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Restructuring the Global Economy

Internet & E-Commerce Have Major Environmental Benefits

Livability and Community Renewal


 

 

By Lester R. Brown
President, Worldwatch Institute

[Excerpted below are portions of a speech made by Lester Brown to a Commonwealth Club event in October 1999 at Hewlett Packard in Palo Alto, California.]

Fe are members of the first generation in history to witness a doubling of world population during our lifetimes.

Stated otherwise, there has been more growth in world population since 1950 than during the preceding four million years -- from when we first stood upright. I don’t think we have yet grasped the dimensions of the consequences of the sort of population growth that we are experiencing.

Population growth has been responsible for roughly half of the growth in global demand for goods and services since 1950.

There has been more growth in world population since 1950 that during the preceding four million years.... Growth in the world economy in 1997 exceeded the growth in the 17th century.

The other half has been rising affluence. When we look at the growth in the pressures on the Earth’s ecosystem over the last half century, it has been about half population growth, half rising affluence.

We’re impressed with the more than doubling of world population since 1950, but the global economy has increased six fold, from $6 trillion to $37 trillion. The economy is huge today compared to anything we’ve seen in the past. Growth in the world economy in 1997 exceeded the growth in the 17th century.

Even a small percentage increase now adds up to an enormous additional burden on the Earth’s natural systems and resources. In effect, the global economy as now structured is outgrowing the Earth’s ecosystem. And the relationship between the economy and the Earth’s ecosystem is an increasingly stressed one.

We see the signs of that stress. We read about them in the daily papers. It’s collapsing fisheries, rising temperatures, more destructive storms, eroding soils, shrinking forests, disappearing species. One can go down the list. Falling water tables. These are all manifestations of increasing stress from a global economy that is outgrowing it support systems.

So the challenge that we face is how to restructure the economy so that we can stabilize that relationship and so that economic progress can continue.

Let me elaborate on two of the signs of stress that I mentioned. I want to talk a bit about what’s happening with water tables and what’s happening with temperatures.

Water Supplies Threatened

Water tables are now falling on every continent.We think at the Worldwatch Institute that emerging water scarcity

Emerging water scarcity may be the most underestimated resource issue the world is facing.

may be the most underestimated resource issue the world is facing as we prepare to enter the new century.

Unlike burning rainforests, falling water tables are not very photogenic. You don’t see clips on the evening news of water tables falling. You hear about wells going dry. That’s how we discover this. It is emerging as a major threat to the world’s irrigated food supply.

Irrigation problems are as old as irrigation itself. Water logging and the salting that undermined the early Mesopotamian civilizations for example, up to the present day.

But over the last half century, we’ve developed a new irrigation problem, and that is aquifer depletion. The reason is that for the first time in history we’ve gone beyond the traditional animal driven and human powered devices for pumping water, and we’ve replaced those with powerful diesel and electrical pumps that can pump huge amounts of water.

As the demand for water grows, we just keep pumping more water. The problem is, at some point we surpass the sustainable yield of the aquifer, and then the water table begins to fall. When the aquifer is depleted, the rate of pumping is necessarily reduced to the rate of recharge.

We’re beginning to experience that in some places in the world today. In China, water tables are falling almost everywhere that the land is flat. In India, a recent estimate by a water research institute is that the withdrawal of underground water is now double the rate of aquifer recharge. This is for the country. That’s scary.

As water becomes scarce in these countries, the growing demand for water in the cities is satisfied by pulling water away from agriculture.

North Africa and the Middle East in recent years has been the fastest growing grain import market in the world. The reason, water, or rather the lack of water. Morocco, across the top of Africa, through the Middle East, including Iran. Every country in that region is facing water shortages.

As the demand of a growing population increases, especially an urban population, they begin to pull irrigation water away from agriculture, and then to import grain to offset the loss of production.

To import a ton of grain is in effect to import a thousand tons of water. It takes a thousand tons of water to produce one ton of grain. If you are faced with water scarcity, then you import the water you need in the form of grain.

Last year, the water required to produce the grain imported into North Africa and the Middle East was equal to the annual flow of the Nile River. So if you want to visualize the current water deficit in that part of the world, it’s as though another Nile River was flowing into the region. And that deficit is growing year by year.

Water scarcity now crosses international borders via the world grain trade. And while we often hear in the Middle East that the wars of the future will be about water and not about oil, it is possible that competition for water in the future will take place in world grain markets, and that the countries that are financially the strongest will win out rather than those that are the strongest militarily. So we are looking at a new problem at a new scale.

To sum it up in one sentence, falling water tables in China could mean rising food prices in the world.We can no longer

Falling water tables in China could mean rising food prices in the world.

separate what’s happening in China from what happens here.

My colleague Sandra Postel has just published a new book entitled Pillar of Sand: Can the Irrigation Miracle Last? She estimates that we are now pumping water from underground in excess of aquifer recharge. That is, she’s measuring the drop in water tables, and she estimates it at 160 billion tons of water, which is equal to 160 million tons of grain.

That’s enough grain to feed 480 million people. Stated otherwise, 480 million of our population of 6 billion are being fed with the unsustainable use of water. You can overpump in the short run, but by definition not in the long run. At some point, we have to deal with that reality.

High Temperatures: Rough Weather Ahead

Let me talk a bit about temperature. There is a series of global average annual temperatures that goes back to 1866. Each year at the Institute (in our State of the World report) we add the last year’s data. When we went to add the temperature for 1998, it literally went off the top of the chart. It was not only a record high, but the increase over the previous high was also a record increase. So we had to recalibrate the vertical axis of the graph and extend it upward in order to get 1998 on the chart.

1998 also brought a lot of related changes on the weather front. You don’t get that kind of an increase in temperature without having some effects. One of those was extreme flooding. Weather related damage in 1998 worldwide totaled $92 billion. The previous record was two years earlier at $60 billion.

Weather related damage in 1998 exceeded weatherrelated damage for the decade of the 1980s.

Weather related damage in 1998 exceeded weather related damage for the decade of the 1980s.

This a curve that is going up rapidly.More flooding should not come as a surprise.

Higher temperatures mean more evaporation. Basic physics. The more water goes up, the more comes down. Exactly where it will come down is not always clear. But quite a bit came down in the Yangtze River Basin last year. A lot more came down in Bangladesh and parts of eastern India.

Another indicator we’ve started developing, and the events of last year did this, was to calculate each year the number of people who are displaced by weather related events.

Last year, it was in excess of 300 million: 140 million in the Yangtze River basin alone. Others in northern China. Huge numbers in Bangladesh, also in India, to some degree in Central America and the Caribbean, though the numbers are much smaller there.

Three hundred million people displaced by weather related events. That’s more than live in North America -- the U.S. and Canada. Enormous numbers. This is new.

We’re also seeing melting. Almost every major ice formation in the world, whether it is the polar ice caps, Greenland, the Alps, the Rockies, Glacier National Park, the Andes, the Tibetan plateau, we’re seeing melting. I was in Innsbruck Austria earlier this month at a conference of business leaders and investment bankers, and was talking with some of the local people about the ice man who was discovered there six or seven years ago -- the guy whose body started protruding from the glacier as it was melting.

There was also a similar discovery in Siberia, and then several weeks ago, a discovery of another male in the Yukon Territories of Western Canada. Our ancestors are emerging from the ice, and they have a message for us: The Earth is getting warmer.

I don’t think we have begun to grasp what this is all about. I think of agriculture. During the 10,000 years since agriculture began, we’ve had a remarkably stable global climate. But as the climate begins to change in major ways, as now appears to be likely, we will be faced with enormous adjustments.

U.S. Economic Model Won’t Work For World

Many people, I suspect most of the people in this room, have crossed the bridge where you accept the idea that there’s going to be a need for restructuring the global economy, the energy economy for example. But a lot of people are not yet convinced of that, though we’re getting a big assist from China in this educational process.

The Chinese economy is developing at an extraordinary rate. It has increased in size four times since 1980. That sounds like a Silicon Valley growth rate, doesn’t it. Four times since 1980.

As incomes have gone up, people moved up the food chain, consuming more animal protean. Pork consumption per person in China is now equal to that in the United States, but beef and poultry are quite low by comparison. They are kind of a one meat economy, we’re a three meat economy.

If they were to try to close the beef gap, and they are actually encouraging beef production now, it would take about three hundred and forty million tons of grain. Seven pounds of grain per pound of live weight in the feed lot. That’s the U.S. grain harvest -- 340 million tons of grain.

In 1994, they decided to make the automobile industry one of the four growth industries in the economy, one of the quote pillar industries for the next few decades. And they invited Toyota and GM and Volkswagen to submit proposals for building assembly plants and so forth.

So what happens if the Chinese do indeed one day have a car in every garage, or maybe two cars? What if one day they begin consuming gasoline or oil at the rate we do?

It would take 80 million barrels of oil a day for China, if they began consuming at the same per capita rate we do. The world last year produced 72 million barrels, and will probably never reach 80 million barrels.

What China is teaching us is that the Western industrial economic model, our model, the one that’s used in Europe and Japan, the one that everyone else aspires to, is not going to work in China. Nor for India, which just passed the billion mark in its population. Nor for the other two billion people in the developing world. And over the long term, not for us either.

The current economy we have cannot take us were we want to go.

The fossil fuel based automobile centered throw away economy that reached its zenith in this country is not going to work for the world.

What sort of economy could? That’s the big question as we turn into the next century.

After the Chinese government decision to make automobiles a center point of their economic growth, a group of scientists, many of them senior scientists and members of the National Academy of Scientists, issued a white paper challenging that decision.

They challenged it on several points. The first point was the availability of land. China, as you probably know, has about the same land area as the United States. But most of its 1.2 billion people live in a one thousand mile strip on the eastern and southern coasts. The rest of the country is basically desert. There is no rain there to speak of.

In order for us to understand the density of population in the inhabited region of China, we’d have to take the entire U.S. population and squeeze it east of the Mississippi River, and then multiply it by five. Yea, ouch. That’s what the Chinese are contending with.

If you begin in that situation to add automobiles, an automobile in every garage, you’re using a lot of crop land. The reason people are there is that’s where the crop land is, that’s where the food is. And the scientists said, we can’t do it. We cannot both accommodate the automobile and feed our people. It was a point that resonated, and then they went through congestion, air pollution, imported energy needs, and so on.

But I think they succeeded in getting some rethinking. There has not been such enthusiasm for the automobile in recent years, particularly not as traffic in Beijing gets worse and worse with each passing month.

This was interesting because it was the first time that a part of the establishment in a developing country seriously challenged the western industrial development model. They said that what China needs is a high tech state-of-the-art rail system augmented by bicycles.

Now they didn’t say they were going to ban cars, because there will be a need for motor vehicles to some degree, but not as the centerpiece. That would be rail and bicycles.

So the old model is not going to work. The fossil fuel based automobile centered throw away economy that we evolved and that reached its zenith in this country is not going to work for the world in the future.

The Shape of the New Economy

What then will work? Well, the exciting thing is that we can now see what the new model looks like. It’s beginning to emerge here and there around the world. Those recycling containers in the back of the room are one small piece of that new economy. Wind farms in Altamont Pass are another manifestation of the new economy that’s beginning to come.

The new economy, instead of being fossil fuel based, will be a solar/hydrogen based economy. The new transportation system, instead of being automobile centered, will be rail and bicycle centered with a lot of intelligent land use planning.

It’s encouraging to see that sprawl has suddenly become an issue in this country. It’s been an issue with many of us for a long time, but it is becoming a public issue.

Instead of having a throw away economy, we’ll have a comprehensive reuse-recycle economy. Some parts of the world are beginning to work on zero emissions. That’s the goal.

And, we will have a stable population: Neither an increasing population nor a decreasing one. The only sustainable population is a stable population over the long term. It may fluctuate a little bit, but it has to be relatively stable. (It could actually decline for quite a while, given the number of people in the world, and we probably would be better off. But over the long term, population can neither be increasing or decreasing without having problems.)

Let me talk just a bit about the energy sector of the new economy. We see wind and solar cells emerging as the cornerstones of the new energy economy. Wind has an enormous potential.

Since 1990, the world’s wind powered generation has increased by 22 percent per year -- 1990 to 1998, 22 percent a year -- and it’s gaining momentum. Denmark now gets 8 percent of its electricity from wind, the northernmost state in Germany gets 14 percent, and the industrial state of Nevara in Spain gets 22 percent. It was zero three years ago.

So we beginning to see things move. India has the largest installation of wind farms of any developing country. China last year opened its first wind farm, a 50 megawatt wind farm in Inner Mongolia, with the help of the Dutch aide agency.

Inner Mongolia and parts of Northern China are probably the Saudi Arabia of wind power. There is an enormous amount of wind energy there. The exciting thing about wind is the great potential.

Today, worldwide, we get about 20 percent of our electricity from hydro power. But the wind power potential compared to hydro power is many many times greater.

A national inventory of wind resources in this country by the Department of Energy concluded that three states, North Dakota, South Dakota, and Texas, had enough harnessable wind energy to satisfy national energy needs. China could double its current electricity generation from wind alone.

Once you get cheap electricity from wind, you can use it to electrolyze water -- separate the hydrogen from the oxygen.

Wind power in some parts of the world is now coming in under coal, which traditionally has been the cheapest source of electricity.

Hydrogen then becomes the core fuel of the new energy economy. That’s why I call it the solar/hydrogen economy.

By solar, we mean the energy sources that come from the sun either directly or indirectly. That includes hydro power because the sun drives the hydrological cycle, it includes wind power, biomass, solar cells, solar thermal processes, the entire complex of sun derived energy resources.

Wind power in some parts of the world is now coming in under coal, which traditionally has been the cheapest source of electricity generation.

Some companies that are in the natural gas business are beginning to see themselves as part of the transition from the fossil fuel economy of the past to the solar/hydrogen economy of the future. Enron, based in Texas, for example, has a large natural gas company. It has now become a global energy company, but it started with natural gas pipelines going into the northeast and midwest from gas fields in Texas.

Enron has bought two wind companies in the last couple of years. The reason -- they anticipate the day when they will be using all that wind power in Texas to generate electricity to produce hydrogen. They expect to use the same pipeline distribution network, the same storage facilities for hydrogen that they now use for natural gas.

In fact, you don’t have to make an abrupt transition. You can gradually, if you develop hydrogen resources, begin incorporating them into natural gas as a fuel. There are hydrogen engines in the world today.

But more exciting are the fuel cell engines that are being developed and will be coming on the market in the next few years. Exciting because they are much more efficient than internal combustion engines, and they are also cleaner. The principal byproduct of burning hydrogen of course is water vapor. So we can see this new technology unfolding.

We have one recent example of a consortium of companies coming together in Iceland with the goal of making it the world’s first hydrogen powered economy. And the government has agreed to this, and they are now working on it.

The two corporations that are leading the consortium are Shell and Daimler Chrysler. Shell is looking at Iceland with a lot of cheap hydro power. Iceland has basically two natural sources of energy. One is geothermal. Most of the buildings in Iceland are heated by geothermal. But they have a lot of hydropower relative to the size of the population. And its cheap hydropower, so they can use that to electrolyze water and produce hydrogen.

Shell sees this as kind of a test area for developing hydrogen as a fuel. Daimler Chrysler sees this as a place for marketing -- and this is still two or three years down the road -- their new fuel cell engine. An automobile powered by a fuel cell.

I mention this because suddenly we have a country that’s moving very fast, and its a small country obviously. But what works there could quickly be applied elsewhere.

We can see this new economy unfolding. I can talk about solar cells moving very fast. They key breakthrough in recent years has been the Japanese solar roofing tile. We’ve been putting roofs on buildings for a long time to keep out the rain and keep in the heat, but now we’re putting on roofs to generate electricity.

The roof becomes the power plant for the building, and one of the keys to this technology taking off in Japan is two-way electrical metering. During the day when they produce a surplus, they sell to the utility, and at night they buy back. It is an exciting new technology that’s going to alter the electric generating industry worldwide.

The new coalition government in Germany a year ago announced a 100,000 roofs program. In response to that, Shell and Pilkington Glass in the UK have joined forces and are now constructing the largest solar cell manufacturing facility in the world. Italy has joined the fray with a major effort for solar roofing materials. So we are beginning to see things move ahead on the energy front, but not fast enough yet.

Twenty-two percent a year sounds like a lot, but we’re starting from such a small base, it’s going to take a while. I think we ought to be pushing that up. Oil and natural gas last year were two percent, nuclear was less than one. Coal has been zero during this decade, and that’s encouraging. What we need to do is convert those zero or positive rates into negative rates so the role of fossil fuels begins to diminish and these others take off.

For wind power, we ought to be thinking more like 100 percent a year than 22 percent a year. That would be the rate that new computers went on the internet from 1980 to 1995. They were doubling each year -- starting from a very small base but doubling each year. Now they are up to 140 million worldwide. We need to step up the pace. We’ve got the technologies. We can see where to go, but we’re not moving nearly fast enough at this point....

Getting There From Here

We can see what the new economy would look like. We have the technologies -- we don’t need any more new technologies. (Although I’m sure there will be some that will help us.)

We can do it, but we have to do it quickly. We don’t have generations. The environmental revolution has to be compressed into a short period of time. The agricultural revolution has been underway for 10,000 years. The industrial revolution, two centuries. The environmental revolution, the restructuring of the global economy, is going to have be compressed into a matter of decades. Time is running out on many fronts.

The key policy instrument to restructuring the global economy is the tax system. Starting in 1917 with World War I, we, like most other governments, began to get most of our revenue from income taxes -- personal income taxes and corporate income taxes.

But we should be encouraging people to work and to save. We should be discouraging environmentally destructive activities. Those are the things we should be taxing -- carbon dioxide emissions, generation of toxic wastes, the use of virgin raw materials instead of recycled materials. Putting a tax on the use of virgin raw materials would do more for recycling than probably anything we can think of.

We’re looking at a need not to change the tax level but to restructure the tax system. Reduce income taxes and increase taxes on environmentally destructive activities.

The great advantage of this approach is that it lets the market do the work. We continue to take advantage of the inherent efficiency and intelligence of the market in allocating resources, but we use fiscal policy, use tax polity, to steer the economy in an environmentally sustainable direction.

The coalition government in Germany had this high on their agenda. They have a four year phase in plan for reducing income taxes and increasing taxes on energy.

This is the way to go. We need basically a carbon tax. If we were to adopt even a modest carbon tax beginning next year and raising over say the next ten years to an agreed upon level, we might get that doubling of wind energy every year, the kind that we need.

If we took the current generation of wind energy, which is about 10,000 megawatts per year, and doubled it every year, within ten years we’d be at ten million megawatts, which is probably enough wind energy to supply the entire world economy for all needs....

Another policy we can use is green marketing. Utilities offering customers the option of having green energy sources, renewable energy sources, wind power, solar power, and so on. Even though it costs more, a lot of people are willing to pay a little more to get their electricity from a source that is not disruptive of the Earth’s climate systems.

The bottom line on this is that from an industry point of view this restructuring of the global economy, to make it environmentally sustainable, to enable economic progress to continue, is the greatest investment opportunity in history. It is huge. There has never been anything like it. And some CEOs are beginning to see it. It is a huge investment opportunity. Those who get there first are going to have an advantage.

The final point is that many corporations, all corporations, now in their annual reports have a section on the environment in which they talk about what they are doing. You know -- we’ve increased office paper recycling by 60 percent over the last five years, or we’ve increased the energy efficiency of our operations by 15 percent over the last three years, or whatever.

That’s good. But what we now need is corporations who recognize the need to restructure the global economy and who will use some of their political capital and influence to restructure the tax system.

If we’re going to make it, it’s going to require systemic change. If, when we turn on the lights, the power comes from a coal fired power plant, were not going to solve the problem -- even if the companies using the electricity are using it more efficiently.

We’ve got to change the system, and that’s going to take a restructuring of the tax system.


Lester R. Brown is President and Senior Researcher with Worldwatch Institute, a private, non-profit Washington-based research institute devoted to the analysis of global environmental and environmentally related issues.

He is the author or co-author of many books and articles on environmental and sustainability issues, including the annual State of the World reports. Brown has been described by the Washington Post as "one of the world's most influential thinkers." The Telegraph of Calcutta called him "the guru of the global environmental movement."

The Library of Congress has requested Brown's personal papers and manuscripts, recognizing the role of his work and that of the Institute under his direction in shaping the global environmental movement of the late twentieth century. In 1995, Marquis Who's Who, on the occasion of their 50th edition, selected him as one of 50 Great Americans.
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