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Posts Tagged ‘Rio+20

Does the Inclusive Wealth framework have the firepower to replace the doddering, myopic GDP?

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Not every country or citizen has benefited from overall higher levels of economic welfare. The gap between the lowest and highest income countries remains large, with many countries in Africa, Latin America and Asia still below the global average. In addition, many countries experience significant domestic income inequalities between rich and poor. In new and rising economic powers such as China and India, millions have been lifted out of poverty, but often at a high environmental cost. “The economic growth of recent decades has been accomplished mainly through drawing down natural resources, without allowing stocks to regenerate, and through allowing widespread ecosystem degradation and loss” (UNEP 2011).

The Inclusive Wealth Report 2012 has been launched at the Rio+20 Conference in Brazil. The report presents a framework that offers a long-term perspective on human well-being and sustainability, “based on a comprehensive analysis of nations´ productive base and their link to economic development”.

Developed by the International Human Dimensions Programme on Global Environmental Change (IHDP), the IWR 2012 was developed on the notion that current economic production indicators such as gross domestic product (GDP) and the Human Development Index (HDI) are insufficient, as they fail to reflect the state of natural resources or ecological conditions, and focus exclusively on the short term, without indicating whether national policies are sustainable.

The IWR 2012 features an index that measures the wealth of nations by looking into a country’s capital assets, including manufactured, human and natural capital, and its corresponding values: the Inclusive Wealth Index (IWI). Results show changes in inclusive wealth from 1990 to 2008, and include a long-term comparison to GDP for an initial group of 20 countries worldwide, which represent 72% of the world GDP and 56% of the global population.

Key findings:

* 70 percent of countries assessed in the 2012 Inclusive Wealth Report present a positive Inclusive Wealth Index (IWI) per capita growth, indicating sustainability.
* High population growth with respect to IWI growth rates caused 25 percent of countries assessed to become unsustainable.
* While 19 out of the 20 countries experienced a decline in natural capital, six of them also saw a decline in their inclusive wealth, thus following an unsustainable track.
* Human capital has increased in every country, being the prime capital form that offsets the decline in natural capital in most economies.
* There are clear signs of trade-off effects among different forms of capital (manufactured, human, and natural capital) as witnessed by increases and declines of capital stocks for 20 countries over 19 years.
* Technological innovation and/or oil capital gains outweigh declines in natural capital and damages from climate change, moving a number of countries from an unsustainable to a sustainable trajectory.
* 25 percent of assessed countries, which showed a positive trend when measured by GDP per capita and the HDI, were found to have a negative IWI.
* The primary driver of the difference in performance was the decline in natural capital.
* Estimates of inclusive wealth can be improved significantly with better data on the stocks of natural, human, and social capital and their values for human well-being.

What is the inclusive wealth framework? It is based on social welfare theory “to consider the multiple issues that sustainable development attempts to address”. First, according to IWR 2012, the inclusive wealth framework “moves away from the arbitrary notion of needs” (about time too, not that the rank-and-file economists are going to be listening) and “redefines the objective of sustainable development as a discounted flow of utility” – this is not good, and does not in any way appeal to readers and practitioners who do not see organic development as automatically linked to some form of economic measurement – which, in this case, is consumption. Does this mean consumption (or not) is the central idea that underlies inclusive wealth? Let’s see. “The framework is flexible enough to allow consumption to include not just material goods, but also elements such as leisure, spiritual aspirations, social relations, and environmental security, among others”. Interesting and curious – spiritual aspiration as a consumption good? Family and clan or tribe ties as consumption?

How useful is the IWR 2012 shaping up to be? There is an “equivalence theorem whereby the framework allows the move from the constituents of well-being to their determinants”. Sounds profound. What does it mean? It refers to the various capital assets a country is able to accumulate – note they’re talking about country, not household, not social network. “This asset base is called the productive base of the nation. The productive base forms the basis for sustainable development and provides a tangible measure for governments to use and track over time”. Again, this is not so good – we want to see inclusive wealth as being easily understood by households (let’s say rural households) and by local administrations (like panchayats in India).

The IWR 2012 goes on to say that “more importantly, the framework provides information for policy-makers – particularly planning authorities – on which forms of capital investment should be made for ensuring the sustainability of the productive base of an economy”. Again not good, because the IWR 2012 has mentioned spirituality and social ties ande environmental security – so why return like a lost child to “the productive base” when ‘productive’ can continue to mean what it does today? A closer reading will no doubt provide answers.

The IWR 2012 has said, predictably and quite justified, that traditional indicators such as gross domestic product (GDP) per capita and the Human Development Index (HDI) have been the main determinants used to measure the progress of nations. “GDP per capita was developed just after World War II by economist Simon Kuznets. It was constructed by Kuznets to measure the level of economic production and to provide guidance to policy-makers on which sectors of the economy are growing and which are slowing, and the throughput that is used by the economy” – a concise definition of GDP worth keeping in mind to see why it has so needed replacing for at least the last generation.

GDP was always meant to be used strictly as an indicator for economic production. Somewhere along the line, GDP came to be used by policy-makers to measure the overall progress and performance of a nation (they were lazy, to begin with, and the gradual realisation of environmental costs from the pursuit of progress made alternatives politically inconvenient to adopt, especially when these implied the well-being of citizens). “This caused some fundamental problems, not with the indicator itself, but with the way it has been used. Increases in total economic production do not translate into improvements in well-being. They might increase employment and might increase the income of individuals, but all these are just possible outcomes and not automatic consequences of economic growth.” That is a truth well worth repeating at every available forum. From a very cursory reading, the IWR 2012 is a very well-conceived beginning to find a Grand Indicator that will once and for all consign GDP to the corner in which it belongs.

Written by makanaka

June 18, 2012 at 11:55

The Blue Planet warning, and prescription

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Painting by Shraddha Satish Shenoy of St Columba School, Mumbai, India

This February in London, Britain, a group of the world’s leading scientists and experts in sustainable development called for urgent changes to policies and institutions to enable humanity to tackle environmental crises and improve human well-being. They had gathered to finalise a paper launched at the UN Environment Programme’s Governing Council meeting in Nairobi, Kenya, on 20-22 February.

Now available, the paper emphasises transformational solutions to key environment and development challenges. It highlights the policies, technologies and behaviour changes required to protect the local, regional and global environment, stimulate the economy and enhance the livelihoods of the poor. Called ‘Environmental and Development Challenges: The imperative to act’, this group wrote the paper as a prelude to the Rio+20 conference in Brazil in June, which marks the 20th anniversary of the historic UN Conference on Environment and Development (Rio Earth Summit).

The paper’s authors are all past winners of the Blue Planet Prize, an award presented to individuals or organisations worldwide in recognition of outstanding achievements in scientific research and its application that have helped provide solutions to global environmental problems.

“The challenges facing the world today need to be addressed immediately if we are to solve the problem of climate change, loss of biodiversity and poverty,” said Bob Watson, who is the Chief Scientific Adviser to the UK government’s Department for Environment, Food and Rural Affairs (Defra), a Blue Planet Prize winner in 2010 and a co-author of the new paper.

Here are the salient messages from their paper:

There is an urgent need to break the link between production and consumption on the one hand and environmental destruction on the other. This can allow risking material living standards for a period that would allow us to overcome world poverty. Indefinite material growth on a planet with finite and often fragile natural resources will however, eventually be unsustainable. Unsustainable growth is promoted by environmentally-damaging subsidies in areas such as energy, transportation and agriculture and should be eliminated; external environmental and social costs should be internalized; and the market and non-market values of ecosystem goods and services should be taken into account in decision-making.

Painting by Siddhi Sudhakar Ghadi of St Agnes High School, Mumbai, India

The immense environmental, social and economic risks we face as a world from our current path will be much harder to manage if we are unable to measure key aspects of the problem. For example, governments should recognise the serious limitations of GDP as a measure of economic activity and complement it with measures of the five forms of capital, built, financial, natural, human and social capital, i.e., a measure of wealth that integrates economic, environmental and social dimensions.

Green taxes and the elimination of subsidies should ensure that the natural resources needed to directly protect poor people are available rather than via subsidies that often only benefit the better off.

The present energy system, which is heavily dependent on fossil fuels, underlies many of the problems we face today: exhaustion of easily accessible physical resources, security of access to fuels, and degradation of health and environmental conditions. Universal access to clean energy services is vital for the poor, and a transition to a low carbon economy will require rapid technological evolution in the efficiency of energy use, environmentally sound low-carbon renewable energy sources and carbon capture and storage. The longer we wait to transition to a low carbon economy the more we are locked into a high carbon energy system with consequent environmental damage to ecological and socio-economic systems, including infrastructure.

Painting by Sanchana Laxman Jadhav of St Agnes High School, Mumbai, India

Emissions of GHG emissions are one of the greatest threats to our future prosperity. World emissions (flows) are currently around 50 billion tonnes of carbon dioxide-equivalent (COe) per annum and are growing rapidly. As the terrestrial and oceanic ecosystems are unable to absorb all of the world’s annual emissions, concentrations (stocks) of GHG emissions in the atmosphere have increased, to around 445ppm of CO2e today and increasing at a rate of around 2.5 ppm per year.

Thus we have a flow-stock problem. Without strong action to reduce emissions, over the course of this century we would likely add at least 300 ppm COe, taking concentrations to around 750 ppm COe or higher at the end of the century or early in the next. The world’s current commitments to reduce emissions are consistent with at least a 3 C rise (50-50 chance) in temperature: a temperature not seen on the planet for around 3 million years, with serious risks of 5 C rise: a temperature not seen on the planet for around 30 million years. Given there are some uncertainties present in all steps of the scientific chain (flows to stocks to temperatures to climate change and impacts), this is a problem of risk management and public action on a great scale.

There are serious short-comings in the decision making systems at local, national and global levels on which we rely in government, business and society. The rules and institutions for decision making are influenced by vested interests, with each interest having very different access over how decisions are made. Effective change in governance demands action at many levels to establish transparent means for holding those in power to account. At the local level public hearings and social audits can bring the voices of marginalized groups into the forefront. At national level, parliamentary and press oversight are key.

Globally, we must find better means to agree and implement measures to achieve collective goals. Governance failures also occur because decisions are being made in sectoral compartments, with environmental, social and economic dimensions addressed by separate, competing structures.

Painting by Pooja Badhe of Udaychal High School, Mumbai, India

The Blue Planet laureates who gathered in London to work on the paper are:

Professor Sir Bob Watson, Chief Scientific Adviser of the UK Department for Environment, Food and Rural Affairs (Defra); Lord (Robert) May of Oxford, former Chief Scientific Adviser to the UK Government and President of Royal Society of London; Professor Paul Ehrlich, Stanford University; Professor Harold Mooney, Stanford University; Dr. Gordon Hisashi Sato, President, Manzanar Project Corporation; Professor José Goldemberg, secretary for the environment of the State of São Paulo, Brazil and Brazil’s interim Secretary of Environment during the Rio Earth Summit in 1992; Dr Emil Salim, former Environment Minister of the Republic of Indonesia; Dr Camilla Toulmin, Director of the International Institute for Environment and Development; Bunker Roy, Founder of Barefoot College; Dr Syukuro Manabe, Senior Scientist, Princeton University; Julia Marton-Lefevre, Director-General of the International Union for the Conservation of Nature; Dr Simon Stuart, Chair of the Species Survival Commission of the International Union for the Conservation of Nature; Dr Will Turner, Vice President of Conservation Priorities and Outreach, Conservation International; Dr Karl-Henrik Robert, Founder of The Natural Step, Sweden.

The Rights of Nature, a Rio reminder from Bolivia

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The so-called ‘Zero Draft of the Outcome Document for the Earth Summit 2012’, an unwieldy name for any collaborative document, has been commented upon and responded to by a very large group of NGOs and voluntary organisations. That’s good, because the UN Secretariat, insofar as it can make a contribution, has provided some synthesis of the conversations till date.

'The Rights of Nature', condensed into a word cloud

But, and this is a big ‘but’, the Zero Draft is not urgent, it is woefully unambitious, it has next to no detail and its tone is about as attractive as a dentist’s chair. Not good for what is to be a grand 20th anniversary meeting which will be watched and heard by tens of thousands of interested parties worldwide.

There’s precious little on the mess that is our socio-economic systems, there’s far too little honesty about what’s wrong. There’s a worrying tendency of repeating the words ‘sustainable’ and ‘development’ and overusing word pairs like ‘green economy’ and overusing ideas like ‘earth systems governance’.

But – there is an alternative. Hard-hitting and truly visionary, this alternative is called ‘The Rights of Nature’. It was submitted to the UNCSD (UN Commission on Sus Dev, which is the host of the Rio+20 meeting). “The proposals developed by the Plurinational State of Bolivia bring together and build upon the progress made in the World Charter for Nature (1982), the Rio Declaration (1992), the Earth Charter (2000), and the World People’s Conference on Climate Change and the Rights of Mother Earth (2010),” explains the Bolivian proposal at the outset, a calling to history which regrettably is left out of the Zero Draft.

You can re-read the stirring ‘The Law of Mother Earth’, and here is a little more from ‘The Rights of Nature’:

1. In this century, the central challenges of sustainable development are: on the one hand, to overcome poverty and the tremendous inequalities that exist and, on the other hand, reestablish the equilibrium of the Earth system. Both objectives are intrinsically linked and one cannot be reached independently of the other.

2. It is essential to recognize and affirm that growth has limits. The pursuit of unending development on a finite planet is unsustainable and impossible. The limit to development is defined by the regenerative capacity of the Earth’s vital cycles. When growth begins to break that balance, as we see with global warming, we can no longer speak of it as development, but rather, the deterioration and destruction of our home. A certain level of growth and industrialization is needed to satisfy basic needs and guarantee the human rights of a population, but this level of “necessary development” is not about permanent growth, but rather, balance among humans and with nature.

3. New technologies will not allow unending economic growth. Scientific advances, under some circumstances, can contribute to resolve certain problems of development but can’t ignore the natural limits of the Earth system.

You can download a pdf of ‘The Rights of Nature’ from here, the source being the World People’s Conference on Climate Change and the Rights of Mother Earth.