Invest in Nature Today to Grow the Economy Tomorrow

Written by Andrew Deutz on . Posted in Learn, The Wonk Room

On Wednesday, I had the opportunity to present some remarks on the latest UN Human Development Report, Sustainability and Equity: a Better Future for All.

The Human Development Report has been produced for 21 years now, tracking progress on human wellbeing across a range of indicators including economic growth, health, and education.  It gives a more holistic accounting of progress toward alleviating abject poverty in the world than just counting GDP.  This year’s report focused on sustainability and equity, spurred on by the recent increases in global commodity prices and the impact those are having on food security in particular and global poverty levels generally.

The report argues that sustainability and equity are inextricably linked and suggests that they need to be addressed simultaneously if either is to succeed.  There is an important message here for the development community – if you want to succeed in your long term development objectives, you need to pay a lot more attention to the environmental sustainability.  And likewise, for the environmental community, if we want to succeed, we need to pay a lot more attention to the social justice impacts of our work.  (The strong correlations that the report finds between women’s empowerment and environmental outcomes, for example, are striking.)

What struck me the most about the report were the long term projections of human development.  The analysis shows that within the next 50 years, environmental degradation may become a significant constraint on economic growth and development.  (What’s even more depressing, but not really surprising, is that the poorest of the poor are likely to be the most negatively impacted.)

The report looks at three scenarios for economic growth wellbeing and environmental conditions and models the impacts on human wellbeing.  Call them the good, the bad, and the ugly.  In the “good” scenario, human wellbeing continues to rise for all income levels, almost approximating the unprecedented improvements in human wellbeing we’ve seen over the last 25 years.  (This is the period when many developing countries, lead by China and India, have seen extraordinary economic growth rates, effectively doubling the size of the global middle class.)  The “bad” scenario projects that human development keeps rising in the future, but environmental degradation causes negative feedbacks on growth and development, slowing the rate of growth by around 10%.  That’s a big loss when billions of lives are at stake.  The “ugly” scenario, which they call “environmental disaster,” results in actual decreases in human wellbeing for the less fortunate of the world – up to a 25% loss in the least developed countries.  That really would be a human disaster.

Now here’s the rub.  That “good” scenario is one where the world succeeds in constraining global warming to less than 2 degrees C.  The problem is – that’s an alternate universe where the world’s leaders at the 2009 Copenhagen Climate Summit actually agreed on a global plan to solve the climate crisis (and where they all followed through on that plan.)  Unfortunately, we’re living in a world that can currently best be characterized as heading somewhere between “bad” and “ugly.”

The take home message here is that unchecked environmental degradation is likely to produce negative feedbacks that will actually constrain economic growth and development – meaning human welfare for the majority of the world’s citizens – in the coming few decades.

In a way, this all reminds me of the current debate we are having here in Washington about the federal budget deficit.  Funnily enough, that discourse and the environmental sustainability discourse have the fundamentally same logic.

Our budget discourse is based on a macroeconomic consensus that large government deficits will soon enough become a constraint on long term economic growth and development.  The annual fiscal deficit is a problem.  Therefore, we need to make significant changes to our economy today to ensure better long term welfare for all.  (The disagreement is about what changes to make and when, not whether they are needed at some point.)

The sustainability debate parallels this.  The Human Development Report shows that we need to make significant changes to our economy today to prevent environmental degradation from becoming a constraint on long term economic growth and development.  In other words, we have a big ecological deficit that is going to hamper economic growth and development.

How big is that ecological deficit?  The G8-commissioned TEEB Report on The Economics of Ecosystems and Biodiversity estimates that the annual loss of natural capital (the ability of nature to provide clean water to drink, food to eat, fiber to wear and built with, wetlands to buffer floods and storms, etc.) was between $2 -4.5 Trillion in 2008.  To put that number in perspective, the estimated financial losses in capital markets in New York and London of the 2008 financial crisis was about $2.5 Trillion. The difference is, in response to the financial capital losses, the world organized bail outs and stimulus packages, whereas in response to the losses of natural capital, well, there wasn’t a response, so we went right on inflicting the ecological equivalent of the global financial crisis every year since.  That’s not very smart when you think about it, since the world is really what’s too big to fail.

It’s not all gloom and doom though.  Earlier this year the UN Environment Program put out a report on the Green Economy which also did some global macroeconomic modeling.  That analysis suggests that we can fundamentally transform our economies to make them sustainable by investing just 2% of global GDP in ten key sectors.  There would be a short term loss (about 0.25% slower annual GDP growth for 4-5 years) and after that, the Green Economy would outperform the Brown Economy on strictly economic grounds indefinitely.

Again, that’s the same logic at play as in the Washingtonian budget battle – some short term adjustments are necessary today in order to ensure long term, sustainable growth tomorrow.  The up side of greening our economies is that we’ll not only get more economic growth, but we’ll also be more resilient to environmental shocks and unpleasant surprises and we can secure bigger advances in human development and equity.

So here’s the bottom line: environment, growth and equity have to go together.  Nature really is a blue chip investment.

Andrew Deutz is director of international government relations at The Nature Conservancy.

Photo by SOS Sahel UK (Livelihoods & food security work in Dawaliaadit village, Rural Port Sudan). Used under a Creative Commons license.

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Comments (1)

  • Urs

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    “Growth at all cost is the philosophy of cancer”. Perhaps we need to start thinking in terms of shrinking GDP, of counting breathable air, drinkable water and untouched nature as inalienable rights for all living beings.

    Global warming is already taking its toll on our ‘economy’ of unfettered growth. And it is very inhumane that those who cannot defend themselves are the ones who suffer and loose the most.

    Economic growth is based on the principle of taking what you can from whomever or whatever cannot defend itself (Polar Bears, Appalachian mountain tops, Somalis, etc.). So, according to the present ‘leaders’ of all governments and industry, economic growth it will be. Global warming will continue – good luck humans, drill for more oil and burn it, it’s good for the economy.

    Or, are there enough of us who will speak out, change our governments (starting with the USA) and begin to reverse the cancer of “growth at all cost”, bring about a sustainable way to count what human wellbeing really is. The Arab Spring and the Occupy Wall Street movements are a good beginning.

    Reply

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