Tuesday, 26 August 2014

Wealth comes from not spending, but saving


British MP Chris Huhne put in an interesting article last week in The Guardian: 'Don't fear Growth, it's no longer the enemy of the planet...' (link here).

Among the take home points were:

"For centuries, the rise of GDP has gone hand-in-hand with the burning of fossil fuels. But technology has now broken that link" ...

"For the first time in history, we are growing richer while using less energy."

"...This is why so many green thinkers have rightly been suspicious of economic growth: the curve of rising living standards has been tracked by the curve of rising energy use from coal, oil and gas. The simple answer was green puritanism: change our lifestyle. Don the hair-shirt..."

"Businesses are bound to be early adopters of energy-saving technologies, because retailers and distribution firms can spend a fortune on energy. They are used to assessing investment and returns, whereas householders are often put off by the higher initial cost, and poorer households simply cannot afford the switch of energy efficient products even though they pay back quickly. Poorer householders simply cannot afford the up-front cost. That is why it is so crucial for government to encourage household energy saving.

It is also why one of the most short-sighted decisions of this government was to halve the amount of support for energy saving through the Eco subsidy, and just this summer to end the cashback scheme for the energy-saving green deal because it was too successful. The £120m budget allocated until next spring was exhausted in six weeks."


None of this is news to yours truly: having worked in an engineering firm supplying energy-efficient systems for lighting and air conditioning, and for several years in Renewable Energy, one of the key selling points of our services was that the cost-return equation could be highly advantageous for the adopter, though this often depended on the existence of other benefits to the client, including tax breaks and subsidies.

An important feature of the decision-making process for businesses was confidence - many clients were suspicious of the technology and highly risk-averse about the processes and potential returns, not least the banks who ended up lending the money for the work to be done. Not a problem which exists in several EU countries, or among large institutional energy users, but particularly prevalent at smaller scales and where the returns were more marginal or more dependent on 'pure' subsidies.

For me, the important message is these figures demonstrate that reducing energy use is NOT harmful to Economies and NOT a threat to a way of life in itself - in fact, the truth is quite the reverse. This means that there is no credence to be given to ideas that living/ doing business more effectively somehow commits us to the 'hair shirt, greeny, degrowthy' future that seems to scare some people so much.

But, whilst Huhne's article makes its points well and emphasises an important feature of the relation between economy and energy, it doesn't address some deeper issues such as sustainability, pollution, trade equity (TBF, it isn't meant to). There is the ongoing presumption that 'growth is good', difficult to argue against for the whole globe, but problematic.

If economic growth can be achieved while using fewer resources and making less waste and pollution, without putting the planet and future generations in resource-debt, then it looks attractive. In a sense, it is inevitable, as population rises, that markets will grow naturally. The argument for energy efficiency also applies to resource efficiency, hence the popularity of schemes like Ellen MacArthur's Circular Economy, which focuses on the whole product life cycle and the resource life cycle, rather than the 'Stuff' approach, where resources are inputted, processed, sold, used, then trashed.

But it is important not to be naive about the problems of Consumerism and Markets. The products of large corporates such as P&G, Unilever and Nestle (the 'big three') are not always amenable to recycling - soaps, oil-based products, luxury foods, etc - these can have potentially toxic outputs on large scales (constituent chemicals sent into the water supply, packaging...). The social impacts are sometimes significant, for employees in some countries, for outcomes such as obesity and landfill.

It is important to see that the world does not need to be overthrown by bloody revolution in order to move in a better direction for society and the environment, and useful to recognise that our fortunes are not tied to energy in the way some have suggested, but the other bottom line that should be pushed here is that, in the real world, we make and buy a whole lot of crap - genuinely useless, unhealthy, unnecessary 'stuff' - and for individuals, getting past the efforts of marketing to convince us that we 'must have' this stuff for our own well-being, is still important. The example from the larger economy should inform our personal economies; more judicious use of our resources (earnings), less profligacy and a bit of prudence, these qualities will make our income 'grow', give us more resources to put aside, or use to create our own capital, and, as a result, make us 'happier', wealthier people with cleaner consciences.