Dossier on Economics and Environment for Vilemov Consultation 1998

compiled by Dr Donald Bruce, Society, Religion and Technology Project, Church of Scotland

Introduction and Scope of the Dossier

Caution - Work in Progress!

This dossier is presented to provide some initial background material for participants at Vilemov. It is certainly not the last word on the subject. At the moment its main focus is on western Europe and the EU, because plenty of good material was readily available from this area. After Vilemov we hope that it can be expanded with perspectives from other parts of Europe, for a more complete picture. It has also focused on economics at a national scale rather than the local. This is a question where national and regional context and priorities will differ greatly. There are common features in the general thesis presented below about how environmental care relates to economic issues. The dossier sets out :

• Some of the key issues, as the churches themselves have analysed them
• Some of the changes which might be made in economic patterns and goals
• what the churches themselves are doing
• Some questions for the future

Key Issues

1. Economics and Environment - A Model of Conflict?

   The Earth Summit in Rio in 1992 put environment on the world political agenda. It was the largest gathering of world leaders ever assembled, all anxious to show their concern about the environment. Most countries signed conventions to address issues like climate change and biodiversity, and committed themselves to develop national strategies on sustainable development and to a programme of action we now know as Agenda 21. When the political leaders went home, their finance ministers said "Do you realise what all this is going to cost us?". Economics rapidly came into conflict with ecology. The high principles of care for the earth became compromised with national economic self interest. Environment slipped down the political agenda, to become something to be addressed only once economic priorities has been set. In a western Europe, environmental action was seen as adding to the costs of industrial production, which might harm competitiveness with the USA or Japan. In eastern Europe, economic restructuring generally took precedence over environmental clean up.This illustrates a fundamental tension which is perceived by politicians between environmental concern and economics : that if we care for God's creation it will hinder economic growth, threaten jobs, and reduce competitiveness and prosperity, and for economies in transition it will slow down recovery. Right across Europe, this political perception is one of the principle barriers to moving towards environmental sustainability. But is this true? It depends on which economic assumptions are dominating the picture. The churches have seen the need to challenge the prevailing mindset, point out its errors and inconsistencies and suggest viable alternatives.

2. Economic Growth, the Free Market and Ecological Failure

   The economics and ecology working group (ECO2) of the European Ecumenical Commission for Church and Society examined this tension, and in 1995 produced a key report "The Dominant Economic Model and Sustainable Development - Are they Compatible?". With the collapse of the centralised economies, the dominant model is sustained economic growth in a global free market competitive climate. The report argued that this model was in direct conflict with a Christian understanding of caring for God's creation and for social justice, now and in future generations. In numerous EU policy documents, the report found a tension between the economics policies and the environmental goals which it proclaimed, with environment generally the loser. It is much the same in most national situations. The UK 1994 sustainable development strategy allowed only environmental measures that were also "cost effective", according to a narrow, short-term definition. Some other countries declared outwardly more ambitious environmental targets, but failed to reach them because of economic and political pressures.

   The notion of continuous growth encourages levels of consumption which are unsustainable, both for the carrying capacity of the earth's ecosystems and in the resources themselves. The economic system depends heavily on non-renewable forms of energy and raw materials, and its emphasis on a short-term payback on the product has led to a neglect of the environmental effect of the wastes, emissions and long term effects. High discount rates for investment capital create a short-term bias on technology developments. This puts at a serious disadvantage many renewable energy sources, which typically require high initial capital investment, but have a long effective production life, whose benefits are largely discounted. It is clear that the way the market has been operated for many years has failed to provide the signals and set the priorities to prevent major ecological damage. Wrong economic indicators, such as correlating measures of economic health to low energy prices and increased private and freight road transport, have sent the wrong signals and led to the wrong policy priorities. Sustainable development, interpreted as an sustained, unlimited growth, is plainly not sustainable!

Changes in Economic Patterns and Goals

1. Alternative Models

   The ECO2 report suggested alternative models of sustainability. Production should be shifted from finite resources to renewable ones. Outputs should not overstrain the carrying capacity of the ecosphere. Unlimited growth was to be replaced by ecological models and by an efficiency revolution in the way we use all the earth's resources. "In place of the present growth-oriented, throwaway pattern of consumption, new models are required. Recalling the efficient ecological paradigm of a mature rain forest, the outputs and wastes of one sphere of economic activity need to become inputs to another." The second WCC Climate Change report (1998) expanded on this and pointed out that increased efficiency is not an end in itself. Pursuing production efficiency too far can lead to serious ecological and social damage. Production needs orienting to different goals. The ECO2 report asserted that the gains from resource efficiency should not be fed back simply to increase consumption, and so continue the problem. They should be used to encourage policies which promote ecological energy, transport and so on, and redress the social damage. Economic indicators such as Gross National Product should incorporate environmental targets.

2. Including Environmental Costs in Fuel Prices

   One major disincentive to sustainability is the cheap price of coal, oil and gas. Conventional economics has regarded the natural environment as a free good, whose conservation does not figure in the equations. As a result, fossil fuel prices do not include the cost of the serious environmental damage which they cause, like global warming, acid rain and urban pollution. This invisible subsidy discourages energy efficiency measures and makes it all the more difficult for ecologically sound technology, such as renewable energy, to gain a foothold. The ECO2 report stressed the urgency of internalising these "external costs" of the fossil fuels. This would send a truer signal of the damage, but it would raise production costs substantially. To avoid economic and social disruption, the report advocated offsetting these increases by a reorientation of the taxation system, reducing taxation on employment, and in effect shifting it to resources. To be fully effective, these tax revenues should be "ring fenced", to be fed back into the promotion of environmental measures.

3. Economics and Environment - Can they be Partners?

   At the CEC/CCEE Crete conference on Environment and Development in 1995, former EC Environment Commissioner Paleokrassas stressed the need also to work within the system. He advocated using the tools of the market to send the right environmental signals to industry. The European Union published a seminal 1993 White Paper "Growth, Competitiveness and Employment", steeped in market philosophy. As a direct result of an ecumenical meeting between EC policy makers and church representatives in Brussels, he had been asked to add a final chapter to lay out the economic cost of not being sustainable. Even on the terms of the market there are sound reasons for putting ecological principles into action. For example, the costs of cleanup are usually much greater than not creating the waste in the first place. Indeed, there are examples where industry is putting this lesson into practice, aware that it will less than back-fitting their factories to meet higher environmental standards in future.

   Implementing radical environmental solutions, such as a major programme to replace the majority of fossil fuels by renewable energy, could not be done without considerable upheaval of the economic and industrial infrastructure. Suddenly to present a company with a large pollution bill for emissions, which until yesterday had been legal, would risk putting the firm out of business. On the other hand, it is easy to make the risk of economic disruption an excuse to get away with as little as possible. Wider studies such as the Sustainable Germany study, partly funded by the German Catholic NGO Misereor, challenge governments and citizens alike to novel ways in which to re-orient economic goals in the direction of sustainability.

4. Economics, Environment and Social Justice

   We cannot speak of economics without drawing attention to the injustices which exist in the distribution of the goods of the earth. In setting up an unsustainable economic ideals to which poorer countries of the world aspired, western Europe is adding fuel to the processes of ecological degradation. Both the ECO2 report and the report of the CEC/CCEE Crete Conference stressed the special responsibility of all European countries to take a lead in reducing our disproportionate consumption of the earth's resources and pollution of its ecosystems. With its stronger economic and research base, Western Europe also has an especial task of sharing its best ecological practice with poorer countries within Europe and the rest of the world, so that they may profit from our mistakes, so that their more justified economic development leads to less degradation. There is also a need to ensure that the transition to true sustainability also needs to consider those who are most vulnerable to the changes. Energy taxes must make careful allowance for those trapped in the cycle of fuel poverty.

   The EC asked the ECO2 working group to examine the social and employment implications of sustainable development. This report will be completed in early 1999. Though difficult to assess, some general patterns are clear. There are many indications that energy efficiency measures, as well as environmental decommissioning and clean up should lead to many new job opportunities. The phasing out of polluting industries like coal mining can, however, lead to serious job losses, often focused in particular localities with little immediate, alternative employment. Many new jobs can be created by the replacement technologies, but these may demand different skills in different locations. It is therefore vital that the churches, in advocating environmental policies stress the need to address their social implications.

What are the Churches Doing?

Extensive reference has been made to the 1995 EECCS ECO2 report,1 as probably the major ecumenical report from the churches in Europe on the relation of economics and environment. This was presented to the European Commission and has led a remarkable development. Two extensive high level meetings took place in which the group and church leaders put their concerns to European Commissioners and senior staff. The EC reaction was surprise that the churches had produced work of such high technical competence, and a very real interest in what principles the churches, as independent spokespeople, saw as important. This has led to an ongoing dialogue and a request from the EC that the churches review and comment upon developing EC policy documents in this area. Moreover, according to the senior EC environment staff, the main problem was that they knew what needed to be done, but could not persuade governments, industry or ordinary people to implement the changes. Could the churches help, as people in touch with the grassroots and people of vision? What vision could we offer for people to change behaviour and lifestyles?

The EC also asked the EECCS working group to examine the employment and social dimension to sustainable development, and the resulting report is almost complete. It is a follow-up study which also analyses the employment and also critiques EU policy developments since 1995, in energy, transport and various other policy documents. From mid-1999, as EECCS is incorporated into the new Church and Society Commission of CEC, a new working group is expected to continue on these general themes, building on these relationships, but also extending the remit beyond the EU.

Reference has been made to the CEC/CCEE Environment and Development consultation in Crete in 1995 6 and the WCC second consultation on Climate Change in Driebergen in 1996, 2 both of which examined similar issues. Their respective reports have much useful thinking on the subject, as does the Bettina Lutterbeck's discussion paper for the Crete meeting. Individual churches have varying amounts of work in this area. The research institutes of FEST (Germany), MCKS (Netherlands) and Institut fur Sozial Ethik ISE/IES (Switzerland), as well as the Society, Religion and Technology Project and the Church and Nation Committee of the Church of Scotland have all had studies touching on economics and environment. At Crete the Church of Norway produced an important document on consumer society in relation to the environment, and the Church of Finland is working with NGOs on the Suomi 21. Economic issues naturally feature in the Baltic Sea consultations promoted by the Christian Council of Sweden. Amongst Eastern European contributions are reports from Hungary on climate change in Eastern Europe and an ecumenical survey of Romanian economic and environmental situation.

Some Missing Perspectives from this Dossier

The perspective of this dossier has been economics in the wider national and international sense, and especially in relation to the European Union. This is by far the dominant economic force in Europe, and will become more so as it enlarges to include many countries from central and eastern Europe (CEE). Input is especially be needed on the issues important to CEE countries in their present and future situations. The dossier has not examined the effects environmental policy in Europe of the economic power of the private and especially trans-national sectors. We must not forget also the significance of local economic and environmental relationships, and the part that local churches can play in promoting alternative patterns of both in their areas.

Some Questions for the Future

1. Which goals should economic systems be geared towards promoting? What investment priorities do these goals imply?
2. What economic indicators are required to send the right environmental signals to the market?
3. The churches have identified major adjustments in infrastructure, taxation, energy and transport policy essential for achieving solutions to environmental problems such as global warming and urban pollution. How do we encourage our Governments to make these changes?
4. What environmental, economic and social "win-win-win situations" can we point to, for adoption by government, industry or local initiatives?
5. What are the current barriers to their implementation?
6. How can we ensure that gains from resource efficiency are not simply fed back to increase consumption, but are used to promote ecological energy and transport use and to redress the social damage?
7. How do we ensure that the transition to true sustainability can take place without unduly endangering production or jobs, and protecting the poorer sections of our societies? How can energy taxes allow for the poor, the elderly, and those trapped in the cycle of fuel poverty?
8. What part can the churches play in forming partnerships across Europe to promote environmental sustainability in poorer regions of Europe?
9. What part can the churches play in promoting the use of best ecological practices to developing countries?

Dr Donald Bruce

SRT Project

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Church of Scotland

8 September 1998