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Pictures for the Future

Overuse of Natural Resources

Risks to Sovereign Bonds Posed by Overuse of Natural Resources Need Greater Attention, says New Report

Loss of soils, forests and fisheries, as well as rising resource costs, are likely to become increasingly important to a nation’s economic health, and may affect its ability to repay or refinance sovereign debt, says the study issued by the United Nations Environment Programme’s Finance Initiative (UNEP FI). 

The report suggests that factoring the way a country manages natural assets into sovereign bond ratings may not only give investors increased transparency when making investment decisions, but also encourage governments issuing sovereign debt to manage their natural resources more sustainably in order to attract investors over the medium to long term. 

In its analysis of five pilot countries, the report, E-RISC: A New Angle on Sovereign Credit Risk, highlights major financial challenges due to the growing gulf between rising demands on freshwater, forests, soil, grazing land and other natural resources, and the goods and services that domestic ecosystems are able to sustainably provide.

The report, produced by UNEPFI and Global Footprint Network in collaboration with a number of asset owners, investment managers and information providers, shows that India now demands over 1.8 times more from its ecological assets than they are able to generate. Other countries are seeing similar trends.

By negatively impacting countries’ natural capital and economic stability, resource degradation has the potential to exacerbate the sovereign debt crises that have helped trigger, and deepen, the global economic downturn.

Yet despite this, such environmental risks remain largely absent from traditional models that determine sovereign credit ratings, and other traditional indicators of economic resilience.

“We are seeing a paradigm shift due to natural resource scarcities with profound implications for economies and, thus, sovereign debt risk worldwide,” said United Nations Under-Secretary-General and UNEP Executive Director Achim Steiner at the launch of the report in London.

“The time has come for a better understanding of the connection between environmental risk, and sovereign credit risk. Only then will investors, credit rating agencies and governments be able to plan effectively with the kind of insight aimed at ensuring long-term economic health and stability,” said Mr. Steiner.

“More and more countries depend on a level of resource demand that exceeds what their own ecosystems can provide,” said Susan Burns, Founder of Global Footprint Network.

“This trend is tightening the global competition for the planet’s limited resources and represents risks for sovereign bond investors as well as countries issuing such bonds. A more accurate description of economic reality is therefore in everyone’s interest,” added Ms. Burns.

Argentina, the United States and Eurozone states including Spain, Italy and Greece are among the countries that have seen their sovereign debt downgraded since 2011. The ramifications of downgrades on borrowing costs, coupled with the serious risks faced by banks and investors in exposure to sovereign debt, have led many experts to call for more refined risk indicators, which fully capture the economic realities of an increasingly resource-scarce 21st century.

To address this gap, the E-RISC report puts forward a new framework that aims to assess the likely risks connected to the planet’s depleting resources, and to allow for a more comprehensive insight into the stability of future national income.

New Methodology: E-RISC

Applied to five test countries (Brazil, France, India, Japan and Turkey), the new risk framework contained in the E-RISC report is based on a number of key indicators.

Central to the methodology is a country’s ‘Ecological Footprint’ (area of biologically productive land and water required to support the activities of a population), versus its ‘biocapacity’ (amount of productive area actually available to generate resources and absorb waste).

Footprint data, which focuses on renewable, biological resources such as fisheries, forests, cropland, grazing land, and the land needed to absorb CO₂ waste, is supplemented in the report with data on non-renewable resources such as fossil fuels, ores and minerals to provide a more comprehensive definition of natural resources.

The E-RISC methodology applies a 3-step approach to connect natural resource risks and its environmental consequences with mainstream macroeconomic indicators. This covers:

1. Trends in natural resource availability and use: patterns of natural resource consumption in comparison with the ability a country’s ecosystems to meet this demand

2. Exposure to resource risks: assessing the importance of natural resources to the country’s economy

3. Financial resilience to risks: ability of a country to cope with increases in commodity prices, or other adverse shocks related to natural resources.

Among its findings, the E-RISC report estimates that a 10 per cent variation in commodity prices can lead to changes in a country’s trade balance equivalent to over 0.5 per cent of GDP.

A 10 per cent fall in the productivity of natural resources, such as grazing land or forests, could force current trade imbalances to grow wider - equivalent to an additional 4 per cent of GDP - due mainly to a need for more imported goods. 

The five pilot countries were chosen in consultation with participating financial institutions to provide variation in terms of natural resource use and economic performance.  

Risk Profiles: Key Findings by Country

Brazil

• Brazil’s ecological footprint has tripled between 1961 and 2008, but the country’s ecosystems still generate more natural resources and services than its own population demands
• Exposure to natural resource price volatility will continue to increase in coming years
• Climate change may affect rainfall patterns and increase drought, reducing agricultural production in poorer regions
• Sovereign debt levels are moderate, so Brazil is in a position to absorb negative shocks, although rising commodity prices pose a risk

France

• France demands 1.4 times more from its ecological assets than they can sustainably provide. This gap has been growing at annual rate of over 1 per cent in past ten years
• France is less vulnerable to changing commodity prices than the other countries studied, but is exposed to fossil fuel-related risks due to potential supply disruptions from imports
• France has lower resilience to natural resource risks because of high levels of sovereign debt and budget deficits

India

• India demands over 1.8 times more from its ecological assets than they can sustainably provide. This gap has been growing at annual rate of over 4.6 per cent in the past ten years
• Deforestation, overgrazing, climate change and soil degradation are key risks
• Access to energy is vital to the economy due to energy intensive industries such as steel-making and cement production
• Due to population increases, an ever larger share of India’s natural resource needs will have to be met from abroad.
• India has lower resilience to adverse resource price shocks due to its high budget deficit and high inflation rate.

Japan

• Overuse of domestic ecological assets has tripled between 1961 and 2008
• Japan met only 35 per cent of renewable natural resource needs domestically in 2008, compared to 73 percent in 1961
• Increasing reliance on imports for fisheries, fuel, food, and agricultural products, exposes Japan to supply disruption risks
• Economy is dominated by high-value added products, representing a lower vulnerability to changing commodity prices
• High sovereign debt and government deficit give Japan little fiscal space to respond to natural resource price shocks

Turkey

• Turkey demands 1.5 times more from its ecological assets than they can sustainably provide. This gap has been growing at annual rate of 6 per cent in past ten years
• Resource-intensive industries, e.g. textiles and food processing, constitute a large part of the economy
• Water scarcity, desertification and land degradation pose major risks
• Water crop demand is set to rise by 20 per cent by 2050, yet severe water shortages are expected due to climate change
• Resilience to resource shocks is helped by moderate government debt levels

The E-RISC report is based on data from Global Footprint Network’s National Footprint Accounts and UNCTAD data on non-renewable resources. The report presents a weighted numerical ‘score’ representing the natural resource risks faced by the five pilot countries.

Although the framework presented in the report is only an initial step, it represents an important first look into developing standardized methods to clarify the linkages between natural resource changes, and financial and economic risks, at the country level.

The authors encourage credit ratings agencies, asset managers, asset owners and others to develop the pilot methodology into a usable and standardized tool for broad investment analysis, which more fully captures countries’ potential exposure to natural resource risks. 

The development of such indicators must go hand-in-hand with concrete actions by governments to promote more sustainable methods of production and consumption, thereby reducing pressures on natural resources, and their related financial risks. 

The report identifies a number of efforts by national governments to better understand how rising resource constraints are impacting economic security and citizens’ well-being.

These include:

• The Philippines has launched the first national Ecological Footprint network in Southeast Asia
• Costa Rica has featured the Ecological Footprint in its 2011 State of the Nation report; an overview of national social, economic and environmental issues
• Ecuador has committed to keeping the country’s Ecological Footprint below the available capacity of its natural resources as part of its National Development Plan

GREEN HOUSE GAS EMISSIONS

Action on climate change needs to be scaled-up and accelerated without delay if the world is to have a running chance of keeping a global average temperature rise below 2 degrees Celsius this century.

The Emissions Gap Report, coordinated by the UN Environment Programme (UNEP) and the European Climate Foundation, and released days before the convening of the Climate Change Conference of the Parties in Doha, shows that greenhouse gas emissions levels are now around 14 per cent above where they need to be in 2020.

Instead of declining, concentration of warming gases like carbon dioxide (CO2) are actually increasing in the atmosphere-up around 20 per cent since 2000.

If no swift action is taken by nations, emissions are likely to be at 58 gigatonnes (Gt) in eight years' time, says the report which has involved 55 scientists from more than 20 countries.

This will leave a gap that is now bigger than it was in earlier UNEP assessments of 2010 and 2011 and is in part as a result of projected economic growth in key developing economies and a phenomenon known as 'double counting' of emission offsets.

Previous assessment reports have underlined that emissions need to be on average at around 44 Gt or less in 2020 to lay the path for the even bigger reductions needed at a cost that is manageable.

The Emissions Gap Report 2012 points out that even if the most ambitious level of pledges and commitments were implemented by all countries-and under the strictest set of rules-there will now be a gap of 8 Gt of CO2 equivalent by 2020.

This is 2 Gt higher than last year's assessment with yet another year passing by.

Preliminary economic assessments, highlighted in the new report, estimate that inaction will trigger costs likely to be at least 10 to 15 per cent higher after 2020 if the needed emission reductions are delayed into the following decades.

Achim Steiner, UN Under-Secretary General and UNEP Executive Director, said: "There are two realities encapsulated in this report-that bridging the gap remains do-able with existing technologies and policies; that there are many inspiring actions taking place at the national level on energy efficiency in buildings, investing in forests to avoid emissions linked with deforestation and new vehicle emissions standards alongside a remarkable growth in investment in new renewable energies worldwide, which in 2011 totaled close to US$260 billion".

"Yet the sobering fact remains that a transition to a low carbon, inclusive Green Economy is happening far too slowly and the opportunity for meeting the 44 Gt target is narrowing annually," he added.

"While governments work to negotiate a new international climate agreement to come into effect in 2020, they urgently need to put their foot firmly on the action pedal by fulfilling financial, technology transfer and other commitments under the UN climate convention treaties. There are also a wide range of complementary voluntary measures that can that can bridge the gap between ambition and reality now rather than later," said Mr. Steiner.

The report estimates that there are potentially large emissions reductions possible-in a mid-range of 17 Gt of CO2 equivalents-from sectors such as buildings, power generation and transport that can more than bridge the gap by 2020.

Meanwhile, there are abundant examples of actions at the national level in areas ranging from improved building codes to fuel standards for vehicles which, if scaled up and replicated, can also assist.

Christiana Figueres, Executive Secretary of the UN Framework Convention on Climate Change, said, "This report is a reminder that time is running out, but that the technical means and the policy tools to allow the world to stay below a maximum 2 degrees Celsius are still available to governments and societies".

"Governments meeting in Doha for COP18 now need to urgently implement existing decisions which will allow for a swifter transition towards a low-carbon and resilient world. This notably means amending the Kyoto Protocol, developing a clear vision of how greenhouse gases can be curbed globally before and after 2020, and completing the institutions required to help developing countries green their economies and adapt, along with defining how the long-term climate finance that developing countries need can be mobilized. In addition, governments need to urgently identify how ambition can be raised, "added Ms. Figueres.

Bridging the Gap

The report looked at sectors where the necessary emissions reductions may be possible by 2020.

Improved energy efficiency in industry could deliver cuts of between 1.5 to 4.6 Gt of CO2 equivalent; followed by agriculture, 1.1 to 4.3 Gt; forestry 1.3 to 4.2 Gt; the power sector, 2.2 to 3.9 Gt; buildings 1.4 to 2.9 Gt; transportation including shipping and aviation 1.7 to 2.5 Gt and the waste sector around 0.8 Gt.

Buildings

The report points out that some sectors have even bigger potential over the long term-boosting the energy efficiency of buildings, for example, could deliver average reductions of around 2.1 Gt by 2020 but cuts of over 9Gt CO₂ equivalent by 2050.

"This implies that by 2050 the building sector could consume 30 per cent less electricity compared to 2005 despite a close to 130 per cent projected increase in built floor area over the same period," it says.

The report concludes that if this is to happen, "state of the art building codes may need to become mandatory in the next 10 years in all of the major economies such as the United States, India, China and the European Union".

Further emission reductions are possible from more energy efficient appliances and lighting systems. The report cites Japan's Top Runner Programme and the Ecodesign Directive of the European Union which have triggered household electricity consumption savings of 11 per cent and 16 per cent respectively.

It also cites Ghana's standards and labelling programme for air conditioners which is set to save consumers and businesses an estimated US$64 million annually in reduced energy bills and around 2.8 million tonnes of CO₂ equivalent over 30 years.

Sustainable Transportation

Potential emissions reductions from the transportation sector are assessed at 2 Gt of CO₂ equivalent by 2020.

The report notes that there is already a shift with the eight biggest multilateral development banks at the recent Rio+20 Summit pledging US$175 billion over the next decade for measures such as bus rapid transport systems.

The report recommends the "Avoid, Shift and Improve' polices and measures that encourage improved land planning and alternative mobility options such as buses, cycling and walking above the private car alongside better use of rail freight and inland waterways.

Combinations of improved vehicle standards and scrappage schemes for old vehicles can also assist. The report says approved and proposed new standards in seven countries ranging from Australia and China to the European Union, the Republic of Korea and the United States are expected to reduce fuel consumption and greenhouse gas emissions of new light-duty vehicles by over 50 per cent by 2025 from 2000 levels.

Forestry

"Although it remained under-utilized, "avoided deforestation" is considered a low cost greenhouse gas emissions reductions option," says the report.

Policies to assist in reducing deforestation and, thus, greenhouse gas emissions, include establishing protected areas such as national parks to economic instruments such as taxes, subsidies and payments for ecosystem services.

The report cites Brazil where a combination of conservation policies allied to falls in agricultural commodity prices has led to a decrease in deforestation by three quarters since 2004 avoiding 2.8 Gt of CO₂ equivalent between 2006 and 2011.

Protected areas in Costa Rica now represent over as fifth of its territory, reducing greenhouse gas emissions and triggering a rise in tourists from just under 390,000 in 1988 to 2.5 million in 2008: tourism now accounts for around 15 per cent of GDP.

These actions by Brazil and Costa Rica predate Reduced Emissions from Deforestation and forest Degradation (REDD or REDD+) policies under the UN Convention for Combating Climate Change.

The report indicates that scaled-up action under, for example, the UN-REDD initiative which is working with over 40 countries, can provide even larger emission reductions while generating additional benefits such as jobs in natural resource management.

OWNING PLANET

A MILLION MASSACRES EVERYDAY- A HEN, A COW, A PIG, A COCK ...
THEIR TWISTED NECKS COULD CRY NO MORE!
TO CHOP OFF THE HEADS OF EVERY BEING THAT MAN LIKES,
TO PLUCK OUT THEIR FEATHERS WITH ALL LOVE ATTACHED,
MACHINES WITH PRECISION ARE  FILLING THE MARKETS.

IF THE KILLING IS OF A MAN BY A 'GUILLOTINE', IT 
BECOMES A HISTORY, IF IT IS NOT OF A MAN
IT BECOMES A DISH ON AN EATERY.


THE 'LITTLE LAMB'  SITTING ON THE DINING TABLE,
OF COURSE, TEACHING  A DIFFERENT  LANGUAGE!
A FLYING BIRD ON THE FRYING PAN
 GIVING WINGS TO MAN TO PREACH LOVE ACROSS THE CONTINENTS,
A BITING DOG BITTEN BY MAN WITH NO 'RABIES' FOR HIM  
THE OOZING BLOOD  FREEZES HIM IN JOY, 
 KITCHEN BECOMING  A CREMATION GROUND 
AND THE GARDEN- A BURIAL GROUND FOR ALL THE SPECIES HE LOVES WITH HIS HEART

HE OWES NOTHING  TO ANY ONE
BUT OWNS EVERYTHING
BEING THE OWNER OF THIS PLANET,

MY DEAREST MOM, PLEASE TEACH NOT LOVE 
TO MY LITTLE SISTER ON THE BABY BED,
LET HER BE READY FOR THE KILLINGS
IN THE KITCHEN WITH A SMILE!

-RETTAVAYAL S KRISHNASWAMY

PEOPLE WHO WANT A CHANGE

Severn Cullis-Suzuki      INTERVIEW of an Environment  Champion

How do you view the speech from the perspective of an adult?

Since that speech, I've spent my life traveling the world speaking as a young person who is concerned for the environment. Yet it's been so long, the event almost feels separate from myself, and I've often wondered why was it was so meaningful then, and still resonant now. We didn't know it was being taped: the UN later sent us the video, which we distributed on request, year after year. Now, with YouTube, it's getting a second wave of attention. I think it's still so popular because it speaks to the need for – and the power of – the voice of youth. Adults need to be reminded of the consequences of their actions, even though they have multiple interests and ulterior motives. Young people see things for what they are and call their elders on their actions. Youth don't know what isn't possible.

When my eco-group went to Rio, there was no process for engaging young people. We were asked, especially by my parents, "Are you crazy?" Eventually, we got support from other organizations. Getting to speak was a fluke: we'd signed up as an NGO, and were only invited to a plenary session when someone else dropped out. So I didn't have to be diplomatic. We wanted to be the conscience of the decision makers, and remind them who they really were: not just politicians but parents and grandparents.

Does the fact that people still find your speech so relevant and inspiring mean nothing has changed?

There have certainly been big changes in social awareness, but it can be hard to measure their immediate impacts. But certainly some things have changed. In 1992 we were worried about the ozone layer, but because of the Montreal Protocol, it's not as big a concern now. Thanks to the UN's work bringing nations together to govern the commons, we now have systems and processes in place for environmental protection where there were none before – where would we be without these? The UN doesn't have a great PR system, so the average person doesn't recognize the progress it has facilitated. But we do need to strengthen the systems and institutions we already have. The conversation about governance that will take place at Rio+20 couldn't be more timely.

It's also worth noting that youth – who represent more than half the world's population – are now included in the process.

Do you think we should rethink at how we present environmental messages to people?

The media loves negativity. A more constructive approach would be careful mix of empowering messages – this is where we're going, what we've accomplished – so people see that change is possible, especially at the grassroots level.

The best way to use hard facts as a motivator is to partner scary information with options for action – "What can we do? Let's find a way to fix it." The young, particularly, can handle bad news if there's an avenue for change. ­

The world's population has grown by nearly two billion since your speech. What are your views on population growth?
It's certainly taking a toll on the planet. But population is really about consumption – looking, for example, at ecological footprints to see the rates at which various countries use up resources. Great care has to be taken in the way we frame the conversation, because it can be used to blame, and as an excuse for inaction. The developed world can say, "we don't have a population problem, so why should we address environmental problems when other people are overpopulating the world?"

But consumption patterns need to change at the cultural, infrastructural level. In North America, for example, you have to go to great lengths not to be destructive. The way everything – transport systems, food systems – is set up is inherently unsustainable. So people feel helpless, a huge reason for inertia.

What do you hope for your own children?

I hope my son is able to fish as his ancestors have. His father is Haida – First Nations people who have lived on this island for 10,000 years. I want to teach my son that we are responsible for maintaining this island for the next 10,000 years.

Do you think that being raised within First Nations culture will give your children a clearer framework for stewardship than those who are not?

I do. I've been spending time here on Haida Gwaii my whole life, and it's affected me profoundly. My parents taught me to stand up for what I believe in, but what I really learned about the environment I absorbed from spending time here with elders. We still can go out and gather crabs and catch halibut because people have harvested sustainably here for thousands of years.

Tradition holds this in good stead, but we all used to be locals. When we move and sever the connection to the place our ancestors stewarded for centuries, we lose the knowledge of how to live harmoniously with that place. People who stay put are more likely to think: "my children are going to have to live here, so I had better behave appropriately," a principle that helps take responsibility wherever you happen to live.

What do you hope for from Rio+20?

I've attended many world summits, and they're essential. We hope world leaders will come up with answers and put revolutionary new policies in place, and it's important to make our voices heard. But we can't wait for change to come from above. It's practical engagement at the community, municipal levels that produces concrete results.

So what can young people do?

First follow your passion. What are you interested in? What are you good at? Society now needs everyone in every field to become sustainable. People think to make a difference they must become an "environmentalist". I disagree. Become whatever you're interested in first and then bring sustainability to it.

It's also important to experience and know the environment around you. Visit your dump. Visit your reservoir or water treatment plants. Go to the sites of local environmental conflicts and learn what the issues are. You'll feel invested and become an authority, giving you confidence to speak out. There's nothing more powerful than youth speaking the truth.

COPENHAGEN: BIKE CITY FOR MORE THAN A CENTURY

The Danish cycle-culture is as old as the bicycle itself. Copenhageners have used bicycles to transport themselves to work since the 1880s. Back then, commuting by bike was the fastest, easiest and most environmentally friendly way to move around the city – and it still is.

Bicycle, Penny-farthing, bike and Iron Horse. Both the name and the bike have changed during the last centuries. The bicycle (the word means two wheels) was first introduced in 1871 by the British Engineer James Starley. This bicycle, also known as a Penny-farthing, had a big front wheel which should make the bicycle run longer per pedal game. Unfortunately the Penny-farthing was rather dangerous and impractical to ride.

Few years later, in 1885 Starley then developed the ´Baton bike´ which is the bike we know today: Easy, safe and fast.

Copenhagen developed a cycle-culture

In Copenhagen the popularity of the bike evolved, especially through the 1920’ties and 1930’ties. In the streets of Copenhagen you would find Copenhageners from all social classes biking side by side. The middleclass mother rode her bike home from the grocery store, the wealthy bank Director took his bike on his way to work and the young craftsman transported his goods by bike.

Times changed after the Second World War. In the 1950’ties new machinery was introduced and bikes were put back into their bike racks. Copenhageners replaced their bikes with mopeds and automobiles, and when the city planners looked into the crystal ball in the 60’ties, they did not see many cyclists. Instead they saw cascades of gasoline, wide highways and tall skyscrapers.

The oil crisis put an end to that dream in the 1970’ties. ‘Car Free Sundays’ was introduced in Copenhagen along with cyclist demonstrations for a ‘Car Free Copenhagen’. Many Copenhageners voted for a clean city and choose the bike instead of a car.

This vintage movie clip from TMC shows that bicycle culture was already big in Copenhagen in 1937:

Future of the Bike City

Copenhagen got its first bike lane in 1910 but most parts of the important net of bike lanes have been established within the last 25 years. Today 50% of the Copenhageners choose to commute by bike every day. Most of them do it all year round – even in rain and snow.

Currently the city is building green routes through Copenhagen to ensure a safe and green transport route for cyclists while creating green spots in the cityscape.

Cycle-routes out of the city are soon a reality. When the first City-to-suburb ‘cyclesuperhighways’ opens in the end of 2011 they will reach a distance of 15 kilometer from central Copenhagen.

Infrastructure is not the only thing Copenhagen is working on at the moment. These days the Copenhagen Municipality are sending 50 ‘karma-policemen and women’ out on the bike lanes to make sure, that the good Danish cycle culture and positive ‘cycle-karma’ is uphold. For two weeks they give karma-cakes to cyclists who show a good behaviour and creates positive ‘cycle-karma’ towards their fellow cyclists.