OECD Observer
Decoupling environment from economic growth

OECD Forum, 14th May, 2001- The Transition to Sustainable Development: Are We Making Progress in Decoupling Economic Growth from Environmental Degradation? 

High hopes of reducing environmental degradation raised at the Rio summit of 1992 have not been borne out, Svend Auken, Minister of Environment and Energy for Denmark, said on Monday May 14. "The record doesn't quite match the good intentions. It's dismal, in fact. Environmental degradation has continued since the global summit in Rio in 1992", Auken told a session at the OECD's Forum 2001 on Sustainable Development and the New Economy. Speaking from the audience, a delegate from the World Wildlife Fund (WWF) reminded the gathering of business, government, labour and civil society representatives that over the past 20 years total pollution in the industrialised countries, including Japan, Germany and the US, has increased by 28%.

Factors contributing to the failure include continued dependence on fossil fuels, population growth, poverty, political corruption, and ignorance, panel members said. Most frustrating is the fact that many governments and corporations still do not see that sustainable development can occur without impeding progress. Denmark, for example, has experienced 70% economic growth since the oil shock, yet by switching to new sources of energy has not increased fuel consumption, Mr. Auken said. Indeed, by 2005, the country expects to reduce its dependency on fossil fuels by 33% and to reduce chemical emissions by 20%. New sources of energy have created 15,000 new jobs and power is now Denmark's third largest export. With proof that sustainable development can be cost effective, the biggest cost of decoupling economic growth from environmental degradation is not economic but political, the Danish minister said.

But can Denmark's successes be applied to the rest of the world? While some panelists believed that privatisation and free markets were of key importance, others were not convinced one could count on "corporate good citizenship". TotalFinaElf chairman Thierry Desmarest pointed out that market driven economies are relatively efficient, but was critical of the heavy taxation imposed for instance on gasoline. The industry could point to some notable successes, such as car emissions which between 1990 and 2000 were down by as much as 50% in some cases. It was possible to reduce greenhouse gases by 1.5% per year with normal programmes, and by 3% with crash programmes, but voluntary rather than governmental programmes should be used to reduce emissions. "Looking back, we can see that central governments have been a disaster for the environment", he commented. The fact that Total reduced its own greenhouse emissions by 10% between 1990 and 2000 is evidence that a free market can be the answer, Mr. Desmarest said.

Setsuzo Kohsaka, chairman of Kurita Water Industries of Japan supported this point, and cited the response to the 1970s energy crisis as a good example of how to face up to major difficulties. Notwithstanding that, there had been a huge growth in emissions, making it essential to link growth to such sources as solar energy. Also there was a need for such policies as “walk to work,” he said.

Eric Duvaud, partner in charge of environmental risk consulting for Andersen France said there were two important factors that were a cause of optimism for the future. The new economy, with the enormous boost it could give to developing services, and the beneficial effect of globalisation within a framework of rules would be of great use in the adaptation of the overall economy. However, we should be careful to avoid 'selling the same yoghurt worldwide' – in other words be aware of the need to tailor solutions according to local need.

Anil Agarwal, Director of the Centre for Science and Environment, India, felt that as far as sustainable development was concerned, we should ‘get rid of’ the state altogether. He said he strongly believed in democracy, but that ‘democracy has an extraordinary ability to produce incompetent politicians’. He too saw the importance of small scale projects, exemplified by Indian villages which had taken their environmental regeneration into their own hands with excellent results. ‘The person who knows most about the village ecosystem is not a Harvard, MIT, Cambridge or even Delhi University professor, but the villager himself’, said Mr Agarwal, citing a formula villagers had used successfully on a water management project.

The continued divide between haves and have nots is perhaps the greatest obstacle to sustainable development, and open markets can’t provide all the answers. Nitin Desai, Under Secretary General for Economic and Social Development for the United Nations (UN) reported that the poorest nations use 80 Kw/hour of electricity per capita, while prosperous nations use 8,000 Kw/hour. “When we speak of decoupling, we can’t continue to live in a world where there is a double order of magnitude between the richest and poorest,” said Mr Desai. “Education is key, many people don’t even know what sustainable development means.” He outlined the need to link the sustainable development agenda with the emerging agenda on poverty, and stressed that we will not achieve our target of halving poverty without addressing the resource base on which the poor depend.

Mr Desai also agreed that technology was a major way forward for sustainable development, but pointed out how important it was that R&D focused on the most pressing, not the most financially rewarding issues. In fact, chairman of the OECD Round Table on Sustainable Development, Simon Upton, who had taken on the role of ‘provocateur’ and directed some stimulating questions to panelists and floor, went on to ask the audience whether they thought the SD problem could only be solved by a massive intervention of technology. Only five hands were raised in an audience of more than 700.

While several panelists believe that information and technology and open markets will come to our rescue, others voiced a need for widescale reforms. Nitin Desai felt that although we do need social and political action, we cannot rely on the present political structure. Reforms are needed not just in developing countries, but also in the industrialised world. Integration of environmental change into market prices, if done globally, could help change.

Daniel Esty of the Yale Center for Environmental Law and Policy, as the final speaker, felt that there were two distinct points raised by the panelists. First, the problem of poverty – it is essential that we move beyond the divide between North and South, developed and less developed countries. Secondly, we must harness technology and innovation, and in a way that doesn’t necessitate a trade-off. Rather than removing consumption altogether, we must find ways of making consumption less environmentally harmful through substitution. In the US, for example, there was a huge success in encouraging recycling but a failure to stop people driving. Studies showed that the major proportion of the population still using cars consisted of working women who needed their vehicles to juggle their home, childcare and work commitments. The solution was not of course to force all women to stay at home, but instead to focus on other methods of mobility, Mr. Esty said. Technology provides us with the major force of comparative data, which can be used to measure progress and shame countries into making the change for good.

©OECD Observer May 2001