Sustainable Development and the Energy Industries

Implementation and Impacts of Environmental Legislation

Nicola Steen

• Publisher: Taylor & Francis
• Year: 2017
• eBook ISBN: 9781351388146
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Originally published in 1994, this book contains the edited papers of the workshop of the Energy and Environmental Programme at the Royal Institute of Interantional Affairs which examined the interaction between environmental legislation and the energy indusutries. It examines past experience; the nature of the challenges to the industries; actual industrial responses and what implications this might have framing legislation. The international contributors represent a range of perspectives.

Part 1

The Challenge of Sustainable Development

Introductory Address:
Concepts and Dilemmas of Sustainable Development

Crispin Tickell, Warden, Green College, Oxford, and Convenor of the British Government Panel on Sustainable Development

Economic Stagnation and Sustainable Development
Marcello Colitti, Chairman, EniChem SpA, Milan

Introductory Address: Concepts and Dilemmas of Sustainable Development

Crispin Tickell

The industrial revolution, when looked at as a whole, has brought enormous benefits. According to the normal (but highly misleading) definition, economic wealth has risen at an almost incredible rate. Global GNP was around $600 billion in 1900. By 1960 it was $5 trillion and by 1988 $17 trillion. But not only has this growth been highly uneven, it has been achieved at a price. We have created what future generations will surely find a peculiar society, hooked on fossil fuels, and pulled by a consumerist philosophy out of synchrony with the natural world both animate and inanimate. This way of life cannot be sustained, and yet it appears to be inescapable. Let us consider five of its aspects.

First, the growth in human numbers: from less than 10 million 10,000 years ago, to 1 billion in the time of Robert Malthus, to 2 billion in 1930, and to around 5.5 billion today. The human population is now increasing by over 93 million a year.

Second, degradation of land: according to the World Resources Institute as much as 10 per cent of the vegetation bearing surface of the earth is suffering moderate to extreme degradation as a result of our agricultural and industrial activities. Enough good topsoil is lost around the world every year to cover the agricultural regions of France. Sixteen per cent of the landmass of the former Soviet Union was judged an ecological disaster area by the now defunct Soviet Academy of Sciences.

Third, pollution of rivers and seas: urban sewage and industrial effluents are a major threat to rivers and coastal waters. In many areas of the world the quantity has outstripped ability to cope. Pollution of fresh water is all the more serious at a time of rapidly increasing demand. Such demand doubled between 1940 and 1980, and is likely to double again between 1980 and 2000. Even in the remotest seas, such as the high Arctic, significant quantities of such toxic chemicals as polychlorinated biphenyls, DDT, lindane, lead and cadmium have been found in air, seawater, sediments, fish, mammals and seabirds.

Fourth, changes in the chemistry of the atmosphere: acidification, loss of stratospheric ozone, and the increasing concentrations of greenhouse gases. Acidification is local in character, and can be remedied with money and political will. Ozone depletion has global consequences. More important than the danger of increasing human melanomas is the potential effect on other organisms from vegetation and crops to phytoplankton in the ocean. Climate change is the least predictable, and potentially the most serious of all. Global warming enhancing the natural and indispensable greenhouse effect could affect every aspect of human society. The main conclusions of the Intergovernmental Panel on Climate Change (1990, updated in 1992, and to be updated again in 1995) represent a broad scientific consensus. On the assumption that we continue to pump carbon dioxide and other greenhouse gases into the air at current rates, the Panel concluded there could be a rise of global mean temperature of around 1°C by 2025 and around 3°C by the end of the next century. Compare this with a drop of around 5°C during the last glacial episodes. Estimates of sea level rise are less precise but the sea could have risen by around half a metre by the end of the next century. But averages are misleading: effects will be much greater in some areas than others, with major disruptions of weather systems, especially in regions already at climatic risk.

Last, depletion of the diversity of life: over 99 per cent of the species that have ever lived are now extinct. But they did not all die out at once. Humans, as they alter and destroy whole ecosystems, are causing extinctions at up to 1,000 times the normal rate. As E.O. Wilson has written:¹ ‘a fifth or more of species of plants and animals could vanish or be doomed to early extinction by the year 2020 unless better efforts are made to save them’. Our understanding of the complexity of ecosystems is very limited and we have little idea which are more important to us than others.

It is too late to prevent all these problems; but over time they can be mitigated and we can adapt ourselves to them. So far we have still to recognize their gravity, and in particular the nature of the relationship between population, resources and environment. It is hard to convince people that there are limits either to the supply of raw materials or to the sinks for the pollution they cause.

Indeed resources seem to have become more abundant. Between 1948 and 1989 commodity prices fell by almost 45 per cent in relation to manufactured goods, although the environmental costs of industrial agriculture and large scale monocultures have yet to be faced. Greater energy efficiency and conservation still have large potentialities. Industrial countries now use much less energy per unit of GDP than before. Most resources have natural limits even if there is always a possibility of finding substitutes for them. Oil is the best example. Current estimates, which have not changed much in the last few years, suggest that there are around 43 years left at present rate of consumption. But studies look back to times when we numbered only two, three or four billion people, and when the overwhelming mass of humanity was consuming at very modest rates. In a world of 11 or 12 billion people consuming energy at industrial country rates, today’s oil reserves would run out in 7 years instead of 43.

Fresh water is another case in point. Many countries are already facing serious problems of supply. The United States has persistent and growing regional problems; but these are as nothing compared to coming shortages in China, still less compared to those in North Africa and the Middle East.

If the crisis in resources is yet to be made manifest, evidence of the limits for sinks for our pollutants is all around us. Bursting landfill sites across the industrial world, transboundary shipment of hazardous wastes, and the increasing prevalence of contamination of the groundwater we depend upon, are all reminders that the capacity of the land to absorb waste products may already be reaching its limits. In the meantime we have little idea of the capacity of rivers and seas to recover from pollution. In Europe the most depressing example is the fate of the Aral Sea. The cumulative cost of cleaning up the legacy of pollution in the United States will be between $400 billion and $1 trillion (depending upon stringency of standards). The cost to the countries of the former Soviet Union and Eastern Europe may be greater still. People have scarcely begun to contemplate the costs of current growth in Southeast Asia. Of course there are enormous possibilities in making better use of land through biotechnology. But this is mostly a feature of life in industrial countries.

The problems caused by depletion of stratospheric ozone are almost universally recognized and are a subject of international agreement. Yet we are still adding to the quantity of ozone destroying substances, and do not know how long it will take to restore natural conditions, nor what the consequences in the meantime will be.

The same is true of our production of greenhouse gases. The carbon cycle is imperfectly understood, and thus the capacity of the earth – whether terrestrial or marine – to absorb the extra carbon we are adding to the atmosphere. The seas absorb a certain proportion, while increased growth of boreal forests has probably been a major sink for most of this century. But felling of large parts of these forests could remove even this temporary safety valve. So far the industrial countries have behaved as if the only issue were the destruction of tropical rain forest. Yet Alaska’s official policy is to increase 20-fold the number of trees felled, and Russia’s forests are being felled at an increasing rate.

To confront this interlocking and wide-ranging group of issues we need above all to think differently. A good place to start is the 1987 Report of the World Commission on Environment and Development². In this, sustainable development was defined as ‘meeting the needs of the present generation without compromising the ability of future generations to meet their needs’. Moving towards intergenerational equity has many implications: among them stabilizing population levels; protecting natural systems; merging environment and economics in decision making at national and international levels; seeing resources as a kind of capital stock; accepting limits to economic growth; and recognizing global interdependence.

Two principles need to be put into practical effect. The first is the precautionary principle or approach, well defined in the Declaration to which all governments committed themselves at the UN Conference on Environment and Development in June 1992: ‘where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a reason for postponing effective measures to prevent environmental degradation’. The second is the principle that the polluter should pay (adopted by the OECD countries as long ago as 1972).

It is not easy to give environmental consideration due weight in decisionmaking. There is a clash of logics. Economic growth, as enunciated by most politicians, is often cited as the only way out of our problems. But growth in this usual sense is most misleading. It takes no account of the impact of growth on the environment nor of the inevitable loss of natural resources. On current reckoning the felling of a forest can be counted as a marketable asset with a plus for the balance of trade. But in development terms it can be a disaster: the conversion of a living asset into a dead desert, and a minus for future generations.

Limits to growth do not imply limits to development. Economic activity has been seen as a circular flow of exchange value on an ever increasing scale. But it also entails the consumption of non-renewable resources and the production of wastes. This is rather as if biology tried to understand animals only in terms of their circulatory systems without recognizing that they had digestive tracts as well.

Thus we should recast our vocabulary and distinguish growth from development: growth refers to quantitative scale, while development is qualitative improvement. We need now to look at the optimum management of our economies within the limits of sources and sinks and on the basis of these principles: the rate of use of renewable resources (soil, water, forests) should not exceed the rate of regeneration; the rate of use of non-renewable resources (fossil fuels, minerals, fossil groundwater) should not exceed the rate at which sustainable alternatives can be developed; the rate of emission of pollutants should not exceed the capacity of the environment to assimilate them.

As has been well said in the paper on Sustainable Development published by the British government on 25 January 1994 ‘economic development is important to any society, but the benefits of any development must be sufficient to outweigh the costs, including the environmental costs’. Such costs must of course include the costs of not taking action when, as in so many cases, it is necessary to take it.

Costs involve pricing. Prices should always tell the truth. They should reflect three elements: the traditional costs of research, process, production etc.; the costs involved in replacing a resource or substituting for it; and the costs of the associated environmental problems.

Pricing of energy is, for example, bizarre. Current oil prices represent extremely short-term reactions to supply and demand, and ignore almost totally the cost of replacing or substituting for a diminishing resource. The pricing of transport is equally bizarre. It takes almost no account of environmental costs, with all its implications for choice of one means of transport against another, the waste of resources involved in the production process, and the curious devaluation of public transport which is so evident in our societies. No wonder that one of the conclusions of the Panel set up by the US National Academy of Sciences in 1990 and chaired by Senator Evans of the State of Washington, was that:³ ‘On the basis of the principle that the polluter should pay, pricing of energy and use should reflect the full costs of the associated environmental problems’.

Pricing should include the removal of subsidies that encourage unsustainable practices. Such natural resources as water and energy are often underpriced in both rich and poor countries. Water supplied by public agencies for irrigation in parts of the United States is sometimes subsidized by between 85 and 90 per cent. Germany subsidizes the production of coal. Other subsidies are less obvious: for example, price supports for fertilizers, pesticides and seeds, which can in turn distort international trade.

As we move from principles towards actions for sustainable development we should clarify the notion of natural resources as capital stock. Sustainability means living on income rather than capital. Hitherto we have often treated natural capital – the natural world – as if it were income, and have focused on increasing human or manmade capital. This was manageable in the 1950s when the scale of the economy was much less, but that is no longer the case. Until now the UN System of National Accounts has been the standard framework for measuring a country’s macroeconomic performance. It is supposed to be integrated, comprehensive and consistent. Yet it is none of these things. It does not treat natural resources like other tangible assets, and it does not include activities that increase or deplete them. The result is to produce a grossly misleading picture of national wealth. Depletion of assets can be presented as income or growth. Thus increasing poverty can be read as increasing wealth, and the ability of the country to develop, engage in trade, accept loans, and play a role in the world of economic systems is distorted beyond recognition. Many of the problems which have arisen between industrial and other countries can be traced back to this fundamental intellectual flaw.

The need for new thinking is well recognized. But we need to be clear not just about what is to be done, but about who is to do it. There are three main channels of action: governments, acting together or singly; business; and public participation through education, academia, non-governmental organizations, unions and others.

First, the role of governments. Already they are under a host of obligations. Among others are those arising from the Convention on the Transboundary Movements of Hazardous Waste and their Disposal; the Vienna Convention on Ozone, the Montreal Protocol and subsequent agreements; the Framework Convention on Climate Change, the Biodiversity Convention and Agenda 21 with its requirement to report to the UN Commission for Sustainable Development; the Global Environmental Facility; and the new GATT agreements resulting from the Uruguay Round. Some of these agreements are more useful than others. Many are ambiguous in character.

Most countries have acclaimed the recent GATT agreements. However imperfect, they will serve to increase international trade. But unregulated free trade is no more capable of delivering environmental protection internationally than are unregulated market forces of delivering it nationally. The GATT final act should have written into it the concept of sustainable trade as part of the overall concept of sustainable development, and the GATT Working Party on Trade and the Environment needs new and more balanced terms of reference. Trade as a source of wealth is too important to be left to traders and trade experts.

Governments are likewise under a multiplicity of national obligations. At home they set ground rules through regulation (where level conditions have to be set); market instruments (such as fiscal incentives and disincentives, and tradeable emission permits); promotion of better environmental management; encouragement of new technologies and greater efficiency, particularly in the field ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Foreword
• Editor’s Acknowledgements
• Notes on Contributors
• Overview of Workshop Discussions: Nicola Steen
• Part 1 The Challenge of Sustainable Development
• Part 2 The Context and Constraints
• Part 3 Energy Industry Experience and Perspectives
• Part 4 Opportunities and Strategies
• Appendix: Welcoming Address from Michael Grubb, Head, Energy and Environmental Programme, Royal Institute of International Affairs