World Environment Day - Seychelles: Finding Solutions to Water Scarcity

Building Economies that are Green and Circular: What Can We Learn from SIDS?

By Steven Stone
Chief, Economics and Trade Branch (UNEP)

Uncertain prospects for growth and jobs…global warming…gap between the haves and have-nots. Although distinct, these different threats feed off each other in an intricate interplay.  We cannot address each in isolation. 
Christine Lagarde, Managing Director, IMF

2014 is the year of the Small Islands Developing States – SIDS.   It is an appropriate time to reflect upon the meaning of this particular class of countries:  islands by definition have had to work hard to overcome isolation and resource constraints, and those that are still on the lower end of the income and human development curves face heightened challenges.
Yet step back for a minute and you realize that all of us have something in common with SIDS.

All countries, regardless of shape or size, share a common challenge of creating and sustaining prosperity in a world where environmental tipping points and thresholds have forced them, for the first time in history, to face binding resource constraints and uncertain weather events as a fact of life.

All countries, regardless of shape or size, share the common challenge of improving economic resilience and autonomy through self-reliance, while looking outward for inspiration and improvement through the free exchange of goods and services.
But most fundamentally, all countries share a common plight with the SIDS.  Because as the climate shifts and basic resources like clean air, and uncontaminated water and land become more scarce, SIDS are the proverbial canary in the coal mine.   Though they are on the front line of climate change, sea level rise, ocean acidification and a host of other challenges, the rest of the world is not far away.

Consider the evidence:

  • Collectively, we breached the 400 ppm threshold of CO2 concentrations in atmosphere in 2013 – the first time in several million years, and well in advance of scientific projections.
  • With historic ice melts in the artic, the first journey ever across the north pole route was undertaken by a container ship in the fall of last year, shaving 14 days off of the normal travel time from China to Europe and heralding a new era in commercial exploitation of the unexplored artic zone.
  • Severe weather – a so-called “polar vortex” – so dramatically up-ended the US economy that a 1% slowdown in GDP in the first quarter has been attributed to it.   Losses from Hurricane Sandy, which flooded New York City, are estimated in excess of USD 50 billion.

Everywhere one turns, the signs of change are evident.  Yet we are so preoccupied with the pressing problems that currently besiege us – austerity, unemployment, and geopolitical tensions – that we are missing part of the big picture, and the patterns that are emerging.
This near-sightedness is no greater than when it comes to measuring and managing our basic environmental infrastructure and the wealth it produces.  Buried within calculations of GDP are the sources of true wealth, often unaccounted for, that drive and underlie prosperity.

Take the case of China, which is poised to become the largest economy in the world, and which through tremendous growth over the past three decades has lifted millions of people out of poverty.  And yet, the environmental cost of this economic progress has been staggering.  By their own measure, over one fifth of all arable land is now contaminated, and about 60% of the ground water is so polluted that it cannot be consumed by humans.
How can progress and prosperity be possible when we have drawn down the very source of our wealth, and our human well-being?

When looking at that great challenge of turning this situation around, we can look to the SIDS for some lessons.  Indeed, when one looks at the range of ingenuity and responsible policy making induced by a vision of a limited resources, it is consoling and instructive for the rest of the world. 

Early on, SIDS knew they alone would be responsible for managing their small and fragile ecosystems, and for creating wealth without destroying their underlying endowment of natural resources.  They have innovated, created policies that increase resilience and create comparative advantage in the face of resource constraints.

Consider the case of Japan, which now boasts some of the highest recycling rates in the world; or Singapore, which has created and sustained an economy of services which is highly decoupled from resource consumption; or Barbados, which adopted a national green economy strategy well before Rio + 20 put the term into common parlance across countries.
More recently, islands as diverse as St. Lucia and Mauritius are showing a renewed commitment to creating and investing in a greener economy, one that positions them for growth and enhanced stewardship of their natural resources and wealth.

At root, we can learn from these resource constrained countries because they learned the lesson early on, that resource efficiency, self-reliance and innovation are the drivers of improved human well-being in the absence of seemingly endless frontiers or unlimited stocks of natural resources.

And probably the first lesson that we can derive from SIDS is to look at how we are investing resources into the future.   How is the money flowing that will shape the economies – and their ability to produce jobs, incomes and wealth  - of the future?

The answer, sadly, at present is that there is still lot of money moving in the wrong direction.

  • Annual subsidies to fossil fuel total somewhere near USD 500bn/yr, with the IMF estimating the total economic cost of these subsidies to be in the area of USD 2 Trillion – well above 2% of global GDP.
  • Meanwhile, large energy companies are still investing in excess of 500 billion/yr in oil exploration – well above the amounts being directed into clean energy.
  • Carbon prices remain on the floor, with the virtual collapse of the European carbon trading scheme.

To turn this situation around will require all the ingenuity and creativity we can muster, and in this, there is much we can learn from the SIDS.

UNEP – the United Nations Environment Programme – is actively working on several fronts to accelerate that learning, and create and share the knowledge that can inform investment and policy decisions needed to create cleaner and greener economies.  From reframing national economic planning to include sustainability under its new Partnership for Action on Green Economy (PAGE), to inclusive wealth accounting which includes the flow of goods and services from the environment, UNEP is actively supporting those countries wishing to engage in an agenda of change that puts sustainability into the heart of economic and fiscal policy making.

Over the coming weeks and months, you will hear more about the Year of SIDS. 
On June 5th, World Environment Day, you will hear the story of how Barbados has put the idea of building an inclusive green economy into the center of their national development strategy.  And at the upcoming  UNEA - United Nations Environment Assembly – the first gathering ever of this newly created body vested with the active stewardship of the global environment – you will hear countries discussing how to finance a green economy.

A few months later, countries will gather in Samoa, in September of this year, to listen and discuss the experience of SIDS as they confront the reality of a changing climate and new strategies to adapt and grow.

As carbon concentrations increase and sea levels rise, listen to the voice and experience of SIDS.   We have much to learn: theirs is a precursor for a common destiny which all countries share .   And one which can be collectively shaped and fashioned through explicit policy design - if we put our minds to it.