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Sustainability: Where the Environment and the Economy Converge

October 26th, 2008 by Max Gladwell · 6 Comments

The financial crisis has sparked plenty of analysis and debate about its impact on the environment. We round up a list of different perspectives.

In our post titled The Time for Sustainability is Now, written in July, we speculated that high oil prices and the global economic meltdown (the meltdown before the meltdown) would trigger a sudden shift toward sustainability and that 2008 would mark the starting point of this long-term trend. Since then, oil prices have plummeted from the $140s to the $60s, driven in large part by efficiency (a good thing) and a recessionary pandemic (not so good). In other words, the same market force that drove them up has driven them down: demand. And just before we entered the worst financial crisis since The Great Depression, we noted that this was (and would be) the worst financial crisis since The Great Depression. Now it’s finally here.

There are tremendous parallels between an unsustainable economy and an unsustainable ecology, and the consequences of each are equally severe. To most environmentalists, sustainability is narrowly defined in terms of managing natural resources, but it is much more than that. It’s a philosophy and mode of thought that transcends the environmental movement and touches every part of society, not the least of which is our financial system. The shift toward sustainability needs to be viewed as both an environmental and economic movement. These are two sides of the same coin, and our quality of life hangs in the balance.

The prosperity of the past eight years was largely a myth, both in terms of wealth creation and our greater well being. The combination of lax regulations, low interest rates, cheap capital from China, the devaluation of the dollar, complex financial instruments, a casino culture on Wall St., rampant speculation, the dotcom bust, good ol’ fashioned greed, and a government that encouraged risky lending has all lead us to this point. The increase in housing “values” will be erased, so just know that this is going to happen. There’s a good 10-20% more to go, depending on where you are, before we hit bottom. This was nothing short of a pump and dump scheme with people’s homes, and everyone was in on it. In the end, prices will revert to the mean only after overshooting to the downside. Not even government can break the laws of economics.

The real crime is that the pain will be felt by everyone, even the relatively innocent. You may not have lied about your income to get a mortgage you couldn’t afford, and you may not be defaulting on it just because you owe more than your home is worth. Chances are, you didn’t package and sell toxic debt. You were probably more responsible. It doesn’t matter. You’ll still feel the pain from those who did.

By this same principle, no matter how eco-responsible and green we are as individuals, we’re all going to feel the pain of living beyond our collective ecological means. The economic crisis may be in full swing, but the environmental crisis is just getting started. Global warming affects us all. Perversely, it tends to most impact those who are least responsible for it. The mismanagement of our natural resources, from soil to air to energy, is a shared burden, regardless of whether or not we, as individuals, have been good stewards. So while we need to behave responsibly and consciously, it’s largely for naught if we don’t have responsible systems and a culture of economic and ecological responsibility. The whole is truly greater than the sum of its parts.

For the past several weeks, we’ve been filtering stories on this topic of economy meets ecology. Here are several points of view on how the economic crisis poses both threats to and opportunities in the movement toward sustainability.

1. The Economist: Climate of Fear

How the European Union is dealing with ambitious emissions-reductions targets in the face of recession.

“Now the mood among Europe’s political and business elites is much more fearful and pessimistic: saving jobs has become a more urgent priority than saving the planet. Mr Dimas may need to be flexible. Under the original terms of the 20/20/20 pact, countries were expected to spend the receipts from auctioning permits on improving their energy efficiency. Last week, however, Mr Dimas suggested that they would be able to use the money however they wanted.”

2. AlterNet: How the Economic Crisis Will Affect the Environment

An upside/downside view of lower output and fewer greenhouse gas emissions.

It’s unclear at this point whether the crisis will do more good or more harm for the environment. In the short term, it will certainly slow the increase in carbon dioxide emissions. It will also cause a delay in developing environmentally hazardous projects like Canadian tar sands. But if the crisis also sets back the development of energy alternatives for any significant length of time, it will cancel out any of these positive developments. Many people are waiting and watching what happens in the global financial markets. Likewise, the verdict is still out on the ultimate impact of the crisis on the environment.

3. San Francisco Chronicle: Fiscal Woes Could Delay Climate Change Efforts

On the political ramifications of the recession in America.

“The truth is there is a very large question mark hanging over the idea that Congress would take economywide action on global warming with the economy in such anemic shape,” said Frank O’Donnell, president of Clean Air Watch. In the short term, a declining global economy could reduce the growth in greenhouse gas emissions as consumption of goods and energy usage drops. But world leaders warn it could also undermine efforts to find long-term solutions.

4. Ecopolitology: The Obama Economic Plan is the Obama Energy Plan

On Obama’s plan to pull us out of the red-ink economy with a green-ink economy.

Obama said that in light of the current economic situation, some portions of any platform would have to be pared, simply because there is less money flowing into the Treasury. But he also said other programs are critical components of an economic recovery, and should not be abandoned. Obama said:

“To create new jobs, I’ll invest in rebuilding our crumbling infrastructure — our roads, schools, and bridges. We’ll rebuild our outdated electricity grid and build new broadband lines to connect America. And I’ll create the jobs of the future by transforming our energy economy. We’ll tap our natural-gas reserves, invest in clean coal technology, and find ways to safely harness nuclear power. I’ll help our auto companies re-tool so that the fuel-efficient cars of the future are built right here in the United States of America. I’ll make it easier for the American people to afford these new cars. And I’ll invest $150 billion over the next decade in affordable, renewable sources of energy — wind power and solar power and the next generation of biofuels — an investment that will lead to new industries and 5 million new jobs that pay well and can’t ever be outsourced.”

5. Umair Haque: Not a Great Depression, A Great Rebalancing

On the need for better corporate DNA, which includes sustainability and transparency at every level.

In an era where our economic institutions are fast becoming value destruction machines, it is revolutionaries who can reimagine what the corporation should be who will be able to seize paths to new sources of advantage. Innovators who can, for example, renew obsolete industrial era DNA by reconceiving today’s toxic relationship between managers and investors will be able to evade and reverse the costs partially fuelling the macro crisis, and discover new sources of advantage built on more liquid, transparent relationships between investors and managers.

6. The Daily Green: With Oil Under $70 Again, What’s It Mean for Green?

On whether or not clean tech will suffer from low oil prices and less investment.

Meanwhile, according to at least some analysts, neither the rising price of oil nor the financial crisis has taken much steam out of investments in “clean tech,” which attracted $2.2 billion in investments in the first half of 2008 and is expected to account for 11% of total investments. And investing in energy efficiency programs, and renewable energy technology research and development, is increasingly being seen as the best hope for a new industrial revolution that would create millions of jobs and reverse the economic slide.

7. ENN: UN Says Credit Crisis Could Enable “Green Growth”

On the opportunity to rebuild a sustainable economy, both financially and ecologically.

“The credit crisis can be used to make progress in a new direction, an opportunity for global green economic growth,” de Boer, who heads the Bonn-based U.N. Climate Change Secretariat, told a news conference. “The credit crunch I believe is an opportunity to rebuild the financial system that would underpin sustainable growth … Governments now have an opportunity to create and enforce policy which stimulates private competition to fund clean industry.”

8. EcoGeek: How the Economic Crisis Will Help Clean Tech

The Darwin approach to decarbonizing our energy in a down economy.

When money was relatively cheap, investors grew careless choosing their investments, most dramatically in structured mortgage products, but also in other sectors.  Now investors are more likely to careful about where they put their money.  For marginal or speculative companies, this is bad news, but it could be an advantage for dull but profitable businesses which might have been overlooked previously.

The first steps toward decarbonizing our economy do not need to be high tech; they need to be hard work. Energy efficiency is cheap (in fact, it usually pays for itself in just a few years, if not months,) but often requires new ways of thinking. Investors and politicians have been quick to talk up photovoltaic companies. Using the energy we already have more efficiently seldom received more than lip service.

9. CNN: The Meltdown’s Silver Lining – Cheap Oil

On why we need to put a floor on the price of oil and gasoline with taxes.

The bank also calculated how high oil prices have to be for OPEC countries to maintain their budgets. Iran and Venezuela, who are often the first to call for production cuts, need the highest price per barrel – $95. Russia needs about $70, while Saudi Arabia, OPEC’s largest producer and de facto ruler, needs about $55 a barrel.

But taking all these measures together, the bank says $60 a barrel seems like a probable place for oil prices to bottom out. That would represent a gasoline price of just over $2 a gallon. Good news for motorists burned at paying over $4 a gallon for much of the summer, but bad news if that price drop at the pump also comes with a pink slip from the boss.

10. ENN: Crunch May Put Price Tag on Environment

On a new paradigm for valuing natural resources.

“Most of our valuable assets are not on the books,” said Robert Costanza, professor of ecological economics at the University of Vermont. “We need to reinvent economics. The financial crisis is an opportunity.”

Advocates of “eco-nomics” say that valuing “natural capital” could help protect nature from rising human populations, pollution and climate change that do not figure in conventional measures of wealth such as gross domestic product (GDP) or gross national product (GNP).

“I believe the 21st century will be dominated by the concept of natural capital, just as the 20th was dominated by financial capital,” Achim Steiner, head of the U.N. Environment Program, told Reuters at the International Union for Conservation of Nature congress in Barcelona earlier this month.

Photo: EcoGeek

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Tags: Economy · Sustainability