Without a profound socio-ecological change, we will never achieve climate neutrality, say three economists. A brief sketch of what a sustainable economy might look like.
Geared for growth, our economic system relies on the fact that damage to the environment costs next to nothing. This encourages the exploitation of nature - even though natural resources are finite. "It’s just not sustainable," says Irmi Seidl, an economist who heads the Economics and Social Sciences research unit at the Swiss Federal Institute for Forest, Snow and Landscape Research (WSL). Seidl’s research explores how we can design an economy that serves people’s needs while preserving the natural foundations of life.
"That’s not what our current system does. Without an ecological rethink, economic crises and social disruption can only increase," she says. For decades, influential sectors of the economy have opposed effective environmental policies, arguing these would inhibit growth.
But such policies are urgently needed. Seidl insists that technology and voluntary action alone are not enough to combat climate change, the destruction of nature and species extinction. She doesn’t believe in "green" growth. "Carrying on as before with some greening won’t work," she ’argues. Seidl says that so far a growing economy has always been accompanied by rising consumption of energy and resources - and there is no sign of an absolute decoupling.
Towards a sustainable economy
As an economist, Seidl insists the answer lies in fundamental socio-ecological change: "If we want to make responsible use of the resources that support our lives and livelihoods, we need to attach a significant value to natural capital and move away from the traditional pursuit of growth."
Seidl argues there are levers to achieve this. "The key is to change the structural incentives that lead to environmental damage," she says. Her first recommendation is that the cost of energy and natural resources should reflect their ecological scarcity, and a price be put on the negative impacts on the climate and environment. "Environmental exploitation should be much more expensive," says Seidl. The second is to abolish - or redesign - subsidies that end up harming the environment. Like in many other countries, the Swiss tax system includes numerous incentives designed to promote sectors such as energy, agriculture, transport, and settlement development. These include direct or indirect support for pesticide use, commuting, land consumption, urban sprawl and construction.
Seidl also argues that we need to make central pillars of our society less dependent on growth. Two examples she cites are tax revenues and social welfare services. Both are heavily financed by contributions paid on employment, at the same time as corporate taxes are falling. This makes labour noticeably more expensive, which is why companies are replacing labour with technology. More growth is then required to create paid employment, achieved - among other things - by measures to attract new companies and workforce, zoning of land, and construction of roads and housing.
Seidl asserts that this spiral of growth must be stopped. This requires not least a new understanding of work, she says, because at present we pursue growth primarily to ensure the availability of paid employment. "We therefore need to reduce the elevated status attached to paid employment," she concludes. That would mean we would spend less time working to earn ’money and would produce and consume less. In return, we would benefit from an intact environment, better health and more time to spend on voluntary and charitable work and caring for others.
Getting the economy on a greener and more climate-friendly track will ultimately require us to completely restructure various sectors, says Seidl, including energy and transport, housing and urban development, and construction and agriculture. "Ecological transformation isn’t easy," says Seidl. "But it’s doable if we tackle it in a socially just way and recognise it as a task that involves the whole of society." Research has a key role to play in this context. Transformation requires sustainable materials, production technologies and infrastructure solutions, all of which researchers will need to develop. "Most of the innovations for this come from universities, not from business," says Seidl. She sees a clear role for the institutions of the ETH Domain and points out that ETH was founded with the goal of helping drive forward Switzerland’s industrialisation and modernisation. "Now it’s time for ecological modernisation, which is a task at least as big!" she says.
Keeping materials in the loop
At the heart of this discussion is the way we use resources. "The extraction and processing of raw materials cause around two-thirds of global greenhouse gas emissions," say Catharina Bening and Nicola Blum, who are senior researchers in the Group for Sustainability and Technology (SusTec) and co-leads on the Towards A Sustainable CircuLar Economy (TACLE) project.
The goal of a circular economy is to decouple economic growth from resource use and to avoid waste by keeping materials and products circulating in closed loops. It is considered by many to be the basis of sustainable development. "The concept of a circular economy has gained in acceptance considerably in recent years," say the two researchers. In collaboration with industry partners, they are seeking ways of transforming linear production processes into circular value chains.
Time and again, they see people optimising circular systems according to the simple rule that "the more material kept in the cycle, the better it is". Focusing on the quantity of recycled materials is a common approach, but it often fails to take into account factors such as water and energy consumption, climate impact, and economic and social repercussions. "The mere fact of keeping material circulating in a loop is not eco-friendly per se, nor is it necessarily financially sound," Blum cautions. One example is glass recycling: although it is undoubtedly important for people to use bottle banks, the energy required to turn waste glass into new bottles may mean it is actually better for the environment to use the glass as an insulation material, which can save energy.
To make the concept of a circular economy more relevant, Blum and Bening recommend looking not only at the flow of materials, but also at how sustainable each measure is in each of the three dimensions of ecology, economy and society. "That way, you ensure any ecological benefits you achieve also make sense from an economic and social perspective," says Bening.
In practice, however, as the two economists are quick to point out, this approach often leads to conflicting goals. For example, although PET recycling in Switzerland contributes to a sustainable circular economy in all the dimensions, a 100-percent collection rate would not necessarily be desirable from an economic standpoint. Ecological sustainability would certainly increase, but the collection costs would ultimately exceed the additional income generated by the sale of recycled PET plastic.
This shows how the goal of an economy that minimises waste and environmental damage is complex and laden with compromises. "Nonetheless, the circular economy is definitely a step in the right direction if we want to preserve natural resources," says Blum. And if there’s any country in the world fit to play a pioneering role here, says Bening, it’s Switzerland.
This text has been published in the 20/04 issue of the Globe magazine.