20 Nov, 2011

Aviation, Eco-taxes Needed To Force Shift to A Green Economy, UNEP report

Imtiaz Muqbil

At the Nov 7-10 World Travel Market in London, travel industry leaders took a strong stand against a carbon emissions tax facing the aviation industry. Although their argument focussed on the impact this would have on air-fares and the aviation sector, a flagship UN report on the state of the global environment issued on Nov 16 indicates that the taxes are one of several “enabling conditions” required to force “behavioural change” in favour of a green economy. That short-term-pain in favour of long-term-gain approach indicates that the aviation taxes are not likely to go away, regardless of how loudly the industry shouts.

Entitled, “Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication,” the UN Environment Program report was released  ahead of a major conference on climate change under the UN Framework Convention on Climate Change (UNFCCC) due to begin in Durban on 29 November. Along with numerous other meetings, this Conference of the Parties (COP 17) is a build-up to the big-daddy event to be held in June 2012 to mark the 20^th anniversary of the so-called Rio Earth Summit. Known as “Rio+20”, it will also be held in Brazil where one of the main themes is will be to further the cause of the Green Economy “in the context of sustainable development and poverty eradication”.

The UNEP report, a voluminous 626-page “State of the Union” document, mentions the aviation sector only sparingly as a small part of a much, much bigger picture.

Indeed, in one of the most damning comments, packaged in a highlighted box, the report says, “It is often claimed that aviation is vital for the economy, because it generates jobs both directly and indirectly; the latter through the facilitation of tourism and business (OEF 2006). This is often given as a key reason to exempt aviation from fuel taxes and other levies, which not only distorts competition between modes, but also leaves aviation externalities unchecked. Sewill (2005) et al. argue that the economic case for investing in aviation is often overstated, if not weak, owing to the large amounts of externalities the sector produces. He suggests that alternative forms of employment can be generated through taxing high-polluting industries such as aviation, and using the revenue to promote other sectors. As an example, the EU in its Emissions Trading Scheme is considering the use of revenue from aviation credits for climate mitigation actions in developing countries.”

Grand Scheme of Things

The taxes the aviation sector opposes become almost inconsequential in the grand scheme of things. As the report notes, the world has just crossed the 7 billion population mark and is looking at the possibility of 9 billion by 2050. It is running short of resources and faces a huge number of accompanying problems, such as health, poverty, education, disaster management, water resources and many more. It argues that progress towards a green economy has been slow in the 20 years since the 1992 Rio Earth Summit, and time is running out.

The report’s bottom-line objective is to “make a compelling economic and social case for investing two per cent of global GDP in greening ten central sectors of the economy (Agriculture, Fisheries, Water, Forests, Renewable Energy, Manufacturing, Waste, Buildings, Transport, Tourism, as well as the world’s cities) in order to shift development and unleash public and private capital flows onto a low-carbon, resource-efficient path. Such a transition can catalyse economic activity of at least a comparable size to business as usual, but with a reduced risk of the crises and shocks increasingly inherent in the existing model. New ideas are by their very nature disruptive, but far less disruptive than a world running low on drinking water and productive land, set against the backdrop of climate change, extreme weather events and rising natural resource scarcities.”

It adds, “The recent interest in a green economy has been intensified by widespread disillusionment with our prevailing economic paradigm, emanating from the many concurrent and recent crises – particularly the recession of 2008-2009. At the same time, increasing evidence is pointing to an alternative paradigm, in which increased wealth does not lead to growing environmental risks, ecological scarcities and social disparities.”

The report argues that “to be green, an economy must not only be efficient, but also fair. Fairness implies recognizing global and country level equity dimensions, particularly in assuring a just transition to an economy that is low carbon, resource efficient, and socially inclusive. These enabling conditions for a fair and just transition are described and addressed at length in the final chapters of the report, along with the steps necessary to mobilize finance at scale for a green economy transition.”

BAU No Longer Possible

Within the mass of statistics, analysis, models and extrapolations, the report’s bottom line is that business as usual (BAU) is no longer possible. In that context, the report makes no case for any special consideration or treatment or exemption to the aviation sector. It says, “Despite a temporary slowdown in demand owing to the economic recession, the fundamental growth in the aviation sector remains strong. Aviation emissions are projected to increase exponentially in the next few decades, fuelled by income growth and reductions in the price of air travel.”

Indeed, aviation is lumped together as part of the transport sector alongside other modes such as roads, railways and marine. All are contributors to economic growth and jobs, and all have an environmental impact. The trade-off lies in assessing this ratio of balance — which sectors are responsible for moving the maximum number of people/cargo and contributing most to economic growth and jobs, at minimum cost to the environment. It could be argued that aviation only enjoys the advantage of speed — being able to move people across longer distances faster than the others.

Says the report, “The transport sector’s consumption of fossil fuels translates into around a quarter of global energy-related carbon dioxide (CO2) emissions, which is projected to increase by 1.7 per cent a year from 2004 to 2030. Land transport accounts for roughly 73 per cent of the sector’s total CO2 emissions, followed by aviation (11 per cent) and shipping (9 per cent). Passenger transport accounts for the lion’s share of overall emissions, with freight transport – predominantly road-based trucks – comprising 27 per cent of all transport energy use (and therefore emissions). More than 80 per cent of the predicted growth in transport emissions is expected to come from road transport in developing countries (IEA 2009b).”

Although both tourism and transport are acknowledged as major contributors to jobs and economic growth, both are considered ripe for “enabling conditions” to bring about behavioural change. In fact, the report suggests that travel, transportation and tourism sectors have some inherent contradictions in their key messages.

Although tourism gets copious coverage via a full chapter authored largely by the UN World Tourism Organisation, the report says that its contribution to jobs and economic growth also needs to be weighed against its contribution to environmental destruction in the form of higher water consumption, more wasteful use of natural resources and huge amounts of garbage generation. This is where the tourism sector’s policy platform hits a crossroads. The more it brags about its growth, the more environmentalists can rightly claim that it is contributing to global emissions.

Surcharges

Same argument applies for the aviation sector. When fuel costs were shooting up to 150 dollars a barrel, the industry responded by levying surcharges, all of which are still in place. To what extent they have been adjusted to suit the reduced prices is a moot point. Airlines continue to claim low costs, and then add on the surcharges as extras, a gimmick that that public accepts. The tax authorities then see no reason why the same cannot hold true if emissions are equally taxed.

Like with all such reports, it is open to debate in terms of its conclusions. From an alternative perspective, it also contains some omissions and “early warning” danger signs.

The biggest omission is a complete absence of the word military. The global military is one of the worst polluters on the planet, possibly THE worst polluter. It is never held accountable. The ten key sectors targeted in the report are responsible for most of the world’s environmental problems. If no exceptions are being made in sharing responsibilities and identifying solutions, ignoring the military sector makes no sense. In fact, if military budgets were to be cut back by even tiny amounts per year, there would be enough money both to promote travel and tourism, AND fund the transition to alternative energies as well as other development objectives. No further taxes would be required. Yet, aviation, travel & tourism leaders never highlight this in any of their public policy statements.

Instead, the report suggests a number of other financing options, which are already being flagged as “early warnings” by civil society movements. For example, the report argues for pricing mechanisms to conserve usage and consumption of natural resources such as water. This is an implicit reference to a growing push for privatisation of key utilities and pave the way for multinationals to take over in the developing countries. The report argues that such pricing mechanisms are also part of the “enabling conditions” to promote conservation. Many civil society movements would disagree, considering the impact it would have on the poor. Indeed, the report says that proceeds from carbon or energy taxes or from phasing out fossil fuel subsidies could be used to make renewable energy investments more attractive. Such lollipops would include time-bound incentives, notably feed-in tariffs, direct subsidies and tax credits. In other words, “tax Peter to boost the profitability of Paul.”

A third area of early warning is the reference to biofuels. This path, being vigorously pursued by the aviation industry, is also perilous. While it may serve the aviation sector’s goal to cut usage of, and emissions from fossil fuels, civil society is warning of the potential after-effects that could emerge down the road. A boom in demand for fossil fuels will lead to a significant shift in agricultural land use patterns, away from food crops to cash crops. This could impact both prices and supply of agricultural products across the board.

The travel & tourism industry will find the UNEP report very useful to see how it fits in with the much bigger picture, which is what policy-makers and government officials have to consider when making their decisions. It will also be able to assess and benchmark its own environmental performance against those of other economic sectors and possibly fine-tune its own future strategies by drawing upon the activities and initiatives of other industries. A “greener” world is certainly a desirable objective but the aviation and travel industry can expect to get the same level of importance as other industries, no more no less.

A synopsis of the various chapters in the UN Report

PART I: Investing in natural capital

Agriculture: This chapter provides evidence to inspire policy makers to support increasing green investments in the sector, and guidance on how to enable this transformation. It aims to enhance food security, reduce poverty, improve nutrition and health, create rural jobs and reduce pressure on the environment.

Fisheries: This chapter demonstrates the current economic and social value of marine fisheries to the world, and estimates the sector’s full potential if it were managed within the framework of a green economy. It also explores how to foster much needed reforms and channel investment that will help shift marine fisheries to a more sustainable future.

Water: This chapter identifies the contributions that water can play in assisting a transition to a green economy. It makes the case for early investment in water management and infrastructure to make greater use of biodiversity and ecosystem services. It also provides guidance on the government arrangements and policy reforms that can sustain and increase the benefits associated with such a transition.

Forests: The chapter on forests assesses the gap between “business-as-usual” in the forest sector and the role of forests in a green economy. It reviews the current range of green investments in the sector and how they are likely to affect both the timber industry and ecosystem services on which the livelihoods of the poorest depend.

PART II: Investing in energy and resource efficiency

Renewable Energy: This chapter makes the case for increasing investment to green the energy sector with a focus on the renewable energy supply. It describes the current world energy supply and the growing role of renewable sources of energy within it, as well as discusses the challenges and opportunities facing both governments and the energy sector.

Manufacturing: This chapter looks at the costs to the sector under a “business-as-usual” scenario and offers a number of strategic approaches to encourage green manufacturing investments in different technologies. It argues that investing in greening manufacturing can often be profitable to business and increase employment, while reducing pressure on the environment.

Waste: The chapter identifies the contributions that the waste sector can play in assisting in a transition to a green economy. It provides guidance for policy makers, and identifies the economic, environmental and social impacts of investments in the waste sector.

Buildings: The chapter makes a strong economic case greening the building sector, and provides guidance on policies and instruments needed to bring about this transformation. The chapter encompasses both new construction and the retrofitting of existing buildings, with a focus on urban areas, which are expanding and now home to more than half of the world’s population.

Transport: This chapter examines the role of transport in a green economy. Drawing on the Avoid, Shift and Improve strategy, it highlights the challenges and opportunities of shifting to a greener transport system. It also examines the various options and conditions required to enable such a transition.

Tourism: This chapter shows how green investment in this sector can contribute to economically viable and robust growth, decent work creation and poverty alleviation, while improving resource efficiency and minimising environmental degradation. It makes the case for investing in “greening” the sector and provides guidance on how to mobilise such investments.

Cities: The chapter makes a case for green cities. It describes the environmental, social and economic consequences of greening urban systems and infrastructure, and provides guidance to policy makers on how to make cities more environmentally friendly. It includes a summary of green practices and looks at the enabling conditions needed foster green cities.

China Backing Green Sectors As Never Before

(Full text of the UNEP media release on the report)

Beijing, 16 November 2011 – A new UN report demonstrates that governments and businesses alike are taking steps to accelerate a global shift towards a low-carbon, resource-efficient and socially inclusive green future. From China to Barbados, Brazil to South Africa, countries are developing Green Economy strategies and activities to spur greater economic growth and jobs, environmental protection and equality.

In a statement issued on the release of UNEP’s flagship report, Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication, UN Secretary General Ban Ki Moon said: “With the world looking ahead to the Rio+20 UN Conference on Sustainable Development in June 2012, the UNEP Green Economy report challenges the myth that there is a trade-off between the economy and the environment. With smart public policies, governments can grow their economies, generate decent employment and accelerate social progress in a way that keeps humanity’s ecological footprint within the planet’s carrying capacity.”

Key Messages

The report, a result of a three-year global research effort involving hundreds of experts, underwent a three-month public review before being unveiled today. It confirms that an investment of two percent of global GDP across 10 key sectors is what is required to kick-start a shift from the current brown, polluting and inefficient economy to a green one.

(+) The report estimates that such a transition would grow the global economy at around the same rate, if not higher, than those forecast, under current economic models.

(+) But without rising risks, shocks, scarcities and crises increasingly inherent in the existing, resource-depleting, high carbon ‘brown’ economy, says the study.

(+) In addition to higher growth, an overall transition to a Green Economy would realize per capita incomes higher than under current economic models, while reducing the ecological footprint by nearly 50 per cent in 2050, as compared to business-as-usual.

(+) The Green Economy Report acknowledges that in the short-term, job losses in some sectors – fisheries for example – are inevitable if they are to transition towards sustainability.

(+) However, it adds that over time the number of “new and decent jobs created” in sectors – ranging from renewable energies to more sustainable agriculture – will, however, offset those lost from the former “brown economy”.

As a result, a growing number of countries are undertaking activities to accelerate this transition. At the China Council meeting this week, for example, the government’s international advisory group is expected to put forward its own study for moving towards a Green Economy.

China is the world’s lead investor in renewable energy, overtaking Spain in 2009 and spending US$49 billion in 2010. Overall, China is committed to spending US$468 billion over the next five years, more than double the previous five years, on key industries, including renewable energy, clean technologies and waste management.

“China considers the Green Economy to be a strategic choice in an increasingly resource constrained world, and we have made that choice in our development plans,” said Mr. He Bingguang, Director General of the Department of Resource Conservation and Environmental Protection in China’s National Development and Reform Commission.

“We appreciate UNEP’s contribution in promoting a global Green Economy transformation, which holds the potential for all countries to benefit,” he added.

Some countries, such as Barbados, Cambodia, Indonesia, the Republic of Korea and South Africa, already have national Green Economy plans that reflect the report’s recommendations.

Others such as Armenia, Azerbaijan, Egypt, Kenya, Jordan, Malaysia, Mexico, Nepal, Senegal and Ukraine are focusing on greening priority sectors, such as agriculture, renewable energy, tourism and clean technologies.

Today in Rwanda, East African countries are meeting to explore how laws and regulatory frameworks can help drive a Green Economy at the national and regional level. Participants from Burundi, Kenya, Tanzania and Uganda, as well as Rwanda, will examine case studies and continent-wide initiatives, the latter being led by the African Union.

On the business side, UNEP has teamed up with 285 of the world’s leading investors, representing US$20 trillion in assets, who called on governments to mobilize action on climate change, including investments in emerging industries – like renewables and green buildings. Similar calls have been echoed by the International Chamber of Commerce, which represents hundreds of thousands of businesses in more than 130 countries.

“The elements of a transition to a Green Economy are clearly emerging across developing and developed countries alike. There are now some nations going further and faster than others which is in many ways generating a ‘pull factor’ that, if maintained, may bring others along over the coming months and years,” said Achim Steiner, UN Under Secretary General and Executive Director of the UN Environment Programme (UNEP).

The recent drive in clean investment is not only benefitting emerging economies, but also other developing countries. According to the latest Bloomberg figures, global investments in renewable energy jumped 32 per cent in 2010, to a record US$211 billion. After the emerging economies of Brazil, China and India, countries in Africa posted the highest percentage increase of all developing regions.

In Egypt, renewable energy investment rose by US$800 million to US$1.3 billion as a result of the solar thermal project in Kom Ombo and a 220 megawatt onshore wind farm in the Gulf of Zayt. In Kenya, investment climbed from virtually zero in 2009 to US$1.3 billion in 2010 across technologies such as wind, geothermal, small-scale hydro and biofuels.

In the California Mojave Desert, one of the world’s largest solar-thermal power plants is under construction and others are also being built in Spain and other parts of the United States.

“The Durban climate convention meeting in a few weeks’ time and Rio+20 next year are key opportunities to accelerate and scale-up the Green Economy. Central cooperative actions range from advancing Reduced Emissions from Deforestation and Forest Degradation (REDD+), moving on green procurement to switch national efforts into the sustainability space up to a new indicator of wealth that goes beyond GDP and internalizes the costs of pollution and degradation while bringing the true value of the planet’s nature-based assets into calculations of a successful and sustainable economic path,” said Mr. Steiner.

A series of UN-backed regional consultations on the Green Economy have underscored the growing interest in the report. While issues of financing and trade need to be addressed further, there is an acknowledgement that the current economic model, based solely on GDP growth, has resulted in the gross misallocation of capital and inequitable distribution of wealth.

The Report shows that investing the equivalent of two per cent of global GDP into agriculture, energy, buildings, water, forestry, fisheries, manufacturing, waste, tourism and transport would not only shift the global economy onto a more sustainable growth trajectory, but it would actually maintain or increase growth over time compared to the current business-as-usual scenario.

Policy recommendations on each of the 10 key sectors, as well as on finance and enabling conditions, are outlined in the report.

On transport, for example, the report suggests that prices need to take account of the societal costs accumulated as a result of congestion, accidents and pollution, which in some cases amount to over 10 per cent of the national or regional GDP. In Beijing, a 2009 study estimated that the social costs induced by motorized transportation are equivalent to between 7.5 and 15 per cent of the city’s GDP.

Globally, the transport sector’s impact on natural resources is wide-ranging, from the manufacturing of vehicles, which uses metals and plastics, to its use of fossil fuels, which involves engine oil, rubber and other consumable materials. Between 2007 and 2030, the transport sector is expected to account for 97 per cent of the increase in the world’s primary oil use.

With the number of vehicles in China expected to more than triple during this period, the government is promoting low-carbon, energy efficient cars and related infrastructure. In the city of Shenzhen, home of China’s first electric car, plans are underway to build large recharging stations and replace traditional buses with more than 7,000 electric ones in five years time.

Generating Jobs

The Green Economy Report suggests that over time “new and decent jobs” will be catalyzed in these key sectors. A recent study by ILO and the Chinese Academy of Social Sciences (CASS), entitled, Low Carbon Development and Green Employment in China, confirms that this is the case.

It provides a list of likely winners and losers and the scale of direct and indirect impact involved to identify net gains. It concludes that while 800,000 workers in small coal power plants in China are likely to lose their jobs due to climate mitigation actions, some 2.5 million jobs could be created by 2020 in the wind energy sector alone.

Currently, Denmark is home to the world’s top wind turbine manufacturer in terms of market volume, and China is in second place, followed by the United States and then another Chinese company. Germany ranks fifth. However, Germany has recently committed to scale up its renewable energy, following a decision to phase out nuclear power by 2022, and has thus set a target to source 35 per cent of its electricity from renewable energies by 2022, instead of the earlier target of 19 per cent.

In Africa, despite recent economic gains, there is increasing interest in creating green and decent employment. Representatives from 11 African countries met in June this year with ILO, UNDP and UNEP to look at case studies in the areas of recycling, sustainable construction and natural resource management. As a result, participants adopted action plans for creating green jobs in fisheries, agriculture and forestry, sectors which represent over 70 per cent of the employment in the region.

In Brazil, the ILO recently helped support the construction of 500,000 new homes with solar heating systems, resulting in 30,000 new jobs. In South Africa, a similar project on water ecosystem restoration created 25,000 green jobs for previously unemployed people, and at the same time, restored vital freshwater sources.

Generating Social Equity

Approximately two billion people live on smallholder farms, and despite making a significant contribution to food security, the majority of these farmers are malnourished and live in poverty. Low prices, unfair trade practice and a lack of transport contribute to their dilemma. The Green Economy Report argues that by moving to more sustainable agriculture practices, these farmers could increase their yields and profits.

Globally, an investment of US$100-300 billion per year in green agriculture, between now and 2050, could lead to better soil quality and better yields for major crops, representing a 10 per cent increase over the current business-as-usual strategies. As many of these farmers are also women, any benefits would most likely be shared with their families and communities.

The waste sector is another area that is expected to enhance social equity. Efforts to green the sector are often driven by cost savings, environmental awareness and resource scarcity.

However, the report notes that greening the sector not only requires improving the often sub-standard waste treatment and disposal facilities, it also entails training the workers, providing more equitable compensation and ensuring proper health care protection for them. Decentralizing large scale, capital-intensive waste management operations could also provide more employment opportunities in the community.

Electronic waste (or e-waste) is also a concern, particularly for developing countries. Current estimates suggest 20 to 50 million tonnes of e-waste are generated each year, while trade in waste becomes more prevalent, heightening threats to human health and the environment.

As sales in mobile phones and computers continue to grow in China, India, and across Africa and Latin America, the report finds that resource recovery and recycling offer the greatest potential in terms of contributing to a Green Economy.

Notes:

Rio Earth Summit: In 1992 the UN Conference on Sustainable Development, popularly known as the Rio Earth Summit, was convened in Rio de Janeiro, Brazil, to address the state of the environment and sustainable development. In June 2012, there will be the follow up meeting or Rio+20 in Brazil, where one of the main themes governments are expected to address is Green Economy “in the context of sustainable development and poverty eradication”.