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Eco-efficiency for sustainability: The Challenge
The challenge of sustainability
Increasing affluence in a globally still growing population creates a heavy burden on the environment. With affluence up 1.5% per year and a population growth of 1% on average for the next 40 years, an improvement in eco-efficiency performance of 2.5% per year is required to keep pressures on the environment constant. Eco-efficiency is defined here as environmental intensity: environmental pressure per unit of GDP. However, for major environmental stressors, substantial absolute reductions are required as many effects are time delayed, like climate change and ecosystem deterioration, and we are overshooting sustainable marks already. Therefore a substantial reduction in total environmental impacts is required. Whatever the exact outcomes of the political process ‘after Copenhagen’, it is clear that a reduction in the order of 50% over 40 years is a not excessive target for climate changing emissions. That is another 1% per year, on top of the 2.5% per year to keep environmental pressure constant. Realising such reductions implies an unprecedented improvement in eco-efficiency of on average 3.5% per year. This would halve the impact per Euro each two decades. A balanced win-win, an equal improvement of both economic and environmental performance, would not decrease total environmental impact but increase it, the amount of economic growth implied, that is over 2% per year on average. So win-win is not the solution; it helps create the problem. We will have to do substantially better.
The task ahead is even more extreme than these average figures indicate. Imagine a new technology-product combination with an eco-efficiency performance 50% better than current average performance. Such a deep improvement will not be realized tomorrow. Basic innovations typically require around three decades for substantial market penetration. Let’s be optimistic and assume exceptionally fast change, with substantial market penetration after one decade and a normal functioning of two decades, being superseded by a better technology by then. This means a time horizon for functioning of twenty years from now; that is an improvement of 3.5% per year on average. That is just enough to keep pace with the environmental targets to be reached.
But the challenge is deeper still. For a performance improvement of 3.5% per year on average, some activities will have to improve much more as some other hardly can reach such improvement figures. Railway transport, airline transport and staple foods can hardly improve their eco-efficiency with such figures. So other product systems will have to improve even more.
Is there other options than such extreme improvements is eco-efficiency through technology improvement? Yes, there is. Total environmental pressure is environmental pressure per unit of expenditure times total expenditure. Spending less may give an essential contribution to achieving overall environmental goals. Spending less means working less and earning less. That is the subject of degrowth. Degrowth may give an essential contribution to achieving environmental quality. It can reduce the as yet unrealistically high requirements on eco-efficiency improvements. By combining eco-efficiency improvement with reduced growth of the richest in the world we may realise the absolute environmental improvement.
The task ahead: dealing with affluence for all
Economic growth currently is driven by globalisation and by innovation. Globalisation is connecting the majority of mankind to modern industrialized society, by involving larger parts of developing and emerging countries and by increasing market size, and by allowing for further specialisation in production. Globalisation will continue to drive productivity growth for at least the next half century, so we may hope. Then the majority of the population in China, Southern and South-East Asia, South America, Africa and the Middle East will have joined in the industrialised production modes, with the concomitant living standards and health. Innovation is driven by knowledge creation, a process supported by improved education and ever larger budgets for research and development globally. So, productivity growth is here to stay, unless interrupted by disasters we all want to avoid.
Economic growth is our goal and our problem. With compound annual economic growth rates at 7%, the global national income doubles every decade, a nearly thirty-fold increase in half a century. Chinese growth has been over 10% per year in the last decade, doubling GDP every seven years. At a more modest level of 4% growth, it still is around an eight-fold increase in global GDP in half a century. The average world citizen then still is by far not as rich as those in the already industrialised countries are now.
Globisation and technology improvement can increase affluence. Redirected technology development, as eco-innovation is essential for environmental quality. The vast improvement in required in eco-efficiency is a deep challenge already, with degrowth contributing an essential part in in improving environmental quality. There is an independent reason for degrowth as well. With rising affluence, as increased labour productivity, there is good reason to reduce working hours, using one part of productivity rise for leisure. Working double shifts is a sign of poorness, not of affluence.
There thus is good reason for eco-efficiency and degrowth to join forces in improving sustainability performance of global society.
Eco-efficiency: macro level and micro level
The goal of sustainability is affluence for all, combined with environmental quality for all, including future generations. At a macro level performance requirements are clear. Absolute decoupling of economic growth from environmental burdens can be defined, in all relevant environmental respects. There are problems of time and complexity involved, as environmental stressors work out on environmental quality with delays; as they work in a combined manner; and as they are conditional on management activities, like zoning laws, ownership rules for fisheries, and liming to prevent acidification of lakes. But main issues are clear. We need a stable climate, based on reduced climate forcing. We need clean air, water and soil, which can only be accomplished by reduced emissions as of hydrocarbons, fine dust, and toxics, especially long lived ones. We need nature, as a source of value and satisfaction and as a sink for the wastes we create. And we need the energy to keep our economy running, and we need the material resources to support our economic activities, both biotic and a-biotic, competing with the energy nature requires for functioning in its food webs. These requirements may be defined at a macro level, as goals or targets, but cannot be dealt with there. The interlinked global economy is driven by myriads of micro level decisions, by many firms, by many consumers and, from the global perspective, also by many governments. How to re-align the micro and meso level with the global macro level requirements is the key problem we face here. Guidance at the micro level is what we need, both intellectually and in terms of the right incentives.
Eco-efficiency for guiding innovation
How do we know if micro level decisions work out in the ways required for macro level sustainability? Micro level improvements in environmental performance of product systems may be analysed in Life Cycle Assessment (LCA), per unit of function. They may look impressive, however, these improvements are part of economic innovation as well, as firms look for cost reductions and higher value creation. With equal reductions in costs and in environmental burdens, the environmental impact per unit of income remains the same, while income rises. So, the balanced win-win option might well contribute to environmental disaster. Also, many innovations change the function or are new functions. They then cannot be analysed in terms of improved performance for the same function, as in applying LCA. The mobile phone is more than just a phone made mobile. Such changes form a core ingredient of economic growth. They involve life style change, which may go in a sustainable direction. Or it may not, like holiday space flight. We must go one step deeper, not just linking environmental performance to the functions of products, including services, but linking it to economic performance in terms of value creation and income generation. The environmental performance is to be specified relative to economic performance, as eco-efficiency.
Targets for improved eco-efficiency must be dynamic, reckoning with aggregate economic growth. In the 4% economic growth scenario, an improvement of technology in terms of eco-efficiency by a factor two is enough to compensate economic growth for only a decade and a half. Bringing fundamental innovation on the market then might seem OK. However, the time needed for full market penetration taken into account, this factor two innovation then is a factor two too low for a three decades period. It will help create environmental havoc, by improving too little, too late. Eco-efficiency analysis can help set the stage for redirected innovation, as eco-innovation for sustainability.
Redirecting innovation in major domains
Getting to grips with the future will require a breakthrough in many economic domains. Fossil energy will remain for some time - with carbon capture and sequestration reducing emission a bit only at best -, but will have to be replaced by renewable energy in the longer term. Housing and transport are key domains where fundamental changes have to take place to align economy and environment, redirecting many other consumption activities in the process. Ultimate performance is the proof, but comes with delay. Strategies may redirect our activities, as practical guides to improve future performance.
Ideas on a circular economy, as by closing loops and cradle-to-cradle, may help us on the right track. They require a stronger basis in analysis, being more specific about their potential contribution to performance and by comparing them with other options. Finally, without a new view on consumption and its role in human happiness, the growth trap remains open. Richer inhabitants in this world could and should shift attention towards more leisure; they can afford it. They can contribute to environmental quality and their own happiness by degrowth, using part of productivity increase for more leisure. The innovation involved in realigning consumptive activities is the most fundamental innovation challenge, a cultural one. Growth is deeply embedded in our culture, where for thousands of years more has been seen as better. This cultural challenge forms the twin to the technological challenge. Neither can create sustainability alone.
One standard for eco-efficiency analysis: Schools in sustainability analysis
Economists, environmentalist, industrial ecologists, ecological economists and life cycle analysts all have their disparate and diverging approaches in sustainability analysis, and hence in approaches to eco-efficiency analysis. The basic assumption here is that these approaches not only may be disparate and conflicting, but that at a deeper level they also are complementary, contributing to a richer view. The differences between orthodox economists and ecological economists are shown in a most clear way by how they approach the evaluation of effects. In regular economics, all relevant effects can be subsumed under one monetary numeraire, directly linked to the market value of goods and services, and based on individual preferences only. In contrast, many ecological economists assume weak comparability between highly disparate qualities like a nature area and a piece of cake. Quantified evaluative statements then become impossible.
Of course, there are shades of grey. Regular economists may reckon with societal risk aversion and ecological economists may reckon with quantified income distribution measures using market prices. However, the contrast in approaches is real. Avoiding such confusing empirical discussions may lead to clear answers in partial modeling but will not contribute to an overall relevance of answers. At the connected empirical level the contrast is less on principle, but not less relevant for practice. The multitudes of partly overlapping mechanisms and disconnected levels of analysis now preclude any specific outcome on which broad groups of scientists can agree, let alone society at large. LCA now is the most detailed model for environmental analysis of product systems. It may try to cover indirect mechanisms like rebound mechanisms, as by incorporating some income effects and a few aspects of market mechanisms. Such market mechanisms are better covered in economic analysis, but then they cannot be linked to environmental impacts in any detail. Currently, LCA leaves out virtually all socio-economic mechanisms, except the technological ones. Material flow analysis is based mainly on a true but single principle of mass conservation. Micro-economics is based on psychology and production functions but leaves out all cultural dynamics, technological dynamics and macro-economic constraints. How can these partly overlapping and partly conflicting knowledge domains be brought together into a more coherent and comprehensive framework? Going for sustainability would require some minimal alignment between these modelling approaches. The urgency of eco-efficiency analysis for sustainability may create the incentive to combine views in a most positive way.
Improving eco-efficiency analysis for decision making
Though principles for eco-efficiency analysis are clear, the practice is not. There are five major issues to be resolved for powerful decision support.
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| Partial eco-efficiency analysis as of carbon footprint, materials use etc. is to be placed in overall perspective of environmental performance. |
| Time frames in environmental analysis need integration, resolving the disparate nature of environmental burdens versus environmental quality. |
| Time frames in sustainability performance need specification, based on speed of market penetration and expected levels of economic growth. |
| Technologies in production and consumption are to be approached with technology specific scenarios on reasonably possible futures. |
| Practical modelling procedures are to link micro level performance to macro level performance.
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An integrated view on these issues is necessary to guide practical decision making towards sustainability. The top down perspective in public policy, as in setting standards for environmental quality, is useful for specifying societal goals. Policies, how ever developed, will have to build on eco-efficiency analysis of technologies and products, taking into account the time frames and dynamics involved. The same eco-efficiency analysis can guide wise producers and consumers towards the roads to take, and to avoid.
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