Sustainable Economics: A Response to Post by Jo Confino, Executive Editor of The Guardian on Need for a Compelling Future Vision for Sustainability to Progress

Short Piece Written in Comments Section in Response to Post by Jo Confino, Executive Editor of the Guardian, titled: "Sustainability movement will fail unless it creates a compelling future vision" 

Ultimately, to survive, everything thing we do will have to be sustainable.  Everything.  Throughout history, societies have faced calamities, to which their collective response made all the difference between survival or collapse.  In most cases, societies were unable to perceive much less respond to their inherent unsustainable ways of living, such as the Mayans, Easter Island or the Anasazi.  Their societies were based on unsustainable and precarious systems of life support tied to the environment.  In some cases, challenges have been recognized and addressed, by perceptive and strong governments which was able to identify the problem and implement solutions. The Japanese in the 17^th century were faced with extraordinary challenge of galloping deforestation.  The government instituted policies including using less wood for construction, putting in more efficient heating stoves, and switched to coal from wood for heating. Japan is currently about 70% forested.  In a more recent century, the world did come together to address CFC’s.  

As seen in the United States and Europe, our carbon emissions have come down over the past five years.  Some may say we have exported our carbon emissions to Asian countries.  That can account for some of the change, but it is also important to look at reduced miles being driven, higher efficiency of cars, the switch to lower carbon natural gas from coal in the United States, and the growth in renewable sources of energy in Europe and the United States.  The US and European economies are responding to higher oil prices, which has reduced the level of economic activity and reduced deleterious environmental impacts.  This provides a clue to our future and solving the problem in two respects.  First, economies of advanced countries do have a higher elasticity of oil price to demand than Asian countries.  Second, higher oil prices result in lower levels of economic activity, increased efficiency, and reduced environmental impacts.  The earth is telling us to cut back on energy, and we are.  The pace of the cut back may not be as steep a glide slope as what is sought, warranted or needed.  The implication is that we need to do something to (1) steepen the glide slope in developed economies; (2) reverse emissions growth in developing countries; and (3) address severe economic and well-being inequities around the world.

Governments will play a critical and pivotal role in turning the tide towards and accelerating the move towards a more sustainable economy.  The challenge with a capitalist system, well established in the literature and through practice, is the frequent absence of externalities, short time frame decision horizons, and boundary conditions that do not address social issues such as global inequity.  Nation states have a hard time being first, to take the lead on tackling large issues.  The move to address deforestation in the United States, for example, began with State and regional initiatives to set aside parkland in the early 20^th century.   We can also see more recent examples of localization of environmental initiatives with RGGI in the Northeast, the carbon trading initiative in California, and the implementation of renewable energy standards in selected states, representing just a few of many excellent examples. 

Ultimately, realizing a sustainable economy is in the interest of business, governments and individuals.  Without sustainable resources, economic decline, which has already begun, is inevitable, and will be inexorable and painful.  Forestalling initiatives which align our policies and investments to be consistent with a move to a sustainable economy is not in our best interest.  Having a  sustainable economy is not inconsistent with our economic interests, in fact, ultimately it is 100% consistent.  This central tenant, that increased sustainability and increased economic well-being are one and the same, may perhaps be that new paradigm people are looking for.  The interests of sustainability and economics are not at cross-purposes, but are of one.  Any society, any collective peoples throughout time, who did not own and embed sustainability within their societies and cultures, did not survive.  

Where does this unified theory of sustainability and economics come from?  Two perspectives.  One, mentioned earlier, is understanding the history of societies that collapsed.  The second is through understanding the source of economic activity within our own economies, and extrapolating the future risks our economy carries without integrating concepts of sustaining the economy going forward.

The global economy has grown to an extraordinary degree over the past several hundred years, tied to the level of energy entering the economy.  The level of economic activity is explained by two things: one being the level of energetic inputs entering the economy, and the second being the level of efficiency and productivity to which those resources are put.  Energy plus Efficiency.  If we want to grow our economy, we have two choices, increase the amount of energy resources being consumed, and/or increase efficiency and productivity.  This is a very interesting finding, given that we can have a growing economy with a static level of energy resources entering the economy, as long as we improve the efficiency of resource utilization.  Second interesting finding is that if we can economically migrate our energy systems away from nonrenewable to renewable resources, while keeping energy use static and improving efficiency, we can once again have a growing economy while simultaneously reducing deleterious environmental impacts. 

The cost of energy, however, plays an important role on our level of economic activity.  Higher energy costs mean a lower level of economic activity, constrained by efficiency improvements.  If sustainable sources of energy are a lot more expensive than non-renewable, then we will see a lowering of economic activity.  The pace of the transition will be governed by the relative economics of the alternatives, and the degree of incentives required to level the economic playing field, and the pace of capital formation and its availability.  Fortunately, the economics of renewable energy are getting close to being competitive without subsidies, with costs continuing to move down over time with scale economies and continuous improvement.   So what is the process to make this happen?

(1) Build a specific vision of where we want to be and when in terms of sustainability.  For example, 80% sustainable in 40 years.  Great detail and specificity by sector, end-use, activity, etc. is highly recommended. (2) Identify specific performance metrics to track performance along the way, such as proportion of renewable energy on the grid, transportation, heating, etc. (3) Implement market incentives to encourage private capital to make investments.  Put a price on carbon, set up carbon caps with trading, keep CAFÉ going, eliminate subsidies on non-sustainable resources, reduce transition and market barriers where possible, expand RPS requirements to every state, implement stretch and zero net energy building codes in every jurisdiction in the country, implement net metering tariffs in every state, increase CHP incentives, invest in expanded public transit, etc. (4) Implement government initiatives to transition government faster than private markets. (5) Expand incentives and reduce market barriers for investments in energy efficiency and productivity.  (6) Incentivize investments in technology innovation tied to renewable energy and efficiency and productivity.

The prescriptive set of activities identified above are no surprise to anyone involved in accelerating our transition to a sustainable economy.  The effort to adopt these steps has to take place throughout society, to build a groundswell of activity that is sound and impactful, building up from the local, state and regional levels to the national and international level.  Significant progress has been made in specific sectors and in specific countries, such as Denmark with wind, German with Energiewende, and Texas with wind power.  There are many more examples, including renewable fuels and efficiency, but the pace has to increase and the efforts have to expand.