A Panel Report on Biofuels, coordinated by Dr. Stefan Bringezu of the Wuppertal Institute, is under preparation and should be published this Summer.

The Working Group on international metal flows is coordinated by Professor Thomas Graedel of the Yale School of Forestry and Environmental Studies.

The Working Group on decoupling economic wellbeing from resource consumption and environmental impacts, which I am coordinating, may publish its report in time for the World Resources Forum in Davos, Switzerland, 16 September, 2009.

Another Working Group on “Prioritization” (meaning to identify the most urgent fields of action) has just agreed on its Term of Reference; its coordinator is Professor Edgar Hertwich from Norway.

A fifth Working Group under the guidance of the Panel’s Co-Chair, Dr. Ismail Serageldin, Egypt, is likely to be established at the Panel’s next plenary meeting in Paris, first week of June, 2009. I am co-chairing the Panel with Dr. Serageldin.

There is one unchallenged parameter for quality rankings of universities: publications in peer-reviewed journals. The same holds for quality measurements of candidates applying for professors’ chairs at ambitious research universities. Peer-reviewed publications typically have a rather narrow disciplinary scope. Moreover, the flow of research money also follows disciplinary logic. The scientific peers deciding on research grants tend to share the same mentality with the publication peers. All this makes for a strong bias in favour of disciplinary excellence when academic quality is measured.

The bias is exacerbated when the ranking of journals is taken into account. For academic research careers, you have to show publications in so-called “A journals”. Their peer review tends to be strictly disciplinary, although top journals like Nature or Science have a multidisciplinary appearance and at least encourage some interdisciplinary consideration of a paper’s impact.

In public debates about this bias, representatives of the disciplines would reply that their impact is universal and their methods often come from neighbouring disciplines, so they are not so “disciplinary” as they may look. But that is no satisfactory excuse, given the fact that some of the biggest research challenges of our days find no adequate resonance in the submitted papers sections of A journals.

The general public as well as politicians and the media are aware of the quality rankings of universities, research institutions and countries. The most popular and most visible indicator is, of course, the head count of Nobel Prize winners. What politicians and the public are typically unaware of is the strong disciplinary bias that governs publications in A journals and even more the Nobel Prizes. These exist only for three natural science disciplines, physics, chemistry and medicine/physiology. The Peace and Literature Prizes are outside academia, and the Economics Prize, since 1969, is not a Nobel Prize proper but the Swedish Central Bank’s Prize in Economic Sciences “in Memory of Alfred Nobel”. Even this has become more and more a prize reflecting disciplinary excellence.

Complex systems and truly transdisciplinary problems are at a disadvantage when it comes to peer-reviewed journals, university rankings and academic careers. It is not easy at all to measure the extent of that disadvantage because scientists aiming at academic careers typically don’t even try to address complex and transdisciplinary problems, knowing that it would be difficult to find adequate journals.

Practical problem solving requires interdisciplinary research

Real world problems such as the ecosystem of the Black Sea and its eutrophication; the cultural determinants for the spreading of contagious diseases; or explanations for the miraculous growth since fifteen years of the Chinese economy, require interdisciplinary approaches. Solving them typically is a highly political affair, and quick results are rare. It may take decades to prove a hypothesis. Researchers engaging in such complex problems cannot realistically hope to win a Nobel Prize or similar honours during their life time. Universities that are in need of public recognition, i.e. high academic ranking scores, tend also to neglect interdisciplinary research even if they are encouraged by governments, local communities or the private sector to engage in it.

According to Einstein, we cannot solve problems using the methods that have created the problems. But in the present mindset, humanity tries exactly to do that. Many of the problems of our world relate to relatively blind applications of science and technology and leaving the steering to market powers or to state bureaucracies. The competition for economic achievement and scientific excellence is a reflection of that mindset. And the mechanism of scientific quality control nearly excludes the growing of sciences that analyse the complex, non-disciplinary nature of the prevailing destructive mechanisms.

A chance for Europe

Universities in Europe may be well positioned just to take a bold and new approach and embrace complex, interdisciplinary research. As a rule, they are not in a position financially to compete with disciplinary excellence of the mega-enterprises of US American universities. The latter can throw hundreds of millions of dollars at one problem such as the biochemistry of Alzheimers disease. Given the history and culture of European countries, European universities may well be better equipped than their American counterparts to successfully work on the fascinating array of complex and interdisciplinary problems our world is facing. Europe provides unique “laboratory” conditions for the study of some of the biggest real world problems.

Let me sketch out some of the problems that are worth studying:

• Healthy societies need a fair balance between public and private goods, or else between democratically legitimated laws and the powers of markets. Today’s markets are international, while laws remained national. This gives markets an unfair superiority over the law. Only through international legislation do we have a chance of re-balancing public and private interests. The EU tries to do exactly that. We need to study how well that works and what the limits and what the obstacles are.
• Global warming has become the highest environmental concern. Which are the realistic measures of mitigation and what can we do in terms of adaptation? I suppose we are in need for a new technological revolution that allows us to more or less de-couple economic and social well-being from the growth of energy demand. But which are the technologies doing that? And which are the policies to give those new technologies a realistic chance to take off?
• Ageing societies are in need of a fundamental restructuring of their social security systems. I suppose that on average people will have to work some five years longer. But they need not do the same work that has been designed for people aged 25–50. In fact, there are hundreds of societal and economic functions that can be better performed by the elderly than by the young. Think of all the tasks requiring experience, judgement, caution and care. In addition, there are many functions where age represents at least no major disadvantage. The respective jobs have to be designed, and regulation has to be developed and adopted encouraging the elderly to accepts the new assignments.
• Globalisation, migration and rapid structural change have put an enormous stress on people. In part that can be answered by life-long learning, – an exciting challenge to our educational system. In part, however, the new rapid changes have made people insecure, fearful and often wildly angry. In this state of mind, many have resorted to fairly primitive, often fundamentalist religions. The nexus between rapid-change economies and religious fundamentalism has consistently been denied. I suggest it should be addressed.

These are four out of perhaps fifty major and complex questions waiting to be addressed. Let me venture to say that old Europe, after having gone through the abysses of political fundamentalism, ethnic and racial violence and devastating wars, has emerged to be uniquely qualified to address such kinds of complex and intricate problems. The European unification movement, starting with Robert Schuman, Konrad Adenauer and Alcide de Gasperi and leading in 2007 to the 27 members European Union stretching from the Atlantic to the Black Sea, has been a unique success story, unparalleled in human history, of peace making, of multiculturalism, and of cultural and scientific rejuvenation. We Europeans should not be shy about ourselves, even if China has higher growth rates, the USA have a more formidable military power, and the Islamic world shows a more passionate dynamism. Hasty growth, powerful armies and aggressive passion may turn out to be part of the problem rather than part of the solution.

Opportunities for the elderly

It would lead too far into fields beyond the competence of the author to expand further on European visions. Instead, I choose to use the Festschrift for one of the grand old men of intellectual Europe as a welcome occasion to say a few words about new opportunities for the elderly.

The demographic transition from the predominance of the young in a growing population towards a stable population with a high proportion of old people is typically deplored by politicians, journalists, and by the managers of the pension systems.

In reality, I suggest, this is the natural and unavoidable state of a “sustainable” society. It also represents a new cultural universe full of exciting new opportunities. One of them lies indeed in harnessing the specific capacities of the elderly.

Let us begin with the family. What is a better holiday from young families’ stress than leaving the children under grandparents’ supervision? Actually, children tend to like that too, for a change, exploiting the seasoned habits of tolerance of the old generation.

But we can go further into public life and the private sector. Who is there in the local community to defend and protect cultural heritage and the beauties of the environment? Who is there to come with wise judgement as opposed to profit maximising options for the economically powerful? Who has the time to welcome guests from near and far and make them feel at home? Who can repair an old radio manufactured in 1970? And who is so attached to the village or the small town not to be lured into the already overcrowded megacities? It’s all the old generation folks.

One word about social security. The present system of employment knows one sharp moment in one’s life where retirement begins. Only self-employed people such as farmers, doctors, independent craftsmen or artists have maintained the habit of a gradual retirement. It is the masses of employed people who constitute the “demographic problem” as they sharply retire by the millions. What I suggest is not what is presently introduced in Germany, namely a mechanical prolongation of the work life before retirement from the age of 65 to 67. What I would find a lot more attractive is the establishment of a “third phase” of life with new job opportunities for the elderly and with very flexible working hours. The elderly would have options how much of the pension benefits earned during the “second phase” of ordinary work they want to consume during their third phase. The earlier they do that, the lower the benefits. Conversely, if they gainfully work in the third phase until the age of eighty without touching their benefits from the second phase, then they would earn bonanza payments easily three times as high as normal after retiring from the third phase. All sides would benefit: Gainful and meaningful work beyond second phase retirement means added value to the economy; the public or private pension funds benefit from not having to pay for fifteen years; and the elderly workers enjoy satisfaction and a significantly higher income during their old age. Sweden has introduced a somewhat similar system (without explicitly speaking about a third phase) and has reduced youth unemployment dramatically, chiefly because there was more added value around, from which added employment arose.

Virtues of 21st century universities

Let us now go a step further into the academic world that has been particularly impatient kicking the elderly out, – because they seemed incompetent to publish in A journals. If the complex and interdisciplinary problems of which I mentioned a few are to be addressed, it will be specifically the wealth of experience and oversight of the old generation scientists that qualifies them. The scarce resource in such fields is not methods of mathematics or molecular biology that impress the peers working for the A journals. It is rather the judgement about which elements from quite different disciplines are needed to be brought into a synergistic relation.

Think of the challenge of re-balancing public with private goods. That work will require an understanding of internationally mobile capital; international law, notably trade law; some history and philosophy of public goods and democracy; concrete experience with successful public-private partnerships; knowledge of the working methods and legitimacy of civil society groups, etc. etc. The disciplinary departments of political science or economics or law would be completely overwhelmed by the complexity of this challenge. Hence they tend show no inclination to engage in that kind of research and they don’t reach out to other departments to overcome their perplexity.

The study of global warming faces similar challenges. Here there is need of first class scientists of meteorology, botany or ocean dynamics to cope with the challenge, but also questions abound of international law, capital markets, political analysis, civil society or technologies.

All the assumed fifty odd complex questions referred to earlier show the same feature of needing disciplinary facts and interdisciplinary reasoning and analysis. In most cases, academic study is just not enough. Universities also need to leave the ivory tower and interact with real world actors in the public and private sectors. This is a demand that cannot be easily met by academic youngsters. They tend to be too impatient, too ignorant of the needs and limits of public life, or too greedy of making money in the private sector.

It is my belief that European universities of the 21st century should try to excel in the study of such complex, interdisciplinary problems. Also academic teaching would benefit from it, because universities should not graduate their students packed with disciplinary knowledge and methods and without exposure to the real world complexities. If non-European universities join in, – all the better.

The university staff would highly benefit from a healthy mix of young and old, of “hungry”, impatient researchers and wise and patient scholars having the overview of complex problems. As for the qualifications of the elderly, they must enjoy the mentality of the impatient youngsters but they should also have a credible dignity hat typically comes with age.

It would be the best of all (academic) worlds if also a new generation of A Journals emerged that accepts publications with a definitely interdisciplinary scope, using peers of outstanding credibility and judgement. Peers like Professor Mircea Maliţa!

Festschrift at the occasion of the 80th birthday of Professor Mircea Maliţa, “Coping with Complexity at the Beginning of a New Century”

Tomorrow, we shall discuss the science, management and economics of catastrophes. After Katrina, this is one of the hot debates in this country and the world. I seem to observe some kind of a new mindset setting in and do hope that the Bren School and the business community with which we are cooperating will be part of that shift of the mindset, with a view of reducing the risks of disasters and of arriving at a safe and prosperous world.

I thought to offer you some reflections this evening about the changes of the ecological mindset over the last half century and perhaps about its future.

Catastrophes have nearly always played a central role in creating a new mindset with regard to the environment. But in some cases it was slow disasters rather than sudden events like Katrina. Perhaps the most important chain of disastrous developments in this country surfaced during the 1960s. It was in 1962 that Rachel Carson in her “Silent Spring” described the widespread poisoning of the environment with toxic pesticides, killing millions of birds or their eggs and driving the bald eagle close to extinction. That gave an outcry of anger in the country about the chemical industry. Soon later you had that unbelievable burning water on the Cuyahoga river in Ohio. All of a sudden, then, it became politically correct also to complain about the air quality in LA or in Pittsburgh.

In Japan, it was chiefly mercury and cadmium pollution that killed fish and fishermen, (the Minamata and Itai-Itai diseases) and the terrible air quality in the two big agglomerations forcing traffic policemen to wear face masks all day. In Germany, the biggest trigger of environmental consciousness was the dieback of forests, and in Italy it was the Seveso disaster releasing tons of dioxin and killing people in the neighbourhood of the factory.

In response, all these countries developed regulation to control dangers and pollution. Pollution control became the core the ecological mindset in the 1970s and 80s. In the US, you had the Clean Air Act, the Clean Water Act. And California always went a step ahead e.g. with its clean cars regulation.

But then, with the political paradigm shift during the 1980s away from state intervention and pro free markets, the environmental movement suffered severe setbacks. Too much had it relied on state intervention and strict regulation.

One of the reasons why the movement got weaker was actually the good news that air and water quality had conspicuously improved over the years in all the rich countries. This made it possible to say in some quarters that environmentalists had overdrawn their cause and had become a real nuisance.

Moreover, the business community and the state could argue that the remarkable 20 or 30 years success story of pollution control was achieved by investing a lot of money in pollution control. The evidence was striking that countries could afford pollution control only if they had become rich in the first place. And turning directly to the activists you could remind them that on the market place organic food was more expensive than conventional produce. So if activists were opposing economic growth or further exploitation of natural resources, you had a convenient ecological argument against them.

The idea of “become rich first and take care of pollution control later” was an integral part of the ecological mindset of those years. And it served as a wonderful excuse for poor countries not to do too much for their environment. Thus the pollution control paradigm was extremely convenient for everybody.

But I am afraid that the days of this current paradigm and mindset may be over. Some very uncomfortable facts and forecasts are creeping in, most notably in the context of climate change. Uncomfortable because it turns out that it is chiefly the rich who cause the largest environmental impact. They have much higher carbon dioxide emissions than the poor. And they have an enormous need for land outside their own countries. Japan, Germany and to a lesser extent the US are exporting some of their environmental problems to poorer countries by importing timber, meat and fruits from those countries.

Of course, you see politicians trying hard to maintain the old, convenient paradigm. The ideal way of doing this is by singling out costly measures of climate protection, such as carbon sequestration, or costly measures of nature protection such as buying land with a view of idling it. Such costly measures allow us conveniently to pursue a “business as usual” strategy.

Let me submit that this strategy, as convenient as it may look at first glance, doesn’t really solve the problem. Chiefly because it encourages all six and a half billion people on earth to believe they can begin to cooperate only after having reached our levels of economic strength. By then it will be too late for a million species and for serious climate mitigation measures.

Fortunately, there is another way out. We can decouple economic well-being from carbon dioxide emissions and from excessive land use more or less the way we decoupled wealth from toxic pollutants. The new operation of decoupling will take longer than 30 years but it may actually become a thoroughly profitable operation.

What we would need, at the core, is a new technological revolution. This time, the characteristic of technological progress will in all likelihood be the dramatic increase of resource productivity. Prof. Umesh Mishra and Steve DenBaars, next door in the Engineering building, work on solid state power switching for hybrid cars, leading, so it seems to hybrid cars doing 100mpg. (This, I submit, would make the use of biofuels responsible, while biofuels for a hundred million gas guzzlers would be an ecological nightmare to me!) And Prof. Shuji Nakamura works on solid state lighting consuming just one tenth of the electricity of the outgoing generation of light bulbs. The same factor of ten seems attainable for buildings. The Bren School building is perhaps four times better than comparable office buildings.

This technological paradigm shift is already taking place in East Asia. There they have less energy and mineral resources of their own, and less space. So they are strategically heading for a doubling, if not quadrupling of their resource efficiency. I suggest that the US economy will be well advised to catch up with the Asians because world markets are becoming ever more sensitive in this respect as resource prices keep growing.

Let me close by explaining to you why I am putting so much emphasis on the technological solution side. It has been an experience all along both in medicine and in environmental policy that the readiness to recognize a disaster or a problem was greatly facilitated by the availability of remedies. The discovery of penicillin resistant bacteria was made in the early 1950s but became widely publicized and accepted only during the 1960s after other antibiotics had become readily available. At that time, the pharmaceutical industry, understandably, was the main driving force in publicizing the penicillin resistance problems! Similarly, the ozone depletion was known since the early 1970s but ozone diplomacy got successful only after Dupont had come up with elegant CFC substitutes. I suggest that in America and elsewhere the readiness to take strong measures on climate and biodiversity protection will grow more or less in proportion with the availability of the respective technologies.

That is a much nicer scenario, isn’t it, than waiting for natural catastrophes or business collapses resulting from dinosaur technologies until we wake up to the real challenges of our days.

The answer to this question should be yes and no.

Yes, we are closer than ten years ago. During all of he 1990s, an irritatingly optimistic mindset was dominating the world. The very expression of ‘saving the planet’ would not have been politically correct in these days, because it sounds ‘pessimistic’.

What caused the air of optimism of the 1990s? The Cold War was over, alright, that was a great relief because it was also the end of the fear of a Third World War. Capitalism was celebrated as the only remaining ideology, constituting the ‘end of history’, as Francis Fukuyama put it. In its radical, Anglo-Saxon version it was politically hailed as the engine of growth and thereby as a cure-all, with slogans like “rising tide lift all boats”. ‘Creative destruction’ was seen as legitimate whenever what was to be destroyed had a smell of communism. Well, markets are a growth engine and a healthy cleansing mechanism, but at least two billion people felt outright cheated and exploited. They saw their ‘boats’ sinking, not rising at all.

Stock exchange quotations were another cause of optimism, as they seemed to rise without limits. That was a deception, too, as the collapse of the ‘dot com’ bubble showed in 2000. Concerning the environment, the prevailing paradigm was the optimistic Kuznets curve of pollution, meaning that once countries turn rich they will spend enough money on pollution control, and countries end up rich and clean. In terms of local pollution, the Kuznets curve was a reality, but for global warming and biodiversity losses the paradigm was dead wrong.

I must say, I was in a state of alarm during the late 1990s about the careless optimism and the uncompromising arrogance behind it. I felt rather helpless raising my voice against it.

So I see with a degree of relief that the days of the blatant type of arrogance are over and that it has become almost mainstream once again to address the real problems. What made this sea change happen? There were many different factors. The billions of people in their ‘sinking boats’ are no longer silent. The world community has addressed their situation in the Millennium Development Goals (MDG), acknowledging that markets will not do the trick. The end of the dot com bubble was a wake up call to some but the broader public did not hear the signals until the sub-prime mortgage crisis of 2007, originating in America but spreading worldwide. Some of the once celebrated investment gurus and their institutions got unmasked as irresponsible speculators using the money of credulous clients.

In the political arena, the military and ideological answer to the insidious attacks on the World Trade Center and other targets (‘9/11’), the “War on Terror”, more and more became a nightmare for all parties involved. The arrogant US unilateralism once impersonated by the Rumsfeld-Wolfowitz Pentagon lost its support even in the White House, let alone the US Congress after its mid term elections.

The environment is back on stage, after a quarter century of denial among the leading classes in the USA, and under the weight of evidence from the Intergovernmental Panel on Climate Change and the devastating pollution in the industrial centres of the high growth countries, notably China. The EU has taken the lead in politically addressing global warming, setting up the ETS, the European Trading System for carbon dioxide emissions. The two remaining candidates for the US presidency have expressed a clear commitment on mitigating global warming. China has become very serious about addressing pollution, climate, and energy efficiency. Renewable sources of energy constitute a dynamic growth sector. The Convention on Biological Diversity (CBD) is enjoying increasing visibility in the signatory states, i.e. nearly all states except the USA.

It is fair to summarise, then, that the last ten years have seen a tidal change in appreciation of the real problems the world community. Overcoming the arrogant optimism of the 1990 has been a huge and necessary progress.

It was necessary, but is surely not sufficient for an agenda of saving the planet. This is the core of the No answer.

Global warming got worse throughout the past ten years. New figures and extrapolations, e.g. from NASA’s James Hanson seem to show that stabilising atmospheric carbon dioxide at 450 ppm is far from sufficient and that we should rather aim at 350 ppm, which is still well above the pre-industrial levels of 280 ppm.

Biodiversity losses have accelerated, notably in the tropical countries. Fish stock depletion went on and partly accelerated. China aggressively began to access mineral and energy resources in Africa and elsewhere so as to continue its steep increase of resource consumption. India, Brazil, South Africa, Angola and a few other countries enjoy tremendous growth rates, all based on accelerated resource extraction, at a comfortably high price level. No end of the trend is in sight, not even a flattening of the curves. All countries of the world seem to work under the assumption that they have a right to the same kind of prosperity as the USA. And after many years of brainwashing that the American way of life was the best one could aim at, this assumption is hard to deny. But six or eventually ten billion people living by US American life styles is just not possible. We would need four or five planets Earth to accommodate their ecological footprints, according to the Global Footprints Network.

Thus in terms of climate and the ecological situation, the picture has become quite a bit grimmer, not better.

How can we now deal with this odd combination of the Yes and No answers? I submit that we can break out of the vicious circle of seeking wealth in material growth alone. I suppose we can decouple wealth creation from energy and material consumption very much like we decoupled wealth creation from the number of hours of human labour. The latter was the achievement of the Industrial Revolution. Labour productivity rose easily twenty fold in the course of 150 years of industrialisation. In other words, from one hour of human labour we learned to extract twenty times more wealth. Now is the time to do the same for energy and materials. We can learn and must learn to extract four times, ten times, and eventually twenty times as much wealth from one barrel of oil or from one ton of bauxite as we do today. Technologically speaking, this should not be more difficult than the rise of labour productivity. Resource productivity should become the core melody of the next industrial revolution.

Labour productivity rose in parallel with wages. Rising wages were justified by rising labour productivity, and rising labour cost stimulated ever further increases of labour productivity. Energy prices, on the other hand saw a secular decline (in constant dollars) over 200 years. The latest price hikes have not even brought us back to the price levels of some thirty years ago. Tragically, the political zeal has always been to keep energy prices as low as possible, thereby frustrating most attempts at increasing energy productivity. Energy price elasticity is very much a long term, not a short term affair. Infrastructure investments, which are crucial for an energy efficient society, take a lot of time.

What our societies ought to learn now is creating a long term trajectory of energy prices slowly but steadily and predictably rising in parallel with energy productivity. By definition, this would not cause any hardship, on average. But it would set a clear signal to investors and infrastructure planners that energy efficiency and productivity will become ever more profitable and necessary. It is bound to become more profitable and sexier even than the renewable energies.

If our societies, starting perhaps with the EU, embrace this new agenda of technological progress, and if later historians see the period between 1998 and 2008 the kick-off period for this new technological revolution, I suppose that those historians will agree that this time span has brought us closer to saving the planet.

Let me at the outset distinguish two different tasks of environmental policy.

• One is pollution control which is predominantly a local and a national activity. The first twenty years of environmental policy in European countries were almost exclusively devoted to pollution control, and the role of the European Community – later Union – was chiefly to set standards that aimed at harmonising national pollution control legislation, and that more of environmental professionals both in the public and private sectors deal with pollution control.
• The other task of environmental policy relates to global and long-term challenges such as climate change, biodiversity losses and unsustainable lifestyles. This is rather a new field of concern and is still in its conceptual phase regarding policy making.

Prices can work for the environment in both arenas. But if one pricing instrument is successful in one of the two, it does not necessarily follow that it is applicable for the other as well.

For pollution control, pricing instruments abound and have greatly helped cleaning up the environment. A typical case has been the waste water charge the revenues of which were used to finance water purification installations. This system of charges most widely used in the Netherlands but also in all other EU countries was highly successful environmentally. It never was very controversial. It fully conformed with the polluter pays principle and it had the attraction that he who applied prevention measures in his factory was freed from the charge.

In a wider sense the same applies to user fees, refund systems, violation penalties and tradable emission permits for classical pollutants such as SO2 or NOx They too met with rather little public resistance when introduced.

Let me not lose more time on this subject because we would all agree very soon that prices work well to reduce classical pollution. Nevertheless, if the EEB wants to document the findings of this conference, I suggest to add an expert paper by an environmental economist on many successes and a few failures.

Let me instead turn the attraction to the other subject, of long term and global environmental problems, notably the greenhouse effect and life style changes.

Let me at this juncture mention one major difference between the two fields of concern. For classical pollution control you could say it is good to be rich so that one can afford costly pollution control. Or, with a slightly modified meaning you can quote Indira Gandhi that “poverty is the biggest polluter”. This famous statement goes down extremely well with developing countries, but equally well with traditional business people and other people in the North because it justifies them to go on with traditional growth strategies and claim that this is good for the environment.

The opposite, or nearly, can be observed when we address the greenhouse effect, biodiversity and sustainable life styles. Here clearly prosperity is the biggest polluter.

This is so embarrassing a phenomenon that economists and politicians prefer not to recognise its truth. They hastily invoke the sustainable development triangle which says that economic and social well-being are equally important as a healthy environment. And very soon they return to the comfortable and familiar paradigm of pollution control where economic prosperity was not at all suspicious. You will discover that in their argumentation the environmental corner of the triangle is always classical pollution control. I am afraid, for the time being I have to invite you to be extremely cautious, if you are an environmentalist, when that triangle of sustainability is put forward.

But now comes the shock for us advocates of pricing instruments: In a domain where prosperity is the biggest polluter, all of a sudden, you have to admit that prices are meant to reduce “prosperity”, – at least the kind of prosperity that is causing so much CO2 emissions, land use, traffic and avalanches of materials. If you want to reduce urban sprawl, you have to say that people shouldn’t live in one family homes and commute to work with their cars. You want them to cut their energy and water consumption. You want them to stop buying lots of unnecessary trash goods and having weekend trips to Malaga and Christmas trips to the Seychelles. Don’t expect anybody, let alone democratic majorities to agree with these objectives.

And yet, having said all this, I remain a staunch defender of pricing instruments also for the second set of problems. How can that be?

Well, it is because I am confident that, fortunately for the environment, different modes of prosperity are available. The core of that “sustainable prosperity” is a new universe of eco-efficient technologies. At the Wuppertal Institute for Climate, Environment and Energy we have sketched out the landscape of that new universe. In a book which I wrote together with Amory Lovins, I gave it the simple title “Factor Four”, with the subtitle “Doubling Wealth, Halving Resource Use”.

The book features fifty examples, from automobiles to household appliances, from buildings to logistics, from industrial processes to farming methods, all demonstrating that a factor of four is available in energy or material efficiency.

The factor four universe can be seen as the Promised Land to those who deal with climate change, urban sprawl and biodiversity losses.

But there is a difference again with classical pollution technologies. Waste water treatment technology can be introduced in a matter of five or ten years, depending on the life cycle of the economy’s capital stock. In buildings, it may take fifty years to refurbish the entire stock of houses. The complete renewal of the car fleet may take thirty years. And a reasonable and comfortable reduction of urban sprawl may take a hundred or two hundred years.

“Factor Four” can be seen as the solid rock of technological insights which we need when talking about pricing instruments that work on the second category of problems. If we want to avoid attacking prosperity we should be patient with the existing capital stock.

The long time frame can also be expressed in terms of price elasticity. You would not expect the car fleet to react to an abrupt price signal, unless it is a brutal signal. However, if society knows that energy and other resource prices will go up for a long time with no hope of their coming down again, companies will strategically invest in resource efficient technologies. Consumer education will make resource efficient behaviour a prime objective. Academic engineers and scientists will target the basics of resource productivity. And public planning will shift priorities towards convenient mass transport, agreeable high-density urban planning and high resource efficiency in public buildings, transport systems and disposal concepts. As a result, the factor of four becomes a realistic perspective for all sectors.

Long term price elasticity means that price signals should be mild but predictable. The best of all worlds would be a political all-party agreement over thirty or fifty years to raise prices for scarce resources in very small and predictable steps, preferably in steps so small that technological progress can keep pace.

Please note that I am talking about a price corridor, not a taxation corridor. Taxes or other instruments would be used to reach the price corridor. In this ideal case, the monthly bills for petrol, electric power, water, space, virgin raw materials remain stable and on average the population is not suffering any losses in their lifestyles.

If the fiscal revenues from this operation go into reducing indirect labour cost, you would expect positive effects on the labour markets. And compared to business as usual scenarios, you would see human labour services becoming gradually cheaper, i. e. more affordable for the beneficiaries of that labour.

So much for the ideal world. I felt it was necessary to talk about the ideal world in order to provide orientation in this conflictual theme of price signals on the basic commodities of modern life.

Let me at the end very briefly address some of the practical problems.

First, with reference to the EEB’s campaign motives and targets, let me clearly say that I support them. It will be, however, extremely difficult with regard to reducing internal farm subsidies; it may be possible, however, to reduce export subsidies of farm products. It is reasonable to demand ten percent of all taxes to be environmental and to make the operation fiscally neutral, ie not to increase the overall tax burden.

Regarding the time frame, it is EEB’s right to ask for rapid results, but as a politician I can tell you that our machinery works rather a bit slower. Perverse subsidies too are difficult to remove. They are consistently targeted at politically influential parts of the electorate. Transport subsidies in particular enjoy extremely strong support not only from the immediate beneficiaries but also from the automobile and aircraft lobbies. Moreover, they tend to increase economic turnover which politicians call growth even if it does not contribute to any quality of life. But it is turnover, not quality of life that creates jobs.

Let me say a practical or political word about the price corridor that I am asking for. It is, let me admit it, highly unrealistic in our days. It requires two unusual things at once: a fiscal policy that flexibly responds to world market signals, and an all-party consensus in one area, which is perhaps the favourite battlefield for political parties. Also, it should be said that the price corridor it not easily attained with emission trading and other pure market instruments. An adjustment mechanism may have to be introduced to avoid brutal jumps that can occur in the course of free market fluctuations.

On the other hand, if the public is convinced that this gentle price corridor is a fair deal and the best guide rail to the Promised Land, it becomes increasingly more plausible for political parties to go for it.

This then brings me to my concluding remark. It is essential that we create a strong vision of what is necessary to avoid disasters from fossil and nuclear energy use, from rapid biodiversity losses and from resources. If that vision also contains a realistic and agreeable strategy of how to get from here to there, you will have the people behind you.

PS:

• In the discussion, Dr. Iannis Paleocrassas mentioned that as Greek Minister of Finance he had introduced a fuel tax flexibly responding to world market fluctuations.
• A few days after the conference, the coalition agreement was adopted between SPD and Greens in Germany. It reaffirms the exciting energy tax escalator and foresees a general review by 2004 of the green fiscal reform, with a view to potentially develop it further and more comprehensively.

Further information about the Conference and the EEB can be found on the EEB’s website.