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The Greening of the Global Economy is Leaving Us Behind

Written by Rod Oram, from Sunday Star Times, Sunday 11th March 2012:

Only one thing is missing from the Green Growth Advisory Group’s report to government: any sense of New Zealand’s abundant opportunities.

These arise from a profound imperative. We’ll have 9 billion or so people on the planet by 2050. If we are to live tolerably well we must achieve radical changes in technology, economics, business models, consumer values and a host of other factors.

This is the absolute heart of green growth. It is a path to sustainability that absolutely depends on a rapid shift to renewable and recyclable use of resources. If we don’t, we’ll run out of land, clean water and air, oil, gas and other finite resources.

Many businesses understand this is the greatest driver of innovation the world has seen, as the Harvard Business Review has described it.

“Green growth is the greatest driver of innovation the world has seen.”

Here’s one measure. Last year PWC asked chief executives in APEC countries if their companies had “some” or “significant commitment” to the following sustainability opportunities over the next three to five years:

  • 91 per cent said they were committed to using more environmentally friendly processes.
  • 87 per cent to using clean technologies.
  • 84 per cent to creating more environmentally friendly products and services.
  • 79 per cent to working with their industry to set sustainability standards and ratings.
  • 79 per cent to actively influencing regulatory policy to promote sustainability.
  • 70 per cent to funding innovation on dean technologies.
  • 68 per cent to working towards specific targets for carbon emission reductions.

But if you indulge in a small change in language – calling it greener growth – you miss this epoch-defining change in the world and the opportunities it is creating.

You are merely proposing to do the same things in slightly more efficient and environmentally responsible ways.

So, if your economy is beset by slow growth of low value products and services, a bit of eco-efficiency won’t transform it into a high growth, high value, sustainable economy.

Well, as it happens our economy is stuck in a long-term growth rate of barely 2 per cent a year. As a result, we run weak trade balances and chronic current account deficits, so our net international liabilities are among the highest of all developed countries. That’s utterly unsustainable – economically, environmentally and socially.

Don’t worry, the government says, our Economic Growth Agenda will deal with that. But the agenda simply sets some impossibly large targets for doing essentially more of the same, albeit slightly more efficiently. If, for example, the dairy industry was to play its part in trebling the value of food and beverage exports to $58 billion by 2025, it would have to double the number of cows it milked.

The government doesn’t want to know its strategy is doomed to failure. It doesn’t want to hear of the abundant alternatives.

Thus, the government gave an impossible task to the Green Growth Advisory Group led by Phil O’Reilly, chief executive of Business New Zealand: make the Economic Growth Agenda a touch greener.

As a result, the group has come up with 26 recommendations. Some are good but will likely be hijacked or ignored by the government; some are vague; and some are outright bad.

Worse, the report is all about what business wants government to do; there is next to nothing about what business will do.

Here’s an example of a good recommendation in the report: a collaborative approach to achieving a consensus on what we should do about complex issues. This is working well with the Land and Water Forum, a multi-stakeholder, private sector initiative the government is wisely supporting in pursuit of effective water policy.

But the advisory group immediately pre-judges the outcomes of such an exercise.

“The extractive sector will continue to be part of New Zealand’s economic future. As such, our framework for green growth must be able to accommodate those activities.”

But what if the best opportunities are renewable uses of resources rather than extractive uses?

Take, for example, land transport.  Liquid petroleum fuels are our biggest energy source, a major source of greenhouse gas emissions and a hostage to rising international prices.

Yet the group leaps to the conclusion that more of the same is our best bet. It says we should reach a consensus on where we should drill. As it happens, the government made minerals and petroleum one of the four sectors in its growth agenda without any consultation of wider business interests or the public.

Scion, the Crown Research Institute, offers a renewable solution. It argues biofuels from forestry should be a big part of the transport solution. They could deliver greater economic, technology, business and environmental benefits to us than deep-sea oil extraction. Even the government’s maximum estimate of future royalties from oil and gas production is only $I0.3b.

The group’s reluctance to embrace global technology shifts runs throughout its report. It simply suggests that the government’s science and innovation policy, reform of the CRIs and other measures should “consider green growth”. It hopes that raising productivity in existing economic activities will give rise to some greener outcomes.

But the group is putting the cart before the horse. The push for sustainability which is central to corporate leaders’ strategies, is spurring innovation, technology change, business growth and value creation around the world. Those are four drivers of wealth creation, not a by-product of it.

Given this failure of understanding, the group misses opportunities at every turn. For example, it calls for the “greening of the supply chain” in the rebuilding of Christchurch. But what’s the point of a little eco-efficiency in a concrete plant if we end up building the same energy inefficient and unhealthy homes?

The advisory group is right about one thing: “New Zealanders have a positive orientation to green growth – confirmed in the advisory group’s engagement programme -but they need greater focus and more consistency of effort if they are to benefit fully from the world’s shift in this direction.”

If the report had delivered those – and the government accepted them – our economic prospects would be a lot brighter.





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