Growth in itself is neither our enemy nor our problem. But what kind of economic growth do we need? And do we want growth at any cost?
A child born today is one of seven billion people on Earth, and during its lifetime will see the world’s population grow by another 3 billion.
At the same time, more people enter the global middle class. That is good news. But more people and a bigger middle class will inevitably put further strain on the planet’s capacity to meet our needs. By the time the child born today turns 18 in 2030, the world, will need at least 50% more food, 45% more energy and 30% more water, according to the UN. How are we going to cope with that?
These numbers show that, as world leaders join the Rio+20 summit tomorrow, continuing with business as usual is clearly not an option. It would be wrong to believe it is the cheap option. It is not. On the contrary, it would be very costly in economic, environmental and human terms.
For instance the Inter-American Development Bank (IDB) reported earlier this month that damage from climate change could cost Latin American and Caribbean countries $100bn per year by 2050. Not a small figure. This is one example of why we need a more sustainable growth model that captures the value of a country’s natural wealth, of a clean environment, of social cohesion.
The traditional way of measuring economic growth based on GDP alone is not sufficient. GDP is nothing more than a measure of production. It takes no account of human wellbeing or natural wealth.
For example, GDP gives no value to a forest until it is chopped down and turned into timber. Likewise, natural disasters that kill people and destroy infrastructure and cultural heritage are positive for GDP because the reconstruction works that follow boost economic activity.
Putting a price on environmental pollution is also crucial to building a sustainable model for global growth. The cost of production cannot be the only factor determining the price of a product. The true cost of its environmental impact also needs to be factored into the price if people are to have an incentive to buy the least harmful and resource-intensive products available.
That is why the Global Sustainability Panel report recommends that, by 2020, all governments establish price signals that value sustainability. This would help guide the consumption and investment decisions of households, businesses and the public sector in a more sustainable direction.
The “grow now, clean up later” mantra is no longer viable. Polluters must be made to pay now instead of sending an unpayable bill to future generations. But we must do this in a smart way. Putting a price on carbon emissions is one of the ways to raise additional money for investments in sustainable development, especially in developing countries.
The EU is already moving in this direction. We have a price on carbon, binding targets for reducing carbon emissions and increasing renewable energy, and an array of energy efficiency measures. And we are looking at smarter ways to use the tax system so that in future we tax less what people earn and more what they burn in terms of fossil fuels.
But developed countries cannot tackle environmental challenges alone. The reality is that today emerging economies account for the biggest growth, not least in energy consumption and emissions. We are at a point where all countries have to act, in line with their respective capabilities and responsibilities.
As for state subsidies for fossil fuels, they have no place in today’s world. They must be phased out as the G20 has pledged. In 2011, fossil-fuel worldwide received about six times more government subsidies than were given to the renewable energy industry, according the International Energy Agency (IEA).
With the current economic and climate crisis, how smart is it that governments worldwide spend $400bn a year of taxpayers’ money subsidising dirty fuels that exacerbate climate change and air pollution? We would do better to spend this money on improving energy efficiency and promoting clean and affordable energy for all.
Last year, global greenhouse gas emissions reached their highest ever level. This underlines once again the need for urgent action on a truly global scale.
We must use the Rio+20 summit to kick off the global transition to a sustainable growth model for the 21st century. Inclusive, greener growth needs to be at the heart of the global economic agenda from now on if a growing world population is to enjoy prosperity, without exhausting the planet’s finite resources for future generations.
Rio cannot afford not to have concrete results. Rio must get it right.
• Connie Hedegaard is the EU Commissioner for Climate Action