Breaking Free From What Was

Creator: Sandra Strait. Creative Commons License LogoThis image is licensed under Creative Commons License.

The limits to our planet’s load-bearing capacity define the framework for green economic policy. Reformative action on its own is not enough to achieve a balance between economics and the environment. We need to learn to think disruptively. Our challenge lies in what Schumpeter referred to when he spoke of the creative destruction of fossil-fuel dominated capitalism in its traditional form. Only in this way can the 21st century’s green economy develop effectively. We need to create space. It's the ecology, stupid!

Over the years I have made it a habit to visit between 50 and 100 companies each year. What is their understanding of sustainability? Almost all entrepreneurs, all works council members and managers I talk with declare themselves in support of the model of sustainability in principle. The measurable consequences of this may vary vastly. Nevertheless, SMEs have made remarkable progress. It is these small and medium-sized enterprises that, together with community cooperatives, have got the transformation of the energy sector underway. Large companies, too, have optimised many internal processes. Thanks to German engineering, energy saving and renewable sources of energy have become hot topics on the executive floor. German industry has an impressive 12 percent share of the global market in environmental goods. And even the plans for TTIP now include a separate chapter on sustainability, in order to promote trade in sustainable products and technologies. But is all of this enough?

The question is whether, as the fourth largest industrial nation in the world, we will be in a position within 30 years to secure our prosperity using a fifth of the material resources we utilise today? The clear answer is yes – we have every opportunity to do so! We have the (networked) knowledge, the technology, the trained workers and the willingness to invest. Yet the framework isn’t right. What we are lacking is a fair market that promotes this change and doesn’t prevent it, that protects public goods and rewards investment in the environment instead of penalising it.

The loss of biodiversity along with areas of land, climate change and the pollution of the world’s oceans – these all generate immense costs for the economy, with irreversible consequences. So why don’t we have this fair market, although the evidence is clear? The answer is simple: profit greed, along with power and influence. Those who create this situation refuse to foot the bill.

Is it difficult to find the perpetrators of these costs? Not at all! According to the Climate Accountability Institute, 90 companies are responsible for 63 percent of global CO2 emissions: the sectors in question are oil, coal and gas, along with the cement and steel industries, while others trail far behind.

“Greening the Economy” is not enough: Measures and instruments

A green market economy adhering to strict ordoliberal principles is necessary for an investment offensive in resource-saving process technologies, energy saving and efficiency, renewable sources of energy, smart grids, new forms of mobility and modern infrastructure. Moreover, it leads to investors pulling out of companies that do not implement sustainable business models. Various instruments and measures are required for this:

A minimum CO2 price

The emissions allowance trading scheme is ineffective and needs to be replaced by a minimum CO2 price, to be increased gradually. The UK took a first step in this direction in 2013, with a minimum CO2 price of the equivalent of 22 euros per tonne. This is to increase to 42 euros by 2020, and 98 euros by 2030. A Europe-wide minimum CO2 price would force old fossil fuel plants from the market and create space for renewable sources of energy and efficient gas-fired power plants. A reliable CO2 price lays the groundwork for the creation of the cleanest, most secure and, in the long term, economical energy system.

No Carbon Leakage

A fair market requires clear provisions relating to the import of CO2 in order to prevent environmentally damaging, CO2-intensive production simply being outsourced – clear rules such as minimum EU customs duties on CO2 and reliable environmental product standards. This does not restrict international trade, but ensures fairness on the market.

Europe as a post-fossil union

The expansion of the European electricity grids and an investment programme for the modernisation of building stock would be visible steps towards reducing Europe’s dependency on fossil fuels. For the EU member states currently in crisis in particular, an energy union based on renewable sources and investments in efficiency offer huge economic and social opportunities.

Sustainable resource strategy

We need binding targets for a new resources policy. The aim must be to ensure efficient use and continually-shrinking turnover of resources-a genuine circular economy which also offers business opportunities to a large number of companies. Natural resources must be declared public goods in a binding sense.

International body of experts on mineral resources

While the impact of climate change has been studied by thousands of researchers since 1988 in the Intergovernmental Panel on Climate Change, the topic of resources has not been the subject of any such reliable scientific analysis. The German Mineral Resources Agency founded in 2010 represents a first foray into this area at national level. But we now need to elevate research into resources to European - or better still, international – level. We need a body akin to the IPCC for resource matters.

Research and development on sustainability

We need to put in place the framework conditions for an environmental Silicon Valley which will unleash a wave of start-ups in the areas of system integration and new technology, and enable digital technologies to support sustainable industry. The aim should be framework conditions for innovation and start-ups which facilitate integration with the research sector and steer the necessary (venture) capital for new business models towards the right projects. Because a shift of this kind is as much a social issue as a technical one, we also need to step up sustainability research in the social and economic sciences, and promote social innovation.

A solidarity economy

Our aim must be to create greater space for alternative business models. To this end, we need a new legal form for companies operating in the solidarity economy. We must not hamstring new, creative business models which are not primarily profit-oriented with unnecessary bureaucracy in our revision of protection for small investors in crowd funding.

Environmental investment and transparency

In some areas, the capital market is further ahead than politics. Investors with a long-term outlook are already placing their hopes in sustainability. A key reason for this is the anticipated fall in value of the oil and coal dinosaurs – the bursting of the “carbon bubble”. In October 2014, the Bank of England became the first financial market supervisory authority to highlight the risk of putting more money into fossil fuels. E.ON has already announced its intention to set up a “bad bank” for its fossil fuel portfolio. Policy-makers cannot tell investors where to put their money, but they can improve the framework conditions for environmentally-oriented investment, with clear reporting requirements on environmental and social indicators and long-term business risks. In turn, investment will flow to where it is needed: business models based around renewables, efficiency and future-oriented forms of mobility.

Prosperity indicators and quality of life

It is no longer a revelation that gross domestic product (GDP) is not an appropriate standard for measuring prosperity. The Bundestag Study Commission on Growth, Wellbeing and Quality of Life, set up in 2010 at the initiative of the Greens, has already undertaken extensive preliminary work. The “wellbeing compass” complements GDP with three indicators measuring environmental aspects, socio-economic factors, and personal happiness, thereby allowing a broader view of how the economy and society are developing. It is important that we not only turn the wellbeing compass into a new standard of measurement, but also implement it in the orientation of our policies.

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