1 Dining off Ecosystems: from the free lunch to terminal ecological indebtedness Presentation to the concluding seminar in the series ‘Sustaining Future Ecosystem Services – from Understanding to Action’ By Professor Paul Ekins Professor of Energy and Environment Policy, King’s College London National Liberal Club, London Friday 26 th June, 2009

2 Principles of sustainable growth Borrow systematically only to invest, not to consume Keep money sound: control inflation, public borrowing, trade deficits, indebtedness Establish transparent accounting systems that give realistic asset values Maintain or increase stocks of capital (manufactured, human, social, natural) As has become apparent every one of these principles has been spectacularly broken over the last few years, even in the financial sector and mainstream money economy What prospect then for the big one, maintaining and rebuilding ecosystems/natural capital?

3 Ecosystems/Natural capital – the big one Climate science and the Millennium Ecosystem Assessment make clear that without a radical reform of the human-nature relation – in favour of nature – human civilisation is at grave threat Specifically, nine billion humans cannot live current Western lifestyles and maintain a habitable planet: the first thing to go will be climate stability, the whole biosphere may then start to unravel. Issue is saving the human, not the planet. Any aspiration for sustainable economic growth must start from the recognition of the need for the sustainable use of resources and ecosystems It must also be rooted in basic laws of physical science: indefinite physical expansion of the human economy on a finite planet is impossible; all use of non-solar forms of energy creates disorder, and potential disruption, in the natural world We must start by getting right the basic conception of how the human economy relates to the natural environment

4 The ecological cycle

5 The ecological cycle and human well-being

6 The economy as a sub- system of the biosphere

7 The concept of capital and the 4-Capital Framework Capital stocks (assets) provide a flow of goods and services which contribute to human well-being. The stock value is the net present value of the flow Four types of capital recognised: –Manufactured Capital: produced assets used to produce other goods and services, e.g. buildings, transport infrastructure, machines –Natural Capital: traditional natural resources (timber, water, minerals) and other natural assets such as biodiversity, climate, ecosystems –Human Capital: health, wellbeing and productive potential of individuals –Social Capital: social networks that support efficient and cohesive societies, e.g. social trust, norms, political and legal structures

8 Capital and sustainability Places Environment in recognisable economic framework on an equal basis with other factors of production (cf ‘externality’ concept) Capital and sustainability: in the provision of goods and services, capital depreciates; for sustainability it must be replenished (investment) Economic, social, environmental sustainability Weak and strong sustainability (substitutability between capitals) Potential for unsustainable development lies in loss of one or more capital stocks, or in trade-offs made between different forms of capital, and extent to which –Any decline represents a breach of some critical threshold (breach of which threatens system integrity), and if not, whether –Any decline in one form is compensated by increases in other forms

9 Natural capital Characteristics, Values and Functions of Nature –Characteristics: air, water, land, habitats –Values: ecological (conservation, existence), social (human health, personal, community, option), economic (production, consumption, employment) –Functions:  Natural capital can only be inferred from the performance of environmental functions  Environmental function: “the capacity of natural processes and components to provide goods and services that satisfy human needs (directly and/or indirectly)” (de Groot 1992, p.7).  de Groot: Regulation, Habitat, Production, Information  CRITINC: Life support, source of resources, sink for wastes, maintenance of human health, other contributions to human welfare (e.g. amenity)

10 Environmental sustainability Sustainability: capacity for continuance Environmental sustainability: maintenance of important environmental functions Importance: –Not substitutable, irreversible loss, ‘immoderate’ losses –Maintenance of health, evidence of threat, economic sustainability Thermodynamics: at a certain physical scale, further physical growth becomes counter- productive. –There is little doubt that except from a very short-term perspective this scale has now been exceeded –What is the optimal physical scale of the human economy? –Have an answer of sorts for carbon; what about ecosystems?

Environmental sustainability: maintaining important environmental functions Biosphere Functions of Nature Life Support Source Sink Functions for Humans Economy Human health Human welfare + -

12 The failure of Western culture The free lunch syndrome –Focus on short-term consumption rather than long-term investment (cf the Victorians); –No value given to ecosystems, ecosystem services, future ecosystem risk (natural capital valued at the cost of turning it into commodities); –Inadequate and untransparent systems for measuring natural capital; leading to –Terminal ecological indebtedness: ecosystem, cultural and population collapse Indicators of collapse –Climate instability and impacts of climate change, accelerating –Habitat, ecosystem and biodiversity loss, leading to –The ‘perfect storm’ (Beddington 2030) of inadequate global supplies of food, water and low-carbon energy, resulting in –Unprecedented pressures of global migration, fuelling social and economic disruption and conflict, leading eventually to –The collapse of human populations (Schellnhuber’s 1 billion people by 2100) The prospect is so dire that even a tiny probability of its realisation should prompt wholesale systemic reform: in fact, we have the understanding, but practically no action.

Action entails an unprecedented policy challenge The Stern Review Policy Prescription for climate change Carbon pricing: carbon taxes; emission trading Technology policy: low-carbon energy sources; high-efficiency end-use appliances/buildings; incentivisation of a huge investment programme Remove other barriers and promote behaviour change: take-up of new technologies and high-efficiency end-use options; low-energy (carbon) behaviours (i.e. Less driving/flying/meat-eating/lower building temperatures in winter, higher in summer) In a market economy, pricing is the key to resource efficiency, investment and behaviour change The basic insights from the Stern Review need to be applied to the use of other environmental resources (water, materials, biodiversity [space])

Broadening the Stern approach Objective By tonnes per head of material use (instead of 20 today) By tonnes/head of CO2 emissions (instead of 5 today) Investment in habitat creation and ecosystem recovery Major instrument Tradable resource use permits (extraction + net imports (raw and embodied) between cooperating countries) (cf EU ETS) Linear reduction from current to sustainable resource use levels Import taxation on non-cooperating countries with higher than average resource use Development of resource measurement capability (required to avoid import taxation) Sustainable commodity agreements to reduce environmental impacts of extractio n (including agriculture) Instruments of national environmental policy Economic instruments (tax/trading), regulation (e.g. for efficiency), voluntary agreements, information/communication Only increasing relative prices signals scarcity, and gives incentives for both the development of resource-efficient technologies and the adoption of resource-efficient behaviours Importance of environmental tax reform (ETR)

Climate change policy so far largely ineffective For carbon/energy relative, but not absolute, decoupling Very little systematic policy on (non- carbon/energy) resource efficiency (Much) More stringent application of policy instruments (especially price-based to avoid rebound effects) is required Political feasibility (in the absence of cultural change) Implications for economic growth 15

The macro-economic costs of increasing resource productivity Optimists: ‘Costs’ are really investments, can contribute to GDP growth Considerable opportunity for zero-cost mitigation A number of resource-efficient technologies are (nearly) available at low incremental cost over the huge investments in the economic system that need to be made anyway ‘Learning curve’ experience suggests that the costs of new technologies will fall dramatically Resource efficiency policies can spur innovation, new industries, exports and growth Pessimists: Constraining resource use is bound to constrain growth Cheap, abundant energy and other resources are fundamental to industrial development 16

Conclusions on costs and growth Attaining greatly increased resource productivity will require huge investments in resource-efficient technologies right along the innovation chain (research, development, demonstration, diffusion). IEA ETP estimates of additional investment needs in energy sector alone: USD 45 trillion (1.1% global GDP from now until 2050) Government funding of R,D&D must increase dramatically, but demonstration and diffusion can only be driven at scale by markets This will require high (now) and rising resource prices, achieved by a global trading scheme supplemented by national resource/environmental policies over the next half century These high resource prices will incentivise investments in resource efficiency and also greatly change lifestyles and consumption patterns Provided that the world goes cooperatively in this direction, there could be high profits to be made from these high resource prices and changing consumption patterns; technological and policy uncertainty mean that the risks are also high Low impacts on growth assume no special productivity improvements from cheap/plentiful/concentrated resources A world of low growth is preferable to one of collapsing eco-systems 17

Headline conclusion on sustainable (green) growth Conclusion from book Economic Growth and Environmental Sustainability: the Prospects for Green Growth (Routledge 2000) Technologically feasible, economically feasible BUT requires sustained, wide-ranging, radical policy interventions to bring about technological revolution and change lifestyles. These interventions are resisted by affected economic sectors (e.g. energy) and households who want to keep current lifestyles (e.g. transport), or attain Western lifestyles

19 Thank you