Economics of sustainability

D. MURALI | Updated on November 12, 2011


Huge sums of public money are spent each year to prop up a form of energy generation that is wrecking the planet, laments Zac Goldsmith in ‘ The Constant Economy: How to create a stable society' ( He is aghast that wind farms, solar power plants and other renewable energy projects are criticised for the costs involved, without taking into account the subsidies provided by governments all over the world to the fossil fuel industry. “The estimated global public subsidy for fossil fuels is between £91 billion to £152 billion a year. Subsidies for oil products in non-OECD countries are estimated at over £55 billion annually.” The book cites statistics from the European Environment Agency that for every £1 spent on subsidising renewable energy projects £4 are spent on fossil fuels.

Highlighting that very little of what tax the government does get from oil and gas is invested in developing alternatives and energy efficiency, the author observes that the revenue that the government collects from the fossil fuel sector may be greater than revenue from council tax, stamp duty, capital gains tax and so forth. He calls for the emulation of the Norway model, of setting up a substantial fund to invest the proceeds of oil taxation to ensure that future generations would benefit once oil has gone. “At the end of 2005 that fund stood at £127 billion – the equivalent of £27,000 for every Norwegian.”

Norway's “Government Pension Fund – Global,” commonly referred to in the country as the “oil fund,” has overtaken the Abu Dhabi Investment Authority (ADIA) as the world's largest sovereign wealth fund, according to the Monitor Group, with nearly NOK 3,100 billion (roughly $570 billion) in the fund today, reports a story dated June 10, in

Best practices

Among other examples of best practices in the book is this nugget about how, in Germany, builders are required to reach high standards of energy efficiency but are not instructed as to how to do it. Extolling such a system based on outcomes, not processes, the author urges governments to trust builders to do the right thing, while being willing to impose heavy penalties when that trust is abused. He hopes that if the regulatory system were turned on its head in this way, we would see an explosion in innovation and a leap forward in standards.

An ‘energy-efficiency' example from Australia is of a ten-storey building in Melbourne, which has reduced greenhouse gas emissions by 87 per cent, electricity consumption by 82 per cent, gas usage by 87 per cent and water use by 72 per cent. “The building exterior moves with the sun to reflect and collect heat, and includes photovoltaic cells, solar water heating and rooftop wind turbines. It also turns sewage into usable water. The sustainability features added 20 per cent to the total cost, but payback is less than ten years.”

An insightful chapter titled ‘A Zero Waste Economy' informs that, in 2007, a staggering 160 million computers across the world were thrown away. If the manufacturers adopted a modular design, where every component of the machine is a separate pluggable element, instead of being simply thrown away, computer could be dismantled and reused, the author reasons. “In Japan, all television sets, air-conditioners, washing machines and refrigerators must be between 50 and 60 per cent recyclable. Brand new computers now have fewer parts, which has also saved on breakdown costs.”

Recommended study for anyone on the sustainability journey.

Published on November 06, 2011

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