GRB describes the net effect of societies overall resource use/environmental impact due to consumption patterns, population development and degree of eco-efficiency.

A study conducted by scientists at the Department of Ecology and Environmental Science, Umea University indicated that improved efficiency in the use of natural resources is insufficient to prevent further increases in global resource use and is insufficient to counterbalance the effects of increasing affluence and increasing population.

The study finds that the ecological footprint across 135 countries did not decrease at high levels of GDP per capita. The improved eco-efficiency, which is seen in many wealthy countries, is associated with economic growth which increases the global ecological footprints of these countries. One example of this ‘catch 22’ is that “Finland, a wealthy and eco-efficient country has been classified as both the most sustainable country (Devitt and DeFusco, 2002) and the country that caused the fifth largest per capita ecological footprint in the world (Loh, 2002)”. The study also finds that a highly efficient information society does not lead to decreased use of natural resources. For example, investments in rail transport can lead to a local decrease in air pollution, but also increase the economic activity in a region, which in turn leads to a net increase in the human ecological footprint.

In addition, a separate report ‘Analysing Rebound Effects’ from the Wuppertal Institute states “the policy conclusion one may drive from neo-classical analysis could be that stimulating efficiency gains for conservation purposes is not very useful or even harmful”.

In my opinion resource efficiency needs to be viewed as part of the wider system that it is operating within, and it is the destructive effect of the ‘system’ we need to alter. To echo McDonagh and Braungart, the key is not to make human industries and systems as resource efficient as possible but to redesign them in a way that has zero impact on (or contributes to) the natural systems that we rely on.  The Natural Step sustainability framework is an example of a scientific methodology for redesigning our systems toward the ideal of full compliance with the laws of a sustainable biosphere.

Is technological innovation enough to create a sustainable society?

These concepts have been described using the Holdren/Erlich equation I=PAT, where I represents environmental impact, P is population size, A is affluence per capita and T is the effect of technology. A factor describing behaviour/lifestyle (B) has also been added (I=PBAT).

The Umea study maintains that to find a way to sustainability, it will be justified to determine sustainable levels of resource and energy flows locally–globally; adapt population (P), change individual consumption (A) and improve technology (T) in the IPAT equation so that sustainable resource and energy flows are reached. Another policy proposed is that rebound effects need to be limited by price policies (e.g. a tax on resources which experience efficiency gains).

Unless economic activity that violates the laws of sustainability (for example The Natural Step principles) is reduced or stopped for conservation purposes, the problems will continue. A sustainable steady-state economy based on the science of sustainability and resource limits needs to replace the current system.

Redesigning the system

A Green Economy needs to be more than just a technology platform for eco-industries. It has to be guided by a vision of what a sustainable society should look like in the long run. In my opinion the economic system needs to be redesigned based on the Science of Sustainability (which includes ecological and resource limits) The Natural Step Scientific framework for Strategic Sustainability, is an example of a successful framework for moving toward environmental, social and economic sustainability and is being utilised in over 30 countries. In 2009, I authored a policy proposal to government to embed peer-reviewed scientific sustainability principles in all government departments to create policy alignment and a shared understanding of sustainability in our system.

In the absence of effective de-coupling, economic systems and models must be considered that are in alignment with the resource-efficiency constraints. The human economy must be enabled to function within the limits of the environment and its resources and in such a way that it works with rather than against natural laws and processes of a sustainable biosphere. A strong concept of sustainability is needed, in which economy adapts to ecological imperatives, rather than seeks technological substitutes that may fail to deliver the same range of functions and services. In the absence of a move toward systems, such as steady-state economics or ecological economics, re-allocation of growth to more environmentally friendly sectors is to be expected. Systemic effects due to peak oil may pre-empt any redesign and according to Dimitri Orlov systems collapse before they re-organise. Due to global resource constraints, in particular ‘peak oil’, there are systemic risks to the global economy and our current systems for acquiring energy, food, goods and services, see article by David Korowicz. It is important therefore that local and national resilience planning is promoted in Ireland.

A Sustainable Ireland

Very little adherence to sustainability principles over the past 20 years has left Ireland overdependent on foreign oil, foreign investment, foreign goods and borrowing. We have built little ‘self-reliance’. Resource efficiency and eco-innovation will be an insufficient strategy for sustainability in the years ahead. In light of global resource challenges, the economic downturn, winter freeze and seasonal flooding we urgently need national and local community resilience planning. While maintaining Ireland’s place in a globalised society, more support and planning law needs to be directed to creating a more ‘self-reliant’ Ireland in terms of food, energy, water, technology and economy. We need a new vision and design for the future direction of Ireland that is based on sustainability policy, otherwise we will remain vulnerable to external factors.

The philosophy of sustainable living must underpin everything that we strive for. Ireland is blessed with many natural attributes that are advantageous including: adequate rainfall and mild climate for food production and water supply; renewable energy potential  (the development of which will likely be hindered by the ongoing economic collapse and above mentioned resource constraints); oil and gas reserves off the west coast (estimated worth > €640 billion); and highly educated people. We have the capacity to re-invent our nation. It is up to us – increased ‘quality’ is always within our capability. A ‘Sustainable Ireland’ can emerge that values fundamental human needs, quality of life, a progressive economy, and the environmental system upon which we all rely. Awareness that our species is part of an interconnected and interdependent web of life is key. Education, co-operation, optimism and leaders with vision are needed for the transition.

Mark Keenan has worked with the Department of Energy and Climate Change, U.K. and with Comhar Sustainable Development Council, Ireland. He has a Masters Certificate in ‘The Natural Step’ sustainability framework, BTH, Sweden; MSc studies in Sustainable Development and Climate Change, DMU, UK; and PhD research experience in Sustainability Strategy, Institute of Energy and Sustainable Development, UK. See also www.sustainableireland.net

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24 Responses to A system in crisis: Is eco-innovation enough?

  1. Hi Mark, good article and in my opinion, an urgently needed, clear eyed assessment of the current situation facing Ireland and the world.

    I’d just add one more perspective on the work we should be embracing now, and that’s the potential for shifting much of our activity into rebuilding biological and social capital, restoring ecosystem services, regenerating our communities…we have drawn down so much of the reserves that we have to now focus our genius on their restoration. We can if we move with intent and resolve. This is activity which will create employment while it rebuilds genuine prosperity and resilience…for humans as well as the rest of the family we share the place with.

    But to get there, we need a big shift in attitudes toward what makes life worthwhile, and fun to live. A D.I.Y. obsession around restoration would be a healthy passion to cultivate, and eventually the “leaders” might cop-on and start to follow.

    I blogged about some of the opportunities developing around a restoration economy last December, and listed a series of promising frameworks (including The Natural Step) and links to resources on valuing ecosystem services: http://bit.ly/hgfKEV

    Erik van Lennep

  2. Theresa Carter says:

    Great piece Mark

    I wish this could be the manifesto of the incoming government but somehow the logic of your points goes way above the short term, unsustainable thinking of the representatives that will run the country.

  3. Mark Keenan says:

    Hi Erik,
    Thankyou for the kind words. Great to see you highlighting these frameworks on your blog and important developments such as the TEEB study. Putting a financial value on the environment is an important means to get economists to factor the environment into policy making and economic strategy. My tuppence worth on TEEB is that we must remember, however, that environmental economics is not a scientifically rigorous discipline. How can we put a financial value on for example the last golden eagle or the last fresh water lake in a region, how much is it the lake worth after being polluted etc. Full cost accounting leads to profound intellectual difficulties – how do you calculate the true cost of something that has been destroyed, such as lost biodiversity or rainforest? In my view we must therefore keep short term economic analyses from being the main policy driver – governments must begin to base policy on the science of sustainability as a successful economy is a subset of a sustainable biosphere and sustainable resource base.
    Kind regards

  4. Mark Keenan says:

    Hi Theresa,
    Thank you so much for your kind words. Yes I notice John Gibbons has already pointed out some of the issues with the FG manifesto. Can only hope the evolving nature of the demographic speeds toward ‘getting’ sustainability. Will there be a ‘tipping point’ of understanding also ? Living in hope :-)
    Kind Regards

  5. Dear Mark, enjoyed the article very much. One comment I have is this.Any policy that is part of a ‘sustainable Ireland’ has to ensure that human, animal and aquatic life is not endangered by polluted water in any form. Clean water assurance comes before banks, businesses, industry and commerce. People need to be well to work and grow in these sectors. When they are well and strong they will sustain health, work better and contribute to society in economic and social terms. Any policy which contributes to wellness is sustainable and any policy which is known to deplete or damage is unsustainable.
    Water fluoridation is unsustainable and most of Europe has stopped for many years now. Hope the greens will make a priority of ending compulsory water fluoridation which allows a known toxic cumulative corrosive acid plus other pollutants like lead, mercury and cadmium into the homes of whole communities for life without any health studies being done in over 47 years.
    Good health starts with clean water, and when the toxic load of fluoridation is ended, there will be improvement in health, less damage to water pipes and environment and more money in the public purse for cash starved projects and business outlined by greens.
    Kind regards,
    Mary Hilary, Fluoride Free Water Ireland

  6. Duncan Martin says:

    There’s a lot of good sense here, Mark, though I’m not so sure about this passage:

    “For example, investments in rail transport can lead to a local decrease in air pollution, but also increase the economic activity in a region, which in turn leads to a net increase in the human ecological footprint.”

    Surely that development would almost certainly have occurred – but elsewhere – so the rail service causes no net increase in footprint?

    Moreover, if that development elsewhere would have been based on road transport and the investment in rail succeeded in diverting it, the rail service would cause a net decrease in footprint, rather than an increase.