Speech by Ibrahim Thiaw, UN Environment Deputy Executive Director at The Economist: Adapt or Die Conference
During the Industrial Revolution, labor productivity increased tenfold. It sparked an incredible cycle of economic growth, lifting millions out of poverty. But it also sparked an incredible cycle of consumption, waste and pollution. It’s a cycle that is pushing the natural resources of our planet beyond economically or environmentally viable levels. And it’s one that is pushing climate change to increasingly dangerous levels.
Maintaining economic growth is essential. It allows us to tackle health care and hunger, provide education and jobs, protect our natural resources and national security, and improve the infrastructure of our rapidly expanding towns and cities.
Jargon aside, that’s what the 2030 Agenda for Sustainable Development boils down to. But for that growth to be sustainable we must decouple it from the growth in carbon emissions and the runaway depletion of natural resources.
Last year, nearly 200 world governments signed up to making that happen. However, a recent report from McKinsey’s shows that to reach the Paris climate change targets and still keep world economic growth above 3%, there has to be a tenfold increase in the amount of GDP produced for each unit of carbon emission. And we need this new Industrial Revolution to happen three times as quickly as the first one.
It can be done – but only – if we make the transition to a circular economy. If we maximize the value of our products, components and raw materials throughout their lifecycle – using, reusing and improving efficiency as we go.
Governments can’t possibly do this alone. They need the private sector to deliver: Incremental improvements to existing industries, products and business models. And disruptive step changes using innovative technology, finance and collaboration.
New policies and legal frameworks will support that change. So, for those willing to adapt quickly, this represents the biggest business opportunity in the last 200 years.
There are already plenty of signs that the private sector is well aware of the mutual benefits at stake.
Take something like aviation.
Efficient manufacturing cuts the amount of energy, water and raw materials used to build aircraft. This in turn cuts production costs and the sales price. Innovative engineering and operating procedures cut fuel burn. This cuts emissions and ticket prices.Cheaper aircraft and increasing profits allow more airlines to replace older models with newer, more efficient versions that can cut emissions by up to a quarter. And finally the knowledge from dismantling the older aircraft is then fed back to engineers working to improve recycling and performance for new models.
The economic and environmental benefits are inseparable and they add up. In the last 25 years, the industry has halved emissions per passenger kilometer and it has become the first industry to agree a global market mechanism for dealing with climate change.
It’s a similar story for other manufacturers that invest in innovation, use resources efficiently and cut waste.
Look at BMW. They racked up 6 record years in a row for sales, revenue and profit, while also steadily working their way to the top of global rankings for the most sustainable companies.
Or what about GE? In the first decade of Ecomagination they’ve generated over $200 billion in revenues by investing about $17 billion in developing clean technology.
And of all that is before you, consider the industrial shift as the worlds of big data and 3D printing come together. With the potential to create better products, made locally, with 90% less waste, it’s no surprise that both governments and the private sector are keen to develop this further.
Again, good for the environment and good for business.
And that’s just one of a huge number of other opportunities still to be fully exploited that could deliver massive benefits.
For example, the International Energy Agency shows that the uptake of economically viable energy efficiency investments could boost economic output by $18 trillion in the next 20 years. That’s more than the combined economic output of the US, Canada and Mexico.
Likewise, the number of air conditioning units is set to increase from 900 million units today to about 2.5 billion by 2050. That’s an enormous ready-made market to tap into. Selling all those units at the same price and performance as the most efficient products already available would be like switching off 2,500 power plants.
And I’m sure everyone here has a mobile phone in their pocket. Like other electronic goods, it uses about 60 different metals. Many of those are difficult to extract and expensive to buy.
The cost of gold in conductor boards is nearly $40,000 a kilo. The cost of the cobalt in batteries is even higher – it includes the suffering of artisan miners in places like the Democratic Republic of Congo.
The amount in each product is very small. But, reports from the International Resource Panel and UN Environment show, about 40 million tonnes of electronic waste – worth about $20 billion – just being thrown away every year.
Surely mining the existing mineral wealth and opportunities in our cities makes more economic and environmental sense that exploiting our natural resources or destroying people’s lives?
A growing section of the financial community agrees. For the last 20 years UN Environment’s Finance Initiative has been working with more than 200 banks, insurers and fund managers. It’s improving the understanding – on all sides – of the links between environmental, social and financial performance.
And that understanding is paying dividends for the economy and the environment.
Ahead of the Paris Agreement, the Global Investor Statement on Climate Change united hundreds of financial organizations, managing over $25 trillion in assets to call for more courageous political leadership.
Over 400 institutional and 2,000 individual investors in 43 countries have committed to divesting more than $2 trillion in assets from fossil fuel companies.
And last year set new records in renewable energy. Investments reached nearly $300 billion, a third of which was from China. As a result, for the first time, more than half of all added power generation capacity came from renewables.
That momentum will have to be maintained.
For example, Europe’s 2020 growth strategy aims to meet ambitious objectives on employment, innovation, education, social inclusion, climate and energy.
It got off to a good start with the European Fund for Strategic Investments mobilizing some -50 billion in the first 6 months – more than half of which was for projects in energy, environment and resource efficiency, or research and development.
There is a long way to go. For example, buildings use almost 40% of European energy. Three quarters of them went up when there were little or no energy codes and almost all of them (90%) could still be in use by 2050.
But I am heartened to see Greece taking significant steps to address this.
A new legal framework and green financing from Pireaeus Bank and the EBRD will support the expansion of Terna Energy, a local pioneering renewables company. And a pilot tend for new energy capacity on 12 December is being reserved entirely for solar proposals, with the tender running and results announced on the same day.
Though I add a note of caution.
Yes we need to speed up and scale up the roll out of new technologies that can deliver a step change towards the circular economy.
But we cannot afford to be reckless. We have much to learn about the full lifecycle impact of many new materials, chemicals and solutions being adopted.
In seeking to fix the ozone layer, under the Montreal Protocol CFCs were widely replaced by HFCs. This was by far our best option at the time.
It put the ozone on track for recovery, prevented millions of cases of skin cancer and billions of US dollars in health costs.
But over time it became clear that those HFCs create problems for global warming. So they in turn have to be replaced.
The Kigali Amendment agreed last month will set this in motion. Again, only the private sector can scale up the solution and only time will tell if it’s the best one.
But the HFC problem also a reminder that to find more effective solutions, we also need to look further down the innovation chain to research and education.
Not just in terms of funding or of tackling successive problems as they emerge, rather than taking a more holistic approach to prevent them in the first place.
But in terms of the number of kids- regardless of gender – who want to study subjects like science and maths, – to pursue careers in fields like chemistry or engineering – to help legislate for new ways of working on environmental problems.
We can’t ignore that the school students of today will be the decision makers of 2030.
Ladies and gentlemen, in casting the circular economy wide, we minimize the risks and maximize the chance of success of delivering that tenfold improvement in performance. As that McKinsey reports out, the alternative is bleak.
The individual carbon budget of stabilizing greenhouse gas emissions would force people to choose between a 40 kilometer car ride, a day of air conditioning or eating two meals. That would be a major drop in lifestyle for developed countries and would hinder economic development in low income countries.
If making our economic and business models ten times more effective seems unrealistic, let me leave you with this thought.
Google is arguably one of the most successful companies in the world today.
Where most companies would be happy with a 10% improvement, Larry Page believes that if something is worth doing well, it’s worth doing 10 times as well.
10 times better than the competition.10 times better than the previous product.
10 times better than his employees even imagined they could do.
If the 10times rule can help a $500 billion global company stay ahead of the risks and adapt to new opportunities, then I’m sure it can help the rest of us do the same in looking after people and planet while making profits!
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