1st quarter 2012 n Jeremy Rifkin n Climate change, climate action n WindMade n ‘Homeland security’ MakingIt n Slovenia Industry for Development
Our low-carbon future NUMBER 1, DECEMBER 2009 NUMBER 2, APRIL 2010 NUMBER 3, JULY 2010 NUMBER 4, NOVEMBER 2010 lWe must let nature inspire us – lThe International Energy l China’s stunning economic l Strengthening productive Gunter Pauli presents an Agency’s Nobuo Tanaka looks at rise: interview with minister of capacity – Cheick Sidi Diarra alternative business model that is energy transitions for industry commerce, Chen Deming argues that the LDCs should – environmentally friendly and l Energy for all – Kandeh l Towards a more productive and can – produce more, and sustainable lHot Topic: Is it Yumkella and Leena Srivastava debate – Ha-Joon Chang calls for better quality, goods l Patricia possible to have prosperity on what needs to be done to an acceptance that industrial Francis on climate change and without growth? Is ‘green growth’ improve energy access policy can work trade l Hot topic: The relevance really possible? of entrepreneurship
NUMBER 5, FEBRUARY 2011 NUMBER 6, APRIL 2011 NUMBER 7, JULY 2011 NUMBER 8, NOVEMBER 2011 lA window of opportunity for l Feeding a crowded world – lThe globalization paradox – l Closing the gender gaps – world trade? – Peter Sutherland IFAD’s Kanayo Nwanze argues Dani Rodrik l Unfair share – Michelle Bachelet on assesses the prospects for the that smallholder farmers must Thomas Pogge on affluent overcoming the barriers that conclusion of a multilateral trade have opportunities to be countries’ responsibility for prevent women from seizing agreement l A path to mutual entrepreneurs l Nestlé CEO increasing global poverty economic opportunities prosperity –Xiao Ye on trade Paul Bulcke on ‘Creating Shared l Hot topic: Is nuclear power l Engineering eco-friendly between sub-Saharan Africa and Value’ l Hot Topic: Does energy necessary for a carbon-free solutions – Carolina Guerra on China efficiency lead to increased future? hazardous waste in Colombia energy consumption? l Hot topic: Growth: the end of the world as we know it?
A quarterly magazine. Stimulating, critical and constructive. A forum for discussion and exchange about the intersection of industry and development. Editorial Imagine a future where the power of green technology drives a new economic revolution, and where everyone, all over the world, has access to clean, safe, and affordable energy services. Does this sound far-fetched? Not according to our contributors. Jeremy Rifkin, whose latest book, The Third Industrial Revolution, is making a big impact, sees developments in renewable energy and communications platforms coming together to form a economic paradigm which will drive humanity to more sustainable horizons. Kandeh K. Yumkella and Morgan Bazilian see the Sustainable Energy for All and Green Industry initiatives as key steps in an essential transition to an inclusive new economy. With the International Energy Agency warning that the world is heading for irreversible climate change in less than five years, there is no time to waste. Elsewhere in this issue of Making It, Soogil Young explains how the Republic of Korea is one of the countries setting the pace in the drive to build a green economy. Jigar Shah from the Carbon War Room writes that business has a major role to play, too, and Morten Albaek of the WindMade group introduces one way that the private sector is taking action to try and secure our future. How realistic is this vision of an innovative economic model based on renewable energy, and how can we reach it? Read on. This is our low-carbon future. Photo: istock
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38 Editor: Charles Arthur [email protected] GLOBAL FORUM Editorial committee: Ralf Bredel, Tillmann Günther, Sarwar Hobohm, 6 Letters Kazuki Kitaoka, Wilfried Lütkenhorst (chair), Cormac O’Reilly and 8 WindMade and the case for transparency – Jo Roetzer-Sweetland Editorial assistance, website and Morten Albæk introduces the first global outreach: Lauren Brassaw consumer label identifying corporations and [email protected] Cover illustration: Mike King products made with wind energy Design: Smith+Bell, UK – www.smithplusbell.com 12 Hot Topic: Climate change, climate action – Thanks for assistance to Mary Robinson and Corinne Schoch on Donna Coleman Printed by inclusive sustainable development and Gutenberg Press Ltd, Malta – rethinking climate security www.gutenberg.com.mt on FSC certified paper To view this publication online and to 16 Business matters – news and trends participate in discussions about industry for development, please visit www.makingitmagazine.net To subscribe and receive future issues FEATURES of Making It, please send an email with your name and address to 18 Building the architecture for green [email protected] growth – Soogil Young explains how the Making It: Industry for Development is published by the United Nations Republic of Korea is leading the way in Industrial Development Organization (UNIDO), de-linking economic growth and Vienna International Centre, P.O. Box 300, 1400 Vienna, Austria environmental degradation Telephone: (+43-1) 26026-0, Fax: (+43-1) 26926-69 20 No place to plug in – The Carbon War E-mail: [email protected] Room’s Jigar Shah sees small solutions Copyright © 2012 The United 22 Nations Industrial Development to big problems Organization No part of this publication can be used or reproduced without prior KEYNOTE FEATURE permission from the editor ISSN 2076-8508 22 A new economic narrative – The designations employed and the presentation of the material in this magazine Jeremy Rifkin explains do not imply the expression of any opinion whatsoever on the part of the Secretariat of the how the five pillars of a United Nations Industrial Development Organization (UNIDO) concerning the legal status of any country, territory, city or area or of third energy- its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic communications system or degree of development. Designations such as “developed”, “industrialized” and revolution will create “developing” are intended for statistical convenience and do not necessarily express a the foundations for the judgment about the stage reached by a particular country or area in the development process. Mention of firm names or commercial next great wave of economic products does not constitute an endorsement by UNIDO. growth, while Morgan Bazilian and The opinions, statistical data and estimates contained in signed articles are the Kandeh K. Yumkella see unique responsibility of the author(s), including those who are UNIDO members of staff, and should opportunities arising from the not be considered as reflecting the views or bearing the endorsement of UNIDO. This document has been produced without creation of a radically different formal United Nations editing. energy system 4 MakingIt Number 9, 1st quarter 2012
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32 Sustainability: a lever for economic growth – European Commissioner Antonio Tajani 20 explains how the European Union is finding solutions that compromise neither growth nor the climate and the environment 34 Country feature: Slovenia – Successful and innovative – Interview with His Excellency Danilo Türk, President of the Republic of Slovenia 38 A case of ‘homeland security’ – Alejandro Litovsky and Paulina Villalpando look at how the risks of investing in farmland create opportunities for sustainability
POLICY BRIEF 42 Networks for prosperity 44 Carbon capture and storage in industrial applications
46 Endpiece – Sumi Dhanarajan considers how the pharmaceutical industry can improve access to medicines in developing countries MakingIt 5 GLOBAL FORUM The Global Forum section of Making It is a space for interaction and discussion, and we welcome reactions and responses from readers about any of the issues raised in the magazine. Letters for publication in Making It should be marked ‘For publication’, and sent either by email to: [email protected] or by post to: The Editor, Making It, Room D2142, UNIDO, PO Box 300, 1400 Wien, Austria. (Letters/emails may be edited for reasons of space).
eco-entrepreneurs? Two come LETTERS to mind. One is Lorna Rutto, who won Non-hazardous the Cartier Women’s Initiative Award 2011 for sub-Saharan I truly enjoyed reading Africa. Her company, EcoPost, “Engineering eco-friendly in Kenya, uses 100% recycled solutions”, (Making It, issue 8). plastics to manufacture The article captures a real aesthetic, durable, and sense of innovation within the environmentally friendly industry, and illustrates well fencing posts and custom how entrepreneurial activities lumber profiles. can work. The article leaves me The other is Majora Carter, with two questions: The first whose Sustainable South thing that comes to mind is the Bronx pushed both for eco- question of other producers friendly practices and, equally make consumers the problem political failure is political around the world. Since important, job training and (and the solution). He was action. aluminum is produced and green-related economic recently in Poland launching l Desmond Attis, website used in many parts of the development for her vibrant the “Generation Awake. Your comment world, what do other neighbourhood in New York. choices make a world of producers do with the She now runs the economic difference!” programme, which aluminum dross? Is it recycled consulting and planning firm, wants to encourage citizens to Solar Sister in a similar way, or is this a the Majora Carter Group, think about their impact on I like this, “Solar Sister: business model that can be putting the green economy the planet when making empowering women with light expanded to other countries’ and green economic tools to purchasing decisions. This is and opportunity”, (Making It, markets? use, unlocking the potential of all very well, but as Gar Lipow, issue 7). It’s clear that poor The second question every place – from urban cities a long-time environmental people can make savings by concerns safety. The article and rural communities, to activist who has spent years having a solar lantern rather states that aluminum dross is a universities, government immersed in the subject of than paying for kerosene, but hazardous waste material, yet projects, businesses and efficiency and renewable the article doesn’t make it clear goes on to explain how the by- corporations. energy, recently wrote: “We did how poor people can find the product of the aluminum There must be loads more. not get into this mess via US$20 to buy the lamp. This dross is used for building l Stacia Grove, website individual consumer choice, seems a lot of money for one material, benches, and fence comment and we won’t get out of it that single outlay for people trying posts. If at one point the way either.” to live on less than two dollars material is hazardous, at what Setting an example by doing a day. Or maybe they can pay in stage does it become non- The some simple, logical things to installments? hazardous? environmental reduce an individual l Alice Postlewaith, website l Émile Potolsky, website environmental footprint is comment comment brink wonderful, but ultimately, we Re: “On the road again – with a will not make up, through Katherine Lucey, CEO of Solar Good to read about a woman new roadmap”, (Making It, private spending or lifestyle Sister, replies: making a success of industrial issue 8), it’s great that the changes, for the fact that it is We find that our customers have waste recycling “Engineering Commissioner is telling the state and the private sector an acute appreciation of the value eco-friendly solutions”, industry to be more resource- that are to blame for bringing proposition of a one-time (Making It, issue 8). Why don’t efficient. He needs to do more us to the environmental brink. expenditure of US$20 versus the you feature some more women of this and less of trying to The answer to collective weekly expenditure of US$2 or
6 MakingIt For further discussion of the issues raised in Making It, please visit the magazine website at www.makingitmagazine.net and the social networking Facebook site. Readers are encouraged to surf on over to these sites to join in the online discussion and debate about industry for development. more for kerosene. The family saves per week for kerosene) that has been seem to be slowing down to a University website against over US$80 in the first year, which received all at once is extremely near standstill, or worse. The enthusiastic forecasts that this can be spent on other important difficult, especially in a culture recovery (if we can call it that) growth will continue: expenses, typically on education, where it is expected that you share from the recession of 2008-9 “These predictions are health care and better nutrition. what you have. As one of our seems to have run into the largely extrapolations from the One of the misconceptions customers told us: “When I have sand. recent past and they overlook about those living ‘on less than two money, I like to invest it, but I don’t Worse is the slow evaporation serious structural constraints. dollars a day’ is that the income trust the banks. They have fees that of the illusion that the China’s problems are already somehow arrives in a regular eat my money. A solar lamp is a emerging market economies, well recognized. The country’s stream and must be managed on a good investment. When I invest in headed by China, will come to growth has been fuelled over weekly basis, as if they are getting a a solar lamp, I make money. And the rescue of the declining the past decade by an ever- paycheque each week. In reality, my brother can enjoy the light, but West. Certainly, China’s robust growing trade surplus that has the true challenge is managing a he does not reach in my pocket.” In recovery from the depths of the reached unsustainable levels. low level of income that is also the perverse economics of poverty, slump in 2008-9 has powered China’s leaders must refocus unpredictable and variable. A the one-time expenditure is growth in economies supplying its economy away from export- family will earn US$100 when actually a better fit to income it with manufactures, food and oriented manufacturing and they harvest their coffee beans, and patterns and levels. raw materials, and encouraged towards domestic sources of then nothing for three or four a more general flow of capital demand, while managing the months. Or the father will move to into the Global South. But Dani job losses and social unrest the city for work, and send home China’s growth Rodrik (“The Globalization this restructuring is likely to money every few months. The two main centres of the Paradox” in Making It, issue 7, generate.” Managing the slow world economy, the United was a fascinating article) l Graham Roberts, Brussels, expenditure of money (the US$2 States and the European Union, warned recently on the Harvard received by email
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WindMade and the case for transparency
Morten Albæk introduces the first global consumer label identifying corporations and products made with wind energy.
MORTEN ALBÆK is Group Senior Vice President, Global Marketing and Customer Insight, Vestas Wind Systems A/S. Vestas is a Danish manufacturer, seller, installer, and servicer of wind turbines. It is the largest supplier of wind turbines in the world. In January 2011, Vestas was awarded the Zayed Future Energy Prize.
I am writing to share a story of how a to introduce you to WindMade. about what their favourite brands were certain historic initiative came to be. This About 18 months ago, a couple of my doing with respect to procuring clean initiative goes above and beyond the status colleagues at Vestas and I started mulling energy, the more these consumers would quo of energy policy and development to over an idea to create a global consumer buy products from that brand, thus show the world that so much more is label for wind energy. We had noticed that encouraging companies to procure even needed. This initiative gathers the voices a growing number of non-utility more renewable energy. Global labels like of an impressive and diverse set of companies were becoming more Fair Trade and FSC (Forest Stewardship stakeholders who know all too well that it sophisticated energy users and purchasers. Council) have proved that labels can is time for us to finally reach our In fact, companies were following several indeed create these cycles, but we were renewable energy goals. This initiative paths for energy procurement, from fairly confident that a global label did not demonstrates how corporate, sourcing clean energy via certificates, to yet exist for renewable energy. Our philanthropic dollars can be allocated in signing power purchase agreements with observations eventually transformed into new, powerful ways. And this initiative will utilities and developers, buying wind conviction, and we decided it was time to allow our billions of global citizens to turbines for on-site installations, and even mould our ideas into something real. clearly and directly inform their favourite investing in wind farms directly. We I am excited and proud to announce that brands that they want more. I am writing believed that the more consumers knew WindMade is now a real organization,
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issuing real labels, to real members. It is the favourite brands use to run their first global consumer label for brands and operations. To accurately communicate products made with wind energy. It took a the different approaches to clean energy great deal of work and creativity to reach procurement, WindMade has created a this point, and we could not have pulled it family of labels. The first label, which was off without the tremendous support from revealed on October 10th, displays how several partners. Last year, we gathered an much wind generated electricity is impressive group of founding partners to consumed as a share of a company’s create an independent non-profit overall electricity consumption. In 2012, organization for this historic initiative. WindMade will also start issuing labels Each founder represents an important that can be placed on actual products to stakeholder group and ensures that inform customers about how much wind WindMade takes a comprehensive electricity was used in its production. approach. At the time of writing, we had not yet l Vestas is the lead sponsor and pioneering announced our most exciting organization behind WindMade; development to date: the unveiling of our l WWF offers expertise as the leading first group of WindMade companies. global sustainability organization, and has However, by the time you read this, our already developed many certification launch event will have taken place, so standards; please find out about our first global l UN Global Compact represents the global WindMade brands at www.windmade.org. policy sector, and has proclaimed They represent a diverse cross-section of WindMade the first global consumer label global industries, further enforcing the ever endorsed by the United Nations; fact that renewable energy is no longer a l The Global Wind Energy Council (GWEC) niche corporate purpose. They also represents the voice of, and support from, highlight the fact that there are numerous the global wind industry’s members; options and methods for clean energy l PricewaterhouseCoopers serves as the procurement around the world, proving verification expert to ensure that the third that any country in the world can procure party audit process is credible and high-quality, clean energy, if it wants to. functional; At Vestas, we understand that WindMade l Bloomberg is the official data provider for is historic in more ways than one because WindMade; it also demonstrates a new model for l The LEGO Group represents WindMade’s corporate philanthropy. Vestas believed so target audience: forward-thinking strongly in the power of a credible and consumer brands. usable consumer label for renewable The founding partners also appointed a energy that we chose to devote a full-time group of respected sustainability experts to team to the idea, gathered a distinguished develop a certification standard that is group of founding partners, and then rigorous yet practical for today’s corporate funded a non-governmental organization sustainability officers. Finally, we worked that Vestas no longer controls. In other with our cutting-edge, creative partner, “The WindMade label shows words, Vestas invested money, human Droga5, to develop a sleek and concise label consumers exactly how much capital, and our brand reputation, to create that delivers consumer-savvy style, renewable energy their a global organization that aims to grow our supported by a credible foundation. entire industry, only to hand it back to The WindMade label shows consumers favourite brands use to run society. While some might call this an exactly how much renewable energy their their operations.” overly complicated marketing strategy, we ‰
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‰ consider it to be a cutting-edge philanthropic model that will significantly contribute to the continued growth of the wind industry. Additionally, since WindMade was created on the basis of our perceptions concerning the topic of corporate renewable energy strategies, Vestas also saw the need to devote more resources to the collection of concrete data about the corporate sustainability trends. This information is being handed back to the world, because we believe that transparency is essential to accelerate the growth of renewable energy. To contribute to our greater vision of transparency, we partnered with Bloomberg New Energy Finance to develop the Corporate Renewable Energy Index (CREX) to document and track the growth in corporate renewable energy trends. The CREX sheds light not only on the number of companies that procure renewable energy, but also reveals how much and from what source. The CREX is the first index of its kind, providing transparency to global purchases of renewable energy by creating a level of transparency that has never existed before. We also commissioned TNS Gallup to conduct a global consumer wind study to understand the growing demand from the consumer side. In the largest survey of its kind, 31,000 consumers in 26 countries were asked about their opinions on topics such as renewable energy, products made with renewable energy, and about how corporate actions impact consumer behaviour. Key findings from this survey showed that not only do a majority of consumers consider climate change as the greatest single global challenge, but 90% of consumers worldwide want more renewable energy, and 79% would have a more positive perception of brands produced with renewable energy. In the future, Vestas will continue to update and refresh the data for the CREX and the Global Consumer Wind Study (GCWS).
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“Not only do a majority of consumers consider climate Photo: istock Photo: change as the greatest single global challenge, but 90% of consumers worldwide want more renewable energy, and 79% would have a more positive perception of brands produced with renewable energy.”
For now, we look forward to seeing the number of WindMade members grow. The first WindMade companies are critical for strengthening the WindMade brand because they will demonstrate to the world that wind and other renewable energy industries are not only here to stay, but are also becoming increasingly relevant and attractive to a growing group of global stakeholders. The lack of clarity about how markets for technologies, like wind and solar, are evolving is creating barriers for future growth. In fact, WindMade, CREX, and the GCWS, grew out of a firm belief that humankind is born sensible. And these three initiatives will continue to be supported by Vestas and our partners due to another firm belief: that activating this sensibility, through transparency, will foster the needed positive behavioural change. We believe that increased transparency will unveil the facts about what consumers and companies want, which will encourage increased investment in the global supply of renewable energy. WindMade, the CREX and the GCWS combine to form a powerful triumvirate of transparency, providing communication tools for global corporations and their stakeholders to see the truth behind the demand and supply of renewable energy. n
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HOT TOPIC Climate change, climate action Climate justice: inclusive sustainable development
MARY ROBINSON aims to put justice for Foundation, the Mary Robinson the poor and the forgotten at the heart of Foundation – Climate Justice (MRFCJ), is the climate debate and to empower the committed to delivering. Climate justice marginalized to achieve sustainable and links human rights and development to people-centred development. achieve a human-centred approach, safeguarding the rights of the most The year 2012 brings with it fresh vulnerable, and sharing the burdens and opportunities to reframe action on climate benefits of climate change, and its change in a positive light – to focus on the resolution, equitably and fairly. benefits – economic, social and MARY ROBINSON served as the seventh, environmental – of a low carbon green Developing countries and first female, President of Ireland (1990- economy. 2012 is UN Year of Sustainable In the context of the next industrial 1997), and as the United Nations High Energy for All and, in the middle of the revolution, it will be critical to ensure that Commissioner for Human Rights (1997- year, all eyes will focus on Rio – 20 years on benefits are shared equitably and fairly. 2002), and was founder and President of from the World Conference on Sustainable Developing countries, and marginalized Realizing Rights: The Ethical Globalization Development – when we will have a long communities within these countries, must Initiative (2002-2010). She is currently the hard look at how we have developed, who be enabled to actively participate in and President of the Mary Robinson has benefited, and at what cost. Rio+20 benefit from the next wave of economic Foundation – Climate Justice (MRFCJ). provides an opportunity to look at how we growth and opportunity. In many ways, can all grow and prosper, without developing countries have an advantage – overstretching our limited natural as they are starting with a clean slate. They resources and without compromising the will be building infrastructure for the first lives of many, for the benefit of a few. We time, rather than retrofitting. They are need to mould economic, social and embarking on new fiscal and development environmental development into a new policies, which can deliver a climate model of inclusive development. resilient, low-carbon economy. And they My approach to these issues is have growing, young, and increasingly encapsulated in the climate justice educated populations to power this green approach I am dedicated to, and which my economic revolution.
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There is an urgent need to capture this potential now, so that developing countries can be part of the supply-side solutions, and part of the innovation and creativity that will inform a new wave of growth. Developing countries should not be mere consumers of green technology – they need to be empowered to be the engineers, designers, producers and marketers of the technologies that respond to their needs and facilitate their growth. This requires us to do things differently, to make brave investment choices, and to see the potential of innovators and entrepreneurs in developing countries. Business as usual will not do it, and we should see 2012 as the year where we make the choice to change direction, embrace opportunity, and bring some new actors onto the scene.
Real partnerships We cannot assume that green Development Report 2012 reminds us that grassroots to the international level to technologies and policies will trickle “women now represent 40% of the global maximize the potential of women as down to benefit the poor and labour force, 43% of the world’s agents of change, innovators, investors, marginalized. Specific, targeted agricultural labour force, and more than and entrepreneurs. To enable this we need approaches will be needed to bring those half the world’s university students.” to provide women with access to at the bottom of the economic pyramid Capturing this contribution would boost education and credit, active participation into the green economy – to enable them productivity and drive the green economy at all levels of decision-making, and the to contribute to and reap the benefits – “eliminating barriers that discriminate chance to have their contribution valued. economic and social environmental against women working in certain sectors We have an opportunity to make 2012 the benefits of inclusive green growth. or occupations could increase labour year we finally register the fact that Without a doubt, the billions of people productivity by as much as 25% in some women and men will power the next without access to modern forms of energy countries.” industrial revolution, and that inclusive constitute a significant potential market In addition, women have a great sense of sustainable development means investing for clean energy – but market forces alone inter-generational equity, seeing life in for the long term, while making sure will not deliver what they need. We need to terms of not just their lives, but those of benefits flow to the vulnerable and work in real partnerships with developing their children and grandchildren. marginalized. We have many untapped country policymakers, researchers, and Harnessing this ability for long-term resources, and I am not just talking about entrepreneurs to design energy solutions planning, with the productive value of wind and waves! to complement and safeguard livelihoods, their contribution to economic life, would If we start to value the things we take for to improve social well-being, and to provide a powerful engine for sustainable granted, everything from the power of the provide opportunity. low-carbon and climate-resilient growth. sun to the contribution of women to Women will be key users, and hopefully society – we will be able to power a new designers, of green technology, and can Women’s leadership inclusive sustainable future for ourselves make a significant contribution to With this in mind, I am working to and, most importantly, for our children sustainable green growth. The World harness women’s leadership from the and grandchildren. n ‰
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HOT TOPIC Rethinking climate security
CORINNE SCHOCH asks if militarizing As a result, the idea that prolonged heat conflict and security is not new, but it climate change might harm those waves, rising sea levels, more variable wasn’t until the fall of the Soviet Union communities most affected by the climates, and more frequent disasters – that discussions around them really problem. such as cyclones or droughts – will result became possible. in more civil conflicts has taken firm root Up until the early 1990s, security agendas Once upon a time, climate change was in the public’s imagination. The popular on both sides of the Atlantic were strictly an environment and development belief that climate change will soon spark dominated by measures to protect the issue. Today, it has become a matter of ‘water wars’ between water-scarce regions state and support military institutions. But national and international security. Efforts and countries is just one example. in the aftermath of the Cold War, the new to link climate change with violent conflict But while the notion that climate change political landscape demanded a broader, may not be based on solid evidence, but could lead to conflict is widespread, it is wider approach to the term “security”. A they have certainly captured the attention based on very little evidence and 1994 report by the UN Development of governments. They have played a vital questionable sources. The debate tends to Programme articulated this need, and gave role in raising the much needed awareness be characterized by conjecture, birth to the term “human security”, of climate change as an issue that deserves extrapolations, and a limited set of facts shifting the emphasis away from a state- global action, but at what cost? that make assumptions about how the centric approach towards one that focuses Focusing on climate change as a security climate will change in years to come, and on securing individual people. threat alone risks devolving humanitarian how people will respond – for example, This created the space to incorporate responsibilities to the military, ignoring that increased climate variability “non-traditional” threats – such as the key challenges, and losing sight of those automatically causes inter- and intrastate environment, health, and human rights – climate vulnerable communities that migration, or that a drop in rainfall is what into the security agenda, alongside stand most in need of protection. led to the Darfur crisis. The links between longstanding issues of military defence Over the past five years, climate change what causes conflict have been simplified. and state interests. In this way, climate has moved from being a purely The truth is that there are, as yet, no change was “securitized”. environment and development issue to concrete examples of violent conflicts Attaching a security label to climate being a matter of national and induced by climate change, and a limited change has certain advantages. For a start, international security. understanding of what the future holds. it gives the state or government power over For years, we have understood that civil Take the example of water wars: many the issue, and can end up mobilizing vast wars generally break out as a result of researchers argue that it is not climate amounts of political and financial political instability, a poor national change that is to blame, but rather it is resources to address it. economy, weakened infrastructures and, in issues such as poor governance of water But perhaps the biggest “win” in the case of African states, the collapse of resources that are the driving factor securitizing climate change has been the Cold War. Now, it seems that behind such conflicts. raising awareness of this environmental environmental shocks can be added to that Just how useful is it to reframe the issue and capturing the attention of list – journalists, academics, policymakers, climate change debate as a security issue? Northern [developed] countries. There is security institutions, and heads of states little doubt that climate change is now repeatedly tell us that the impacts of A seat at the table firmly in the sights of decision makers at climate change pose a grave security The debate on links between climate all levels – in a way that would have been threat. change, diminishing resources, violent much harder to achieve with an
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environment and development framework will be felt first and foremost by some of the alone. Prominent leaders, including most vulnerable communities across the Barack Obama, Al Gore, Nicolas Sarkozy, globe. The IPCC, for example, warns that and Ban Ki-moon, have all cited climate Africa is one of the most vulnerable change as an international security threat. continents to climate change: agricultural Within the global security community, yields could fall by up to 50% by 2050 in climate change has also been given a seat at some countries and, by 2020, up to 250 the table – it was discussed within the UN million people are projected to face Security Council, both in 2007 and 2011. increased water stress due to climate change. On both occasions, the push to include Will steps to involve security institutions climate change under the council’s remit and the military protect the interests of the met with fierce opposition from China, most vulnerable – or merely the interests of Russia, and much of the developing world. the powerful? To what extent are we Despite the reticence from some prepared to devolve responsibilities of a countries, the world has embarked upon a humanitarian or developmental nature to path that will be difficult to turn back on. It these new actors? is true that securitization can, in theory, be Ensuring that the most vulnerable are “reversed”. But in practice, because protected is not just a moral obligation but security institutions, such as NATO and CORINNE SCHOCH is a researcher in the is a question of justice and equity. There is others, have begun actively engaging in the Climate Change Group at the International surely a great risk that the human security debate, new political power dynamics are Institute for Environment and needs of the most vulnerable could be taking shape that will make it hard to Development (IIED). undermined. simply take climate change off the security agenda. Next steps By turning climate change into a security Focus on people Perhaps the first step in moving forward issue, advocates may have got the attention There are other risks associated with must be to gather more evidence about the of governments, but the question we must turning climate change into a security links between climate change and violent ask is: at what cost? issue, particularly when it comes to conflict. Stepping up the research in this Climate change is filled with uncertainty. addressing the full spectrum of challenges area would enable policymakers, heads of As with other highly politicized debates, posed by climate change. Deciding action state and security institutions to garner a uncertainty tends to breed anxiety, which based on the engagement of a limited pool much more accurate understanding of the could lead to fear and result in a set of of security institutions, risks sidelining or issues at hand and allow for more informed policies that merely mirror sensationalist missing out completely issues such as decision making. academic and media headlines. adaptation, mitigation, development, There is also a clear need to reshape the The military of Northern countries economic growth, equity, justice and climate change and security debate to focus argue that the world cannot afford to wait resilience, which do not figure as priorities on protecting not ourselves but those most for 100% certainty before it acts to on the security agenda but which are vulnerable to future impacts. diminish the climate change security integral to addressing climate change. Climate change is not the first issue to be threat. But what form that action should In today’s world – filled with talk about linked to security: issues such as HIV/AIDS take is already being discussed in many “human induced climate change”, and migration have both also been cast as a forums, such as the annual UN climate “compensation”, “responsibility” and security matter in the past. Reflecting on negotiations. Bypassing these to bring “global justice” – it is also important to ask these experiences – teasing out what enforceable action through the UN ourselves to what extent the reframed worked, where and why, the impacts on Security Council would leave many of the climate-security debate is tackling the real different stakeholders, the political most climate-vulnerable countries, who drivers of climate change. And we must ramifications – could provide important are not part of the council, out of the similarly ask ourselves whose interests we lessons for ensuring the success of decision-making process. are serving. The impacts of climate change securitizing climate change. n
MakingIt 15 extractive industries, and transportation – report that their companies are taking a trends more active approach than those in other sectors, probably n Many companies are actively survey of executives on how their On the whole, respondents as a result of those industries’ integrating sustainability companies understand and report a more well-rounded potential regulatory and principles into their businesses, manage issues related to understanding of sustainability natural-resource constraints. according to a recent McKinsey sustainability, the year 2011’s and its expected benefits than See: The business of survey, and they are doing so by results show that larger shares of in prior surveys. As in the past, sustainability: McKinsey Global pursuing goals that go far executives say sustainability they see the potential for Survey results (McKinsey beyond earlier concern for programmes make a positive supporting corporate Quarterly) reputation management – for contribution to their companies’ reputation, but they also expect example, saving energy, short and long-term value. operational and growth- n Asia and the Pacific region developing green products, and This survey explored why and oriented benefits in the areas of countries should find ways to retaining and motivating how companies are addressing cutting costs and pursuing accelerate infrastructure employees, all of which help sustainability and to what extent opportunities in new markets investment to help maintain companies capture value executives believe it affects their and products. Furthermore, growth at a time of significant through growth and return on companies’ bottom line, now respondents in certain downside risk to the global capital. In McKinsey’s sixth and over the next five years. industries – energy, the economy, Asian Development BUSINESS MATTERS The prosperity index Legatum Prosperity Index 2011 rankings: Top five: Sub-Saharan Africa An index that ranks countries on which has a demonstrated effect Botswana, South Africa, Ghana, Namibia, Mali both wealth and well-being on economic growth or on shows Norway ranked number personal well-being. The Index Top five: Middle East and North Africa one out of the 110 countries consists of eight sub-indexes, United Arab Emirates, Kuwait, Israel, assessed, narrowly ahead of each of which represents a Saudi Arabia, Tunisia Denmark and Australia. The fundamental aspect of Legatum Prosperity Index prosperity: Top five: The Americas provides the world’s only global Economy – Stable and growing Canada, United States, Uruguay, Chile, assessment of national economies increase per capita prosperity based on both wealth income and promote the overall Costa Rica and well-being. well-being of its citizens. Top five: Asia-Pacific region Traditional measures of Entrepreneurship and national prosperity are based opportunity – A strong Australia, New Zealand, Singapore, China – entirely on indicators of a entrepreneurial climate in which Hong Kong SAR, China – Taiwan province country’s income. Yet for many citizens can pursue new ideas Top five: Europe people, ‘prosperity’ is not just and opportunities for improving about money, it is about their lives leads to higher levels Norway, Denmark, Sweden, Finland, satisfaction with our lives and of income and well-being. Switzerland our future prospects. The Index Governance – Well-governed defines prosperity as both wealth societies enjoy national www.prosperity.com and well-being, and finds that economic growth and citizen the most prosperous nations in well-being. the world are not necessarily Education – Education is a Safety and security – Societies society welcoming of diversity, those that have only a high GDP, building block for prosperous plagued by threats to national their country enjoys higher levels but are those that also have societies. security and personal safety of income and social well-being. happy, healthy, and free citizens. Health – A strong health care cannot foster growth in average Social capital – Social The Legatum Prosperity Index infrastructure in which citizens levels of income or well-being. networks and the cohesion that a assesses 110 countries, are able to enjoy good physical Personal freedom – When society experiences when people accounting for over 90% of the and mental health leads to citizens enjoy their rights to trust one another have a direct world’s population, and is based higher levels of income and well- expression, belief, organization, effect on the prosperity of a on 89 different variables, each of being. and personal autonomy in a country.
16 MakingIt could participate inhandicraft fabricsothat they pieces of waste tofindandrecyclescrap dump sitewerescavengingthe discovered that womenat the teaching childrenwhenshe dump sites. Philippines' biggest rubbish living nearPayatas the – one of fabrics, by workingwithwomen materials, andindigenous recycled scrapcloth, organic and homeaccessoriesout of 2007, createseco-ethicalfashion wealth andsocialjustice. entrepreneurship that creates makes herarole-model for and commitment tosociety entrepreneurial achievement 35whose under theageof selected asanentrepreneur November 2011.Shewas 2011, heldinSingapore, in World EntrepreneurshipForum Young Entrepreneur Award Manila, thePhilippines, wonthe eco-ethical businessbasedin Rags2RichesInc.founder of an Reese Fernandez-Ruiz, co- Rags toriches public-private partnerships. domestic investors, aswell to encourageinternationaland regulatory andpolicy reforms governments must continue private sector, andKurodasaid substantial support fromthe 2020. This willrequire are neededbetweennow and estimated at aroundUS$8trn infrastructure but investments rapid roll-outnew of have beensupportedby the Honolulu, inNovember 2011. financeministersin meeting of (APEC) group’s 18thannual Pacific EconomicCooperation Haruhiko Kurodatoldthe Asia- Bank (ADB)President Reese Fernandez-Ruiz was Rags2Riches, foundedin Asia’s boomingeconomies at the
Photo: EMLYON Business School finished product. the day, earnedonly penniesper the womenwho, at theendof created anunfairvaluechainfor access tothemarket. This scrapfabricandthewomen's of boththesupply take controlof middlemen hadmovedinto over time, aseriesof rug-weavers haddevelopedbut, informal cottageindustry of their childrenat home. An weaving, whiletakingcareof production likerugandrag- Latin Economic Commissionfor n medium-sized enterprises. smalland the development of measures, including support for and supply-side policy this willrequirebothdemand driven demand.He notedthat on domesticandregionally economies, putting morefocus up itsefforts torebalanceits stressed theneedfor Asia tostep deal withglobaleconomic regional integrationinorderto improving importance of Bárcena, reaffirmed the Caribbean (ECLAC), Alicia The the ExecutiveSecretary of The ADB president also America andthe Laurel, AminaAranaz-Alunan, local fashiondesigners, likeRajo partnering withwell-known integrated adesignsolutionby personal well-being. It towards long-term financialand career potentialandtakesteps that they canmaximizetheir financial, andhealthtraining, so additional skills-based, formal economy, aswellwith fair accesstothemarket andthe to providethesewomenwith will dependontheirexternal countries’ roomformanoeuvre financial crisis, emerging countries oranew global new recessionindeveloped a she saidthat intheevent of prioritized. At thesametime, and socialpoliciestobe matters, investment, innovation regional tradeandforfiscal crisis. Shecalledformoreinter- theeconomic the problemsof American responsetodealwith integration andajoint Latin the countriesforgreater November 2011, Bárcenaasked Montevideo, Uruguay, in Association (ALADI)in Integration Latin American the turbulence. Addressing Rags2Riches Inc. wascreated to get out of poverty.”to get out of need opportunities tobeable told talent ordetermination,” she years. “It's not about lackof today to5,000inthenext five from workingwith450women expects Rags2Richestogrow handbags. higher-end designer smallpursesand bags,of and these ragsintofoot rugs, aline and Oliver Tolentino, turning insecurity andviolence. infrastructure, andhighcostsof technology, educationand lags ininnovation, scienceand advantages, low investment and than dynamiccomparative comparative advantagesrather exports structurebasedonstatic account deficit, aproductionand weaknesses, such ascurrent assets, but alsosignificant faces thissituationwithgreat ECLAC stressedthat theregion markets. productsand in termsof theirforeigntrade structure of monetary policy spaceandthe reserves, their fiscaland balance andtheirinternational Fernandez-Ruiz saysthat she The ExecutiveSecretary of Fast Company. “People Forum 2011. World Entrepreneurship Entrepreneur Award at the receiving the Young Rags2Riches,co-founder of Reese Fernandez-Ruiz (left), MakingIt 17 The Republic of Korea’s green growth policies The Five-Year Plan assigns 2% of annual Soogil Young explains how were formally launched on August 15, 2008, GDP to green investment by the government when President Lee Myung-bak declared in – double the level recommended to govern- the Republic of Korea is his speech marking the 60th anniversary of ments by United Nations Environment Pro- leading the way in de-linking the founding of the country’s modern gov- gramme (UNEP). economic growth and ernment that “low-carbon green growth” As President Lee has indicated, the key to should be the core of the new development sustained green growth will be a pervasive and environmental degradation vision for the next 60 years. In this speech, continuing process of innovation, in both the President Lee defined ‘green growth’ as technological and the institutional sense. The “achieving sustainable growth by reducing role of this innovation will be to de-link eco- greenhouse gas emission and environmental nomic growth and environmental degrada- pollution.” How would this be possible? He tion, most crucially by stimulating investment answered this question by saying, “Green in the de-carbonization of energies, as well as Leem/Reuters Photo: Truth growth is a new development paradigm that in saving and recycling natural resources. creates new growth engines and jobs with green technologies and clean energies.” The National Greenhouse Gas Emissions In the following one and a half years, the Reduction Target government set up the institutional frame- Given the country’s highly energy-intensive in- work to implement President Lee’s declara- dustrial structure, which makes its economy tion of the green growth strategy. It consists of vulnerable to international energy crises and four key pillars: possible carbon reg- ulations, the main The Presidential Committee on Green Growth focus of green inno- This is an advisory institution for the presi- vation is on cutting dent, consisting of 14 ministers and 36 ap- down CO2 emiss- Building the pointed members from the private sector with ions. The determination to reduce greenhouse professional backgrounds relevant to green gas emissions is the major driver of the green emissions target management system, and the growth, which is co-chaired by the prime innovation that Korea needs. planned introduction of the emissions rights minister and an appointed chairman. It serves In November 2009, after several months of trading system in 2015. as the highest level venue for inter-minister- national debate, the government adopted a ial coordination of policies, as well as for medium-term emissions reduction target of The Framework Act for Low-Carbon public-private sector consultation on those 30%, relative to ‘business-as-usual’, by 2020. The Green Growth policies. following month, at COP15, in Copenhagen, This legislation, enacted in April 2010, permits President Lee made this an international polit- the government to intervene in the market in The Green Growth Strategy and the ical commitment by declaring that Korea would order to address market failures in promoting Five-Year Plan pursue this target unilaterally and voluntarily, green growth. Among other things, it makes The Strategy, prepared by the Presidential in what he called the ‘me-first’ spirit. provisions for the emissions rights trading Committee, envisages the Republic of Korea The country’s business community ex- system. (hereafter, Korea) becoming one of the top pressed a strong objection to this target, con- seven ranked green economies by 2020 and sidering it overly ambitious and fearing its Green business boom one of the top five by 2050. It has three parts: impact on the competitiveness of industry. Since the formal launching of green growth first, to reduce greenhouse gas emissions However, the Presidential Committee consid- policies in Korea in 2008, there has been a while adapting to climate change; second, to ered an ambitious target necessary in order to green business boom. All major business create new growth engines from green tech- stimulate a broad range of clean technology groups have made green business a high pri- nologies; and third, to improve the quality of innovation for greater energy efficiency across ority for investment in their short and long- life by greening lifestyles, while becoming an the economy, as well as for the deployment of term plans. Between 2008 and 2010, the international role model as a green growth renewable energies. combined total of such investment by the 30 country. The unilateral adoption of the emissions largest business groups recorded an annual The Strategy should show that Korea’s reduction target has allowed Korea to become growth rate of 75% and amounted to 15.1 tril- green growth is indeed a new development an ‘early mover’ for green growth, without lion won (about US$13bn). Investment is fo- model. It is far broader in scope than energy having to wait for others to do the same. cused on new and renewable energy or environmental policies, though it does not The government has been playing a criti- equipment, high-efficiency electric equipment, go far enough to also address social policy cal role in triggering, facilitating and sustain- green cars, and climate change adaptation. goals. ing the green innovation process with Small and medium-size enterprises, too, regulatory and supportive measures, especially have been joining in the green rush. For Dr. SOOGIL YOUNG is a Korean economist, in regard to research and development and example, some of them are already emerging who has been serving as Chairman of the creating the initial market. Among measures as champions in the global market for parts Presidential Committee on Green Growth since July 2010. He is also the founding Chairman of being implemented to achieve the emissions and components for solar and wind power the Green Investment Korea Forum. reduction target are the so-called sectoral systems.
18 MakingIt Songdo International Business District (IBD) is a sustainable city currently under construction on 1,500 acres near Incheon, The Republic of Korea. Sustainable design practices are incorporating the latest design standards and technologies that reduce energy Photo: Songdo IBD consumption, increase energy efficiency, utilize recycled and natural materials, and generate clean or renewable electricity. By its completion date in 2015, Songdo IBD will have more than 40% of its area reserved for green space, including a park of 100 acres, 16 miles of cycle lanes, numerous charging stations for electric vehicles, and a waste collection system that eliminates the need for garbage trucks.
To this end, the government has taken a number of international initiatives: l In 2008, annual work programmes were launched to help developing countries in Asia undertake green growth projects under the East Asian Climate Partnership (EACP) Initiative . l In 2010, Korea formally acceded to the Or- ganization for Economic Cooperation and De- velopment’s Development Assistance Committee and declared that the country would continue to increase its Official Devel- opment Assistance (ODA) commitment, with focus on green ODA, including the EACP Ini- tiative, to meet the level of the OECD average ratio of ODA to GNI by 2020. l In June 2010, the Global Green Growth In- stitute (GGGI) was launched as an international think tank to advise developing countries on their green growth policies, as well as to help architecture for them with specific green growth projects. The GGGI is run by an international board of di- rectors, and draws financial resources from Korea and other advanced partner countries. As of October 2011, eleven countries, including six green growth developing countries, have joined GGGI as part- ner countries. It also partners with many inter- The government itself has been a leading in- tection; and an effective coordination among national organizations and institutions. vestor in green growth, especially in green in- all the relevant ministries. l In 2009, the OECD accepted Korea’s proposal frastructure. Two leading examples are a major The challenge now is to sustain progress to conduct a study of the green growth strategy, construction project to restore four major rivers toward the realization of the emissions reduc- and a two-year project was begun. When the and a project to create a nationwide network of tion target and environmental protection goals. final report was released in May 2010, the OECD high-speed railways in order to induce a modal This is no small challenge, considering indus- declared its intention to push the green growth shift of people from road to the rail. try’s constant concern with its international strategy with its member countries, as well as By any measure, green growth policies in competitiveness and the political uncertainties, with non-member countries. The OECD has Korea have been a success. Businesses are ac- which will heighten as the presidential election begun to collaborate on green growth with tively exploring opportunities in green growth, of December 2012 approaches. other international organizations and institu- and local governments are pursuing visions of tions such as UNEP and the World Bank. Korea green communities. There is enthusiastic sup- Towards a global architecture for will continue to work closely with all these in- port for green lifestyles and green growth green growth stitutions to promote global green growth. among the public. One of the objectives of Korea’s green growth lThe government is preparing to launch a Green policies is to promote the adoption of a green Technology Centre, which will promote interna- Secrets of green growth success thus far growth strategy in all countries, especially the tional green technology cooperation in general, The success of Korea’s green growth can be developing ones. A global architecture for and for developing countries, in particular. attributed to at least three factors, including green growth will enhance the effectiveness of All these efforts will contribute to the cre- the visionary leadership of a political leader national green growth policies, offer a founda- ation of a global architecture for green growth firmly committed to a new green growth tion for global sustainable development, and for the benefit of all countries, and help facili- strategy; the ‘me-first’ approach to carbon facilitate international cooperation for the mit- tate sustainable development and climate emissions reduction and environmental pro- igation of climate change. change cooperation. n
MakingIt 19 The most important innovation in the past Our lack of charging stations can actually decade related to wealth creation and develop- charge a new market which will achieve four ment has been the growth of the mobile phone significant goals: industry. There are 5.3 billion mobile sub- 1. Make an impact by solving a pressing prob- scribers worldwide – yet, according to Green lem of our time; Power For Mobile: Charging Choices by the GSMA 2. Generate compelling returns for investors; Development Fund, nearly 500 million of these 3. Generate growth for economies; and folks do not have a means of charging a mobile 4. Generate prosperity for developed and de- phone. veloping nations. While the statistics are devastating and So, let’s look at the simple, yet growing, staggering, I believe that this and other energy problem of cell phones with no place to plug JIGAR SHAH is the CEO of the Carbon War Room, challenges are the wealth opportunities of our and the founder of SunEdison. He is a successful in. It has actually pushed entrepreneurs to lifetime. I call this ‘impact investing’. This is clean tech entrepreneur who is leading the Carbon find solutions, and to find new business op- investing that is socially responsible and de- War Room’s crusade in making gigaton savings in portunities. For example, in just the past few livers compelling financial returns. carbon, while at the same time creating wealth, jobs years, new solar-powered cell phones have and growth. The Carbon War Room harnesses the By leveraging the explosive growth trajec- power of entrepreneurs to implement market-driven evolved for impoverished places like Central tory of mobile communications, we can create solutions to climate change. The War Room’s unique America, the Caribbean, and the South Pacific, entire industries that solve critical issues and approach focuses on bringing together successful where there is no grid and no plug. And last create hundreds of billions, if not trillions, in entrepreneurs, business leaders, policy experts, year, wireless mobile phone carrier, Vodafone, researchers, and thought leaders to focus on market value. market-driven solutions. introduced a solar-powered mobile handset No place to plug in
Solar visionary Jigar Shah sees small solutions to big problems. Photo: istock
20 MakingIt for India, where a third of the population does to sell solar power to businesses as a service, economic benefits of “distributed” (decen- not have access to the power grid. not to sell a power plant. In doing so, it made tralized) electrical resources. Part of this is If we think about these big problems, the it sense for leading US retailers like Walmart, avoiding social costs. A recent case in point is solution is not a silver bullet. For example, Staples, Kohl’s, Whole Foods, and others, to the social cost we just witnessed with the cell phones solutions are often numerous and have an energy source right on their rooftops. tsunami in Japan, which led to the meltdown small in scale, such as solar phones, solar With SunEdison installing, owning and of a nuclear reactor. chargers, wind-up chargers, base station operating the solar power plants on rooftops, Before we attempt to invent new tech- charging or village changing stations. These customers sign power purchase agreements nologies, we need to unlock business solu- answers are all practical examples of minia- locking in electricity prices for as long as 20 tions that will deploy distributed energy turizing power sources – a trend that started years. solutions – as we found with the PPA for solar back in the 1970s. This miniaturization trend This has created an affordable way for that unleashed a multi-billion dollar industry. has accelerated in other areas, such as clean customers to use (very) locally generated, So, ‘Job One’ is to make business sense out water, transportation, and agriculture. clean, miniaturized power (compared to the of existing technologies that are not yet de- With regard to power sources for electric- grid) for their businesses. They replaced peak ployed. This is what we did with solar, and it ity, the answers have become miniaturized by energy delivered from the grid with point- is the opportunity that Vodafone is trying to tapping sources, like solar and wind – off-grid. of-use solar energy. It made real the theory realize with the growth of global cell phones. I found this out first hand at SunEdison, a that Amory Lovins, Chairman and Chief Sci- Another example is how, at the Carbon company I founded in Beltsville, Maryland, entist of the Rocky Mountain Institute, de- War Room, we have just helped organize a USA, in 2003. SunEdison employed a business picted in his book, Small Is Profitable. The multi-billion dollar market without govern- solution, a power purchase agreement (PPA); book uncovered proper accounting for the ment money. We have launched a new con- sortium that will unlock billions of dollars of investment in renewable energy and energy efficiency technologies for United States com- mercial real estate. With the consortium, the Carbon War Room is deploying simple de- veloped technologies that were not being de- ployed to improve efficiency of buildings. The consortium released incentive legis- lation that was sitting dormant. The Property Assessed Clean Energy (PACE) legislation en- ables property owners to accept a voluntary tax assessment as a means of repaying up- front financing of energy efficiency and re- newable energy improvements. The business consortium, that includes Lockheed Martin and Barclays Bank, plans to invest as much as US$650 million over the next few years to cut the energy consumption of older buildings in Miami, Florida, and Sacramento, California. These cities’ pro- grammes alone could stimulate US$2.3bn and create more than 17,000 jobs. A key point is that the implementation is in buildings, one-at-a-time – a miniaturized solution. The answers are here. The answers are through miniaturization. From the cell phone that is solar-powered, to the building that is solar-powered. We are at the threshold of the next great industrial revolution through thousands of deployments – first, using our existing tech- nologies. While there is no magic solution to meeting our energy demand by using clean fuels, we can win it a thousand cuts at a time. Five hundred million cell phone users with no place to plug in is just one multi-bil- lion dollar opportunity in the ‘Third Indus- trial Economy’.n
MakingIt 21 Photo: istock Photo: 22 MakingIt Anew economic narrative In a two-part keynote, Jeremy Rifkin opens the door to a post-carbon future, while Kandeh K. Yumkella and Morgan Bazilian explore the challenges of inclusivity.
MakingIt 23 Internet technology and renewable energies are merging to create a powerful new infrastructure. Jeremy Rifkin explains how the five pillars of a third energy-communications revolution will create the foundations for the next great wave of economic growth.
The survive. It is becoming increasingly clear that we need a new economic narrative that can take us into a more equitable and sustainable future.
A new convergence of communication and energy By the 1980s, the evidence was mounting that the third fossil fuel-driven industrial revolution was peaking and that human-induced climate change was forcing industrial a planetary crisis of untold proportions. For the past 30 years, I have been searching for a new paradigm that could usher in a post-carbon era. I came to real- ize that the great economic revolutions in history revolution occur when new communication technologies converge with new energy systems. New energy Our industrial civilization is at a crossroads. Oil and regimes make possible the creation of more interde- the other fossil fuel energies that make up the indus- pendent economic activity and expanded trial way of life are dwindling, and the technologies commercial exchange, as well as facilitating more made from and propelled by these energies are anti- dense and inclusive social relationships. The accom- quated. The entire industrial infrastructure built on panying communication revolutions become the fossil fuels is aging and in disrepair. The result is that means to organize and manage the new temporal and unemployment is rising to dangerous levels all over spatial dynamics that arise from new energy systems. the world. Governments, businesses and consumers In the 19th century, steam-powered print technol- are awash in debt, and living standards are plum- ogy became the communication medium to manage meting everywhere. A record one billion human the coal-fired rail infrastructure and the incipient beings – nearly one seventh of the human race – face national markets of the First Industrial Revolution. hunger and starvation. In the 20th century, electronic communications – the Worse, climate change from fossil fuel-based telephone and later, radio and television – became the industrial activity looms on the horizon. Our scien- communication medium to manage and market the tists warn that we face a potentially cataclysmic oil-powered auto age and the mass consumer culture change in the temperature and chemistry of the of the Second Industrial Revolution. planet, which threatens to destabilize ecosystems around the world. We may be on the brink of a mass An “energy Internet” extinction of plant and animal life by the end of the In the mid-1990s, it dawned on me that a new conver- century, imperilling our own species’ ability to gence of communication and energy was in the
24 MakingIt “The great economic revolutions in history occur when new communication technologies converge with new energy systems”
offing. Internet technology and renewable energies five pillars of the Third Industrial Revolution are: were about to merge to create a powerful new infra- 1) shifting to renewable energy; structure for a Third Industrial Revolution that 2) transforming the building stock of every continent would change the world. In the coming era, into micro-power plants to collect renewable ener- hundreds of millions of people will produce their gies on-site; own green energy in their homes, offices, and facto- 3) deploying hydrogen and other storage technolo- ries, and share it with each other in an “energy gies in every building and throughout the Internet,” just like we now create and share informa- infrastructure to store intermittent energies; tion online. The democratization of energy will bring 4) using Internet technology to transform the power with it a fundamental reordering of human relation- grid of every continent into an energy-sharing inter- ships, impacting the very way we conduct business, grid that acts just like the Internet (when millions of govern society, educate our children, and engage in buildings are generating a small amount of energy civic life. locally, on-site, they can sell surplus back to the grid In 2006, I began working with the leadership of and share electricity with their continental neigh- the European Parliament in drafting a Third Indus- bours); and trial Revolution economic development plan. Then, 5) transitioning the transport fleet to electric plug-in in May 2007, the European Parliament issued a and fuel cell vehicles that can buy and sell electricity formal written declaration endorsing the Third on a smart, continental, interactive power grid. Industrial Revolution as the long-term economic vision and road map for the European Union (EU). Integrate and harmonize This is now being implemented by the various agen- The critical need to integrate and harmonize these cies within the European Commission, as well as in five pillars at every level and stage of development the member states. became clear to the EU in the fall of 2010. A leaked European Commission document warned that the The five pillars EU would need to spend €1trn between 2010 and The establishment of a Third Industrial Revolution 2020 on updating its electricity grid to accommodate infrastructure will create thousands of new busi- an influx of renewable energy. The internal docu- nesses and millions of jobs, and lay the basis for a ment noted that “Europe is still lacking the sustainable global economy in the 21st century. infrastructure to enable renewables to develop and However, let me add a cautionary note. Like every compete on an equal footing with traditional other communication and energy infrastructure in sources.” history, the various pillars of a Third Industrial Revo- The EU is expected to draw one-third of its elec- lution must be laid down simultaneously or the tricity from green sources by 2020. This means that foundation will not hold. That’s because each pillar the power grid must be digitized and made intelli- can only function in relationship to the others. The gent to handle the intermittent renewable energies ‰
MakingIt 25 “The creation of a renewable energy regime, loaded by buildings, partially stored in the form of hydrogen, distributed via smart intergrids, and connected to plug-in, zero-emission transport, opens the door to a Third Industrial Revolution”
‰ being fed to the grid from tens of thousands of of the First and Second Industrial Revolutions will local producers of energy. increasingly be subsumed by the distributed busi- Of course, it will also be essential to quickly ness practices of the Third Industrial Revolution; and develop and deploy hydrogen and other storage tech- the traditional, hierarchical organization of nologies across the EU’s infrastructure when the economic and political power will give way to lateral amount of intermittent renewable energy exceeds power organized nodally across society. 15% of the electricity generation, or much of that elec- At first blush, the very notion of lateral power tricity will be lost. Similarly, it is important to incen- seems so contradictory to how we have experienced tivize the construction and real estate sectors with power relations through much of history. Power, after low-interest green loans and mortgages to encour- all, has traditionally been organized pyramidically age the conversion of millions of buildings in the EU from top to bottom. Today, however, the collabora- to mini power plants that can harness renewable tive power unleashed by the coming together of energies on-site and send surpluses back to the smart Internet technology and renewable energies, funda- grid. And unless these other steps are taken, the EU mentally restructures human relationships, from top won’t be able to provide enough green electricity to to bottom, from side to side, with profound implica- power millions of electric plug-in and hydrogen fuel tions for the future of society. cell vehicles being readied for the market. If any of The music industry didn’t understand distributed the five pillars fall behind the rest in their develop- power until millions of young people began sharing ment, the others will be stymied and the infrastruc- music online, and corporate revenues tumbled in less ture itself will be compromised. than a decade. Encyclopedia Britannica did not appre- ciate the distributed and collaborative power that A new economic paradigm made Wikipedia the leading reference source in the The creation of a renewable energy regime, loaded world. Nor did the newspapers take seriously the by buildings, partially stored in the form of hydrogen, distributed power of the ‘blogosphere’; now many distributed via smart intergrids, and connected to publications are either going out of business or plug-in, zero-emission transport, opens the door to a transferring much of their activities online. The Third Industrial Revolution. The entire system is implications of people sharing distributed energy in interactive, integrated, and seamless. When these five an open commons are even more far-reaching. pillars come together, they make up an indivisible technological platform – an emergent system whose The democratization of energy properties and functions are qualitatively different To appreciate how disruptive the Third Industrial from the sum of its parts. In other words, the syner- Revolution is to the existing way we organize gies between the pillars create a new economic economic life, consider the profound changes that paradigm that can transform the world. have taken place in just the past twenty years with the The conventional, centralized business operations introduction of the Internet revolution. The democ-
26 MakingIt ratization of information and communication has nature of the Third Industrial Revolution infrastruc- altered the very nature of global commerce and social ture, risk can be more widely diffused, with localities relations as significantly as the print revolution in and regions pooling resources to establish local grid the early modern era. Now, imagine the impact that networks, and then connecting with other nodes the democratization of energy across all of society is across regions. This is the very essence of lateral likely to have when managed by Internet technology. power. The Third Industrial Revolution build-out is Energy regimes shape the nature of civilizations – particularly relevant for the poorer countries in the how they are organized, how the fruits of commerce developing world. We need to keep in mind that 40% and trade are distributed, how political power is exer- of the human race stills lives on two dollars a day or cised, and how social relations are conducted. In the less, in dire poverty, and the vast majority have no elec- 21st century, the locus of control over energy produc- tricity. Without access to electricity they remain tion and distribution is going to tilt from giant fossil “powerless,” literally and figuratively. The single most fuel-based centralized energy companies to millions important factor in raising hundreds of millions of of small producers who will generate their own people out of poverty is having reliable and affordable, renewable energies in their dwellings and trade green electricity. All other economic development is surpluses in an info-energy commons. impossible in its absence. Universal access to elec- But in order to facilitate this transition it will be tricity is the indispensable starting point for improv- necessary to provide a favourable playing field, and ing the lives of the poorest populations of the world. that means financial aid, technology transfer, and Because renewable energy – solar, wind, geother- training programs to assist emerging countries. mal, hydro and biomass – is widely distributed, a What’s going on in developing nations heralds a Third Industrial Revolution is ideally suited to take historic transformation, as households jump from off in the developing world. Although a lack of infra- the pre-electricity era directly into the Third Indus- structure is often viewed as an impediment to devel- trial Revolution age. This process represents the opment, what we are finding is that because many democratization of energy in the world’s poorest developing nations are not saddled with an aging communities. electrical grid, they can potentially “leapfrog” into a The Third Industrial Revolution offers the hope Third Industrial Revolution. In other words, by that we can arrive at a sustainable post-carbon era by building a new, distributed electricity system from mid-century. We have the science, the technology, scratch, rather than continuing to patch up an old and the game plan to make it happen. Now it is a and outworn grid, developing countries significantly question of whether we will recognize the economic reduce the time and expense in transitioning into a possibilities that lie ahead and muster the will to get new energy era. Moreover, because of the distributed there in time. n
JEREMY RIFKIN is president of the Foundation on Economic Trends, and the author of more than twenty bestselling books on the impact of scientific and technological changes on the economy, the workforce, society, and the environment. His most recent books include The Third Industrial Revolution: How Lateral Power Is Transforming Energy, the Economy, and the World; The Empathic Civilization: The Race to Global Consciousness In a World In Crisis; and The Hydrogen Economy: The Creation of the Worldwide Energy Web and the Redistribution of Power on Earth. Jeremy Rifkin has been an advisor to the European Union for the past decade and is the principle architect of the European Union’s Third Industrial Revolution long-term economic sustainability plan to address the triple challenge of the global economic crisis, energy security, and climate change.
MakingIt 27 Morgan Bazilian and Kandeh K. Yumkella see unique opportunities arising from the creation of a radically different energy system
The vidual behaviour to national policies. But let me assure you that the shift will not be a clean straight line. We are barely putting in the foundations of the new economy. We are constructing it, and all construction sites are new messy.” The First Industrial Revolution was not premedi- tated as an inclusive, global movement that would economy: bring prosperity to all. While it brought untold tech- nologies and unimagined riches, it also left in its trail an unhappy history of inequity and exploitation of inclusive both people and natural resources. The advances of the past century have led to a world more interdependent than ever in terms of trade, finance and movement of and labour, yet the great unfairness remains: the First and Second Industrial Revolutions were not designed with the poor in mind. Clearly, therefore, in transitioning sustainable to a new economy, based on a radically different energy system, we have the unique opportunity to make the In this issue of Making It, Jeremy Rifkin cites numer- next industrial revolution an inclusive one. ous interacting crises as the impetus for a new economic narrative, which he terms the “Third Indus- Sustainable Energy for All trial Revolution”. He sees the seeds of this narrative in Let us examine in more detail the critical role of energy the confluence of “new communication technologies in the next industrial revolution. Energy powers [and] new energy systems”. The label, “Third Indus- human progress, from job generation to economic trial Revolution”, is indeed attractive from a number of competitiveness. From strengthening security to perspectives. It helps to form in the mind an image of empowering women, energy is the great integrator, it the potential transformative power of the communi- cuts across all sectors, and lies at the heart of all coun- cation/energy nexus. Others have begun to use it too. tries’ core interests. Now more than ever, the world In October 2011, Christiana Figueres, the Director of needs to ensure that the benefits of modern energy are the UN Framework Convention on Climate Change available to all and that energy is provided as cleanly (UNFCCC), used the phrase to help motivate the busi- and efficiently as possible. This is a matter of justice, ness community to take action on climate change. She first and foremost, but it is also an issue of urgent, prac- described it in this way: tical importance – and this is the impetus for the UN “A low-carbon economy necessitates a multifaceted Secretary-General’s new Sustainable Energy for All paradigm shift across a broad spectrum, from indi- initiative.
28 MakingIt “From strengthening security to empowering women, energy is the great integrator, it cuts across all sectors, and lies at the heart of all countries’ core interests”
The initiative can be viewed as a firm commitment the amount of power needed to support them. by the UN and its partners to make sure the next Increased efficiency in the production and use of elec- industrial revolution is powered for the poor, not by tricity relieves strained power grids, allowing them to the poor. It has been launched in a time of great stretch further and reach more households and busi- economic uncertainty, great inequity, high urbaniza- nesses. tion and high youth unemployment. But it is also a Does this sound far-fetched? Consider the alterna- time when there is finally an emerging consensus on tive: unconstrained expansion of today’s conventional the need to act cohesively towards global issues such as fossil fuel-based energy systems, locking in a long-term sustainable development. We are not, however, start- infrastructure commitment to an unsustainable emis- ing from scratch. New technologies ranging from sions path for the world’s climate. improved photovoltaic cells, to advanced metering, to electric vehicles and smart grids, give us a strong foun- An action agenda dation on which to build. How we capture these The UN Secretary-General has formed a high-level opportunities for wealth and job creation, for educa- group to design an action agenda and provide tion and local manufacturing, will be the key to momentum to the goal of providing Sustainable unlocking any real revolution. Energy for All. This will require catalyzing action from Three linked objectives underpin the goal of achiev- a broad array of stakeholders to help meet its stated ing Sustainable Energy for All by 2030: objectives by 2030. The Secretary-General, in an input lEnsuring universal access to modern energy services to the 2012 UN Conference on Sustainable Develop- – access to electricity and to modern fuels and tech- ment (Rio+20) process, described the Initiative as nologies for cooking, heating, and productive uses. follows: l Doubling the rate of improvement in energy effi- “At Rio+20 we will ask all stakeholders to make a ciency – increasing the current pace of improvement global commitment to achieving Sustainable Energy to 2.5% per year, achieving a 40% reduction by 2030, for All by the year 2030. Reaching this goal will require measured in terms of global energy intensity. action by all countries and all sectors to shape the l Doubling the share of renewable energy in the policy and investment decisions needed for a brighter global energy mix – increasing the current renewable energy future. Industrialized countries must acceler- energy share of global energy consumption to 30%. ate the transition to low-emission technologies. Devel- These three objectives are mutually reinforcing. oping countries, many of them growing rapidly and at Increasingly affordable renewable energy technologies large scale, have the opportunity to leapfrog conven- are bringing modern energy services to poor rural tional energy options and move directly to cleaner communities where extension of the conventional energy alternatives that will enhance economic and electric power grid would be prohibitively expensive social development.” and impractical. More efficient devices for lighting and The action agenda will be a “living document” that other applications require less energy, and thus reduce establishes clear actions and commitments over ‰
MakingIt 29 “Any definition of ‘green economy’ will need to provide diverse opportunities for both economic development and poverty alleviation” Photo: istock Photo:
‰time that will dramatically shift current energy path- Green economy and green industry ways onto new trajectories that will: In the run-up to Rio+20, there is growing agreement l establish firm political commitment that in a resource and carbon-constrained world any l create stable policy and regulatory frameworks Third Industrial Revolution should be rooted in a l finance the transformation green economy. However, such a shift cannot be made l strengthen local capacity and forge global partner- at the expense of the developmental priorities of devel- ships oping countries, and any definition of ‘green economy’ l ensure accountability and transparent reporting will need to provide diverse opportunities for both l strengthen the analytical foundation economic development and poverty alleviation. l disseminate information In response to these challenges, UNIDO created its Within the UN system we are working closely ‘Green Industry Initiative’, which aims to accelerate the through the UN-Energy mechanism, which is foster- green growth of the manufacturing and related sectors. ing new partnerships and better communication, and It provides the international community and national facilitating effective action on the ground. We want the governments with a platform to foster the positive role UN to bring the energy benefits of the next industrial of industry in achieving sustainable development. revolution to all parts of the globe. ‘Greening’ industrial development is thus an integral
30 MakingIt pillar of the ‘green economy’ concept, as it provides a The massive electricity infrastructure requirements framework for developing countries to ‘green’ their to reach universal access offer a unique opportunity to industrialization process and to promote businesses learn from the nexus between ICT and energy systems, that provide environmental goods and services. A and move forward without necessarily repeating all holistic framing of the global energy issue is required previous development stages. to underpin this work. While these issues resonate in both developed and An important year developing economies, the impact on the Least Devel- The UN General Assembly named 2012 as the Inter- oped Countries is a matter of which we are acutely national Year of Sustainable Energy for All, thus placing aware. Even within these countries, good precedents energy at the heart of the multilateral process. It is an for national action exist: Rwanda and Ethiopia are enormous opportunity to share models that work, are prime examples. These countries are putting together scalable, and can help fill gaps in existing funding or sophisticated national plans to address sustainability capacity. It is also a chance to ensure that the political issues for the entire economy. momentum currently focused on this area is main- For a model of transformative change that has tained. reached every corner of the world, we can look to the We must do considerably more than scratch the mobile phone and the ICT sector. This precedent is surface if we want to make the new industrial revo- now influencing the possibilities for smart grids, even lution an inclusive and sustainable one. This will in the most remote corners of the world. In the future, mean commitment from many different stakehold- “Smart and Just Grids” for developing countries could ers. On the energy side, emerging partnerships, such provide similar functionality to smart grids in indus- as the Norwegian Energy+ and the UN- trialized countries, even though they are likely to follow Energy/Global Sustainable Electricity Partnership, a different pathway and timeframe. This will require offer conduits for multi-stakeholder engagement attention to constraints, such as lack of good gover- and dialogue, as well as for real action on the ground. nance, limited investment capital, largely inadequate Meanwhile, Rio+20 offers UN member states and infrastructure and lack of well-trained power sector agencies the opportunity to reframe the very concept personnel. Such impediments are most likely stifling of development in the context of sustainability and innovative practices that could already be occurring green growth, with an eye on global commitments organically in developing countries. For the next indus- beyond 2015. The Third Industrial Revolution starts trial revolution to take hold, these must be overcome. here. n
MORGAN BAZILIAN is the Special Advisor to the KANDEH K. YUMKELLA is the Director-General Director-General of the United Nations Industrial of UNIDO. He is also Chair of UN-Energy and Development Organization (UNIDO) on international Co-chair of the High-level Group on energy and climate policy. In this role, he helps shape Sustainable Energy for All, consisting 46 global the United Nations approach to energy for leaders in business, finance, government and development. Previously, he served as Senior Advisor civil society. Previously, he served as Chair of on energy and climate change to the Irish energy the UN Secretary-General’s Advisory Group on minister. He has been the lead climate change Energy and Climate Change. Prior to joining negotiator for the European Union on low-carbon UNIDO, he served as Minister of Trade, technology, and a member of the UNFCCC’s Expert Industry and State Enterprises for the Republic Group on Technology Transfer. of Sierra Leone.
MakingIt 31 One of the biggest societal challenges facing the European Union (EU) in these times of financial and economic crisis is how to deliver much needed growth and jobs, while doing Sustainability: the right thing by the planet. This is a chal- lenge that by no means is isolated to the EU. The economic and environmental mecha- nisms are globally interlinked, and what happens on one side of our globe can have a lever for dramatic consequences on the other side of the planet. Acknowledging that, to a large degree, we share the same challenges, and that our economic actions have an impact on other nations, we also have an opportunity to learn from each other and create new global markets. The smarter development of our industries and growth technologies in Europe will make us better equipped to combat the pressure on resources, an ageing population, climate change, and a threatened environment. But, first and foremost, setting up the right condi- tions for investment in promising sectors will foster the immediate recovery from the crisis. As Commissioner for Industry and Entre- preneurship, I am proud to spearhead the making of an even stronger and more competitive European industry. The Commis- sion’s Europe 2020 strategy sets out a vision of how we can turn the European Union into a Antonio Tajani explains smart, sustainable, and inclusive economy, how the European Union with strong growth rates, delivering employ- ment, productivity, and social cohesion. is finding solutions that With sustainable growth being one of the three priorities of Europe 2020, we want to neither compromise promote a more resource-efficient, greener, and more competitive economy. In doing so, growth nor the climate we try to keep our heads clear when assessing and environment. the impacts of our policy actions. We must ensure that green is compatible with – and does not compromise – growth. Sustainable industry should not be perceived as the domain of certain environ- tional’ manufacturing industries, aiming to by a desire to invest in a greener planet, but mental industries. It has, on the contrary, stimulate innovation to reduce the carbon they make changes to their business concepts become the business of all businesses. The intensity of energy-intensive manufacturing because green production has become transition to more sustainable means of processes. economically sound. production, or more sustainable products and Indeed, industry is a core driving force services, can offer opportunities, but we must Sustainable growth and resource efficiency behind the technical and technological inno- keep in mind that it requires a prior invest- are opportunities for EU industry vation required for greater sustainability and ment, which may not be affordable in the Finding solutions that neither compromise resource efficiency. Although eco-innovation short term. We are therefore striving to make growth nor the climate and environment is – remains under-exploited, public and private clear, coherent, and well-conceived industrial, I must admit – not always an easy task. But investment in this area in the EU has contin- climate, energy, and related policies that although at first this merging of interests uously increased over the last 10-20 years. promote eco-innovation, without leading to might seem like a marriage of convenience, The eco-industries sector has grown to industrial outsourcing and the loss of jobs we often see that many of them turn out to be become a sector equivalent (in terms of and prosperity. And it is for this reason that, fruitful relationships. There is, in fact, a employment) to chemicals or electrical and in 2011, we launched the Sustainable Industry growing tendency among businesses to optical equipment. Annual employment Low Carbon initiative, which is a practical, produce in more resource-efficient ways. growth in this sector between 1999 and 2008 industry-based initiative at EU level for ‘tradi- These businesses are not necessarily driven has averaged approximately 180,000 jobs per
32 MakingIt ANTONIO TAJANI is Vice-President of the European Commission and Commissioner for Industry and Entrepreneurship. Photo: European Union 2011 Photo: European Photo: Kai Pfaffenbach/Reuters Photo: Kai Pfaffenbach/Reuters
tion, others will be confronted with high invest- ment costs in new technologies and innova- tion. This is especially a problem for small and medium-size enterprises (SMEs) which lack time, information, and human and financial resources and miss out on the opportunities offered by efficient products and services in terms of a reduced energy bill and greater effec- tiveness. In February 2011, the Commission revised the so-called ‘Small Business Act’, and shifted the focus to helping SMEs with the transition to resource-efficient growth.
The future of European sustainable industrial policy Additional investments will be needed if Euro- pean industry is to move further in the direc- tion of resource efficiency. The starting points vary widely in different European regions. This is why the Commission is supporting invest- ments in infrastructure, and is helping to kick- start economic development in the different regions. Finding new ways to reduce inputs for year, representing over 7% annual growth, and “Industry is a core driving manufacturing industry, to improve manage- in 2008 it was estimated to employ 3.4 million ment of resource stocks, to optimize produc- people across the EU. force behind the technical tion processes, and to make the best usage of Furthermore, our 2020 energy goals can waste, are just some examples showing how result in €60bn less in oil and gas imports, and and technological increasing resource efficiency can also bring over 1 million new jobs in the field of renew- innovation required for economic opportunities for companies. This able energy and energy efficiency. will help stimulate technological innovation, A key driver for sustainable industry is the greater sustainability and boost employment in the fast developing green Commission’s product policy. The first nine technology sector, and open up new markets. measures under the Ecodesign and Energy resource efficiency.” It is important to me and to my colleagues Labelling Directives are expected to reduce in the Commission to be open to new ideas annual energy consumption by some 340 TWh and to consider new ways of dealing with our by 2020. This is equivalent to 12% of the total elec- economic and environmental challenges. It is, tricity consumption in the European Union or after all, my first and finest priority to work for the entire electricity consumption of Italy in 2007. Sheep grazing in a solar a flourishing and viable European Union – a park in Waghaeusel, Whereas some sectors will meet few barri- 12 miles southeast of competitive society which leaves a healthy ers in changing to a more sustainable produc- Karlsruhe, Germany. environment for future generations. n
MakingIt 33 COUNTRY FEATURE Slovenia Successful and innovative
A country with spectacular mountains, thick internationally competitive. Since Germany its main market. In 2010, forests, and a short Adriatic coastline, independence, and especially since the machinery and transport equipment Slovenia was always the most prosperous and country joined the EU, traditional industries, represented 39% of total exports, liberal corner of Yugoslavia. Multi-party such as textiles and truck-making, have manufactures 22%, and chemicals 16%. elections in 1990 were followed by a contracted, but at the same time, there has At home and abroad, Slovenian companies referendum that chose independence, and been an increase in light manufacturing and have produced and marketed successful and since going it alone in 1991, the country has higher value-added sectors, such as highly innovative products. For example, prospered. It moved quickly from a centrally pharmaceuticals and electrical engineering. Elan is among the top manufacturers of skis planned economy to a market one, and Industries with strong links to Western and snowboards; Seaway is one of the embraced free trade, making it a model of European economies, and those that are world's leading boat development economic success and stability for the region. highly export-oriented, have performed companies; Pipistrel is a successful light Slovenia joined the European Union (EU) in strongly. The best example is Revoz, the aircraft manufacturer; and Gorenje is a May 2004, and was the first of the newcomers Slovenian subsidiary of the French carmaker, manufacturer of high-quality, design- to adopt the euro currency in 2007. Renault, which for many years has been the oriented, domestic appliances. Slovenia is, by a wide margin, the richest top Slovenian exporter. Production increased Following years of uninterrupted growth, country in eastern central Europe, well ahead by around 40% between 1998 and 2009. to a large extent fuelled by a rapid increase of its Balkan neighbours, and even ahead of Despite the financial and economic crisis, in investments and exports, Slovenia was Portugal, which has been a member of the EU 2009 was a record-breaking year for the Revoz one of the central European countries worst since 1986. The high living standards enjoyed plant, which produced 212,680 cars, 7% more affected by the international economic and by the two million-strong population are than in the previous year. Since 2007, Revoz financial crisis. In 2009, the country’s largely a legacy of the past, when Slovenia was has been the first and only Renault plant to export-oriented economy was hit hard, Yugoslavia’s trading arm. In the 1970s and manufacture the Twingo model. The plant, shrinking by 8%. Economic growth 1980s, a large number of Slovenian which is located in the town of Novo Mesto, returned in 2010, with the recovery driven manufacturing concerns obtained western 40 miles south-east of the capital, Ljubljana, by an upturn in demand, particularly in the technology through licensing agreements, was awarded the most environmentally-aware EU and Balkan markets, but this slowed and this enabled them to become company prize by Slovenia's Environmental again in 2011. Development Fund in 2003. Apart from cars and car components, other important sectors of Slovenia’s strong and diversified manufacturing base are domestic appliances and other electrical items, pharmaceuticals, and metal-processing. Services have grown in importance since independence, reflecting a broader economy- wide shift away from traditional ‘smokestack’ industries. Investment in infrastructure and greater quality in the tourism industry have led to healthy growth in tourism services receipts. Machinery and chemical products are among Slovenia’s main exports, with
34 MakingIt Interview with His Excellency Danilo Türk, President of the Republic of Slovenia
Looking at the current global situation – with cated regulation, which should not stifle the the financial crisis, climate crisis, fuel crisis, dynamism of finance, but rather put the finan-
food crisis – one could paint a gloomy picture. Photo: Bobo cial system into a framework, which will ensure Has globalization failed us? its orderly functioning. First, globalization is an old process that has Coming to the impact of all these important been going on for centuries. For example, in global shifts, what can be done at the local the 19th century already globalization level to mitigate these crises? Is regional inte- progressed with various innovations, includ- gration a response to controlling the impacts ing telecommunications and expanded navi- of globalization? gation. The specific feature of the current This is an interesting question, particularly as phase of globalization is that it affects more it is a real challenge nowadays to define what people, in more places, at a much faster pace is local. Of course, people live and act locally, than in any other phase of globalization before. but very often their local action is part of a This is, to a large extent, due to the operations much larger system. For example, if you go to of today’s global markets for goods and serv- a factory in Ljubljana that produces automo- ices. Today, we should ask ourselves whether tive light systems, it is, at the same time, a local these markets are really put in the right production system and part of a global system normative framework? of automotive manufacturing. So, the local This is the second question, which is at the manufacturers need to consider global trends centre of the globalization debate now. As you and issues when thinking about their local know, there has been a period during the past logistical or managerial problems. 30 years when deregulation was the primary Globalization has really changed the under- order of the day. Regulation was seen as inim- standing of what is local and what is global. ical to market forces and it was therefore not The question of what can be done at the local promoted. I think these times have passed and level to mitigate global problems can therefore we are entering into a phase when the question not be answered easily. The fact remains, of regulation has to be put on the global agenda however, that individual actions are happen- and considered very seriously – and in fact, this ing locally rather than globally. If you take the is already happening. In 2009, after the first emission of greenhouse gases, for example, wave of the financial crisis, market regulation much can be done through regulating and and global economic governance issues were at organizing local traffic, especially in large the centre of the debate, and have stayed there cities. Here, one cannot expect specific answers ever since. In the fields of financial services and from global or even national regulators. Very global financial regulations in particular, there often, the decisive response comes from the is a very serious need for a new era of sophisti- cities themselves. They themselves ‰ Dr DANILO TÜRK was born in 1952 in Maribor, Slovenia. He studied law, and followed an academic career at the Faculty of Law, University of Ljubljana, Slovenia. After Slovenia’s declaration of independence, Dr Türk took an active role in its diplomatic activity, and in 1992 he assumed the position of Ambassador of the Republic of Slovenia to the United Nations. From 2000 to 2005, he served as UN Assistant Secretary-General for Political Affairs. In 2005, he returned to Slovenia, becoming professor of international law and vice dean of student affairs at the Faculty of Law of the University of Ljubljana. He ran as an independent candidate in the 2007 presidential election and, with the backing of centre- left parties, won 68% of the vote, becoming the third president of Slovenia on December 22, 2007.
MakingIt 35 COUNTRY FEATURE Slovenia
‰ contribute to a large part of global green- house gas emissions, and they themselves can
change that. So, much can be done locally, but Photo: Bobo one needs to use imagination and see how that fits into a larger scheme of things. As far as the European Union (EU) is concerned regarding the regional framework for Slovenia, we appreciate the development of environmental standards in the EU. They help national policymakers to design stricter and more seriously conceived standards than would otherwise be the case. This, combined with the direction of the financial resources of the EU to related local infrastructure develop- ment, is very helpful indeed. And again, in Europe everything regional is also local. To give you an example: a few weeks ago, I opened a new sports centre in Mokro- nog, a small town in the south-east of Slove- nia. The centre has been built with environmentally friendly material and in an energy-efficient way. A part of the resources came from the EU, and EU standards were applied. As a consequence, local people at the opening talked a lot about the EU as a “local” different level of development, one can very governance today is to make these different actor in their local development efforts. You easily understand that the same model of envi- approaches converge. see, these are interplays that nowadays exist. ronmental protection or economic and social But we are still in a long learning process Overall, I think that the EU has a very crucial development is not conceivable. What needs to in this regard. Take the experience of Copen- role to play in mitigating global problems and be done is to figure out how one can work at hagen 2009 for example; you can see the diffi- environmental challenges. the global level to improve the performance of culties because it was not yet clear then how In view of this positive appraisal, could the EU mitigation of environmental impact in differ- one can put these different policymaking serve as a model for other regions as well? ent circumstances. How to combine different systems together. We need global rules and a Probably not – one needs to be realistic about policy models into a workable global global regulatory system, but we cannot simply these things and understand that circum- programme? One must not deny the differ- say that we need to have a single legal frame- stances vary considerably from one place to ences but work with them. work with a compulsory power – this has not another. If you take the EU with its 500 million In fact, this question exemplifies the worked so far. But this does not mean that we people and compare it to India, for example, increasing complexity of today’s global gover- should rule out the possibility for a coordi- with more than one billion people and a very nance system, which functions without a nated regulatory system to emerge in the single global centre of power, as we do not have a central global government. We will need to find a clever combination of the various normative, financial, and policymaking instru- ments, to make them suitable for the diverse local and regional circumstances and situa- tions in our world. In Europe, we will largely coordinate these instruments within the framework of the EU. In India, it will be national policymaking, and the same will apply to China. This does not mean that all these governance instruments cannot be put together in a coherent fashion. On the contrary, I think, the challenge for global
36 MakingIt future, with the full understanding and partic- time. Now, I think, there is a real opportunity ipation of large national systems, such as India, “If you go to a factory in for UNIDO to play a coordinating role in China, Brazil, and other big players. Ljubljana that produces bringing together all these different policies In the current network governance system, and models aiming at green growth. And, of many people are expecting the G20 to be an automotive light systems, course, many of these models and policies are answer to many global problems, as it is often it is, at the same time, a based on private sector engagement. seen as fast and decisive. Is this the way for- This is not new. At the recent 50th anniver- ward in global network governance? local production system sary of the OECD, I saw a very clear direction Well, I think that one has to be very realistic towards green growth. Indeed, wherever one about the G20. The G20 proved to be quite and part of a global system goes, green growth is talked about as the effective in 2009, and that produced a great of automotive desired policy direction. The main question degree of encouragement everywhere in the remains whether the international community world. This shows that it is very important to manufacturing.” is sufficiently well-organized for defining this have leadership – leadership with the appro- direction to move ahead. We have sophisti- priate amount of power – so that things can be cated methods for promoting this direction moved forward. and, I believe, UNIDO can play a very critical However, in 2010 and 2011, we have discov- experience of the past years will be properly role in this context. ered that the G20 has also lost a lot of steam absorbed, and whether the most appropriate Coming back to the local impact and re- and hasn’t been able to perform, just when and realistic outcome will be envisaged in due sponses to global sustainability challenges: much of the global economy is entering a new time. I think that the time is really very short. where is Slovenia in all this? phase of the crisis. I believe that this should be We, in Slovenia, will obviously be looking at First of all, Slovenia is a member of the EU. So, a very clear sign to the G20 to remobilize. the European Commission’s leadership, which for us, its standards apply, and policies are Remobilization, of course, cannot be the has been fully involved in the negotiations and designed in conformity with EU policies. Now, end of the story. Once the main direction of various conferences from Cancun to Durban where we are lagging behind is in the use of future governance is developed, it needs to be and beyond. Therefore, the EU countries will our own natural resources for the purpose of put into a proper normative framework, and coordinate their policies within the framework technological change. For example, we are a that normative framework will have to be legit- of the Union, and the Commission will lead heavily forested country. About 60% of our imate. I therefore think the G20 – and I believe the process. territory is covered by forests. I think that we the members of the G20 understand this EU countries understand that Rio in itself are not using enough the opportunities of perfectly well – will have to operate within such was a huge success with its Agenda 21, the biomass for the production of energy. We are normative systems as the United Nations and climate change framework, and biodiversity as not using enough our wood as a material for the International Monetary Fund. That is a major task. But the follow-up was rather energy-efficient houses. So, in certain areas, we where the norms and rules of the game will varied, and did not succeed in every respect. It are lagging behind. But, in others, we are doing have to be elaborated and determined in a is important that the preparatory process better than average, for instance in the produc- participatory process. towards Rio+20 finds a timely definition of tion and use of solar panels, which is some- A two-phase approach is therefore unavoid- sustainable development priorities and goals what surprising because we are an Alpine able. The first phase is the remobilization of the for the next decade. country. We are also doing better in areas such G20, and the second phase is norm-setting and UNIDO and others are looking at a new, sus- as water protection and purification, and so legitimization of norms through appropriate tainable industrial revolution. Would you forth. You can see that this is a varied picture – institutions such as the UN and the IMF. agree with such an approach, which also in some technological fields we are more Looking at Rio+20 in 2012 in this context – means a stronger involvement of the private advanced, in some we are not. Our focus, what would be, in your view, the best recipe sector in the problem-solving processes? however, should be on those technology areas for success? Absolutely. I think that a new industrial revo- where we lag behind and where we need to Rio+20 is coming very fast, and we do not have lution is not only called for but indeed is make more progress. much time. The questions are whether the already happening. In this context, we should l Interview by Kazuki Kitaoka, UNIDO. very carefully examine countries such as the Republic of Korea or China – very different in size but very similar in their ambition to change towards environmentally friendly tech- nologies and green growth. That, I think, should be the priority. Obviously, the private sector has a major role to play on such a development path. The private sector has been the driving force in technological change in the past and will remain so in the future. In this context, UNIDO has shown a remarkable capacity to adapt – it has gone through several stages in a very short period of
MakingIt 37 Acaseof ‘homeland security’ Alejandro Litovsky and Paulina Villalpando look at how the risks of investing in farmland
Photo: istock create opportunities for sustainability.
How agricultural land is owned, what is holds all the trade-offs together. Add recur- grown on it, and by whom, will probably ring droughts, and one begins to understand determine much of the next century’s profits, why the United States military calls climate politics and, possibly, revolutions. As the agri- change a “threat amplifier”. cultural paradigm of industrial productivity faces growing social, economic, and gover- Land security nance pressures, investors seeking to manage Investors are flocking to land-based assets as the resulting risks will require an unconven- a more secure alternative to the volatile stock tional approach to risk management: insert- and bond markets; and for countries like ing ecological limits and human security into Saudi Arabia and China, food and commod- the agricultural equation. ity supplies are becoming a matter of Food commodity prices are on a steady national security. Both trends are resulting rise. Much of the planet’s arable land is being in large-scale acquisitions of land in regions cultivated, and large proportions of it are where the soil is still fertile and water still being used to grow biofuels and crops to feed available. In sub-Saharan Africa alone, in just livestock. The extraordinary amounts of ten years, over 200 million hectares have water needed for irrigation further compete been leased to investors for agricultural with increasing human water consumption development by governments that often and with the needs of hydropower plants. As ignore the interests of communities living the world’s population continues to grow, on the land, leading to forced evictions and ‘land’ is quickly becoming the nexus that social instability.
38 MakingIt The results are direct reputational and sustainability. The sort of security framework political risks for investors that undermine that is emerging combines three inter- the long-term viability of investments. related types of risk: Conventional risk management approaches will struggle. What is needed is for companies Productivity and investors to align agricultural productiv- In the United States, to cite one example, an ity, human rights, and ecological limits as an exponential growth in pests that have effec- integrated investment strategy. tively adapted to pesticides such as Just as large carmakers have turned to glyphosate is leaving US farmers either electric cars, large agribusiness firms will unable to shoulder the costs of additional turn to organic farming. Just as new compa- chemicals or having to experiment with nies are being created on the basis of provid- untested chemical cocktails that are likely to ing services through distributed networks, increase the toxicity of water supplies and the like car-sharing schemes in large cities, so soil. Investment analysts have signalled that too, agribusiness must better integrate the the growing resistance of pests to chemical role of smallholder farmers into a radical pesticides is a cause for concern for investors rethink of its business models. Incentives for in agrochemical companies. pursuing these innovations are more likely Ecological limits are forcing farmers to to arise from fully understanding the secu- acknowledge the importance that a healthy rity and risk challenges involved in the environment has on long-term agricultural current model, than from appeals to global productivity. Organic methods that shy ‰
MakingIt 39 “Investment deals may boost food or commodity exports, but human security concerns and land-related conflicts will make their way to the top of the business and investment agenda.”
‰away from the heavy use of chemicals and between governments and investors, even if through an their informed and prior consent genetic modification to, for example, by well-meaning investors, are likely to to these deals, but also with options that strengthen biodiversity of crops and crop increase the vulnerability of poor communi- build their capacity and livelihood to partic- rotation as a strategy to challenge pests, have ties. The risks to human security are signifi- ipate in development. proven to be effective. cant, whether because communities are Recently, after 30 years of scientific forcibly evicted from the public lands they Ecological limits research, the Rodale Institute in the United have cultivated, usually without formal rights, The situation in Mali illustrates the chal- States has found that organic farming, for various generations, or because new water lenges that lie ahead. A recent study aggre- although providing lower yields in the first canals, meant to improve large-scale irriga- gated all the new land deals entered into by years, in the long term outperforms conven- tion, jeopardize water availability for small- the government of Mali, and found that, if tional chemical farming in terms of crop scale subsistence farming. The growing social they all fully developed, there won’t be yields, sustainability and profit. It is the instability and vulnerability created by this enough water in the Niger River to irrigate longest-running scientific comparison booming industry is growing in visibility, and them. The availability of water and water between organic and conventional agriculture. a few high-profile cases have shown just how rights that come with land rights will be the A part of this paradigm shift implies material these reputational and political risks main point of contention. Currently, two conceiving the fertility of the soil and the are for investors and companies. large investments are said to require more diversity of supporting ecosystems as Taking human security into account will than half of the critical reserve of water for ‘natural assets’ that must be taken into become a norm for farmland investments, the dry season, and have exclusivity of service account in the agricultural economic equa- even if that means going beyond legal in emergency situation. Some of the new tion. In sub-Saharan Africa, where farmers compliance. Ethiopia, for example, recently contracts take water rights for granted. A are either too poor to afford chemical offered to lease 3 million hectares to foreign large irrigation canal is being built by Libyan options or the distribution models are not investors for agricultural production at a investors to cater for the needs of industrial- sufficiently developed, natural ways of fixing time when 2.8 million Ethiopians are suffer- scale agriculture. This canal is said to affect nitrogen into the soil are driving agricultural ing from hunger in one of the worst famines the water supply for more than 90,000 innovation which can offer considerable in history. These investment deals may boost hectares of land used by small-holder farms insight to the research capabilities of more food or commodity exports, but human secu- for subsistence (of one or two hectares per developed nations. One example is ‘fertilizer rity concerns and land-related conflicts will person), as well as cut routes of passage for tree systems’: by planting certain types of make their way to the top of the business and livestock. Given the impending water nitrogen-fixing trees alongside crops, investment agenda. scarcity, analysts foresee a serious problem farmers have managed to boost crop fertility, Blaming unaccountable governments is arising both in terms of water availability for while increasing the biological diversity not likely to be enough to get investors ‘off agriculture, as well as water-related conflicts. needed to face climate changes, such as more the hook’. They will have to take proactive Climate change and recurrent droughts, frequent droughts. measures to ensure the transparency of which are increasingly difficult to predict, are In light of the long-tem risks involved for investment deals and bridge the gap between likely to aggravate the situation. agricultural productivity, when transitioning private and informal land tenure by commu- Land contracts that grant preferential from ‘Green Revolution’ to ‘Green Economy’, nities. History shows that, as with other areas access to water resources, or fail to consider it will probably make economic sense for where governments have been slow to water rights, should concern investors – as companies and investors to assume the respond or just sloppy – for example, in rela- should the overall institutional capacity put short-term costs of switching to environ- tion to labour standards or Apple’s recent in place by government agencies to manage mentally friendly agriculture. standoff over the environmental footprint of the aggregated demands of agricultural its supply chain in China – the private sector developments on limited water resources. Human security will be held to account. It is reasonable to Further unintended consequences from The generally low levels of government think that a proactive approach to risk surpassing these ecological limits pose addi- accountability in sub-Saharan Africa mean management must include ways of involving tional risks for investors. For example, since that large-scale land investment deals made and benefitting local communities, not just 2004, Saudi Arabia has leased more than
40 MakingIt Image: Damien Glez
376,000 hectares from the Sudanese govern- ment to grow rice, a water-intensive crop. Weak water regulation has forced the Sudanese government to halt its wheat production because of water scarcity, which in turn has reduced grain supplies and increased its price on the local market. Another example is Tanzania, where water demand from land investments has had a detrimental effect on electricity supply, which in turn has affected the country’s entire economy since more than half of Tanzania’s electricity is generated by hydropower. It is reasonable to assume that these trade-offs and externalities, which will increasingly translate into costs to be written-off the balance sheet, are re-defining how to assess the long-term productivity and risk of land and agricultural investments.
Where next? While progress depends on host govern- ments getting good governance and land US$1.3 trillion in assets to explore how to in Tanzania. Ensuring there is a long-term planning right, the costs of inaction will drive more responsible investments. Opera- view of a community’s development is likely undoubtedly land on the balance sheets of tionalizing a commitment to transparency is to feature centrally on this agenda. companies and investors. Avoiding these among their main interests. Considerable With global financial markets in turmoil, risks requires some foresight. Two areas of opportunities exist for cooperation, but investors regard land-assets as a more stable opportunity to move this agenda forward are: precisely how investors operationalize trans- opportunity. Many will think it is unfair for parency is an area where the first mover will a broader human rights and sustainability Transparency have the advantage. agenda to be coupled with investment focus, Pressures for greater transparency are but, incorporating productivity risks, human increasing. Within civil society, a research Agribusiness beyond compliance security and ecological limits into the equa- partnership between the International Land Obtaining prior and informed consent from tion is essential to fully understand what lies Coalition and a number of development local communities for large-scale invest- ahead. Managing these risks proactively agencies aims to become the world’s largest ments is becoming a central demand of civil offers not only an extraordinary opportunity database on large-scale land investments. society to both governments and investors. to move the sustainability agenda forward, Increasing transparency by investors can Framing this in terms of compliance is but also one that looks at productivity in a create virtuous circles with governments and important, but more important from a busi- new way. Time is of the essence, and every- communities, but transparency will not be an ness perspective will be to create more inclu- one has a stake in trying to make the land easy subject, especially due to competitive sive value chains and offer local communities agenda work for the long-term. pressures within the investment sector. ways to be involved in development. As the Initial steps are being taken however through global media becomes increasingly interested l Alejandro Litovsky is Founder and Director of the Principles for Responsible Investment’s in this agenda, investors are likely to continue the Earth Security Initiative; Paulina Villalpando is (PRI) Farmland Working Group, where six to be exposed when promises are not kept, as an Associate at the Earth Security Initiative. pension funds are pooling their combined was recently the case with biofuel investments www.earthsecurity.org
MakingIt 41 POLICY BRIEF
The report clearly shows that the ‘connectedness’ of a country has a strong Networks for prosperity positive correlation with various aspects of its economic performance, justifying the growing interest of policymakers in knowledge networks. Specific issues related to the governance of international, inter-organizational and intra- By KAZUKI KITAOKA, Programme Management information and knowledge creation organizational networks are discussed in Officer, UNIDO networks. It then explores the empirical separate chapters. These are illustrated evidence in a global “Connectedness Index”, with detailed examples from a wide range While not a new phenomenon, knowledge which ranks countries in accordance with of developing countries and transition networking and network governance have their internal and international knowledge economies. gained importance with the rapid networking capacities. Using this initial What stands out in all cases is that there globalization in all spheres of our societies: ranking, the top 20 connected countries are: are great benefits from ensuring that a country’s economic success, social 1 Switzerland knowledge networks are successfully cohesion, and environmental sustainability 2 Sweden embedded in the structures and networks depend more than ever on the performance 3 Netherlands related to development policy. But vibrant and behaviour of its neighbours, regional 4 United States knowledge networking needs more than leaders, and global economic powers. This 5 Finland that. It requires a living ‘institutional knowledge, with a focus on the driver of 6 Singapore ecosystem’, with new organisms providing development – private enterprise, has 7 Norway new knowledge and opportunities; and it therefore become of crucial importance, 8 Canada implies the development of solid, durable and knowledge management and 9 Germany networks, which are built on trust, as well knowledge networking are important topics 10 United Kingdom as constant movement between relevant for change agents and policymakers. 11 France networks to capture new information. A joint publication by UNIDO and the 12 Australia The report makes the following Leuven Centre for Global Governance 13 Japan recommendations: Studies, Networks for Prosperity – Achieving 14 Malaysia 1. The international community should Development Goals through Knowledge 15 Czech Republic actively promote knowledge networking Sharing, lays the basis for the development 16 New Zealand and network governance structures for of knowledge networking concepts that will 17 Israel achieving local, regional and global help developing countries to acquire and 18 Slovenia development objectives. This may include: adapt private sector development (PSD)- 19 Korea, Republic of – Fostering international, national and relevant knowledge to their specific 20 Thailand local knowledge networking approaches contexts and needs, and enhance the in all capacity-development activities; knowledge capabilities of the United – Improving national ownership Nations system and its national “The ‘connectedness’ of a through multi-stakeholder networking counterparts and partners in the field of country has a strong arrangements in the policymaking PSD policy. UNIDO was requested to positive correlation with processes at all levels; prepare the publication as the technical – Making the international system more convenor agency of the funding window, various aspects of its inclusive through the engagement of ‘Development and the Private Sector’ of the economic performance, more countries and institutions in Spanish MDG Achievement Fund (MDG-F). justifying the growing solution-finding processes; and The report first explains why information – Supporting networking arrangements and knowledge networks are important, interest of policy-makers in with the goal of enhancing innovation differentiating between learning, knowledge networks.” and private sector development.
42 MakingIt POLICY BRIEF
2. Member states of the United Nations should encourage and facilitate the international knowledge networking capacities of their public and private institutions. This may include: – Formulating networking strategies for the achievement of development objectives and reforms; – Supporting regional policy and research network participation; – Investing in institutional infrastructure and innovation networks domestically and internationally (South-South and ‘triangular’); – Upgrading the knowledge networking capacities and capabilities of domestic institutions; and – Providing incentives for the formation of new networks in specific fields of strategic interest. 3. International organizations should improve their inter-institutional information and knowledge exchange systems and facilitate better knowledge networking among their members. This may include: – Improving thematic information exchange in communities of practice to provide more user-friendly platforms for knowledge sharing among members; – Seeking the involvement of non- state actors in policy development processes; and – Supporting knowledge network development in relevant fields. 4. An international and cross-sectoral research and policy network should be established to further develop the initial findings on connectedness and knowledge networking for the achievement of development goals. It should recommend measures and programmes that enhance development effectiveness through increased knowledge networking, in particular in the field of private sector development. n
MakingIt 43 POLICY BRIEF
Carbon capture and storage in industrial applications
By the International Energy Agency Energy (IEA) production, offer an early opportunity to demonstration programmes efficiently Technology Policy Division and the United demonstrate CCS. If this opportunity can between power generation and industrial Nations Industrial Development Organization be linked to enhanced oil recovery, costs production processes. (UNIDO) Energy and Climate Change Branch could be lower than US$10 per tonne of CCS in industry needs more specific CO2, or even negative. support, including financial assistance for Current options for reducing CO2 As with CCS in general, incentives and investing and operating CCS. Over time, emissions from industrial sources will not regulatory measures will be required to however, incentives for CCS technologies be sufficient to achieve deep emissions facilitate industrial applications of CCS. should be linked primarily to their ability to reduction in industry, so new technologies The mechanisms should be selected reduce CO2 emissions. are required. Recognizing the importance according to the maturity of the technology, Additional capital investments of about of carbon capture and storage (CCS), the IEA and should distribute funding for CCS US$256bn would be required for industrial and UNIDO have collaborated to develop a CCS between 2010 and 2030. Of this total, technology roadmap for the application of US$172bn will be needed in developing CCS in industry. countries. This high additional capital cost is one of the main barriers to Key findings implementation. Carbon capture and storage is a key cost- For developing countries, CCS could be effective option for reducing carbon dioxide part of a low-carbon industrial development (CO2) emissions from industrial strategy. If CCS can be implemented applications. Whereas the power sector can through the United Nations Framework take advantage of alternatives to fossil fuels, Convention on Climate Change (UNFCCC), in several industries deep emission Clean Development Mechanism (CDM), or reductions can only be achieved through other new global climate mechanisms, the CCS. cost barrier could be partly overcome. It is CCS could reduce CO2 emissions by up to likely that if CCS moves forward under the 4.0 gigatonnes annually by 2050 in CDM, the first projects will be in industry. industrial applications, accounting for about 9% of the reductions needed to halve Key actions in the next 10 years energy-related CO2 emissions by 2050. To Governments need to ensure adequate achieve this target, 20% to 40% of all funding for CCS demonstration projects in facilities need to be equipped with CCS by “For developing countries, major industrial and fuel transformation 2050. carbon capture and storage sectors such as ammonia, gas processing, High-purity sources, such as natural gas could be part of a low-carbon biomass conversion, refineries, iron and processing; hydrogen production from steel, and cement manufacturing. By 2020, natural gas, coal or biomass; ethylene oxide industrial development investment worth US$27bn will be needed production; coal-to-liquids; and ammonia strategy.” to fund about 60 early large-scale projects.
44 MakingIt POLICY BRIEF
If additional operating costs, transportation and storage are included, the total additional cost would reach an estimated US$45bn. Governments and financiers need to ensure funding mechanisms are in place to support demonstration and deployment of CCS in developing countries, where the largest opportunities exist for CO2 capture in industrial applications. To enable a deeper understanding of the potential for CCS in industrial applications, more data need to be made available on emissions, technologies, costs and projections. Governments need to review the opportunities for industrial CCS in their countries and ensure that industrial CCS is given prominence in the short term, especially in low-cost applications. Although industry will eventually need to implement the technology, public research and development programmes on CCS in industrial applications are required to bring more information into the public domain. Best practices for CCS in industrial applications need to be developed and disseminated, so that interested parties can learn faster how to apply the relevant technologies. CCS opportunities in industrial applications need to be mapped better and more consistently at the national and local level, including CO2 storage opportunities in enhanced oil recovery operations. l Technology Roadmap – Carbon Capture and Storage in Industrial Applications, © The OECD/International Energy Agency and United Nations Industrial Development Organization, 2011, page 5
MakingIt 45 ENDPIECE
The new pharmaceutical frontier
Looking ahead to the next issue of Making It, planning. Donated supplies also have the which focuses on industry and health, overarching negative effect of
SUMI DHANARAJAN considers how the Photo: istock undermining market competition – even pharmaceutical industry can improve access to generics cannot compete with free medicines in developing countries. medicines. Price discounts have been more effective, though their effect is It has been a challenging decade for the limited by their focus on specific high- pharmaceutical industry. With patents profile diseases and least developed expiring in high numbers, new-product countries (LDCs). pipelines drying up, and intensifying Advocates of improved access to competition from generics, branded medicines have posed three demands of pharmaceuticals have been the pharmaceutical industry: haemorrhaging value. l Transparent pricing schemes that At the same time, traditional markets are systematically address the challenge of becoming saturated. Stark realities in affordability; industrialized countries – such as the l Investment in research and impact of aging populations on tax-based development that is relevant to the and employer-funded health-care models and malaria, new infectious diseases like diseases affecting developing countries, – are leading governments to adopt Influenza A (H1N1), and a “silent pandemic” and in medicines suitable for resource- regulatory regimes that demand more in the form of non-communicable diseases poor contexts (for example, heat-stable economical, value-based, and transparent such as diabetes and cancer. The challenges formulations or fixed combination drugs); drug pricing. surrounding access to medicines remain and Under these circumstances, emerging critical, and, indeed, relevant to the l A flexible approach to intellectual markets present a new frontier. Originally industry’s business model. property (IP) rights, in recognition of the attractive for offering low-cost production, Philanthropic approaches to the problem role that generics play in vastly reducing developing countries now present a viable have achieved little systemic change. Drug medicine prices. market for multinational corporations. The donations by companies have been Leading companies are starting to pharmaceutical industry has been eyeing criticized for being mostly unsustainable. understand how integrating these this trend for a while. A recent study Often, the medicines are unsuitable for concerns into core business practices may predicts that sales in 17 ‘pharmerging’ patients, unfamiliar to local prescribers, do hold the answer to sustainable long-term countries – including India, Indonesia, not match national clinical guidelines, or profitability in emerging markets. Pakistan, Thailand, and Vietnam – will “in are near expiry. Reliance on the traditional “blockbuster” aggregate expand by US$90 billion during Because supplies of donated medicines model, which targets the elite, is proving 2009-2013.” can be unpredictable, they can create chaos unfeasible and short-sighted. But in many emerging economies, a in the market by preventing accurate For starters, it limits the size of the large proportion of the population is poor, quantification of needs and thus affecting consumer base. More importantly, the and those who are not, remain vulnerable model’s dependence on aggressive defence to falling into poverty in times of crisis. “The challenges surrounding of patents and high profit margins, in Health care is financed largely out-of access to medicines remain order to generate the all-important pocket – up to 60% in Asia – and many US$1bn per annum, keeps companies countries shoulder a “triple disease critical, and relevant to the from serving target markets effectively by burden” of “old” diseases like tuberculosis industry’s business model.” providing products that are relevant,
46 MakingIt ENDPIECE MakingIt Industry for Development FURTHER READING Economic Commission for Latin America and the Caribbean (ECLAC) – The Economics of Climate Change in the Caribbean Summary Report Ford, Martin – The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future Heinberg, Richard and Lerch, David (eds) – The Post Carbon Reader: Managing the 21st Century’s affordable, and accessible. Many argue model sells medicines in smaller, more Sustainability Crises Kugelman, Michael and Levenstein, Susan (eds) – Land that the perverse incentives created by affordable package sizes. The jury is still Grab? The Race for the World’s Farmland the blockbuster model discourage out on whether or not these new Lovins, Amory – Reinventing Fire: Bold Business innovation. approaches deliver systemic change, and Solutions for the New Energy Era Martenson, Chris – The Crash Course: The Finally, governments of the developing whether companies are adopting a Unsustainable Future of Our Economy, Energy, and countries are beginning to prioritize “serve” rather than “capture” market Environment health care and are seeking cost-efficient strategy, but at least the issue of access to Palast, Greg – Vultures’ Picnic: In Pursuit of Petroleum Pigs, Power Pirates and High-Finance Carnivores outcomes, as well as the means to medicines is no longer being viewed at Parenti, Christian – Tropic of Chaos: Climate Change effectively manage disease burdens. In arm’s length. and the New Geography of Violence these countries, building access to More needs to be done on the issue of Srinivasan, Ancha, Ling, Frank, Nishioka ,Shuzo and Mori, Hideyuki Mori (eds) – Transition to Low- medicine into companies’ core business intellectual property (IP) rights – the Carbon and Climate-Resilient Economies in Asia: models has become vital to securing a sacred cow of the pharmaceutical Challenges and Opportunities Yergin, Daniel – The Quest: Energy, Security, and the license to operate. industry. Governments of developing Remaking of the Modern World At the end of 2008, one company countries continue to go head-to-head attempted to beat a new path. The chief with ‘Big Pharma’ in battles over executive of GlaxoSmithKline (GSK) compulsory licensing and patent FURTHER SURFING unveiled a four-point plan that included legislation. There is serious questioning http://cleanenergysolutions.org – The Clean Energy Solutions Centre helps governments turn clean a commitment to cap prices for patented of whether IP rights are actually an energy visions into reality. medicines in LDCs at 25% of the price in effective incentive for drug development, http://regions20.org – A coalition of partners led by the developed world. In middle-income especially with respect to medicines that regional governments, working to develop, finance, implement, evaluate and replicate low-carbon and countries, prices would more closely are relevant to diseases in developing climate-resilient projects reflect a country’s ability to pay (for countries, given the current dearth of www.carbonwarroom.com – The Carbon War Room example, GSK cut the price of its cervical research and development into these harnesses the power of entrepreneurs to implement market-driven solutions to climate change. cancer vaccine, Cervarix, by 60% in the diseases. www.chinadialogue.net – The world’s first fully bilingual Philippines and gained a 14-fold increase New models are being tested. website devoted to the environment that aims to in volume sales). Further, it proposed the UNITAID’s patent pool for AIDS promote direct dialogue and the search for solutions to our shared environmental challenges. establishment of an LDC patent pool for medicines, for example, allows generics www.earthsecurity.org – The Earth Security Initiative neglected tropical diseases and donated producers to make cheaper versions of explores new cross-sector responses to the risk and to it 13,500 compounds for malaria patented medicines by enabling patent opportunity of the ecological limits that fundamentally challenge the security of people, vaccines. holders to license their technology in economies and nations. Slowly, other companies are following exchange for royalties. Ultimately, www.foet.org – The Foundation on Economic Trends examines emerging trends in science and suit. Sanofi-Aventis recently announced generics remain the current front-runner technology, and their impacts on the environment, that it would halve the price of its diabetes in terms of delivering affordable the economy, culture, and society. drug, Lantus, and cancer treatment, medicines. Formulating policies that www.gggi.org – The Global Green Growth Institute is dedicated to pioneering and diffusing a new model Taxotere, in Indonesia and the Philippines. enable generic competition with the of economic growth, known as "green growth." The Japanese firm Eisai dropped its price branded pharmaceutical industry will www.mrfcj.org – The Mary Robinson Foundation – for Aricept, an Alzheimer’s treatment in six require creative measures that emphasise Climate Justice is a centre for thought leadership, education and advocacy. Asian countries. the imperative of maximizing public www.rmi.org – Rocky Mountain Institute is an Other companies are experimenting health. independent, entrepreneurial, non-profit think-and- with base-of-pyramid models that seek l Copyright: Project Syndicate, 2010. do tank, co-founded by Amory Lovins. www.sustainableenergyforall.org – The International to boost sales. Novartis’s Arogya Parivar www.project-syndicate.org Year of Sustainable Energy for All promotes action on energy issues at the local, national, regional and SUMI DHANARAJAN is an independent consultant specializing in the international levels. www.windmade.org – An initiative leading to the first field of business, human rights and sustainable development. Since global consumer label identifying products and August 2009, she has been based in Singapore. From 1998 to 2008, she companies made with wind energy. was Head of the Private Sector Team at Oxfam GB, the international www.un-energy.org – UN-Energy is a mechanism to promote coherence within the United Nations family development organization addressing poverty issues worldwide. of organizations in the energy field.
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