Graciela Chichilnisky is a Professor of Economics and Statistics at Columbia University in New York, as well as the Director of the Columbia Consortium for Risk Management. The views, opinions and positions expressed by the author of this blog are hers alone, and do not necessarily reflect the views, opinions or positions of Blouin News or Louise Blouin Media. This blog is part three of a series.
The future of humankind may be played out in the rest of this 21st century. Here is a summary of the situation and what to do about it – which I will develop further in the rest of this piece.
First, let’s take stock of the world today: in a nutshell we see energy limits confronting enormous future global needs for energy today and in the future. The problem of overuse of natural resources, more generally, continues to be a clash of civilizations: it is a North – South impasse in using the world’s resources. The North are the rich nations that inhabit mostly the Northern hemisphere of planet Earth, the South the poor. The former have about 20% of the world population, and the latter, about 80%. We examine the market’s role in getting us here and in finding a solution, and define three building blocks that are needed for any solution going forward. We discuss the next generation of green markets; how to bridge the global wealth gap and to transform capitalism as needed for this purpose – and whether is this possible. We examine the role of the United Nations Kyoto Protocol and its Carbon Market in this global transformation process – by itself and in conjunction with other global markets for environmental resources for water and biodiversity – that are still to emerge. We examine the critical role of women, how the global financial crisis fits into all this, what is the light it throws onto our future, and the lessons we have learned. Avoiding extinction is the ultimate goal of sustainable development.
Financial and Global Environmental Crisis
While we try to climb up from the depths of a global financial crisis that started its deadliest stages in 2008, the world knows that the game is not over yet. Judging by the threats from the Eurozone, it could all restart next year. The recent downgrading of the U.S. as a debtor nation – for the first time in history – and its financial markets’ shocks underscore these points. At the same time, within a larger historical context, the financial crisis takes a second place. We have seen such crisis before. What we have never seen before is the global threat to human survival that is developing in front of our own startled eyes. We are in the midst of a global environmental crisis that started with the dawn of industrialization and exacerbated with globalization, ever since the Bretton Woods institutions were created after WWII to provide a financial infrastructure for international markets and for spreading the role of markets and industrialization across the world economy.
In both cases, however financial mechanisms are at work, essentially financial markets are implicated in both situations. Both the financial crisis and the environmental crisis are essentially two aspects of the same problem. How so?
We will explain how by using simple examples available through the media that is read by the average person. The urgency of the situation has become clear. For example, on Tuesday June 21, 2011 The Times newspaper in London writes “Marine life is facing mass extinction” and it explains: “The effects of overfishing, pollution and climate change are far worse than we thought.” The assessment of the International Program on the State of the Oceans (IPSO) suggests that a “deadly trio” of factors — climate change, pollution and overfishing – are acting together in ways that exacerbate individual impacts, and that “the heath of the oceans is deteriorating far more rapidly than expected. Scientists predict that marine life could be on the brink of mass extinction.” Observe that all the three causes of extinction just mentioned – overfishing, pollution and climate change — are attributable to the industrialized world which consumes the majority of the marine life used as seafood, generates over 60% of the global emissions of carbon dioxide, and uses 70% of the world’s energy. All this while housing only 20% of the world’s population. Industrialization is at work in the impending destruction and mass extinction in the Earth’s seas, the origin of life as we know it.
The complexity of the problem is baffling scientists. Normally the Earth self-regulates, but now we are tying the Earth’s hands in self -regulating itself out of the problem industrialization has created. There is no quick fix. The standard way that the planet regulates carbon is by using its vegetation mass which breathes CO2 and emits oxygen. Animals – for example humans — do exactly the opposite. Animals breath oxygen and emit CO2. In balance, the two sets of species – vegetation mass and animals — maintain a stable mix of CO2 and oxygen, and therefore since CO2 in the atmosphere regulates its temperature, a stable climate. But the enormous use of energy by industrial societies is tipping the scales, preventing the planet to readjust. On the same date, page 17 of The Times, writes: “Planting trees does little to reduce global warming” and explains how a recent Canadian report (The Times, 2011) has found that “even if we were to plant trees in all the planet’s arable land – an impossible scenario with the global population expected to rise to 9 billion this century – it would cancel out less than 10% of the warming predicted for this century from continuing to burn fossil fuels.” Observe that it is not the developing nations with 80% of the world’s population that are causing this problem. This is because over 70% of the energy used in the world today is used by 20% of the world population that lives in industrial nations, who emit 60% of the CO2 therefore. These are the same industrial nations that created the Bretton Woods Institutions in 1945 and have consumed since then the overwhelming amount of all the Earth’s resources.
For these reasons I say that the financial crisis and the environmental crisis are two sides of the same coin. They are at the foundation of the current model of economic growth in industrial nations and of its voracious use of the Earth’s resources. The world’s financial crisis and the global environmental crisis – the two sides of the same coin – both require a new model of economic growth.
This opinion is not just mine. Indeed, the newly created international group G 20, the first world leading group of nations that includes developing countries, met in Pittsburgh, U.S., on September 24 – 25, 2009. Its leader’s Statement (G-20 Leader’s Statement, September 2009) reads:
“As we commit to implement a new, sustainable growth model, we should encourage work on measurement methods so as to better take into account the social and environmental dimensions of economic development.”
“Modernizing the international financial institutions and global development architecture is essential to our efforts to promote global financial stability, foster sustainable development, and lift the lives of the poorest.”
“Increasing clean and renewable energy supplies, improving energy efficiency, and promoting conservation are critical steps to protect our environment, promote sustainable growth and address the threat of climate change. Accelerated adoption of economically sound clean and renewable energy technology and energy efficiency measures diversifies our energy supplies and strengthens our energy security. We commit to:
– Stimulate investment in clean energy, renewables, and energy efficiency and provide financial and technical support for such projects in developing countries.
– Take steps to facilitate the diffusion or transfer of clean energy technology including by conducting joint research and building capacity. The reduction or elimination of barriers to trade and investment in this area are being discussed and should be pursued on a voluntary basis and in appropriate fora.”
“Each of our countries will need, through its own national policies, to strengthen the ability of our workers to adapt to changing market demands and to benefit from innovation and investments in new technologies, clean energy, environment, health, and infrastructure. It is no longer sufficient to train workers to meet their specific current needs; we should ensure access to training programs that support lifelong skills development and focus on future market needs. Developed countries should support developing countries to build and strengthen their capacities in this area. These steps will help to assure that the gains from new inventions and lifting existing
impediments to growth are broadly shared.”
“We share the overarching goal to promote a broader prosperity for our people through balanced growth within and across nations; through coherent economic, social, and environmental strategies; and through robust financial systems and effective international collaboration.”
“We have a responsibility to secure our future through sustainable consumption, production and use of resources that conserve our environment and address the challenge of climate change.”
I could not have written this better myself. The G 20 knows the problems all right. What they don’t know is what the solutions are — something we will discuss in the next installment of this blog series.
– Graciela Chichilnisky
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