Providing capital to companies that operate responsibly will be the more successful investment strategy in the long run.
The theme of the “Rio+20” gathering to commemorate the seminal Earth Summit in the same city 20 years ago – “The future we want” – was a deceptive slogan. It suggests that the world can somehow exercise its judgement about sustainability and make a conscious choice, when in truth we have no choice at all.
What the Rio debate boiled down to is when rather than whether we will learn to abide by the laws of sustainable living.
I am not talking about some arbitrary, watered-down notion of sustainability, but the real thing – that which is non-negotiable and can only be achieved by operating within the biophysical limits of our planet.
Thermodynamically, the Earth is a closed system, as it exchanges energy with outer space but little else. So in the long run, unless we consider the colonisation of space as a realistic possibility, we have no choice but to confine ourselves to the limits of our own planet.
This is a challenge that is becoming tougher by the year.
According to the World Wildlife Fund’s recent Living Planet Report, our ecological footprint is already 50% larger than the regenerative capacity of our planet: on current trends we will need two planet Earths by 2050 to both satisfy our ever increasing hunger for resources and absorb our waste and pollution. The financial debts our governments are running up are nothing compared to this ecological debt burden. And there is no bailout or quantitative easing programme that can solve this problem – when environmental credit is used up, it is gone for good.
If the world population is to rise towards 10 billion by 2050 and enjoy a standard of living remotely comparable to what we would associate with a decent life, let alone the lavish lifestyle we have become accustomed to in the West, we will have to make profound changes to the way we live and do business.
Resource efficiency is a key part of the transition to a more sustainable world. We have to deploy all our research and development efforts to make or do more with less in every sphere of life.
But while using our resources more efficiently is an important first step, it is not a sufficient condition for sustainability – there are limits to the gains that can be achieved through this approach. A major drawback is captured by the Jevons paradox, named after the 19th century English economist William Jevons.
In his studies, conducted during the Industrial Revolution, Jevons found that an increase in the efficiency of using coal to produce energy tended to raise coal consumption rather than reduce it. In other words, increased efficiency could accelerate rather than decelerate the depletion of a natural resource.
Today we see Jevons paradox everywhere we look. For example, Tata’s nano car is an extremely energy-efficient car but its low price tag means it will bring millions of new drivers to India’s roads. Elsewhere we see the declining cost of refrigeration has merely increased the use of refrigerators. The same is true of air travel, heating and lighting and so on. Is increasing energy efficiency merely an endless treadmill in a race we can never win?
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