Put 'eco' back in 'economics'

Growing in a green way means short-term costs but long-term benefits
Jessica Cheam, Straits Times 28 Aug 08;

I RECENTLY came to the conclusion that 'growth' is overrated. Or at least, that conventional definitions of economic growth need updating.

To quote from Canadian environmental activist David Suzuki, we need to put the 'eco' back into economics.

Both concepts, he notes, are derived from the same root word 'oikos' (eco) which literally means house - that is, the environment we live in.

The word 'economics' is a combination of 'oikos' and 'nomos' (rules, management). Thus, economics means house management. Somewhere along the way however, we have forgotten about the 'eco' in economics.

What triggered these thoughts was the recent public exercise to gather ideas for a blueprint on Singapore's green journey for the next 10 years.

Since its debut on July 28, the Sustainable Singapore website has received 700 suggestions and counting, on issues ranging from solar energy and cycling, to the country's energy efficiency.

I noted with interest the quick assurances issued by the Government that Singapore's green steps will be taken 'in a manner that will not upset economic development'. Finance Minister Tharman Shanmugaratnam added: 'What will not be compromised is economic growth.'

Not that these statements are peculiar to Singapore: they are not. They crop up often in multilateral debates on greening economies.

And for good reason: economic growth is important, as it leads to increased wealth and job security, all elements of a happy and stable country.

As Prime Minister Lee Hsien Loong pointed out in his Rally speech, growth gives us the resources to solve problems.

Singapore has used its wealth to move towards greening its economy, such as by making investments into environment-related research and development.

Still, the fear that economic growth will be compromised hampers efforts to go green faster.

When in town earlier this year, the UN Environment Programme's executive director Achim Steiner said to me: 'You can never expect a politician to say you're going to lose your job, or I'm going to make your life more miserable, for the sake of the environment.'

The sad fact, he added, is that 'many of those in charge of economies today exaggerate the cost of moving towards greater sustainability, and under-represent the returns from such actions'.

'This has led many countries to defer decisions about the future for far too long and the result is it gets much more expensive,' he said.

So how to balance the costs and benefits in greening any economy? How much gross domestic product (GDP) should be sacrificed?

In conventional economics, environmental costs are treated as externalities and unaccounted for.

Take China as an example. A recent Financial Times report highlighted its deteriorating environment as the 'devastating price' it pays for its rampant growth.

While millions of citizens are lifted out of poverty, 'large swathes of the country' are being 'devastated and unable to support even basic ecologies'.

Some reports put China's economic losses from environmental degradation at some 5 to 10 per cent of gross GDP.

It is an example of how measuring growth by GDP figures alone is a 'narrow, artificial indicator' that captures economic activity but does not account for real costs, said Mr Steiner.

The good news is, more economists are starting to realise this. The United Nations is working with leading universities and the World Bank to create a new wealth indicator that will take into account the drawing down of 'natural capital' from the environment.

As we in Singapore start thinking about sustainable development, we should keep in mind these changing definitions of wealth and growth.

While we try to perfect the art of 'balancing costs and benefits', we should also ask what we are defining as the reasonable cost of greening.

Are we willing to take the necessary steps, or will our 'greenspeak' just be lip service?

Do not get me wrong, I am not saying we should stop growing. Indeed, the green movement presents tremendous growth opportunities for us in the clean energy, water and environmental sectors.

All I am saying is we can grow in a much greener way, which might cost more in the short-term, but offer much longer-term returns.

And we must dare to do it.

There are already suggestions aplenty. Top of the list would be a greener tax structure to encourage Singaporeans to go green, similar to the pro-family tax structure unveiled earlier last week that aims to get Singaporeans to make more babies.

Under this tax structure could be rebates for adopting energy saving devices, concessions on income from carbon trading, and tax incentives for efficient and pollution-reducing equipment for businesses.

Pricing structures for utilities can also be made greener. For example, electricity can be made more expensive at higher consumption volumes.

Some countries such as Sweden and Norway are ahead of the curve, adopting bold environmental policies that others have avoided (like a direct tax on carbon emissions). They have proven that it works.

One country Singapore could take a leaf from: Switzerland. There, residents have to pay for how much rubbish they throw out. Here, we pay for someone to take our rubbish away, for the waste to be landfilled or incinerated. But we do not pay for the damage or costs to the environment our rubbish causes.

If, like Switzerland, we factored the cost of our rubbish into daily life, our actions will be a lot more different. People will start factoring the cost of their waste and recycling will come naturally.

Such are the changes we can suggest and lobby for, during this nationwide call for ideas to make Singapore greener.

Put the 'eco' back to economics, and chances are, we'll get it right.