Green Economy

CORRECTED TRANSCRIPT OF ORAL EVIDENCE    To be published as HC 1025-i

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

Environmental Audit Committee

Green Economy  

WEDNESday 7 SEPTEMBER 2011

Professor Tim Jackson, Jules Peck and James Meadway

Evidence heard in  Public Questions  1 - 15

USE OF THE TRANSCRIPT

1.

This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2.

The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the  Environmental Audit Committee

on  Wednesday 7 September 2011

Members present:

 Martin Caton (Chair)

Peter Aldous

Katy Clark

Zac Goldsmith

Simon Kirby

Mark Lazarowicz

Caroline Lucas

Ian Murray

Sheryll Murray

Caroline Nokes

Mr Mark Spencer

Dr Alan Whitehead

Simon Wright 

 ________________

 Examination of Witnesses

Witnesses:  Professor Tim Jackson, University of Surrey, Jules Peck, Partner, Abundancy Partners, and Chair, Edelman’s Sustainability Group, James Meadway, Senior Economist, New Economics Foundation, gave evidence.

Chair: Good afternoon. Welcome to the Environment Audit Committee. First a couple of apologies, for the late start caused by a division in the Commons and also that our Chair, Joan Walley, cannot be here because she is moving a new clause in the Health Bill that is currently under consideration at Commons. Perhaps if very briefly each of you could introduce yourselves and your background. Can we start with James Meadway?

James Meadway: I am senior economist at the New Economics Foundation.

Professor Jackson: I am Tim Jackson. I am professor of Sustainable Development at the University of Surrey and former economics commissioner on the Sustainable Development Commission.

Jules Peck: Jules Peck, I am a trustee of NEF and I have worked quite a bit with Tim Jackson on various things, and mainly I advise companies on sustainable development, well-being and limits to growth.

Q1 Chair: Thank you very much. I am going to open up the questions. There seem to be a lot of different interpretations of what the green economy means, ranging from greening the current economy by stimulating growth in renewables and green technologies, to a whole new economic system. What do you see a green economy as being?

James Meadway: There is a minimum definition which talks about green sectors of the existing economy and expanding those somewhat-that is the kind of absolute bare bones minimum-but I think to really seriously address some of the environmental problems that we are facing you have to talk about far more extensive definitions of a green economy. You have to talk about an economy that is able to perform its activities without breaching significant environmental limits, so you are talking about an economy that does not overstep the mark in carbon emissions, that does not overfish, that does not overgraze. There are certain absolute physical barriers to growth within that economy that a genuinely green economy will not overstep. That, I think, is the kind of definition that you need to start from. You can then also start to talk about well-being and social justice within that economy but essentially those are secondary issues I think.

Professor Jackson: I would agree very much that a green economy is one that is literate in relation to ecological constraints, resource constraints, climate constraints, biodiversity constraints, so that it is not heading in a direction that is bound to confront those constraints and cause environmental and resource related problems in the future. Where I suppose I would slightly pick up on James’ point is that I think that social justice is integral to that in the sense that it is possible to see a world in which rich economies develop resource-intensive consumption patterns that remain, at least temporarily, within resource limits. However, if the resource consumption levels are significantly higher-orders of magnitude higher-than in the poorest countries, as they are at the moment, that cannot be seen to be either socially just or sustainable. A green economy, to me, must be one that is consuming resources on a per capita basis that if equitably shared across a population of 7, 9 or 10 billion people could still remain within resource constraints. To me, the social justice element is integral to the way that you think about the resource consumption patterns in a green economy. For example, in climate-if you are thinking about the climate constraints-a green economy with respect to climate must not be consuming carbon, emitting carbon any faster on a per capita basis than can be sustained within the scientific targets that we know we have to meet.

Jules Peck: As I am at the end I am probably going to agree with everything that has been said already. The only thing I would add-because I do agree with everything that has been said-is I was sent a link to this Enabling the Transition to a Green Economy report which I think is to a large degree what we are talking about here, and I think those sorts of views are completely absent from this paper and that is a great shame. I think a lot of work needs to be done to integrate that sort of perspective of a shift from wealth and growth as prosperity to well-being fundamentally as prosperity and that is really needed.

Q2 Chair: The Government’s recently published document clearly does not deal with well-being or social justice. You find that as a major weakness in it.

Jules Peck: Absolutely, yes, because of all the things that-

Chair: Mr Meadway, you would not necessarily agree with that, would you?

James Meadway: Well, you can imagine a green economy that still is socially unjust, that does not deliver well-being, you can imagine this, and I do not think you would necessarily find it desirable to end up there. I think in practice you would, of course, also want to talk about social justice, and you would want to talk about the distribution of wealth, and you would want to talk about distribution of resources within that economy, but Tim raises a good point that as soon as you start to do that, there is a kind of a global perspective starts to open up; you could create quite an equitable, single, national economy here that respects its own environmental limits, but then does nothing about respecting social justice and the distribution of resources internationally. Potentially you start talking about very large issues indeed.

Professor Jackson: But it has immediate relevance, for example in relation to the UK’s climate change targets. We might think of ourselves temporarily, at the moment, as moving towards a green economy if our domestic carbon emissions are reduced but if we are reducing those carbon emissions as a result of trading finished goods with countries elsewhere in the world who are emitting additional carbon emissions, then it is not a green economy. Complex though it may be to talk about the green economy in a purely domestic context, it omits those critical issues both about resource constraints at the global level and about social justice at the global level. The reason why that is difficult for the Government to address at the moment, in a document such as this, is because it is challenging. It is challenging to lifestyles, it is challenging to global commitments, it is challenging to ideas about global trade and it makes the Climate Change Act a much more challenging thing to achieve if you were to account for traded carbon as part of the UK’s target.

Q3 Simon Wright: What in your view are the first practical steps that need to be taken to deliver on and to develop the green economy? What do the priorities need to be?

James Meadway: We may have some disagreements on this. Right now in the British economy as it stands, the first practical steps, I think, revolve around addressing the problem of demand deficiency. The reason the economy is in the state it is in is essentially due to the collapse of demand inside that economy over the last few years. That has particularly been driven by a collapse in investment spending, which has been the biggest single component of the fall in GDP over the last few years, and private investment has kind of disappeared. It has sort of recovered a bit over the last quarter or so but nothing to really speak of, and indications are that it is falling again. It has fallen by about 20% since its peak in 2007. It is a real slump. The reason that links into the green economy is because if we think of a recovery taking place in that private investment and for people to have jobs again and for other economically worthwhile things to happen, that does need to occur and it is likely to go for the easiest options first. So they go for the low-hanging fruit. It returns to the high carbon output economy we had in the past rather than finding a new lower path to take. It is a problem of path dependency-what you have done in the past is what you tend to want to do in the future, and if demand, investment demand in particular, recovers like that, it is a challenge for delivering any sort of green economy. One of the things that needs to happen is that the Government has to start to use its own resources to lay out a new path, to support the growth of investment in green industries and use its resources in order to make that happen.

The Green Investment Bank could be an element of that but I think its powers would need to be substantially increased. It would need to develop its own borrowing powers. It would need to be able to go out and really earmark sectors and industries and regions where development on that scale could take place, and on the kind of scale we are talking about it would have to be substantial commitment of resources. Potentially also I know that George Irvin and John Weeks have floated the idea of using RBS, one of the nationalised banks, as a kind of national investment bank. This too would be something where Government could use its own resources to stimulate demand and to lay out a new path for the economy to follow. As things stand, the likely progress out of this recession is back into the old world and not towards the new green economy.

Professor Jackson: I would see three broad strategic avenues. The first of them is the economy and that the direction of the economy is literate in relation to green constraints-in relation to ecological constraints. We actually were at the forefront in the world in relation to that in terms of the Climate Change Act. But climate is not the only green fruit, and the issues around limits in relation to biodiversity, the constraints around finite resources, the impact on fish stocks, the loss of habitat and the pollution of ground water are all areas which are systematically under-accounted for in relation to the structure of economic activity. To me, route one-objective one-would be that our economic strategy is literate with respect to these environmental and resource constraints. This is just pure economic sense in relation to resources, where we may be facing resource constraints within the next two to three decades, even according to the most established and conservative sources. So area one is to establish these constraints for the economy to become literate.

The second one, I think, is similar to what James is suggesting. It is clear that we have a business as usual plan to get back growth, and that is to stimulate investment and employment in the areas in which we have habitually done that. Investment will go to those areas naturally and it will particularly go to them when the external costs of polluting industries are not internalised in risk, where the long-term resource risks are not internalised in investment decisions, where the structural instabilities of the financial sector are not internalised in the investment decisions. This rush to get growth back, one could argue, is one of the first things that we should avoid, whether or not we want growth in the longer term. It is not so much about growth because that is how we know what to do, it is about creating employment. It is about the re-visioning of a financial sector, as James points out, which is suitable to invest in the transition to a sustainable, green economy. It is about creating the structures, the incentives that will direct investment in those directions. It is around the public sector’s own role in that investment process, both through the Green Investment Bank and through other vehicles that it might want to create public assets in. Ultimately, that again is not a trivial task. It is very nice to have a target like setting up a Green Investment Bank under restricted powers, with very specific technologies that we want to promote, but that will not work in an economy in which the other incentives are driving in a different direction. There is, alongside ecological literacy, a demand for an economic literacy-a literacy for an economy that works in a different way, where investment is channelled into transition, where investment is laid down in ecological assets, when economic structure is not simply business as usual, expansion of consumer demand, but is geared towards the provision of good quality human services in health, education, social care and community coherence at the local level. These are, I think, enormous conceptual challenges, but they are the starting point for the transition.

Chair: Have you anything to add, Mr Peck?

Jules Peck: Only that I would agree with all of that and there is much more detail on these steps in Tim’s book, Prosperity Without Growth, which if you have not read it everyone here should read; but I think there is a considerable roadblock to starting on the process of putting these steps into place. It comes down to the language we are using here-the green economy; sustainable development and sustainability is the language that has tended to be used for a long time. I have bored Caroline with my idea that the Green Party ought to change its name because it is slightly out of date, but green really is not what is important. Sustainable development is about real human needs within the limits of the planet and those two things have to be taken into account. This paper talks about half of that, but only half of that; it talks about the limits of the planet to some degree but it completely misses the other, probably more important aspect, which is human well-being, flourishing lives and so forth. There is a massive amount of data and research on this. If we are obsessed by growing the economy and greening the economy-putting a green veneer on what is effectively an obsession with growth-we are completely missing out the much more rich and important definition of prosperity, which is about increasing flourishing lives for everybody, for all our citizens. Until we shift away from that conceptual roadblock, we are not going to be able to start even beginning to think about these steps.

Q4 Caroline Nokes: In the global economy, what work do you think is needed to create the right international conditions to help the UK move to a more, should I say, sustainable economy now rather than a green one, and can you identify any other countries that you think have a successful green economy?

Jules Peck: There is not a lot of progress on this, to be fair, so I think it is going to be a question of leadership, and I think the UK has been a leader on sustainable development and it is high time we upped our game and became a leader on the redefinition of prosperity and a flourishing economy-an economy that delivers flourishing to all people. But there are interesting, slightly counterintuitive evidence bases, such as the Happy Planet Index, which the New Economics Foundation brings out every year. If you have not seen the Happy Planet Index, what that does, effectively, is to say which country delivers long, happy lives for its citizens with the least environmental footprint. That is exactly the question we should be asking of our economies. It takes three datasets-longevity which is a really good proxy for women’s empowerment, child mortality, all sorts of developmental issues. It takes environmental footprint data, and it takes well-being data, and it cranks it all into a machine and out the other end pops a list of which countries are the most ecologically efficient at delivering long, happy lives. I am afraid Britain does not do very well. America does much, much worse. Countries that do well are places like Costa Rica, a lot of Central American countries, countries where they are not hyper-consumerist; people are not starving but they are not all chasing the next consumer object. There is usually much more community cohesion, the sort of things that Cameron talks about in the Big Society. Those are the sorts of constituents of society which seem to lead to long, happy lives with the least environmental footprint.

Chair: Have either of our other witnesses something to add to that?

James Meadway: Potentially, I think partly the issue is that the examples of genuinely green economies at present are few and far between to the point of near nonexistence, but what we are talking about here is a transition-a shift from an old way of operating the economy to a new way. There are previous historic examples of economies that have done this from which some lessons could potentially be learned. It is usual to talk about East Asia, South Korea and Japan as places where the government displays leadership, displays the necessary qualities of getting people together, organising itself sufficiently to provide sector-level support, through the provision of credit in particular, to certain sectors and therefore develop the economy. We are talking about quite a different kind of transition here, but one that would require those elements, as Jules said, of leadership, of overcoming a very large co-ordination problem inside the economy where lots and lots of different groups of people and organisations all have to start to point in more or less the same direction, and no one will take the first step, because the costs of doing so are high, the risks of doing so are high. Therefore there is a clear role for Government in lots of different ways to enable that co-ordination process to take place.

The other good example-in many ways better I suppose-is Finland, which made a sharp transition in the midst of a very, very deep recession in the early 1990s from being a largely resource-dependent or heavy resource exporter. Its major market in the USSR collapsed. It had little choice, with unemployment at 20%, other than to try and reinvent itself and the Government stepped in at this point, built on some of its existing strengths in engineering and developing strength in telecommunications, laid out a kind of national recovery plan to develop the Finnish economy, and Finland today is now a world leader in telecommunications devices, rather than being a world leader in the export of timber. That is how transition can occur in a developed economy and that is the kind of example we might want to look to.

Professor Jackson: Your question was about international conditions. I do think, as James said, there are lots of things you can take from different places. Jules mentioned the indicators issue and there is a lot of international work around indicators beyond GDP-OECD’s Beyond GDP process, the Sarkozy Commission, international examples like the Happiness Index and the Gross National Happiness measure in Bhutan. These are all examples of different ways of measurement and I think one of the conditions-one of the international conditions-is around different measurement frameworks and consensus around those frameworks. The UK’s interaction with those international efforts is incredibly important, but I think there are two other areas where international conditions matter to the domestic ability to create a green economy: one is in relation to trade and the other is in relation to finance and the structure of global finance. There are clear places where the conditions of trade matter, in terms of our ability to ensure that our responsibility for environmental impact lies within our own control. The question of whether it is possible, for example, to protect our own interests in environmentally sustainable products depends on the conditions of trade laid down at the international level. In finance I think it is particularly important; it is very difficult for an individual nation to go it alone in terms of restructuring its financial sector and its financial conditions in the absence of international endeavours. Such international endeavours already exist, for example, around the regulation of the financial markets in the wake of the crisis, around efforts like the Sustainable Stock Exchanges-an example that I like very much-in which disclosure of environmental impact would be a pre-condition of listing on the Stock Exchange. This looks like a quite minor amendment to existing set-ups but it could be immensely powerful. Those kinds of initiatives are to be encouraged. There are also of course suggestions that would slow down the speed of global finance that would then make it easier for an individual nation to protect itself against capital flight. A Tobin tax on financial exchange is one of those suggestions.

Finally, I think what is becoming increasingly obvious in the international field is the question of debt. National debt and debt restructuring is going to be the critical issue, in terms of not just green economy but probably financial and economic survival, particularly in the Eurozone, in the years to come. There has to be, I think, a vigorous effort to think about how debt restructuring is going to work, as increasingly the poorer economies in the Eurozone face unmanageable debt and are forced into restructuring packages that have nothing to do with the green economy but are, in fact, debt reinforcing in some of their aspects and unlikely to deliver anything sustainable.

Q5 Caroline Lucas: I want to ask a follow-up question. Professor Jackson was just talking about flows of international trade, and I wonder how compatible you think current trade rules are with an aspiration towards a greener economy, given that if you are going to try to relocalise your economies in any way, currently world trade rules are not very helpful to that end?

Professor Jackson: They are not very helpful to that end at the present point in time, and I think the response to that is either to engage in those negotiations to, for example, further the talks around the ideas of border tariffs to create conditionality that is within the sovereign rights of the nation to impose in relation to environmental and social conditions. The second response that an individual nation can do is to think structurally about its trade patterns. Some commodities are more naturally traded than others. Some sectors are more local than others. It is possible, even within existing trading restrictions, to create restructuring that promotes and supports those industries which are naturally local. One can think about supporting food industries that are local; one can think about the provision of healthcare and education, which are naturally local service provision activities. To me, that idea is one of the building blocks of a green economy. It is the idea that what you want your economy to deliver is high quality services to allow people to flourish. This is something where local sectors, which can be supported by Government policy, are a natural deliverer of those services.

Q6 Caroline Lucas: Can I just push you a little further, because we are still at a fairly abstract level. Would it mean that you would support, for example, taking agriculture out of WTO in order to then be able to protect your local food economy?

Professor Jackson: Taking agriculture out of the WTO is obviously something that is not entirely a sovereign activity. That’s where it gets very difficult, where you have to engage in both strategies. You have to find everything you can to support your agricultural sector in the ways that are permissible within the trade and the WTO regulations but you also have to be lobbying hard at WTO level to either renegotiate your position in WTO or to shift the WTO structure.

Q7 Zac Goldsmith: I wanted to pursue this theme. My first question is do you think there are any signs at all of a willingness at top levels in any country to renegotiate the trade rules in such a way that sustainability is-I am tempted to say-possible? Are there any political signs at all that this is even close to getting into the agenda?

Professor Jackson: At WTO level-

Zac Goldsmith: Not just at the WTO level, but trade.

Professor Jackson: Trade generally. A little. It is a conversation, as I’m sure you know, that has gone on over decades and has been frustrating for decades. Has anything changed recently that might impact on that? Interestingly, one of the things that has changed is the balance of political power in the world, so that the trade rules as they were inherited and laid down are essentially still a kind of outcome of post-war consensus and Bretton Woods power structures. That has changed and it has changed in the wake of the financial crisis, so there are other interests coming in. They may not make that an easier place for a developed nation to be negotiating something different, but they have changed the context of those negotiations.

There is also, I would argue, and I have witnessed this at a personal level, something more in the way of humility among some of the key figures, for example, in WTO, to think differently about the structures of trade and to incorporate some of these aspects. On the other hand, you could argue that what has made that more difficult to achieve in terms of green economy is the harshness of the financial conditions and the harshness of the situation which the developed economies now find themselves in-the new trade negotiation.

Q8 Zac Goldsmith: Just one further question if you do not mind-again on this issue. I take it from what you are saying that you see renegotiating the trade rules as a prerequisite to getting where we need to go and the question relates to how we get to that point. Do you see that happening as a result of international discussions and negotiations, which, in my view, is almost too depressing to contemplate, or do you see it happening as a result of individual national actions on individual issues at the beginning of the process, almost chipping away at these trade rules, with perhaps a country deciding to opt out from the aspects of the trade rules in relation to food or fishing, or something along those lines? What do you see as the process for getting to where we need to go?

Professor Jackson: I don’t think that this is a process in which one can easily foresee which of those strategies will be most successful and, therefore, it is a situation in which one should engage in both. I am sure that they are, in fact, self-enforced reinforcing processes, because as countries opt out of existing relationships, relationships become weaker and therefore there is more impetus to change them; there is more internal effort to change them. I do not see it as an absolute prerequisite. It is essential in the long run that those trading conditions are supportive of sovereign policies-of national policies-but it is still possible to take sovereign action around economic structure at the national level.

Jules Peck: There is a risk that the intractability of international negotiations around things like WTO is used as an excuse by politicians not to do things that they can do nationally, and the things that are happening-take agriculture, the flourishing of things like Land-share, Transition Towns or sustainable food initiatives-are all happening despite what the Government is doing. Government are doing nothing to support those things; the flourishing of collaborative consumption and grassroots action is happening because ordinary citizens have given up on Government and big business bringing the solutions they are looking for. I don’t think we should kick this into the long grass by just saying, "WTO, oh, don’t do anything."

Q9 Caroline Lucas: To go back to business, in a sense, Jules, you said in your introduction that you spent some time advising business and we often sit here and have representatives for business sitting there telling us reasons why they cannot go for higher environmental standards, because of international competitiveness and it will put them out of business and they will have to relocate and so on and so forth. That is always the tension point whenever we debate these things and they come up against the stark realities of people’s businesses and they feel they are under threat from the green agenda. What do you say to businesses who have those fears?

Jules Peck: Most of my work with business is focussed on the kind of things that Tim and I have been talking about, which is a redefinition of prosperity through the lens of well-being. What I do is strategic innovation, usually at the very top of companies, often with CEOs, to help them re-vision what their company could be about-their business model, their products and services-to be businesses which deliver maximum well-being to their consumers and to wider society with the least environmental footprint. That is the starting point.

There are, surprisingly, many CEOs and senior people in business who, behind the scenes, will agree with my thesis, for instance, that we have reached the limits of growth and that macro-growth on a planetary scale is no longer possible and we need to redefine things through the lens of prosperity and so forth. They are loathed to come forward publicly; that is one of the problems. I think that will happen more and more. Due to frustration with the lack of facilitation for the kinds of things that need to happen by the market we have at the moment, we will see business leaders coming forward. But I think one of the fundamental challenges for them is the market. The market is set up in the wrong way to facilitate the sorts of things they are seeking to do, both because it is not focussing on delivering of well-being, but also because taxation regimes are inappropriate, regulatory regimes do not support the right sort of things and, particularly, the financial sector is far too short term.

One of the big bugbears if you are a CEO, one of the really big challenges to doing anything pretty radical in this space is that your shareholders just are not interested and won’t let you do the sorts of things that you want to do. We are beginning to see some corporate leaders being outspoken on that. Paul Polman, the CEO of Unilever, as you may have seen recently, has said, "I don’t work for the shareholder, I work for the customer". He is pushing at the boundaries of Capitalism 1.0 in that space.

More and more, either current incumbents are going to have to look for different types of shareholders-co-operative, mutual, employee ownership type models-or Government is going to have to step in and give much more definition of fiduciary responsibilities of the finance sector around things like sustainable development, environmental and well-being issues, or those sorts of current incumbents are going to die a death and these sectors are going to be taken over by things like collaborative consumption, WhipCar, Zipcar, Landshare, you name it. There are more Land-share initiatives in America now than branches of Wal-Mart, and that’s from a standing start four years ago. These sorts of things are flourishing, as I said, despite support from Government.

Q10 Caroline Lucas: I know I need to move on, but I want to ask you about efficiency. Basically the Government’s vision of a green economy is one that is basically business as usual but a bit more efficient. Is efficiency going to be enough to get us there? That is their definition of green growth. It is growth that is a bit more efficient in terms of use of resources.

Jules Peck: Efficient in terms of use of resources. The Holy Grail is absolute decoupling between economic growth and throughput of material resources-the planet. If we could discover the perpetual motion machine tomorrow, perhaps we could reach that. But if you look at the scale and the urgency of the challenge that we face, because we have gone past the limits on crucial things like atmosphere, it is just inconceivable, if you look at the work that Tim has done on the scale of the challenge-reducing from, what is it, 700 grams of CO2-

Professor Jackson: Seven hundred and sixty-eight.

Jules Peck: Every global dollar of economic output currently equates to 768 grams of CO2. If you wanted to reach a 450 parts per million target by 2050-which, of course, is too high a target, it should be 350-just going with that very liberal target and spread equitably around the world we would need to get that down from 768 grams of CO2 per global dollar to 6 grams of CO2. That is a massive transformation which pretty much literally does require a perpetual motion machine. It is just not going to happen in time and, therefore, the efficiency thing is a dead end. Sufficiency is the frame that we should be thinking about, not efficiency.

Professor Jackson: Efficiency is none the less essential.

Jules Peck: It is important, yes.

Professor Jackson: We do need those more efficient technologies, I think, and Jules is right, the numbers speak for themselves. The challenge is if you really want to keep expanding your aspirations and have a chance for 9 billion, or now 10 billion people in 2050, to achieve those aspirations. Technology itself, by itself, is not going to deliver green economy.

Q11 Dr Whitehead: The Government’s Natural Environment White Paper that came out recently has been floating the idea of reflecting the value of the natural environment in decision making-the Secretary of State was recently talking about computing the value of bees to the business economy. How real or practical do you consider that sort of concept might be, particularly in terms of how business might incorporate those sorts of ideas into their operations?

Professor Jackson: Is that a question about how natural, how easy it is for businesses to incorporate that in their operations?

Dr Whitehead: Yes. The claim in the Natural Environment White Paper is that you can indeed start to produce metrics of natural environment value for transactions. I must say, I find it very difficult to see how you could incorporate that sort of metric into business activities in the way it is put. I wonder whether you think that has any way to run or has any value or, indeed, has any practical way of being incorporated into business activity?

Professor Jackson: I think it has some practical ways of being implemented. In fact, some attempts of that have already been put in place. I’m thinking, for example, of the Prince of Wales Accounting for Sustainability project that attempts to systematically incorporate at least some environmental impact into its accounting systems. Once you get them into accounting systems they are at least psychologically internalised in decision-making processes in business. That doesn’t necessarily still impact on financial decision-making processes, although it might do. To get that further step you need the monetary valuation to be a part of the exercise. That either happens at the business level through an individual determination to internalise those costs into decision-making processes or it has to happen through pricing structures that are laid down through taxation systems, incentive systems, possibly even grant funding systems, that essentially operate as economic mechanisms to internalise the values that you are assigning to the natural environment. Simply saying that the natural environment has a value, and even being able to compute it, as you can in some cases, is not, in itself, sufficient to ensure that it is internalised in business decision-making processes.

Q12 Dr Whitehead: You made the distinction between environmental impacts on balance sheets and what I take it the Environment White Paper is talking about which is, as you say, making a metric of the natural environment; one is the ecological limit, i.e. what would not be there, and the other one is what would be there. Is that a reasonable distinction?

Professor Jackson: Yes. I think what I’m suggesting is that there is a spectrum of internalisation processes and some of them are hard. If there is an external cost on carbon, for example, that is a hard internalisation of the environmental impact of a business’s activities. If there is a process or even a requirement on businesses to disclose certain environmental impacts, they would then have to put in place accounting systems and they would begin to make decisions that would affect that disclosure and would, therefore, have an impact in terms of changing business practice. The monetary valuation of a business’s impact on the environment is, if you like, the hard end of that spectrum of influence on business.

Jules Peck: The sorts of ecosystem services that are talked about are often public goods, not private goods. PUMA is doing probably the most groundbreaking work of any company on these sorts of accounts but they are shadow accounts; at the end of the day, they are not real accounts. Businesses are beasts of the market and, as I have said, most of these goods and services are not of the market, they are public goods. Unless Government steps in and somehow makes these become part of the market or regulates to protect them from the market, the market is blind to them.

Dr Whitehead: Does that imply, because of the essential public good nature of a number of these things, that eventually, in order to chop it up and boil it down to a number of individual-

Jules Peck: That is the tragedy of the commons, isn’t it? It is often the case. There are things that we have brought into the market like the atmosphere, albeit at an insufficient level of pricing.

Professor Jackson: I do not think it necessarily does imply that. I think what I was suggesting with this spectrum of influence was that there are different ways of internalising that decision-making process that do not necessarily involve the marketisation of the services and the commodities themselves. Accounting disclosure is one means of doing that; regulation is another. Indeed, a shift in the mindset in which businesses themselves are engaging in the process of remaining within environmental limits is also a part of that process. As Jules said, we do now see businesses-quite big corporations-making those kinds of decisions about their internal operations.

Q13 Peter Aldous: Could you look at what I call the three players’ role in the move towards the green economy-the Government, businesses and people? If we look at the Government’s approach, I think you might say up to date their approach has been to rely on businesses leading the way. Will this approach, do you think, deliver the green economy you have described? Businesses are largely driven by the profit motive. How do you see them transforming to a green economy based on well-being? Will some businesses more than others be able to adapt more readily? As far as the people-the public-are concerned, do you have a sense that the public will support the move towards the green economy? Are there some sectors of society more than others that perhaps will be more resistant and will not take it up? You may want to divide that question up, with one looking at the Government, one looking at it from the business point of view, and perhaps Mr Peck might want to look at it from the public-people-point of view, in view of the work that he has done on the shift from passive consumers to active citizens.

James Meadway: Yes, the Government’s current approach is something along the lines of-the language used in enabling the transition to a green economy is full of this-"Businesses could do this, businesses might want to do this, businesses could if they thought about it perhaps consider." That rather passive voice dominates the documents and the unfortunate problem is that this is almost certainly not good enough, never mind to talk about the kind of very large-scale transition we have mentioned as the green economy; even the sort of minimal green economy, or greening of the existing economy, does not really look very likely on that basis.

It comes back to something I mentioned earlier, which is that a transition of this kind-a shift of this kind-relies on privately motivated businesses being able to identify a big potential thing in the future, which is the green economy, and the possibilities of making profits from that, and taking on the costs of making that transition without knowing that everybody else is going to do it. They don’t know that all the other private businesses are going to make that transition. There is no point in you saying, "Okay, we’re going to green our operations, we’re going to have to try to reform what we are doing" if you don’t know that everybody else is going to do it and you don’t know this new green economy is going to turn up in the future. It is a co-ordination problem.

As Jules mentioned, there is a big public good issue here. There is a public good in a green economy and private actors are not necessarily well able to achieve that public good by their own actions. Someone has to step in at some point. The usual someone here, the biggest collective actor we have, is Government. There is a role automatically for Government in being more interventionist, to use a sort of old-fashioned word, than it has been. Some of that might include a kind of moral suasion, I suppose, the laying down of what we would like to see happen, hoping that your influence will be enough to get people to act in the right ways, and that, I think, is more or less what the Government is doing at the moment. Some of that might include regulation, tightening up what businesses do and forcing them to act in certain ways and some of it would include taxation and spending. You tax the output of certain activities and you would subsidise the other kinds of activities. The combination of these different ways the Government could do that would be the way you would start to steer lots and lots of private businesses, in particular, to move towards a transition point. That, I think, would be the role that you would want to see Government play. That is not the role that it sees itself playing at the moment, but I think it is one that it could play.

As mentioned, other economies have, in the past, been able to act in this way. It requires a degree of national leadership, it requires a degree of national co-ordination, it requires quite a high degree of consensus about what you are doing, but I think it is possible on that basis.

Professor Jackson: I would want not to divide that question up. I think it is quite important not to. They are not independent actors and they have extensive influence over each other. When you divide it up, it looks impossible because Government cannot act because businesses are operating this way and people will not vote for them if they do. Businesses cannot act because incentive structures are this way, consumers will not buy it if they change. People cannot act because they want a decent life.

For the last five years I have been directing an ESRC research group at the University of Surrey which looks specifically at the people side of it, people leading sustainable lives and the relationship between lifestyle, what people are doing and their impact on the environment. I think there are a couple of key lessons from that that are pertinent to this task. One of them is that there are commonalities in the sense of wanting a decent life and in the society that we have; the decent life is expressed through consumerism, through material ambitions. It is not within the remit of Government to exercise moral suasion to persuade people to think differently and vote differently. It simply is not. In fact, interestingly, on the one occasion when the public, when consumers, when people want to behave differently in the face of a recession, their spending behaviour changes. They tend to save more than they spend. They tend to concentrate on necessity rather than luxury. They are much more prudent in terms of their expenditure decisions and their saving. That is the occasion when Government gets out and tries to persuade them to be better consumers because it is them as consumers that will get the economy back going again.

The other thing that our research shows is that the public is incredibly sharp at picking up moral and practical and political inconsistency. You do not trust a messenger who tells you different things from different parts of their mouth. You do not trust a messenger who says, "We want you to be nice consumers who do not constrain the economy and buy the right things" with one voice and as soon as the hard times hit, "You should go out extending your credit in order to expand demand in the economy."

This relationship between Government and public is an incredibly important lesson from the study; they are both dependent on each other, in terms of their ability to act. But there is one key message from this work on lifestyle and environment that I think is worth also airing, which is that there is a section of the population who are already highly motivated to change, who are already taking action to invest their money differently, who buy different kinds of things, who have green energy tariffs, who live often very simple lives, who give up the propensity to consume and who work less, take lower salaries and lead a different kind of life.

This is a very interesting section of the population because one interpretation is to say what we need is to get everyone like this and then we would be fine. That is difficult because if everyone was like this we would probably crash the economy. That is one of the issues. The other issue is that these people themselves, although sometimes they are measurably different in terms of the values they express and the lifestyles they lead, face constant conflict and struggle in attempting to lead the kind of life that Government sometimes tells them that it wants them to lead. Those conflicts are real, they are around physical infrastructures, they are around institutional signals, they are around incentive structures, they are around social identity and the way in which they are perceived. While these obstacles to people leading the change exist, they will not change. They cannot change and it is morally suspect for Government to use the exercise of suasion to persuade them to change.

The one key area, where I think this does put the ball very much back in the court of Government, is in relation to shifting those structures within which we lead our lives. The infrastructure of public transport, the infrastructure of public goods, the infrastructure of health, the infrastructure of education, the infrastructure of finance and the institutional incentives for saving and borrowing are all a part of the architecture over which Government uniquely has a degree of control, but which could have enormous impacts in releasing what is, in fact, a latent desire for a decent life in a sustainable world that clearly exists in the population.

Jules Peck: Yes, I would agree with all that, so I will not add a huge amount. That latent desire is there, and in all the work that is done in a participative approach to work with citizens to help unlock what their real needs are and what they really desire out of life, all the sort of things that Tim was talking about come to the surface. The pressures of advertising and consumerism are blocking our ability to make this journey that I write about in Citizen Renaissance [1] , the shift from the consumer to the citizen. I think fundamentally, again, I completely agree, you cannot disassociate business, Government and citizens. It really is a question of who is going to blink first, and fundamentally in a democracy I think it is the responsibility of Government to blink first when there is something as intractable, as serious as the issues that we have been discussing here.

To be frank, Government is asleep at the wheel. Politics is asleep at the wheel. This is not just the case in Britain, it is the case internationally. But politics and the Houses of Parliament are astonishingly asleep at the wheel on all these sorts of trends and these problems. It is despite, not because of, facilitation from Government that the sorts of things that I am interested in are happening.

I will give you one example where progressive business and the Citizen Renaissance is coming together to deliver solutions with absolutely no involvement from Government, local or central. That is an initiative where I live called Bath & West Community Energy and that came out of something called the Transition Towns movement, which is ordinary people, butchers, bakers, candlestick makers, housewives, accountants, getting together in their front rooms and church halls and saying, "Right, we’ve had it with big Government and big business messing the planet up. We’re going to put forward the kinds of solutions that are needed ourselves." Out of this has come a peak oil resilience plan, an energy downscaling plan and so forth, which has led to this social enterprise called Bath & West Community Energy. First round, £5 million. This is not chickenfeed; these are big enterprises. This is so big-bear in mind, this has all come out of the citizens, just normal people; this is so big that one of the big six energy companies-I cannot name it because it has not been announced, it will be announced in the next week-is investing £1 million of their own money at no profit into this community enterprise because they see it as the future of the energy market and they want to be in ahead of the rest of the energy companies. In America one in three people are part of a co-op for community-owned food or energy enterprise. These things are flourishing, exploding all over the world and are going to happen more and more in the UK. I think it is beholden on Government to tune into these things, both at a local and a central level, and facilitate them and put their money where their mouth is around things like the Big Society. The Big Society-the rhetoric at the Big Society should be precisely spotting these sorts of things and facilitating them.

Chair: Thank you. We need to move on to our last question this afternoon. Mark Spencer.

Q14 Mr Spencer: Thank you. The concept basically is so huge, it almost feels like we as the Government are a football team which has been told we need to win-which is achievable-but we need to win 35-nil and the targets are so far away, the task is so daunting. But unlike the football team with a 35-nil target, we do not have a physical target we can grab hold of because the way we have measured success in the past has been via GDP and that is very solid and measurable. What system could we use to measure? We have mentioned well-being and things like that, but what targets can we to measure the success that we have to try and achieve?

Jules Peck: I don’t think it is so complex, to be quite honest. There is a great deal of research in welfare economics, in well-being and so forth, much of it from Nobel Laureates, not crackpots, which identifies the direction you need to take in developing indices and indicators around human well-being and flourishing. The other side of the coin, the planetary well-being and the planetary limits piece, there is again a great deal of understanding of the planetary limits piece. I think what is required now is to bring those two together and overlay both of those lenses on to what we will define as a prosperous economy, if you like, rather than a green economy.

Professor Jackson: It does become more complex when you abandon the idea that a simple indicator tells you your measure of success. I don’t think there is an easy simple analogy. Maybe you have balanced the number of goals scored against the red cards and your manager tells you, "I want no red cards this season." It is not necessarily what the fans want-they want the goals and the trophies-but at least it is an indicator. Are those kinds of indicators available within this situation? Absolutely, yes. There are many of them and if you start even from basic economic premises-the GDP as the principal indicator-it is the wrong thing on which to be measuring the success of your economy. It does not tell you, for example, that your debts are expanding, that your assets are collapsing, that financial instability is round the corner and that your GDP in two years time is going to collapse. We had a Chancellor and a Prime Minster who insisted in fact that these were the golden years of the economy, an unparalleled season of growth of historical proportions. Yet within a matter of two years almost the entire system had collapsed. Why? Because we had focussed on a simple flow measure of output when what matters is the structure of assets, of balance sheets, of financial credit and liability, and the way that that works through the market.

Even at the very purely economic level we have not measured the right thing. To expand our literacy in relation to those economic measures is obvious; to expand them in relation to resource constraints and to expand them in relation to carbon constraints is also obvious, and yet at the same time it is clear that you do not do either of things, really, without an eye to basic social objectives. The measures around employment still matter, around the quality of employment still matter, around health in different demographics still matter, around the distribution of incomes still matters, around deprivation; these are all absolutely key indexes. It is not that we do not have the measurement instruments to guide the change, it is that we simply have been fixated on one of them and it was the wrong one.

Q15 Mr Spencer: Do all three of you support the Government aspiration to measure well-being? Are they going down the right route?

James Meadway: Yes, broadly. The issue with the well-being measurement is to what extent it then turns into real policy changes-to what extent it becomes something that Government listens to ahead of whatever GDP might be doing at the moment, and then alters what it is doing to suit the well-being measure. Now, whether that happens or not is a politically indeterminate thing. As I just said to Tim and Jules, my suspicion is that the desire of everyone to fixate on GDP is dwindling. Even the kind of minimal promises that rising GDP is supposed to offer-GDP goes up; this makes everyone richer-simply have not happened. The evidence now suggests for the last decade or so that median real incomes have fallen during a period of rising GDP. Even the blunt economic, "This is going to make you richer", part of it is starting to fail. I think we can win support for a wider, broader measure of economic success. I think it has to happen if we are serious about a transition to a green economy.

Chair: We are going to have to draw to a conclusion now. I thank our witnesses very much; that was a very useful session. We are grateful and it will certainly inform our report.


[1] Note by witness: www.citizenrenaissance.com

[1]

Prepared 1st November 2011