What ecological risk threatens economies and competitiveness
Posted by Alessandro Galli on July 15, 2011 at 7:30am
The evidence of links between ecological and financial risk to countries' economies and competitiveness is becoming increasingly clear. In order to reach a one planet economy by 2050 European countries need to understand the critical links between their country's resource use, Ecological Footprint, as well as the resource use and ecological footprint of the countries they are dependent on for resources. Those countries that can manage their use of the Biosphere’s limited resources in the next decades will be the winners of the 21st century.
Ecological health is important but “what’s in it for our economies?”
This is the question we are addressing in an ongoing study tracking Ecological Footprint trends for the countries of the Mediterranean region.
We believe that if we look more closely at the resource dynamics, we would see that it is in each nation’s most central self-interest to combat ecological deficits quickly and aggressively. Not only that, such action does not depend on whether our global neighbors follow suit or not. In fact, each country’s own actions will become more urgent and valuable the less others do.
Our natural systems can only generate a finite amount of raw materials (fish, trees, crops, fresh water etc.) and absorb a finite amount of waste (such as carbon dioxide emissions). Global Footprint Network quantifies this rate of output through a measure called biocapacity. Biocapacity is as measurable as GDP – and, ultimately, far more significant, as access to basic living resources underlies every economic activity a society can undertake.
Up to now, we have treated biocapacity as an essentially limitless flow, to the point that humanity’s demand for nature’s services now outstrips biocapacity by 50 percent, according to our research. And as our interim report on the Mediterranean region shows, the biocapacity demand of residents in this region exceeds the region’s biocapacity by more than 150 percent.
Why would it be in any individual country’s interest to address a problem whose costs are ultimately born by all of humanity?
In a world facing a biocapacity crunch, the winning economic strategies will be managing biocapacity on the one hand, and reducing demand for it on the other. Many believe the race to develop green technology – what columnist Thomas Friedman has dubbed the “Earth Race” – will bring the spoils of the future to the early movers and adopters, and secure innovative nations and enterprises with positions of advantage on the global stage. This is the carrot pushing green innovation. But there is an even more powerful stick. Those countries and cities trapped in energy- and resource-intensive infrastructure will become dangerously fragile and will not be able to adapt in time to meet the emerging resource constraints. But those who adjust early will lead the next renaissance.
Global Footprint Network’s Ecological Footprint Initiative in the Mediterranean Region is based on a simple premise: human societies and economies depend on the biosphere’s natural capital and its many life-supporting ecological services. As demand on these ecological resources increases, economic success can no longer be secured without carefully managing and tracking the demand on, and availability of, natural capital. Thus tools are needed to illustrate the scale of change we are witnessing, and to provide a platform for weighing the policy options that will help nations remain competitive in an increasingly resource-constrained world. We believe the Ecological Footprint can be one of such tools, providing an ecological bank statement for Mediterranean countries, evaluating their use of local and global resources, and how this compares with nature’s endowment.
The main goal of this Initiative is to bring the reality of resource constraints into national and regional policy debates, help policy analysts and decision- makers more deeply understand the social and economic risks associated with resource limitation and finally engage with national governments to help them make more effective and informed decisions. Eventually we want to see countries turning around the current downward trend.
The preliminary results of our Mediterranean study are really interesting as they have far-reaching implications for the region’s future:
- Since 1961, the Mediterranean region has been in a situation of biocapacity deficit, with its demand for ecological services (Ecological Footprint) increasingly exceeding supply (biocapacity). In order to maintain this situation, the import of ecological assets from regions outside the Mediterranean is necessary.
- Such dependency on external assets makes the stability of the Mediterranean Region highly dependent on a) the availability of assets in external eco-regions from where such assets are drawn and b) the financial capacity to pay for these assets.
- The major trade partners have changed in the last 30 years from those with a biocapacity surplus (e.g. Canada, Scandinavia, South America) to those running a biocapacity deficit (e.g. USA, China, non-Mediterranean European states).
- In terms of financial capabilities we found that while the average per- capita GDP in the Mediterranean region was approximately twice as much as the world average in 1961, it is now only 50% higher.
The region’s declining financial situation poses challenges to countries’ ability to compete for limited ecological resources. Meanwhile, the region’s reliance upon resources from abroad makes it vulnerable to price volatility and supply disruptions. These factors combine to pose significant economic, social and geopolitical risks. These findings make clear that the way Mediterranean countries manage their ecological resources will be central to their long-term capacity to remain economically competitive and provide for the well-being of their people.
The question by governments, “What’s in it for me?” and the lack of answers perceived as relevant for their country’s short to medium term well-being, has up to now been a major stumbling block to progress and international agreement. But if leaders and their administrations truly understand the role that resource dynamics play in their economies and competitiveness they would have the exact opposite approach. In fact environmental issues will very quickly start to burden each nation’s economy evidenced by increasing food dependencies, energy dependencies and, as a result, a rapidly increasing national debt.
With the recent food and energy crises, it has become even more evident that the 21st century will be shaped by ecological constraints. Successful governance will depend upon resource accounts to understand risks, as much as it has depended upon GDP to measure economic progress. National competitiveness needs ecological stability and European governments have the opportunity now to reverse negative resource trends. To get on track to a one planet economy governments need to more deeply understand the social, economic and competitiveness risks associated with resource limitation.