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Technical preconditions for sustainability

Given the previous discussion, one can identify the following hypothetical necessary (but not sufficient) conditions for long-term sustainability:

- no increase in the atmospheric concentration of "greenhouse gases" (beyond some limit yet to be determined);

- no increase in environmental acidification (hydrogen ion concentration) in surface waters and soils (beyond some limit);

- no increase in toxic heavy metal concentrations in soils and sediments (beyond some limit);

- no further topsoil erosion, beyond the rate of natural soil formation;

- no further degradation of groundwater with nitrates and nitrites; no further draw-down of "fossil" (non-replaceable) groundwater;

- preservation of (most of) the remaining tropical rain forests, estuarine zones, coral reefs, and other ecologically important habitats; no further disappearance of species.

A shorter list that is substantially equivalent to the above has been set forth by Holmberg, Robrt, and Erikkson (Holmberg et al. 1995). Their list (paraphrased) is as follows:

- no accumulation of substances taken from the earth's crust in "nature," i.e. the biosphere or its supporting physical systems (atmosphere, oceans, topsoil);

- no accumulation of synthetic materials produced by man in natural systems;

- no interference by man in the conditions for biospheric diversity and stability;

- natural resources should be utilized as efficiently as possible.

To satisfy these conditions, several straightforward implications can be drawn. Among them are the following:

1. use of fossil fuels must stop increasing and must drop to very low (and declining) levels by the middle of the twenty-first century;

2. agricultural, forestry, and fishery practices must be radically overhauled and improved, with much less dependence on chemicals and mechanization;

3. net emissions to the environment of long-lived toxic chemical compounds (especially compounds of the toxic heavy metals and halogenated organics) must drop to near zero levels by the middle of the twenty-first century, or so.

To simplify even further, one can argue that the average materials intensity per unit of service (MIPS) must be decreased radically for society as a whole (Schmidt-Bleak 1992, 1994). Putting it another way, which is perhaps more acceptable to economists, I think that sustainability in the long run requires a very sharp increase - by at least a factor of 4 and perhaps a factor of 10 - in the materials productivity of our society.8 Although such a radical productivity increase may seem utopian at first, it is well to recall that labour productivity in the Western world has increased by much larger factors, perhaps a hundredfold or more, since the beginning of the industrial revolution, largely by substituting capital goods and energy from fossil fuels for human and animal labour. What I am suggesting now amounts to a minor (but necessary) reversal of that historical substitution trend. In short, the time has come to substitute a modest additional amount of human labour to achieve a radical decrease in the extraction, mobilization, and discard of physical materials and fuels.

Do technically feasible solutions exist?

Question 3.2 was: is there a range of plausible technological possibilities that would be compatible with long-run eco-sustainability? Paraphrased in less abstract language, the question is whether sustainability is technically feasible for a stable population of 10-12 billion people living with "middle-class" (or higher) standards of living in the very long run (say, by the end of the twenty-first century)? This question, as such, is hardly new. The negative position has been strongly and somewhat dogmatically asserted in the past by some environmentalists of the "no growth" school, notably Paul Ehrlich (Ehrlich 1968; Ehrlich and Ehrlich 1970) and Barry Commoner (Commoner 1971,1976). Most economists, however, did not and do not subscribe to this view, at least in its original (somewhat simplistic) form.

The main counter-argument adduced by economists such as Beckerman, Nordhaus, and Solow against the neo-Malthusians (e.g. Meadows et al.) was, and is, that, given the right incentives - prices and time enough, technology is capable of finding a way to avoid essentially any physical resource bottleneck, as long as the product or service in question is produced and exchanged within the competitive market system. However, this answer is much too theoretical to be satisfying. It really avoids the question; it does not answer it.

To attempt an "existence proof" of at least one plausible long-run solution (setting aside the question of cost for the moment), the technical implications of eco-sustainability must be spelled out more precisely. As noted already, agricultural and industrial activity today is almost entirely dependent on fossil fuels (and also on dissipative uses of toxic chemicals and heavy metals) whose extraction and use harm the environment. This pattern is clearly incompatible with long term sustainability.

It is obviously not possible to describe, in detail, technology based on discoveries and inventions that still lie in the future, perhaps a century hence. However, the constraints imposed by the definition of sustainability limit the range of possibilities worth exploring considerably. In addition, it is possible to carry out a major part of the analysis in terms of macro-scale indicators of technological performance that could be achieved in many different ways.

For example, it is clear that sustainability requires much more efficient use of energy in the future than we observe today. Some improvement will occur as a direct consequence of the fact that electricity is displacing other energy carriers, because of its convenience and cleanliness at the point of use. Electric space heating can be quite economical (using heat pumps), especially in properly insulated buildings. (However, effective means of recycling refrigerant fluids will be necessary.) Microwave cooking is so much faster and more efficient than its competitors (gas or electric cooking) that it is rapidly spreading anyhow.

Substitution of electric power for other fuels for space heating, hot water, and cooking can and will occur more or less quickly, assuming appropriate price incentives. There are no technological barriers. Most energy needs, except for transportation, can be supplied by electricity. Very long distance high voltage lines - or possibly super-conducting lines - could distribute power around the globe, and even under the sea. Orbiting solar satellites or lunar photovoltaic (PV) farms transmitting energy to earth via satellite are a possible variant.

Of course, there is little or no environmental advantage in using electricity if it is generated by burning fossil fuels. Fortunately, there are viable long-term alternatives on the supply side, including biomass and wind (near term), PV-electric and PV-hydrogen (longer term). Chapters 5, 6, and 7 in this book go into detail. Also, efficiency gains can reduce the need for more energy. Nuclear power (fission or fusion) cannot be ruled out of consideration. However both variants involve long-term storage of radioactive wastes, not to mention other major costs that continue to escalate. Thus, nuclear options are less attractive in the very long run than the solar option.

Most mobile power sources at present (except for the few electric trams or trains) depend on liquid fuels derived from hydrocarbons. Up until the present time, centrally generated and wire-distributed electric power has not been economically attractive for mobile power, although it is technically feasible for local deliveries and commuting. Middle East petroleum will finally approach exhaustion around the middle of the twenty-first century (or sooner). It seems probable that electric vehicles (for short distances) will finally become economically competitive with any coal-based synthetic fuel, especially if coal is made to bear anything like its real environmental costs. There seems little doubt today that, sooner or later, the electric car will play a bigger role.

The fact that gasoline-burning vehicles are becoming increasingly intolerable in large cities suggests a plausible mechanism for this to come about: large cities plagued by traffic congestion, noise, and smoggy air may begin to create "car-free" zones in their centres, permitting only small electric cars (as some lakes already permit only electric boats). At first, the electric cars will be found largely in these zones. But, these same central zones will also be accessed by high speed electric (probably "mag-lev") intercity trains, which will finally begin to reverse the auto-induced suburban sprawl of recent decades. As time passes, the electric vehicles will get better and cheaper, the "electric" zones will spread to the suburbs, and eventually gasoline (or synfuel) powered ground vehicles will be essentially limited to rural use. By the second half of the twenty-first century electric vehicles may be able to extend their range by using automated mag-lev pallets along major intercity routes.

Electrification is only part of the solution. As suggested above, sustainability implies reliance mainly - if not entirely - on renewable sources of energy. In principle, the energy could easily be supplied by the sun, as combustible biomass, as direct heat for buildings, as heat to operate engines, or via photovoltaic cells. The latter, in turn, could generate hydrogen by electrolysis. (There are other possibilities too, including geothermal heat and nuclear fusion.) The most likely solution seems to be a combination of wind power for irrigation water pumps, direct solar heating or "district heat pumping" using waste heat from high-temperature industrial processes to supply warm water for many buildings, and electrolytic hydrogen as a fuel for aircraft.

To reduce waste and pollution by converting them into raw materials is another technological and economic challenge of the next half-century. To accomplish this structural change we need to create a whole new class of economic activities - the equivalent of decay organisms in an ecosystem - to capture useful components, compounds, and elements and re-use them. In other words, the linear raw material-process-product chains characteristic of the present system must ultimately (within the next century or so) be converted into closed cycles analogous to the nutrient cycles in the biosphere (Ayres 1989; Frosch and Gallopoulos 1989). This new class of activities, called "industrial ecology," will gradually replace some of the extractive activities and associated waste disposal activities that are characteristic of the current system.9

The existence question can also be addressed theoretically by putting it in the negative sense: are there any fixed minimum materials/ energy requirements to produce useful goods and services for humans? Or are there fundamental limits to the amount of service (or welfare) that can be generated from a given energy and/or material input? If there is no such limit, then energy intensities and materials intensities can be reduced indefinitely; there can be no fixed relationship between primary energy or materials requirements and GNP.

In fact, if this condition is met there is, in principle, no theoretical maximum to the quantity of final services - i.e. economic welfare in the traditional sense - that can be produced within the market framework from a given physical resource input (Ayres and Kneese 1989). It follows, too, that, there is no physical limit (except that imposed by the second law of thermodynamics) to the theoretical potential for energy conservation and materials recycling.

This restatement is actually critical to the fundamental case for optimism today. However, it is not a "mainstream" view among engineers and "men of affairs," or even economists, at present. In common with the World Commission on Environment and Development (WCED), virtually all economists would regard continuing economic growth as both necessary and possible. However, the implication that economic growth can and must be permanently "delinked" from energy and materials use is far from universally accepted. (In short, most economists and business leaders have not thought through the consequences of their assumptions.) In fact, something like an "existence proof" is needed, to demonstrate that there are feasible technologies that, if adopted, could end our current dependence on fossil fuels and substantially close the materials cycle.

This is still an area of sharp disagreement. The politically powerful extractive industry argues strongly for linkage:

No doubt about it, we all need to be careful of the amount of energy we use. But as long as this nation's economy needs to grow, we are going to need energy to fuel that growth.... For the foreseeable future, there are no viable alternatives to petroleum as the major source of energy... Simply put, America is going to need more energy for all its people. (Mobil Corp "Public Service" advertisement in the New York Times, April 1991)

In other words, the conventional position is that economic growth cannot occur without more energy - i.e. a fixed relationship does exist.

In principle, any such fixed relationship between energy/materials use and economic activity would be quite inconsistent with fundamental axioms of economic theory, which assume general substitutability of all factors of production. Economists who are quick to attack neo-Malthusians for unjustified worry about natural resource scarcity should be equally optimistic about the potential for energy savings by increased conservation. Unfortunately, this is not the case, for reasons discussed later.

Optimism in regard to the potential for energy/materials conservation - or increasing energy/materials productivity - is also justified by recent history. The energy/GNP ratio has been declining more or less continuously for many decades in the case of the advanced industrialized countries (fig. 1.1). Past experience suggests that this ratio tends to increase for countries that are in the early stages of industrialization, only to decrease later; this is the so-called "inverted U" phenomenon (World Bank 1992). Moreover, countries industrializing later have lower peaks than countries that industrialized earlier. Lower energy intensity reflects the shift from heavy industry to "high tech" and services. The trend would almost certainly continue in any case. It can probably be accelerated significantly by appropriate policy changes.

The energy/GNP ratio is closely related to the thermodynamic efficiency with which the economy uses energy. For this purpose, it is convenient to define the so-called "second-law" efficiency - or, in European parlance, the "exergy efficiency" - with which energy is converted from primary sources to final services.10 Electricity is currently generated and delivered to homes with an overall efficiency of about 34 per cent in the United States. This figure has increased only slightly in recent years. Efficiency in less developed countries (LDCs) is significantly lower, implying greater room for improvement. Energy experts generally agree that by the year 2050 efficiency might increase to something like 55-60 per cent for steam-electric plants, taking advantage of higher temperature (ceramic) turbines, combined cycles, co-generation, etc.

Energy is currently used very inefficiently to create final services, as compared with the first stage of energy conversion and distribution. The problem is that energy is lost and wasted at each step of the chain of successive conversions, from crude fuels to intermediates, to finished goods, to final services. For instance, incandescent lights (converting electricity to white light) are only 7 per cent efficient (fluorescent lights are better). Moreover, lighting fixtures are typically deployed very inefficiently (c.10 per cent) so that the final service (illumination where it is actually needed) is probably less than 1 per cent. Electricity may be used less wastefully than fuel, although this is doubtful because many end-uses of electricity are extremely inefficient from a second-law perspective.

Fig. 1.1 Long-term in energy intensity (Source: Glodemberg 1990, fig. 4)

Second-law (exergy) end-use efficiency has been estimated at 2.5 per cent for the United States as a whole (Ayres 1989). This means that, in principle, the same final services (heat, light, transport, cooking, entertainment, etc.) could have been obtained by the expenditure of only 1/40 as much energy as was actually used. Western Europe and Japan are significantly more efficient (in the second-law sense defined above) than the United States. Both regions are in the 4 per cent range, while Eastern Europe, the former Soviet Union, and the rest of the world are even less efficient than the United States perhaps 1.5-2.0 per cent (Schipper 1989; Nakicenovic et al. 1990; Nakicenovic et al. 1996).11 For the world as a whole, it is likely that the overall efficiency with which fuel energy is used is currently no greater than 3.0-3.5 per cent. But there is no fundamental technical reason why end-use efficiency could not be increased by several-fold (perhaps as much as a factor of 5) in the course of the next half century or so.

Finding the least-cost (least-pain) path

To summarize, there are three technical elements to a programme leading to long-term sustainability. The first is to reduce, and eventually eliminate, inherently dissipative uses of non-biodegradable materials, especially toxic ones (such as heavy metals). This involves process change and what has come to be known as "clean technology." The second is to design products for easier disassembly and re-use, and for reduced environmental impact, known as "design for environment" (DFE). The third is to develop much more efficient technologies for recycling consumption waste materials, so as to eliminate the need to extract "virgin" materials that only make the problem worse in time.

There is also an important socio-economic and political dimension to the problem that we do not address sufficiently in this book. To state it very briefly, the strategies that maximize profits for an individual firm in the manufacturing sector of our competitive economic system tend to be the ones that exploit economies of scale and do so by maximizing sales and production. The downstream consequences, in terms of energy consumption, pollution, and final disposal of worn out goods, are not the responsibility of the producer and are, there fore, not taken account of in either product design or pricing. Thus, competitive markets, as they currently function, tend to over-produce both goods and pollution, while simultaneously over-consuming natural resources. In short, there is an inherent dissonance - economists call it an externality - in the economic system that must be eliminated or compensated.

It does not follow that the resolution of this fundamental dissonance is to be found in public ownership. That "solution" clearly does not work. The next most obvious solution seems to be regulation. But the regulatory approach works well only when the regulations are simple and easy to enforce. It has worked well mainly in the case of outright bans on the production of certain products, such as DDT, PCBs, and tetraethyl lead. But this strategy is also limited. It does not work well, for instance, when applied to widely used consumer products such as cigarettes, liquor, drugs, hand-guns, or pornographic literature. "Green" taxes on resource consumption, or on pollution per se, are another possibility. But, there are at least two major drawbacks. One is that taxes on resource consumption - or pollution - tend to be regressive (hitting low-income consumers most heavily). The other drawback is that they would be complex to administer, because of the need to provide exceptions and exemptions, e.g. for farmers, health workers, exporters, et al. In practice, green taxes are probably not feasible at the national level. There would have to be major efforts at cross-border "harmonization" in order to maintain international competitiveness. Still other approaches are currently being explored, such as tradable permits and quotas. However, there is very little experience of actual implementation for these newer ideas.

But, having said this much, the fundamental issue of compensating for externalities in the economic system is not addressed further in this or the following chapters.

It is not easy to discern a long-term trend toward increasing recycling/reuse. Indeed, anecdotal evidence would suggest the contrary: poor societies recycle and re-use far more efficiently than rich ones do. Also, the increasing complexity of both materials and products has made recycling and re-use more difficult in many cases. For instance, old wool clothes were once routinely collected by rag-merchants and recycled (after a complicated process of washing, unpicking, bleaching, re-spinning, re-weaving, and readying) into blankets and pea jackets. Today, because of the prevalence of blends of natural and synthetic fibres, recycling is almost impossible. Much the same problem occurs in many other cases. To increase re-use and recycling, it may be necessary to induce manufacturers to sell services, rather than products, and/or to take back products they have previously made.

Remanufacturing avoids many of the problems of recycling. It is not an important economic activity at present. However, it may grow, especially as the shortage of landfill sites induces municipal authorities (or, perhaps, original equipment manufacturers forced by law to accept trade-ins) to offer subsidies. Remanufactured refrigerators, cars (or engines), and other large appliances can offer a good low priced alternative to low-income workers in the rich countries, or they could fill an important economic niche in the developing countries. Actually, since remanufacturing will always be more labour intensive than original equipment manufacturing, it is inherently a suitable activity for border regions such as Mexico, Eastern Europe, or North Africa. (As these countries develop, of course, the "border regions" will shift too.)

In the case of municipal waste (mostly paper products and containers), recycling is already increasing in importance. Again, the shortage of land for disposal is mainly responsible. More efficient technologies for separating materials will certainly be developed in coming decades. In any case, there is no technical reason why the recycling/re-use rate for most types of materials should not be dramatically increased from the low levels of today. This will happen, eventually, when material prices better reflect the true environmental costs of both extraction and use.

It is not really necessary to know in detail how this will be accomplished. It is sufficient to know that it is technically and economically feasible. (It remains, still, for policy makers to create the appropriate incentives to harness market forces. But this is a separate topic.) Of course, specific "scenarios" might be helpful in making such a conclusion more credible to doubters. However this would serve a communications purpose rather than an analytic one.

Assuming the existence of a collection of potential technological "fixes," the last question follows: is there a feasible political/institutional pathway to get from "here" to "there"? What, in particular, is the role of economics? This question can be rephrased to make the underlying problem clearer. Assuming technical and economic feasibility, it is reasonable to assume political feasibility if (and only if) there exists a painless (or near-painless) development trajectory, such that each incremental socio-economic change leaves every politically powerful interested party better off- or at least no worse off than before. Along such a path there must be very few or no losers. Everybody gets richer more or less automatically. This is called a "win-win" strategy, in the language of game theory. In more literary terms, it might be termed a "Panglossian" path.

To restate the question then: is there a Panglossian path? The fundamental problem is that an affirmative answer (i.e. that low-cost "win-win" solutions, or "free lunches," do exist) is essentially inconsistent with most economists' fundamental belief in profit-maximizing behaviour and perfect information. Given these assumptions, the economy would always be in (or close to) equilibrium and this equilibrium would reflect the most efficient (i.e. Ieast cost) choices of technology. If this were true, energy and natural resource conservation should cost a lot more money ("there is no free lunch"). This view seems to be supported by econometric data, based on historical responses of energy demand to price changes. These data indicate that higher prices encourage lower consumption, and vice versa. Reduced physical consumption is commonly interpreted by economists as "anti-growth."

It happens to be convenient to incorporate this set of assumptions in long-term forecasting models based on the assumption of a quasi-general equilibrium varying slowly along an optimal path over time (e.g. Edmonds and Reilly 1985; Manne and Richels 1990, 1992; Jorgenson and Wilcoxen 1990 a,b; Nordhaus 1994)12. However, such models do not - and cannot reflect the endogenous nature of technological change. How can an optimal path be determined that takes into account unpredictable technological change? Nor do these models reflect the distortions due to institutional barriers and "wrong" prices.

To explain the dilemma in non-economic terms, if a lot of "win win" opportunities really do exist, then somehow these opportunities must have been overlooked by entrepreneurs. Assuming entrepreneurs always do what is in their own best (economic) interest, any real opportunities to make profits would be instantly snapped up; consequently no more such opportunities can exist.

The obvious flaw in this reasoning is that entrepreneurs are constantly finding opportunities for making extraordinary profits. If no profitable opportunities existed, there would be no entrepreneurs. Since there are many entrepreneurs, it follows logically that many more such profit opportunities must exist. In recent years, since environmental concerns have become more pressing, surprisingly many profitable opportunities have been found to reduce environmental pollution. To explain this, it must be assumed that industry and consumers have not always chosen the optimal energy technologies, even at present (too low) prices. Entrenched oligopolies or monopolies, established regulatory bodies, institutional separation between technological decision makers and final consumers who pay the costs, and lack of technical information are the most likely reasons (see, for instance, Sant 1979; Lovins et al. 1981; Goldemberg et al. 1987; Ayres 1990, 1994; Mills et al. 1991). Inappropriately low prices due to subsidies (e.g. to coal mining and nuclear power) compound the problem.

Fortunately, there is a potential link between increasing resource productivity and reducing unemployment. Unemployment is becoming a very serious political issue in Europe. Conservative (business oriented) economists tend to blame the problem equally on high wages and benefits and "labour market rigidity" (i.e. the network of taxpayer-supported measures known as the "social safety net"). But there is growing recognition that the tax system itself may be more to blame than the size of the public sector. The problem is that the "safety net" in Europe is financed almost exclusively by taxes on labour, whereas the use of energy and materials by industry is virtually untaxed (except for motor fuel) and, in many countries, fossil energy is heavily subsidized.13

Up to now, environmentalists have approached the issue of environmental protection largely as a regulatory problem. Regulations in this field are now numerous, burdensome, and - in many cases inefficient. As an alternative, environmental economists have recommended schemes such as effluent taxes, but this approach has not been strongly supported by the business community (which, surprisingly, is less opposed to regulation than its rhetoric would suggest). Environmental economists argue that revenue from effluent taxes and resource-based taxes could be used to reduce other unpopular taxes, such as taxes on savings or investment. Conservatives fear that "revenue neutrality" would not be adhered to in practice, and that any increase in government revenue would be used to finance more "spending."

In recent years another scheme ("tradable permits") has received some support. The idea here is that "rights to pollute" would be issued, but in limited amounts corresponding to the total target level for a given pollutant. The initial allocation system could be either "free" to current polluters or based on an auction (as with offshore oil rights). Once allocated, these rights would be tradable. Those firms able to reduce their emissions below their entitlements could sell the excess entitlement. This possibility would induce firms to innovate. The revenues would remain in the private sector and government revenues (after the initial auction, at least) would not be increased by such a system.

The tradable permit is opposed by many environmentalists on moral grounds. It is argued that there should be no "right to pollute," and certainly it is repugnant that such a right should be purchased for money. But, to some extent, this issue is a matter of perception. For instance, consumers now have an implicit "right" to pollute by virtue of the fact that they have a right to consume. Thus, the right to consume gasoline, for instance, could be rationed equally. Those able and willing to consume less than their "share" could be allowed to sell the excess. This would actually provide a kind of minimum income for the poor and elderly (if they do not drive cars) and could serve as a partial substitute for existing and increasingly unaffordable social services provided by the government from taxes.

The main alternative to regulation is to use emission-based or resource based taxes or exchangeable permits as a method of internalization of environmental damage costs. For both regulation or standard-setting and for the use of emissions taxes or permits, there is still a problem of enforcement and a role for government. On the one hand, bureaucrats must determine the standards; on the other hand, they must set the scale of fees or fix the allocation of permits, and regulate the operation of the market mechanism to minimize opportunities for fraud. In any case, government must also monitor the effects of the policy.

Unfortunately, a "win-win" path is not necessarily painless. Those now receiving subsidies will experience pain. Those who cannot reduce their pollution levels by innovation will have to pay more. This being acknowledged, the obvious implication is that a truly painless pathway to an ecologically sustainable future may not exist! If a painless path does not exist, or cannot be found, it means that to get from our present techno-economic state to one capable of permanent sustainability - even by the "least-pain" route - significant short-term adjustment costs must eventually be borne by some groups or institutions. This means, in turn, that some very hard decisions will have to be taken, and soon. Unfortunately, experience suggests reason to doubt that our chaotic world of nearly 200 sovereign nation-states can make such a transition successfully. Nevertheless, if the human race is to have a long-term future, we must make the attempt.

Notwithstanding the difficulties, I think there is a "win-win" path to sustainability, or at least a policy that could take us a good part of the way in the right direction. I have noted that, if a single "objective function" for societal sustainability were to be selected, it would probably have to be something like the following: sharply to increase the productivity of natural resources, especially non-renewable. The reason this could turn out to be a "win-win" strategy is that increasing resource productivity implies decreasing the use of natural resources as a substitute for human labour. This, in turn, implies increasing employment! Since high unemployment (together with increasing associated costs of social security) is one of the most persistent socio-economic problems in the West, it seems only logical to explore possibilities for solving both the sustainability problem and the unemployment problem with a single common policy approach. It may not be too much to hope that this approach will also be beneficial to the less developed countries and the developing countries.

At first glance, increasing employment seems to imply decreasing labour productivity, which is not consistent with continuing economic growth. In the short run, some measures to increase resource productivity - especially by using less energy - may temporarily have this effect. Recycling tends to be more labour intensive than manufacturing with virgin materials, for instance. However, in the longer run, the object is to increase total factor productivity while using a lot fewer resources and a little more labour. This can be done, I believe, by reducing the cost of labour and increasing the cost of material resources while encouraging technological innovation and the development of new (but not resource-intensive) services.

At any rate, it seems clear that there are some promising possibilities to be explored. This exploration is critically important. Some will say that society must seek pathways to long-run eco-sustainability regardless of what the cost in conventional economic terms turns out to be, whether high or negative (i.e. profitable). If the latter turns out to be the case, so much the better. However, society will be much slower to adopt a high-cost path than a profitable one. Indeed, there is good reason to fear that, if the cost (or pain) appears too high, the difficult decisions will be delayed too long - perhaps until it is too late.

Concluding comments

For pessimists (or, by their own estimation, "realists"), the deeper question lying all of the foregoing is this: should we defer taking actions that might have economic costs (at least to some sectors) in the hope that further research will reveal that the threat is overstated or non-existent? Needless to say, those likely to be affected adversely by restructuring changes - especially the extractive industries - will tend to argue vociferously for delaying any serious action until more research is done. Scientists, too, are usually in favour of more research. Both these groups are influential. Hence, the argument for delay is likely to prevail indefinitely, or until there is "indisputable" evidence of the seriousness of the problems.

A case in point: the scientific predictions of ozone depletion between 1974 and 1984 were countered by protracted arguments for delay by the affected industries. It was only after the discovery of the "ozone hole" that the resistance crumbled and the Montreal Protocol was adopted.

Unfortunately, in some cases indisputable evidence may not be available until it is too late to reverse, or prevent, major damage. Indeed, the damage itself may be the only convincing evidence. For example, the sceptics about climate warming may not be convinced until the average temperature of the earth has risen by half a degree or so (with accompanying sealevel rise). By that time, hundreds of thousands of hectares of low-lying land may have become unproductive or uninhabitable, and hundreds of thousands of peasants in Bangladesh or Indonesia may have been killed by floods. Thus it is particularly important to state clearly the case for not waiting until the evidence is "indisputable." It is also important to develop clear and defensible criteria for (1) when looking is better than leaping, and (2) when it is time to stop looking and to leap, even into the dark.

It need hardly be said that most elected officials in most countries are committed (at least in public) not only to the existence of such a painless development trajectory but to the idea that we are already moving along it, thanks to the "invisible hand" of the free market. According to this comforting view (which, it must be said, is supported by many mainstream economists), market forces left to operate with minimal government intervention will automatically induce the necessary technological responses. These "technofixes" (it is assumed) will compensate for gradual resource exhaustion and environmental degradation.

I believe that the optimistic view that the free market will take care of the problem is false and unwarranted. The present path is one in which virtually all of the trends are clearly in the wrong direction, as I have taken some pains to explain above. Energy use, exhaustible resource use, erosion, toxic pollution, and waste are all increasing globally.

It is not enough to establish a plausible case that technical solutions do exist. The institutional framework of society, as it is structured today, is not likely to allow these solutions to emerge spontaneously. If unregulated competitive markets were going to solve these problems, there should be some indication of it; the trends, at least, should be in the right direction. There is no such indication. The fact we must face is that competitive "free" markets are imperfect. Market forces do not function in some of the critical areas. Alternative approaches are going to be needed. Governments must intervene on several fronts. They must increase the level of R&D support in critical areas (notwithstanding the usual criticism that governments should not attempt to "pick winners").

Governments must also intervene to eliminate or compensate for externalities. Regulation is only part of the answer. "Green" taxes may be another part. The encouragement of voluntary agreements may be a part, also. Tradable pollution permits of tradable consumption permits may be a part of the answer in the future. But all of these interventions will have the effect, separately and cumulatively, of increasing the cost of resources vis--vis labour and capital. This is the negative view. It has led many economists to conclude (with the assistance of so-called computable general equilibrium, or CGE, models) that environmental regulation, by driving up costs, must inevitably reduce the rate of growth of the economy.

The other side of this coin is that rising resource costs imply ipso facto that labour and some kinds of capital (especially knowledge based capital) will be relatively less expensive, vis--vis resource inputs. The argument can be turned on its head. When one factor of production becomes less expensive than another, that factor will be more utilized. The factor that is to become less expensive is labour. This implies - or seems to imply - that the demand for labour can be expected to increase. In other words, costlier material resource inputs more jobs and less unemployment.

Actually, this outcome would be a kind of "double dividend," if it can be achieved. But theory is one thing, practice is another. The service sectors are growing, to be sure. If the costs of physical materials were to increase (to compensate for externalities) this trend should accelerate. But the "growing tip" of the service sector is "high tech." It is health services, biotechnologies, telecommunications, and information technologies. Unemployed factory workers or miners cannot easily convert themselves into medical technologists or network systems managers. Since older, uneducated people are very difficult to retrain, the transition is limited by the rate at which skilled and educated young people can enter the labour force.

This, again, is an area requiring government intervention. In brief, governments must invest much more in human capital. This will be increasingly difficult in the environment of extreme budgetary stringency that will have to be faced by virtually every industrialized Western country in coming decades.

But the socio-economic and political dimensions of eco-restructuring are far more complex than even the last few paragraphs have suggested. As noted earlier, the socio-economic and political aspects of the "eco-restructuring" problem deserve - and must ultimately get much more attention than they have yet received. Indeed, it is a subject for another book.


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