BackPricing our planet, correctly
Pricing our planet, correctly
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Could the crises of food, fuel and finance that we experienced in 2008 simply be three canaries in the coal mine? What if these are just the early warning signals that our current economic system is not sustainable at a much deeper level?
For the past 50 years we have amassed unprecedented financial wealth, but we have also chronically underpriced risk in terms of our natural resource base. We have financed our extraordinary growth in aggregate living standards by systematically underpricing the goods and services we derive from our planet’s natural resources, the negative externalities we create by polluting them, and the future risks we face from our cumulative depletion and degradation of them.
Those of us in middle age today in richer countries are the third successive generation to benefit from the natural resource bubble that our first world economy has exploited since the mid-20th century. It is highly unlikely—unless we make some deep, structural changes to how we manage our economy—that our children and their children will experience the same sense of progress and wealth.
Here are just a few chilling observations from the experts who met in Dubai, which link the natural resource challenge to the future security of our economy and global society:
1) If present trends continue, nearly four billion people will live in areas of high water stress by 2030. Simply augmenting the water supply is no longer possible in most places —historical approaches to water use will not work in the future.
2) The International Energy Agency (IEA) predicts an expansion in world energy demand by 45% by 2030, with coal accounting for at least one-third of this overall rise. IEA says these energy trends are “patently unsustainable, economically, environmentally and socially". A new energy paradigm for both developed and developing countries is urgently required.
3) The world will need to double food production in the next 40 years to meet projected demand. Our ability to meet current and future production needs is seriously challenged by increasing water scarcity, climate change, and volatile energy costs and supplies. Unless we change how we do it, we will not be able to supply our future food needs.
4) Humanitarian assistance will increase to an unprecedented scale if, as commentators foresee, large-scale migration results from climate change and water scarcity. The International Red Cross estimates that there are 25-50 million climate change refugees already, compared with the official refugee population of 28 million. The Intergovernmental Panel on Climate Change suggests that 150 million environmental refugees could exist by 2020. Currently, international law has no such thing as an environmental refugee.
It seems that the world can ill-afford to “return to normal". The financial crisis gives a stark warning of what can happen if known economic risks are left to fester. These fundamental environmental risks need to be addressed if we are to survive and thrive. We should not see this as the same old environmental story of conservation or protection. We want economic growth. But we need a new and progressive risk management agenda to help improve the lives of everyone who participates in tomorrow’s global economy. Managed smartly and with private sector innovation and entrepreneurialism in the global interest, will turn these risks into opportunities for new wealth and value creation.
In this context, arguably the most serious WEF annual meeting in years will be held in Davos, Switzerland, in late January. More political, business and civil society leaders than ever before are due to take part. The discussions at Davos must address how the world system should be reshaped, not only for recovery in the short run, but also to mitigate fundamental sustainability risks and promote new sustainable growth opportunities in the longer run. This is a very pertinent discussion for 2009.
In December, a follow-on treaty to the Kyoto Protocol on climate change is scheduled for negotiation. Can the plans for world economic recovery be linked to the jobs, skills, investment and technology opportunities that a global low-carbon economy requires, if climate change is to be managed successfully?
In these unprecedented times, can government and business leaders forge a new coalition to develop a set of practical global actions which can stimulate economic growth in the short run and create the foundations of a more sustainable, low-carbon economy for the longer run?
We got a stern warning in 2008 that current trends cannot be continued. We must read these warnings. Can 2009 be the year when we find innovative new collaborations to help shape the post crisis world? We must, as returning to “normal" is not an option.
Dominic Waughray heads WEF’s environmental initiatives. Comment at theirview@livemint.com
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