Green Strategy

Ireland may not be the most likely candidate to find a solution to climate change but that doesn't mean we don't need to put a strategy in place to deal with environmental challenges.

THERE IS nothing new about the concepts of green or sustainable economic growth. The Cambridge economist Arthur Pigou wrote about these ideas as far back as 1912. His famous example was a factory which belched forth smoke and thereby entailed “social costs” which, he believed, the manufacturer should be forced to bear by paying a special tax. The Pigovian tax, as it became known, was probably the first carbon tax.

Economists at the green end of the spectrum often remind us GDP is not a very good measure of economic welfare if damage is being done to the environment. In the first place, people will suffer various forms of distress. The recent floods in the west and south of Ireland were a dramatic example of this.

In the second place, the environmental damage may well reduce the prospects for economic growth in the future. Flooding, for example, could damage the fertility of the soil. The exhaustion of non-renewable energy – peak oil – is probably the most dramatic way in which future growth will be compromised. Statisticians are working on how to adjust conventional measures of GDP to allow for environmental damage and overuse of natural resources, but such adjustments are not yet much in evidence.

Perhaps the most extreme case of unsustainable growth occurred centuries ago on Easter Island. All the trees were cut down to make rollers and sleds for moving the huge stone statues. Soil erosion followed, and the economy (and society) collapsed completely. Of course, the inhabitants back then had little knowledge of ecology; we do not have such an excuse.

The logging companies of Brazil may not fully comprehend the damage they are causing around the world by cutting down the rain forests of the Amazon basin. They do not have to pay for these huge “negative externalities”, to use Pigou’s phrase. While we might immediately think in terms of some kind of tax on logging companies, there may be a case for considering subsidies too – to compensate the companies for a slower rate of felling and a stepped-up programme of re-planting. Where less developed countries are concerned, the carrot may be far more effective than the stick.

It is disappointing that the US did not sign up for the Kyoto agreement and Copenhagen was a fudge that got us nowhere. A recent article by Bjorn Lomborg in Time magazine argues these types of agreement are extremely divisive as between rich and poor countries, and expensive to implement. (The UN is not a very efficient organisation and is virtually powerless without the support of the US.) He cites Professor Richard Tol (at present in the ESRI) who has estimated that to keep global temperatures from rising any higher than 2 degrees above pre-industrial levels, would have disproportionate costs on GDP. The tax on petrol, for example would have to go as high as $35 a gallon!

Instead of thinking solely in terms of taxation which, politically, has many downsides, we should consider putting massive resources into finding alternative energies. He advocates a major research effort into smart grids, ultra-efficient batteries and nuclear fusion. This would appeal to Americans who have an amazing belief in the power of technology to solve all problems. Many Americans don’t see why they should economise on oil or electricity or meat or anything else when some professor in Silicon Valley is going to solve the global warming problem with some brilliant new technology.

The belief is that technology will lead to a viable renewable source of energy and that, in addition, a relatively pain-free means will be found for halting global warming. It would be akin to liposuction: the toxins can be flushed out without having to diet. There are, apparently, already four major “pain-free” technologies being examined, ranging from artificial trees, to injecting clouds with chemicals.

Maybe this is all fanciful and a Eureka! solution will not emerge. On the other hand we should remember that America put men on the moon as far back as 1969.

It does not seem as if Ireland has much chance of contributing to this solution; we lack the critical mass for this kind of world-beating research. That means we must concentrate on the more mundane approach of economising on energy, paying carbon taxes, recycling, etc. Even if we did all of that conscientiously it does not mean we would make any difference to global warming. If we went further than Paul McCartney’s suggestion and got rid of all our cattle, it probably wouldn’t make any difference to global warming. But this is not the point. We must play our part and be seen to do so – because if all small countries opted out then the combined carbon footprint could be quite significant indeed.

There is general agreement that we have a natural advantage in terms of wind, wave and tidal power. The real challenge for Ireland is to develop a technology to harness one or more of these sources of renewable energy. This is essentially what the “smart economy” framework plan calls for. Ireland would then become self-sufficient in homemade energy and would be able to export surplus energy. In addition, the equipment behind the new technology – all developed here – could also be exported world-wide.

It is clear that to achieve this kind of result, a major research effort will be required as well as a combination of scientific and entrepreneurial skills that will be far from easy to organise. This of course is a high risk/reward strategy in that some other country might beat us to the draw. In that event, most or all of the expensive resources we invested in research and development would be wasted. Although we have a couple of private-sector companies which seem well advanced in wind and tidal power, some commentators believe they do not command the resources to win world markets.

Because of this risk, we must proceed along more mundane lines as well, for example, improved management of energy use, including the retrofitting of the housing stock. The latter has been given a fillip in the recent budget. We also need to provide improved public transport, waste management, water treatment and environmental consultancy and services. These were the main areas identified in the Forfas report on environmental goods and services.

The problem remains that green issues may be put on the back burner during a severe recession which is likely to last longer in Ireland than elsewhere. Another risk is the possibility that the Green Party might not be a member of the next government.

The carbon tax measures in the recent budget are basically designed to raise revenue from sales of petrol rather than to reduce our carbon footprint. The €15 per tonne of petrol, diesel, home heating oil and gas (ie 5 cent per litre at the pumps) is little more than a start. The fact it is expected to raise €330 million in a full year suggests it will not lead to much economising in the use of energy. The revenue is to be earmarked for home insulation schemes which should make some contribution. The scrappage scheme may result in more fuel-efficient cars on the roads but the result on carbon emissions is unlikely to be all that significant. In general the Budget does not make much of a commitment to the environmental agenda.

Hopefully general economic pressure will not take attention away from environmental issues. Our record to date is not good – polluted water, slurry run-off, 50 per cent of drinking water leaking into the ground, toxic rivers and streams, houses built on flood plains. A small island in our position on the planet may well suffer disproportionately from global warming – this needs to be researched. Considerable resources may be required for flood defences, to take but one example.

We probably should not aspire to contribute to the grand Eureka! solution. That would be too high-risk for us. But there is still a question of strategy. Should we aspire to developing new technologies to produce energy from wave or tides? Or should we just concentrate on the more mundane activities of managing energy use and waste? In the interest of diversification we should probably do both.

There is also plenty of scope for using more carbon-friendly technology for producing ordinary (non-green) goods and services. This should be given more priority at present, especially where costs of production are reasonable and the output can be exported. We should be as green as possible while keeping costs down and our productive base reasonably well diversified.