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New Bottom Line, Volume 1.7 – Environmental Efficiency: An Engine of Economic Recovery

December 17, 1992

The message is starting to sink in: environmental products and services – and environmental quality itself – are emerging as a major source of national and corporate prosperity.

The US abandoned this market to Japan and Germany under President Bush. Fortunately, the Clinton/Gore administration shows every sign of understanding and pursuing this strategic opportunity. This is good news for the country, and good news for businesses that are ready to act.

President-elect Clinton has the opportunity ‹ in the midst of his “first hundred days” focus on the economy – to launch key environmental initiatives that can have major macro-economic significance as well. Environmental efficiency can be a key engine of economic recovery and competitiveness. Let’s get serious about it.

Resource Efficiency

Problem: Energy imports are a drain on the economy, accounting for about half our trade deficit. Pollutants and waste heat from burning fossil fuels have multi-billion dollar impacts on public health, and immeasurable impact on global climate and local weather. The US uses two and a half times as much energy for every dollar of GDP as does Japan; this translates into a five percent structural pricing advantage for Japan. And Japan is planning to double its energy efficiency by end of decade. The US must at least match Japan’s efficiency, if not surpass it.

Action: Declare a national goal to double energy efficiency in ten years and end the US addiction to fossil fuels. Back the declaration with a revenue neutral carbon tax, with proceeds invested in development of solar economy, and mitigation of the impact of transition on the poor and on oil-dependent regional economies.

Action: Direct the Department of Energy encourage the “demand side management” policies that have worked so well for major utility companies that are profitably using efficiency gains to produce “negawatts” than megawatts, and eliminating any need to even consider nuclear in our national energy mix. Enlist their help in extending these programs nationwide.

Action: The “negawatts” model works just as well with water resources. Apply it to all Federal water projects: improve efficiency before expanding supply.

Public investment and public accounting

Problem: Subsidies pervade government programs, more in response to lobbies than to a coherent investment strategy. We need a “clean slate” analysis (using input/output and other tools) of all subsidies as the societal investment they really are.

Action: Zero-base all subsidies, and assess all through a common and rigorous analytic framework. What shared investments are we making as a nation? What return on investment are we earning? We may not eliminate the pork barrel, but at least we can shine some light on the process.

Problem: Federal policies encourage the use and depletion of forests, mineral rights, grazing, water and more ‹ and then we wonder why environmental alternatives “aren’t economical”.

Action: Level the playing field. Shift all Federal resource sales and leases to market price, and do it quickly. Provide an exceptions mechanism only to support stated strategic goals or ease demonstrated hardship.

Problem: The Gross Domestic Product simply isn’t an accurate measure of national well-being. Environmental clean up shows up as economic activity, though in the long run it is a wealth sapper that we are forced into by old mistakes, not a wealth generator ‹ or not as much of a wealth generator as “doing it right the first time.”

Action: Develop and publish economic and environmental indices that measure quality of life rather than quantity of waste.

Pollution prevention

Problem: Pollution control is an expensive way to solve a problem that shouldn’t exist in the first place. EPA’s shift in emphasis, from end of pipe controls to pollution prevention, from prescriptive standards to performance standards, is a step in the right direction.

Action: Invest generously in EPA’s pollution prevention programs. Provide a pollution prevention extension service, serving both businesses and local regulators, so regulators can serve as coaches as well as cops. Provide critical R&D, support and training the the small and medium sized companies that, due to lack of resources, are lagging in getting on the environmental bandwagon.

Problem: Market incentives for pollution control may just move the problem around, when it’s time to solve it.

Action: Promulgate tough standards for tradeable pollution rights, and lower the ceilings quickly to drive pollution prevention innovation.Use the bully pulpit to encourage efficient companies to “bury” their surplus rights, as 3M has done, rather than trade them, so as to not shift the problem to the less fortunate.

Green planning

Government, citizens and industry in Holland, Canada, Austria, England and other countries have developed national Green Plans with ambitious goals for toxics reduction and national renewal. The US needs a similar collaborative process, but probably undertaken at a different scale.

Action: Charge the Vice-president’s office to lead an inter-agency program (including Commerce and Labor, as well as the “resources” agencies) to convene regional public/private green plans, at county or metropolitan area level, to build local economic strength. Build from regional plans to state and national strategy.

Action: Redirect the Vice President’s Council on Competitiveness in support of U.S. environmental leadership, which can be a major source of competitive advantage. Make the Vice President’s office a focal point for Federal long range scanning and planning.

Infrastructure

Problem: Infrastructure development should not simply be pouring concrete for the sake of jobs, but an investment in productivity for coming decades; therefore we must not just try to rebuild the infrastructure of the 1950s, but envision and build the infrastructure of the next century.

Action: Invest in multiple transport modes, not just highways ‹ and in access, not just mobility. Insist on coordinated regional transportation plans, that effectively integrates rail and other transit systems (not like the $150 billion hodge-podge that the LA basin is buying). Encourage urban development that minimizes the need for highways and automobiles. Launch a Civilian Conservation Corps style environmental restoration program. Demand the highest standards of environmental quality and energy efficiency in all programs.

Problem: The Los Angeles riots reminded us that major segments of urban America are still left out of the American dream. And the inner cities are rarely talked about on environmental agendas.

Action: Employ state of the art environmental efficiency in the rebuilding of South Central LA and other inner cities‹ not because it’s trendy, but because it’s sensible. Make the inner city development a living example of environmentally sound urban planning, housing, and business plant design. Bring environmental business opportunities into inner city economic development. Move the poor from the end of the line to the front for a change.

Federal procurement

Problem: Environmentally sound alternatives are often slowed by the chicken-and-egg problem of not enough market demand to bring prices down, prices too high to generate enough market demand. On the other hand, government purchases (federal, state and local) account for nearly one-fifth of total Gross Domestic Product.

Action: Leverage the power of the Federal purse to prime the pump for environmental market demand. Add environmental quality standards to all Federal procurement protocols. Extend “recycled content” requirements. Invest in significant ‹ and cost saving ‹ energy efficiency improvements in all Federal installations.

Problem: Market demand is a more serious factor than technical breakthroughs in making photovoltaic (solar electric) power economical competitive. Unfortunately, Federal neglect has allowed much of this industry ‹ invented here ‹ to drift from the US to Japan and Germany.

Action: The federal government can generate that demand, and do so for a fraction of the funds it has squandered on nuclear energy. Commit to purchase and install photovoltaic systems as the power source in all federal installations (new construction and renovation) where life-cycle costs are no more than 5% greater than next best alternative. Immediately establish solar preference wherever currently cost competitive.

Trade & aid

Problem: Pesticides that have been banned from US agricultural use can find their way back into our stomachs on food imports from countries that allow the sprays ‹ sprays often sold to them by American companies that can’t sell them here.

Action: End dumping of unsafe chemicals and products to other countries. Block imports that don’t meet US standards. Let’s export the best of US technology, not the worst.

Problem: The Global Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA) seem to value “free trade” over environmental health and safety. At their worst, they could allow appointed international bureaucrats to override decisions of our elected representatives if our environmental protections are deemed “obstacles to free trade.”

Action: Renegotiate GATT and NAFTA to allow varied environmental standards (as EPA has allowed California to maintain stricter air quality standards than the Federal standards). Environmental quality is too important – for both health and business – to relegate to the lowest common denominator.

The challenge for US business

Some business leaders will resist these changes. Others will embrace them, and build on them for competitive advantage. Which would you bet on?

(c) 1992 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

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