Janez Potočnik: Getting the future we really want will depend on each one of us

Janez Potočnik – European Commissioner for Environment

Debate organised by “Ecolo Ethik, de l’Ecole des Affaires Internationales des Sciences Po”

Paris, 8-4-2013 — /europawire.eu/ — Good evening,

Nearly a year ago, in Rio de Janeiro, I gave a speech entitled “Making sure that the future we want is the future we get”. I gave this speech at the UN Conference on Sustainable Development – the 2012 Earth Summit.

Today, I want to share with you some of the thoughts I shared with world leaders back there coupled with some of the messages I gave at the Bled Strategic Forum, just a month later. As future policy makers, leaders and active members of our society, I believe that you, notably the Sciences Po students, have a very important role to play in shaping this world, and in making sure that you do get the future you want.

On 7th June last year a scientific article in the journal Nature stated as follows: “Today conditions are very different because global-scale forces including, but not limited to, climate change, have emerged as a direct result of human activities. Human population growth and per-capita consumption rate underlie all of the other present drivers for global change”.

I want to talk to you about those global challenges that we all share and the strategic choices they impose on us. Then I want to look more particularly at the challenges that we face from the perspective of one global region – Europe. I hope to show you that, even if in Europe we are faced with specific problems such as the severe financial and economic crisis, our solutions to those problems are closely tied into how we deal with the global challenges.

First let’s look at those global challenges which we all share.

Our planet’s population is expected to rise to more than 9 billion by the middle of this century. We will share our planet with 3 billion extra middle class consumers by 2030. This is great for those 3 billion whose living standards will rise, and for the businesses that will thrive in providing for those demands. But new demands will put immense strain on many resources. We will need three times more resources – 140 billion tons annually – by 2050. The demand for food, feed and fiber is projected to increase by 70%. Yet already today 60% of our ecosystems underpinning these resources are degraded. Without important efficiency gains, by 2030, we will need 40% more water than we can access.

To put it simply: the world has changed. We are more interconnected and interdependent than ever. Many challenges, like for example climate change, disappearing biodiversity, scarce resources (like water, land or oceans), potential pandemics, poverty, global security … can only be addressed if we join forces. Transition from our current resource intensive growth model to a resource efficient growth model is – in the context of those global megatrends – actually inevitable for all our economies.

Of course this growth model is more advanced in the industrialized part of the world, but the danger that the emerging economies – those where most of those 3 billion new middle class consumers live – will follow the same development path is more than real. It may sound hypocritical for rich countries to say “grow as we say, not as we did”, and of course those 3 billion have just as much right to a decent quality of life. But the resource intensive growth model of the previous century can simply not be extended to today’s global population. Industrialized nations must change their production and consumption patterns of the last century, and developing countries must not seek to imitate those patterns, but rather take a different route to higher living standards. The stakes are high and our responsibility to manage our own future has enormously increased.

The importance of the necessary transition to a resource efficient growth model is more or less already understood worldwide. These were basically the questions we have jointly addressed few months ago at the Rio de Janeiro conference on sustainable development.

The 2012 Earth Summit did not lead to the ambitious outcome many – including myself – had hoped for. But it did reach a very important milestone: a renewed commitment in favour of a global transition towards a green economy. This in itself is an achievement, and even more so in these economic times, where the tendency is too often to put the environment at the bottom of the political agendas.

Unfortunately, still today, many think that when we talk about the environment, we are talking about an agenda set by the rich that have high standards of living and no serious worries, such as where their next meal will come from.

Yes, it is also about the energy and raw materials that we use to enjoy the comfortable lifestyle we are accustomed to, to heat our homes, light our cities or fuel our industries. But, it is also about the air we breathe, the water we drink and the food we eat. It is about resources that have complicated inter-relations between themselves and which know no geographical boundaries. It is about resources that have outside pressures from many sources of demand, be it local or international. It is about natural resources that need to be managed.

All this is even clearer when we think of the poorest nations whose economic growth and development opportunities depend on how they manage their forests, their water or their land. But it tends to become more blurred when we think of emerging, or richer countries like ours. We use natural resources for almost everything we do. And we tend not to think about it because, unlike women in African countries, we don’t have to walk kilometres to collect clean water or firewood; we just have to turn on our kitchen tap or microwave.

The Rio Summit showed that in this context the EU and emerging powers will be, in the 21st Century, partners. We face the same resource pressures and environmental challenges – even if at different stages. But, we will also be competitors, as increasing competition for resources leads to economic, but also political pressures, and even to conflicts. The fact that we will be in such greater competition means that we have to find ways to better manage our resource use. I would dare to guess that in the future strategic partnerships will be more than in the past built around resources, with large, resource rich countries with relatively low population density on one side, and highly populated, resource-poor countries on the other side.

Our future, taking into account human population growth and growing per-capita consumption rate will be very much shaped by how well we manage existing limited resources. Water, land, energy, oceans, raw materials, biodiversity, ecosystems and the complexity of their interactions will be decisive for our future. In the past we were never so seriously forced, at least globally, to deal with these questions. As we have advanced in our ability to provide for consumer needs, eradicate and treat diseases, live longer, handle natural disasters and wage wars, we have done all of this on a planet that has stayed the same size. Whilst we can achieve a lot by directing our technological and innovative capacities to getting more out of our limited resources, it will not be enough. We also need to rethink our existing development model.

For the past two centuries we have relied on an economic growth model based on cheap and abundant resources. But today the situation is different and many of the natural resources we rely on are under threat, depleted and some are already slowly disappearing.

This great acceleration has been a fantastic achievement of the generations of humans that have so successfully mastered so many obstacles to bring such unimagined health and prosperity.

The real question is: What will happen in thirty or forty years? The world’s population is increasing by 140 000 people per day, all aspiring… legitimately… to the same living standards that we enjoy. 140 000 more people a day sharing a planet which will stay the same size. A planet on which most resources are finite.

We cannot go on growing in the resource-intensive way we did in the past; certainly not on a global scale. Today the richest 20% of the world consume about 60 times more than the poorest 20%. Just imagine the stress on world’s resources if the rest of the world would live the same way as we do.

Ladies and gentlemen, dear students,

These pressures on natural resources will be the most significant limiting factor on our ability to grow and provide higher living standards, also within the European Union.

Europe is of course part of that interconnected and interdependent world. An important part. All the challenges I have just mentioned are also our challenges. On the top of that we are in the turmoil of the most serious financial, economic and even political crisis. We are struggling to find the way out, to stabilise and reform our economies and to find effective ways to inject new growth and create new jobs. Long term financial consolidation is of course necessary, but in the Commission we are also strongly supporting the renewed drive for sustainable growth, that is sweeping across Europe. The build-up of debts, deficits, and imbalances in our economies did not happen overnight, it happened over many years. And the readjustment we are now going through won’t be concluded overnight either. There is no silver bullet, if there were, it would have already been fired. So financial and economic consolidation must be achieved whilst dealing with the structural problems and strengthening the competitiveness of European economy. We need consistent policies, but also patience.

For me one of the most important answers, if not the most important answer, is to put the knowledge based, resource efficient, low carbon economy in the centre of our political attention and actions. Making the same green economy we were so vocally supporting in Rio, a reality in Europe. Using our natural resources in a more efficient way is not only about safeguarding the environment (although I think that that is a pretty important aim in itself), it is also about future EU competitiveness, long-term prosperity, economic growth and job creation. It is about giving an answer to the economic instability we have plunged into, and about shaping our future.

In the past we were never so seriously forced to deal with these questions. We have advanced enormously in our ability to provide for consumer needs, eradicate and treat diseases, live longer, handle natural disasters and wage wars. But we have done all of this without taking into account the limits of our planet.

Why is it so important that we now look back and fix the damage we have done on the way? Three facts explain the difficult situation of the EU in this context:

• First we use a lot of resources. The European economy is built on decades of resource intensive growth. We use 16 tons per person per year, we throw away 6 tons of that, and half of that waste is buried in the ground as landfill: 3 tons per person every year;
• Second those resources are getting more expensive. After a century of declining resources prices in real terms, pressures on resource supplies have led to a steady increase of prices since 2000, and prices will inevitably continue to rise and remain volatile. Already today the cost structure in German industry shows that 43% are the cost can be attributed to the use of resources and 18% to the cost of labour;
• And third, we import most of our material resources. More than half of the materials that we use are imported, indeed we import six times more than we export. We have the world’s highest net imports of resources per person. And our dependency on import is increasing. We get 48 % of our copper ore from abroad, 64 % of zinc and bauxite and 78 % of nickel. We import all of our cobalt, platinum, titanium and vanadium, as well as rare earth metals.

What can be done? What must be done?

I know that many of you in this room are wondering what your future will look like once you graduate. I have two sons that are more or less your age, and I know that it is not ideal to grow up with so many uncertainties. But the one thing that is very clear to me, is that we can and should transform the challenges we face today into opportunities for tomorrow. I know it sound a bit like a cliché, but I can’t find a better expression to use.

For this we need change. We need to rethink the way we function, the way we produce and consume. The process of economic recovery cannot only be about stimulating growth, it has to be about building the basis for a different quality of growth in order to ensure a prosperous, inclusive and sustainable future.

This is why the EU has made the efficient use of natural resources one of the pillars of its economic growth strategy. Growth through resource efficiency responds to the challenges of resource scarcity and environmental degradation. It provides a long-term perspective on which companies can rely to invest in their future competitiveness, while at the same time providing clear potential for short term growth and jobs.

What does resource efficiency mean? It means using less stuff, but getting more value and wellbeing from it. It means reducing the environmental impact of our resource use. We have to use that same human creativity and innovation that so successfully exploited those resources to provide us with health and prosperity, to roll out those benefits to billions more, in ways that exploit resources less.

McKinsey estimated that such increases in resource productivity could deal with about 30 % of the extra demand for global resources we can expect by 2030. So it will help, but it is not enough. That is why I believe that the concept of resource efficiency must go further than resource productivity; beyond getting more value per unit of resources. Because those same resources can have a second, or a third life. They can be re-used and recycled. We need to move from a linear economic model, where we extract, produce, use and throw away, to a circular economy model.

Let me give you an example. Do you know that the phones you have in your pockets have within them many precious substances that have to be sourced through primary extraction? These substances can be recovered. One of them is gold. One ton of mobile phones contains between 250 and 400 grams of gold. That means that with app. 10 kilos of mobile phones you could make a gold wedding ring.

The European eco-industry alone has created 1.2 million new jobs since 2000, employing today around 3.4 million people. And this is only one small part of the story. It is the greening of the wider economy that will produce the most new jobs. It is already doing so. Evidence points to an increasing number of green jobs as we move towards a resource-efficient economy. The most recent estimate is of around 20 million jobs or 5 per cent of the workforce.

In addition, with the global market for clean technologies forecast to double by 2020, we can build on our current strengths. The EU is amongst the world’s leaders in sectors such as energy efficiency and water and waste management. Today we provide one-third of the global market for clean technologies and, if we can keep that share in a rapidly-growing sector, it will inevitably mean new jobs, new markets and new benefits from launching innovative technologies or business models.

It is for public authorities, including at EU level, to show leadership and give the right signals. In the EU, re-orienting our growth will be particularly difficult because we are locked into old growth models. This is why our policy approach must be based on carrots as well as sticks. We need to go beyond the traditional “three C’s” – command, control and compliance – and the polluter pays principle, by developing the “three I’s” – innovation, incentives and integration. We must recognise that it is enterprises that will innovate on the scale needed for our transition, but public authorities/governments need to provide direction, incentives and leadership in order for enterprises to make the right investments in change. As the situation is today, market forces are too slow and imperfect; the financial, business and economic world takes a too short-term view; and politicians tend to work too tightly only around electoral cycles.

We live in market economies and the role of the market will also in the future remain central. It is the best means we have, but free market alone is not enough to bring this transition about. The market cannot ensure efficiency in the allocation and use of resources: if prices do not reflect the true costs of resources, if rewards to capital are disproportionate to other inputs, if managers on annual contracts are induced to make short term investment decisions, if directors’ business decisions are overly influenced by bonuses based on short term share price.

We need to give clear signals to the private sector so that it can make the up-front investments needed to become more resource efficient. So that companies are ready for input price increases, not just responding to supply shocks. This is particularly important for SMEs. If we just try to shield our incumbent industries from the future we are not doing them a favour, indeed we risk “killing them with kindness”. We need to think about the industries of the future and that means “creative destruction” as well as “innovative creation”. Our job is to make the transition effective, smooth and just.

Ladies and gentlemen,

The 21st century is a century of fragility. We must turn it into a century of sustainability.

That change will be difficult, but I would like to conclude on a positive note. I take my optimism from the level of understanding and support I see developing in the progressive part of the business sector. The World Business Council for Sustainable Development, a forum of 200 member companies from all sectors and from all continents with a combined revenue of more than $7 trillion, in their Rio declaration, calls for regulation, norms, standards and codes of conduct so that front-runners who have developed and pioneered the solutions are rewarded with lower barriers and entry risks. Similarly, we hear increasingly the voice of long term investors, like pension funds, whose concerns about sustainable growth and whose commitment to contribute to the Green economy transition were loud and clear in Rio.

We need industry and investors on board. Rather than fighting the power of capital, or trying to legislate away its environmental downsides, we need to harness market forces to turn economies onto a track that is sustainable economically, financially, socially and environmentally. We need green economics.

As my good friend Achim Steiner, Executive Director of the United Nations Environment Programme, after the Rio+20 Summit said:

“We have failed to turn things round in the past 20 years, but underneath that failure there is an extraordinary array of activity and innovation”…. “Twenty years ago, we agreed what to do, now we have the tools to do it. If we do not go into the heart of economic policy, we will meet here at Rio+40 even more culpable. Markets are social constructs. They are not a force like gravity. They can be governed.”

Yes, we must address market failures, but we must also address governance failures.

It is imperative that we address the prevailing short term logic which is built in all our systems, be it political or economic.

Do you happen to know a politician that has been re-elected because she or he was defending longer term interests over the short term ones? Or a manager who was rewarded because the profits of his or her company were lower that year, but more sustainable in the longer term? It is of fundamental importance that we build more long term logic into our data collection, reporting systems, rewarding mechanisms, decision making processes. I’m convinced that one cannot manage the world of the 21st Century without taking into account the longer term picture and consequences. This would be simply self-destructive.

In shaping our future sustainable development path the strong role of civil society will also be important. We have to take citizens with us on the journey. And I believe strongly that it is the pressure of enlightened citizens, particularly through the power created by social media, that will play a decisive role in pushing companies and politicians in the direction of more sustainable choices.

Finally, for me Europe’s role in this “reshaped global order” is clear, as is the path out of the economic crisis. Natural resources and the challenges they bring know no frontiers, and in this context neither should alliances and partnerships between existing and emerging powers. Europe has an important role to play and we cannot afford to fail.

Resource efficiency is more than a ‘green’ agenda. It is a transformational agenda. Yes, we have to change and structurally adjust our production patterns and consumption behaviour. But we are only at the start. The transformation of our economy will require further action in a wide range of policy domains: from energy, transport, construction and greening agriculture to combating climate change, preserving biodiversity and ecosystem services, eliminating environmentally harmful subsidies, shifting taxes from labour to pollution and resource use, and encouraging industry to take a longer-term view and to invest in technologies that will reduce the impacts on resources.

To see tangible results we all need to be on board. This is why the Rio Earth Summit represents such an important milestone. Global commitment is crucial if we want to ensure a safe and sustainable future.

Whether we will succeed or not,… whether we will get the future we really want,… will depend on each and every single one of us. I was impressed and very pleased to see the participation of so many young people from all over the world at the Rio Summit. You are our hope. Our hope for real change.

Today the responsibility of policy makers in all countries is to prepare for that transition. But tomorrow, as future leaders, your responsibility will be to take that transition forward, and to make sure that you get the future you want.

Thank you for your attention.

###