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Each year, the Worldwatch Institute releases a report analyzing the year's environmental trends. This year's report focuses on the "greening" of industry. During today's OnPoint, Tom Prugh, co-director of Worldwatch's State of the World 2008 report, explains why environmental issues are driving the global economy. He discusses what lies ahead for carbon markets and also addresses how local governments can engage communities for a more sustainable world.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Tom Prugh, co-director of the World Watch Institute's State of the World Report 2008. Tom, thanks for coming on the show.
Tom Prugh: Thanks Monica. It's nice to be here.
Monica Trauzzi: Tom, this year the focus of World Watch's report is on how environmental issues are essentially driving the global economy. Talk a bit about why this emerged as the trend.
Tom Prugh: Well, because it's an unmistakable and an extremely important trend. The bad news, that I think everybody is aware of at some level, is that by now the global economy has grown to be so large and so powerful that it's actually begun to undermine the ecological capacity of the earth to support the economy and us. And the poster child example of that is climate change. The good news is that these problems have unleashed a wave of innovations from virtually all sectors of the economy that are beginning to meet these challenges. And which, if they were scaled up and spread around the world, could put us on the path to true sustainability. That's why the report is so upbeat this year.
Monica Trauzzi: They're meeting the challenges by investing in cleaner technologies, renewable energy, things like that.
Tom Prugh: Exactly right. For example, you mentioned renewable energy. In 2007, according to preliminary estimates, $66 billion were put into renewable energy. That's roughly 30 percent higher than the year before and last year was roughly 30 percent higher than the year before that. So this is a clear and important trend.
Monica Trauzzi: So, which sectors are faring the best because of this trend?
Tom Prugh: Well, as I mentioned, renewable energy is obviously booming at the moment, and rightly so. It's interesting to note also that the risk taking capitalists out there are also interested in what's happening in sustainability trends in general. Investment in clean and green technology is now the third-largest venture capital category, behind only the Internet and biotechnologies. So we estimate that roughly $100 billion, and probably much more than that, are being affected by these trends right now.
Monica Trauzzi: One of the major issues that the Bush administration has had with mandating emissions cuts is that a plan like that could potentially hurt the economy. Your report is painting a picture of economies actually thriving by the investment in these cleaner technologies. So why is there this disparity and is everyone thriving or are there certain sectors that will not benefit from this green push?
Tom Prugh: Well, I suppose in any economy, in the ups and downs of any economy it's cliche to note that there are winners and there are losers. I guess probably the overriding question is what is the overall health and sustainability and robustness of the global economy? And we think that these trends that we've been discussing in the book are very positive in that regard. And that in the long run this will make for a much more robust and healthy economy for everybody on the planet.
Monica Trauzzi: And so you specifically cite Nicolas Stern's assessment that the changes that we're seeing in our atmosphere could lead to the greatest and widest ranging market failure ever seen.
Tom Prugh: Exactly right.
Monica Trauzzi: It's a scary thought.
Tom Prugh: It's very scary and the Stern report in particular noted that the possible costs measured in the ordinary terms of gross domestic product for the globe as a whole could be as high as 20 percent per year. Compare that with the cost of doing something about it and averting the worst of the effects of climate change at perhaps one percent per year. Totally it will cost some thing, but it's easy. It's a no-brainer. We should be doing what we can to head that off. And the same thing is true for the other negative trends in the environment that these innovations that we discuss in the book are meant to address. It would be better to go with them and do the best we can.
Monica Trauzzi: Environmental issues are basically altering the way that businesses do business at this point. Many of them are sort of siding on the green side because it's going to benefit their bottom line and not necessarily because they want to help the environment. It's just going to be beneficial to their bottom line. Is that a problem or do we really just care that something is being done?
Tom Prugh: It's not a problem. It's what business does. The important trend that we note in the book here is that everybody knows that nonprofit organizations and many ordinary individuals and of course some governments have been banging this drum for years, this sustainability drum. But the breakthrough is that the business community is now starting to get this message, see the light, and get on board with this. For example, last year 27 major U.S. corporations, including Alcoa and Duke Energy, began urging the United States Congress to pass legislation regulating greenhouse gases. That was a breakthrough. Now that the business community is beginning to see the light and pull in the same direction as the other sectors, we have a chance to make serious progress here.
Monica Trauzzi: You highlight the auto efficiency standards in Japan and Europe and they're expected to go up there. But the U.S. is also raising auto efficiency standards based on the energy law that the president just signed in December. The Japanese and the Europeans still have greater efficiency in their countries. What could this mean for the bottom line of U.S. automakers down the road if we're not producing vehicles that are as efficient?
Tom Prugh: Well, I think the trends have been pretty evident for some time, if you just read any newspaper or watch TV, over the last several months we've seen the U.S. automakers struggling a bit. Toyota neck and neck with General Motors for being the largest auto company in the world. Ford's position threatened as number two. The fact is that, frankly, the U.S. automakers have been a little slow to develop the advance technologies at the auto market demands and that the Japanese manufacturers have been leaping ahead with and maybe this is the kind of prod they need to get going on this. And that's a hopeful sign too.
Monica Trauzzi: One of the things discussed in the report is how to engage communities for a sustainable world. And a lot of this is new to the average public. There are new technologies, new ideas floating around. So really, when you're talking about individual communities it's a question of tailoring sustainability for the specific area based on industry there, based on lifestyles in that area. Am I right?
Tom Prugh: Absolutely. It is going to be a bit of a sell I think, but when you get to the bottom line about sustainability, what we're thrusting for here is a way of living on the planet that doesn't hurt the planet and actually works to make the planet a healthier and more robust place for people to live in and that actually stresses the kind of things that truly do improve human well-being. And there's a great deal known about this now that wasn't known 25 or 30 years ago that dovetails very nicely with the kinds of things that we need to do to the economy to achieve sustainability. So that's a hopeful sign as well.
Monica Trauzzi: What lies ahead for the future of carbon markets?
Tom Prugh: Carbon markets are clearly on the rise. There was something like $30 billion worth of trading in carbon markets last year, that's set to continue going up and that's another hopeful sign. I sound like Pollyanna here, but there are so many hopeful signs. Carbon markets and cap-and-trade systems and even dare I say the word carbon taxes will become more prominent and more important in the coming years as we get a grip on the need to control carbon emissions in order to avert the worst of climate change. And that's going to pay off in the long term as well.
Monica Trauzzi: And so looking ahead, the year ahead, what are you expecting the trend to be this coming year? What does the 2009 report hold?
Tom Prugh: Well, hard to say what we'll see in the 2009 report as far as these trends go. I think they're pretty strong at the moment. It's a rising tide and what they're telling us is that we have the tools now to put us on the path to sustainability. We can do this and we're beginning to do it.
Monica Trauzzi: All right. We will end it on that note. Thanks for coming on the show.
Tom Prugh: Thank you.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
[End of Audio]
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