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Industry and sustainable development

The industrial base of developing countries is undergoing diversification and moving into more capital-intensive areas such as metal products, chemicals, machinery, and equipment. Heavy industries, traditionally the most polluting, have grown in relation to light industries (World Commission on Environment and Development, 1987). The expected growth in these industries foreshadows rapid increases in pollution and resource degradation unless care is taken to control pollution and waste (especially hazardous wastes) and to increase recycling and re-use. However, these options have to be economically viable for them to be adopted. In several industrialized countries efforts at recycling have not been successful, because the large quantum of energy used and the other costs involved in the recycling process render these possibilities economically unattractive. This is in line with Georgescu-Roegen's view that since dissipated matter is inevitably lost, only "garbo junk" is recycled (GeorgescuRoegen, 1980). Further, recycling tends to be labour-intensive, and for most industrialized countries labour costs are high. Also, pollution-control measures often require heavy capital investments at the initial stage. In most developing countries, with constraints in access to capital resources, these measures are often not acceptable even when they are economically viable.

Industry has an impact on the natural environment through the entire cycle of raw materials exploration and extraction, transformation into products, energy consumption, waste generation, and use and disposal of products by the final consumers. If industrial growth is to be sustainable over the long run, it will have to change radically in terms of its quality. This does not necessarily suggest a quantitative limit to industrialization in developing countries. However, governments and international funding agencies could encourage those industries and industrial processes which are more efficient in terms of resource use, which generate less pollution and waste, which are based on the use of renewable rather than non-renewable resources, and which minimize irreversible adverse impacts on human health and the environment.

With the emergence of new process technologies that reduce the length of process chains, the possibilities of efficiency in resource use are enormous. The developing countries could take advantage of improvements in the efficiency of resource use already achieved in industrialized countries, and by adapting them to local conditions could not only reduce environmental costs but also "stretch" the resource base.

The increasing pressure on non-renewable resources (petroleum, copper, etc.), as well as the increasing constraints on sinks (ozone depletion, deforestation, dumping of solid wastes, etc.), suggest that throughput in the world economy has reached the global biophysical limits, and partially even surpassed them (Meadows et al., 1992). Yet it is neither ethical nor efficient from an environmental point of view to expect the developing countries to cut or arrest their industrial growth, which has the potential to absorb the large and growing population of the South. In the future, however, more growth for the poor must be balanced by negative throughput growth for the rich.

Resource utilization

While such a posture would address the political concern for development in the South, it does not address the problem of depletion of non-renewable natural resources. The concept of "sustainable development" does certainly not preclude the mining of nonrenewables. A sustainable industrial policy for non-renewables, however, has to employ a different method of project appraisal. Since resource depletion may be treated as a social cost, a certain portion of the revenues from industrial projects should be invested in the creation of renewable substitutes, leaving aside an appropriate portion as disposable income. The income component would be higher either for a nonrenewable asset with a longer life expectancy or for a faster growing substitute (higher discount rate).

This principle, enunciated by El Serafy, does not imply a rejection of the notion of income as defined by Hicks. The idea is that even for industrial projects the net present social value (NPSV) may be calculated to take account of the depletion of non-renewables (Mikesell, 1991). In fact, such a novel measure of appraisal of industrial projects is still in its infancy, though industrial strategy may be built around this principle in the future.

For renewable resources, industrial projects should seek to maximize productivity of resource stocks over the long run. This means, for instance, that, to sustain pulp and paper industries in the long run, in addition to wellmanaged forests reserves of pristine forest are essential as reservoirs of biodiversity. The same goes for industries based on fisheries and biotechnology, and so on. In sum, sustainable societies would have to use the flows of resources rather than mine the stocks. This would help delink economic growth from the intensive use of environmentally significant resources - a process that has begun in some industrialized countries like Sweden and Germany (see Udo Simonis, chapter 3 of this volume).

Industrial material recycling, as discussed above, can perhaps best be seen as a process wherein the short-term throughput of virgin raw materials is minimized without sacrificing output. In the following, we will concentrate on short-term measures that are feasible, of which improvement in energy efficiency is an important and representative example.

Energy efficiency: An overview

The interdependence between energy and industrial growth is crucial in formulating policies for sustainable development. Industry is a major market for energy, and the pricing and availability of energy closely affect industrial growth. Conservation of energy is possible through short-term measures in the industrial sector, but major changes in the structure and mode of transportation also become necessary if significant gains are to be made. But as the economic life of vehicles is relatively short, a transition in the road transport sector can be implemented more easily than in the case of rail transport, where replacement of existing capital stock is slower.

The major technical measures for energy conservation in industry include the recovery of heat from exhaust gases, the introduction of integrated energy systems, the recycling and re-use of materials, and automatic control, as well as the search for more advanced equipment and processes. Energy conservation in industry has led to improvements in overall energy efficiency in many countries over the last 15 years. In the United States, for instance, industrial energy use declined by 17 per cent between 1973 and 1986. This occurred in spite of a 17 per cent increase in industrial production during the same period. Structural changes and the replacement of open-hearth furnaces by more efficient basic oxygen furnaces has cut energy needs by half in the steel industries of most industrialized nations. Co-generation has grown rapidly in the United States and may surpass the share of nuclear energy by the end of the century.

Seen globally, these gains from decreased energy and materials intensity in the industrialized world may well be offset by the growing industrialization in developing countries. It is therefore imperative that the frontiers of technology shift along with the movement of many energy-intensive operations in the developing countries.

The iron and steel industry exemplifies the progress made in energy conservation and at the same time shows the potential for further improvements. With 6 per cent of the world's commercial energy consumption, the steel industry is a highly energy-intensive sector. Table 1 shows, however, that use of energy per ton of steel produced in India and China is more than twice as high as in Italy and Spain. The two latter countries have turned to the electric arc furnace, which uses 100 per cent scrap and as a result requires only two-thirds of the energy needed to convert the ore to the final product. The world recycling rate could easily be doubled or even tripled (Brown et al., 1985) from the present levels. In the United States, investments in energy conservation could cut the energy required per ton of steel by a third by the turn of the century. In China and India, investments to upgrade from the open hearth furnace would save at least 10 per cent of energy use. A World Bank study estimates that such investments could pay for themselves in less than a year (quoted in Brown et al., 1985). Further conservation could be effected in developing countries which plan to expand capacity, such as Brazil.

Table 1 Energy use in steel manufacturing in major producing countries, ranked by efficiency, 1980

Source: Brown et al., 1985.

a. These 15 countries account for 84 per cent of world steel production.

b. Production figures represent averages for the years 1978-1981.

c. Energy totals are for crude steel-making, including ironmaking.

The aluminium industry provides another case of an energyintensive industry where there is high potential for energy conservation. As table 2 shows, there are still wide disparities in electricity use for aluminium smelting. Energy intensity could be further reduced in this industry to 46.27 GJ/t, using currently available technology (Brown et al., 1985). Recycling can cut energy requirements by over 90 per cent, but recycling rates worldwide averaged only 28 per cent in the early 1980s (Brown et al., 1985).

Table 2 Electricity use in aluminium smelting in major producing countries, ranked by eficiency, 1981

Source: Brown et al., 1985.

a. Average primary production for years 1980-1982.

b. Electric energy equivalent.

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