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.

Dear Professor Lu Mai, dear Professor Liu Shinjin, ladies and gentlemen,

It is an unusual honour for me to be invited to this keynote address, which I have put it under the title of Resource Productivity.

Fig 1

This title contrasts with the preoccupation with labour productivity during the last 200 years of technological progress. Labour productivity has been the melody of the first Industrial Revolution. It increased twentyfold or more during those 200 years. This has been the basis of prosperity and it is the main theme of China’s stunning economic progress.

During those same 200 years, the world has also seen a systematic decrease of prices of natural resources.

Fig 2

This invited mankind to a wasteful use of those resources. Small wonder, then, that resource productivity was stagnant or even decreasing during much of this time.

Let me submit to you that we cannot continue on this road. It may be wise, chiefly for the industrialized countries to slow down the further increase of labour productivity while forcing the increase of resource productivity.

Forcing resource productivity has become an imperative also for the developing countries that cannot afford a wasteful use scarce resources. Obviously, this consideration was at the roots of planning this conference. The new trend in technological development, namely a strong emphasis on resource productivity, may be triggered by the recent increase of resource prices:

Fig 3

For China in particular, the rising commodity prices were a signal of warning. But then, you have additional reasons to become more resource efficient. It would allow you to simultaneously reduce one major health problem, namely pollution-caused mortality in your industrial agglomerations:

Fig 4

Clearly, air pollution should also be addressed directly by appropriate pollution control measures. These have an additional cost, which however, is far exceeded by the economic benefits for China, according to Stefan Hirschberg et al (2003) of the Swiss Paul Scherrer Institute:

Fig 5

China is going through the standard development with regard to pollution: Countries start poor and clean. Then they industrialize and get rich and dirty. And then they rich enough so that they can afford pollution control and end up rich and clean:

Fig 6

It has been the traditional view of the developing countries that they are too poor to pay for pollution control. As Indira Gandhi said it in 1972 at the first UN Conference on the Human Environment in Stockholm: “Poverty is the biggest polluter”

Fig 7

Indira Gandhi’s slogan went down well not only with the political leaders of developing countries to whom it was a nice excuse for not acting on pollution control, but also for industry in the North that could conveniently say that they needed good profits for the sake of the environment.

The trouble is that today’s biggest environmental problems, biodiversity losses and climate change, are chiefly caused by the rich.

Fig 8

Regarding biodiversity, the biggest problem is habitat losses due to increased land use for agriculture, settlements, mining, energy and transport. You can estimate the acreage that is needed per person for a sustainable supply of all the daily goods and services. This is then the “ecological footprint” according to William Rees and Mathis Wackernagel, caricatured in the next picture:

Fig 9

The ecological footprints of average Chinese people are roughly one hectare. We in Western Europe have footprints four times as large, and in the US and Canada, footprints are even eight times that size. If all 6.3 billion people had US type lifestyles, we would need three to four planets Earth to accommodate all their footprints. This is obviously unsustainable.

The other big problem is global warming. Global temperatures have been rising and falling over the last 160.000 years in close correspondence with CO2 concentrations.

Fig 10
Based on the physics behind this correlation, the Intergovernmental Panel on Climate Change (IPCC) has projected temperatures to rise dramatically during our century:

Fig 11

The consequences could be alarming for water, food security and for biodiversity. You would also have to count with more devastating typhoons and, most dangerous perhaps, with a rising sea water table, indicated by the green line in the next picture.

Fig 12

The difference between high and low water tables is more than 100 metres, which means that coast lines will heavily vary. The next picture shows it for Italy. 20.000 years ago, during the last Ice Age, the Sea was lower and Italy was larger than today. But two million years ago there were no polar ice caps (and also the geological situation was different in the Mediterranean Basin) so that Italy was much smaller:

Fig 13

At present, we see a dramatic change of temperatures in the Arctic region, as has been discussed in the Arctic Climate Impact Assessment (2004). The summer freshwater coverage of Greenland has increased more than fourfold in ten years:

Fig 14

We are unable to predict the consequences of this development. But we know from historical records that ice masses can collapse or glide into the oceans in a very short period of time. This has been the case with the ice shield once covering Labrador and the Hudson Bay, which disintegrated during a few decades, perhaps even a few weeks some 7800 years ago, letting the sea water table rise by some 7 metres:

Fig 15

Imagine what such a mega-event would mean for China’s or Japan’s coastal areas, or for the Netherlands or Egypt or Florida!

What do we have to do to prevent such disasters from happening? It is plausible that at least we should try to stabilize CO2 concentrations. This, however, will require us to reduce annual CO2-emissions by 60-80 percent, according to the IPCC. Let us optimistically assume that 50 percent will do. But under the present trends, we shall get exactly the opposite. We are heading for a doubling of CO2-emissions:

Fig 16

China, India and other countries are drastically expanding their industrial outputs, their motorized transportation and their energy consuming housing and agriculture. So we shall see China and India to have emissions similar to those of the US:

Fig 17

Fig 18

The world energy pie shows that worldwide we have still an overwhelming dominance of fossil fuels.

Fig 19

In Europe, we have begun systematically to work on the reduction of CO2-emissions. The trading began in December, 2004. Initially, the prices paid per ton of CO2-emissions were at around 8 Euros. Meanwhile, prices have roughly doubled.

Fig 20

One component of our combating greenhouse gas emissions has been the increase of renewable sources of energy. In Germany, we have been quite successful in this:

Fig 21

We were very glad to see a large Chinese delegation at the Renewables 2004 conference in Bonn last year, and many said that China was about to copy the German system and is now planning another such conference this November. However, for all their merits, the renewables will not suffice to solve the problem. The energy pie is simply too large and must be reduced if we want to fight global warming and also avoid a dangerous dependence on nuclear power.

The key to the answer will be a Second Industrial Revolution focussing on the strategic increase of resource productivity. This has been the vision in the book “Factor Four. Doubling Wealth, Halving Resource Use”, which was also translated into Chinese:

Fig 22

It has been known for a long time that lower energy intensity is a sign of modernity:

Fig 23

We therefore see the Factor Four story as a true continuation of technological modernization and progress.

Let me now open a window for you to look into the new universe of eco-efficient technologies. The pictures will mostly compare existing technologies on the left hand side with new technologies on the right hand side that are some four times, or even ten or a hundred times more resource efficient than the old ones.

Fig 24

Let me start with my co-author’s Amory Lovins’ favourite idea, the “hypercar”, which allegedly does 150 miles a gallon, or needs only 1,5 litres per 100 kilometres.

Fig 25

Some remain a bit sceptical about its success but according to Amory, some 2 billion dollars have already been invested in the concept.

Fig 26

The next is Amory Lovins’ institute and home, the Rocky Mountain Institute, high up in the Rocky Mountains, which during much of the year is largely energy-self-sufficient and is easily a factor of ten better regarding energy than typical mountain.

Fig 27

The concept has been transferred ten years ago to ordinary apartment houses in Germany and elsewhere, as “passive houses” making use of solar heat and of heat exchange ventilation.

Fig 28

In my political constituency, Stuttgart, or rather in nearby Fellbach, we have a true zero-external-energy house. It has become a tourist attraction. And part of the excess energy it produces is channelled into a super-efficient car.

You all know the efficient light bulbs that need only a quarter of the electricity used in old incandescent bulbs. China has become the largest manufacturer worldwide of the efficiency bulbs. However, as most of you know, this is not yet the end of the road. Light diodes are coming up that are yet another factor of two or three better than the efficiency bulbs shown on the picture.

Fig 29

This is a small cooling chamber to replace the refrigerator that stands freely in the kitchen. Two weeks ago, I met with a Japanese gentleman who told me that even freely standing refrigerators have now been developed that are seven times more energy efficient that the old ones. The new development was probably triggered by the “Top runner programme” of Japan.

Fig 30

Fig 31

If you replace the old-fashioned filing cabinet technology by CD ROM’s you save more than a factor of ten and you have easier access to your data.

Fig 32

Water scarcity is one of the biggest problems of China. You may therefore be interested in a technology used in Germany that has reduced water consumption twelve fold in paper manufacturing, chiefly by systematically recycling and cleaning waste water.

Fig 33

My friend Professor Ryoichi Yamamoto of Tokyo once sent me the above picture showing a thin rod of steel that has the strength and capacities of otherwise ten times more resource consuming steel.

Fig 34

Video conferences are, of course, something like a factor of one hundred more energy efficient than the otherwise necessary business travel. I admit that video does not easily substitute for a business meeting on the Bahamas.

Fig 35

This is the story of modern, energy intensive agriculture. Winter tomato grown in greenhouses in Holland tend to need a hundred times more energy than they afterwards contain! With intensive cattle farming, the ratio is hardly better. Organic farming, on the other hand, is roughly by a factor of four more energy efficient.

Fig 36

This is the well-known strawberry yoghurt saga established by Stephanie Böge at the Wuppertal Institute. Lorries criss-cross Europe and drive some 8000 kilometres for the manufacturing of strawberry yoghurt. Obviously you could do at least ten times better.

So much perhaps to encourage you to think further about the upcoming technological revolution. Let me close by making a few remarks about methods to arrive there.

China is one of the countries that has established efficiency standards for cars. To meet the 2008 standards, many European and American car manufacturers have still to do considerable homework, while Toyota is well prepared.

Fig 37 [*]

In the business world we seem to see a slight competitive advantage of eco-efficient companies listed in the Dow Jones Sustainability Index over the average listed in the Dow Jones Group Index.

Fig 38

And if you compare different countries using the World Economic Forum’s Competitiveness Index you see a positive correlation with the Sustainable Development Index of countries.

Fig 39

So we seem to be on a good way. However, this is all too slow to reach the necessary factor of four. Let me in closing say a few words about instruments. I am impressed with what I heard in China about the determination with which you are creating incentives for more resource efficient technologies. Moreover, Douglas Ogden this morning mentioned the possibility of tax refunds for companies that achieve ambitious standards, and James Sweeney spoke about appropriate pricing.

Japan has gone a considerable step further with her “top runner programme” that makes the most energy efficient appliance or vehicle the top runner or standard and announces shame on those companies in a few years that still sell outdated, less efficient items. Ultimately they even have to pay a fine.

Germany and other countries have adopted an ecological tax reform to reduce the fiscal load on human labour while making natural resources more expensive.

And at the G 8 Summit that takes place in a few days, we hope countries agree on a geographical extension of climate policy beyond “Kyoto”. We hope that also China, India, Brazil etc will be invited under fair term to join international climate policy.

For this, the North has to understand that the present “grandfathering” approach is unfair to the developing countries and has to be replaced step by step by a system based on per capita allowances, – which would be good for China and India.

Mr. Chairman, ladies and gentlemen, I feel that the race is on worldwide among countries and among companies to take the lead in the Second Industrial Revolution that is driven by the second melody of progress, the melody of a revolutionary increase of resource productivity.

Thank you for your patience and attention!

References

• Hirschberg, Stefan, et al. 2003
• Rees, William and Mathis Wackernagel
• Von Weizsäcker, Ernst Ulrich, Amory Lovins and Hunter Lovins. 1997. Factor Four. Doubling Wealth, Halving Resource Use. A Report to the Club of Rome. London: Earthscan. Also available in Chinese and ten other languages.

[*] After the lecture, I was approached by a reresentative of General Motors who said that GM had also met the standards with cars exported to China.

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.