Why sustainability is more than just a fad

Since the 1970s, we’ve been operating beyond the resources our planet can sustainably provide. Today, we use the equivalent of 1.5 earths to give us the resources we need, and also to absorb our waste. Several future scenarios suggest that if current business-as-usual trends continue, we will need the equivalent of three earths by 2050.

Sustainability – of the environment, economy or society – is an attempt to ensure that the way we conduct ourselves today will not impose unfair costs on future generations. The green economy (now widely recognized as an effective engine for sustainable growth) has an important role to play here: it can increase the share of renewable energies in the power sector, improve the efficiency of natural resource consumption and reduce pollution.

Green growth is of paramount importance to the leadership of the United Arab Emirates. Celebrating the country’s 17th National Environment Day, Sheikh Khalifa bin Zayed Al Nahyan said that the “green economy is a key component of the state’s strategic thinking”.

According to Bloomberg New Energy Finance, about $254 billion was invested last year in clean energy projects. Investment fell for the second year running, from a peak of $279 billion in 2011. Clearly, this spending must increase to mitigate global warming, and more effective international coordination is also necessary. On the positive side, the costs of solar and wind-based systems have fallen during the past five years (solar down just over 50%, and wind by about 15%). This has considerably reduced payback periods for rooftop installations and has made solar and wind more competitive with coal and gas in many markets. In Chile, for instance, solar capacity is being installed for use by the mining industry.

What are the necessary conditions for true sustainability to become a reality? Experience suggests that the overall initiative should be a combination of top down (with public planning and expenditure, accompanied by tax breaks and other market incentives) and bottom up (including the private sector and individuals). Although somewhat utopian, sustainability must rise above mere politics – one important reason being that investors are highly sensitive to political change.

A few years ago, South Korea committed to allocate roughly 2% of its GDP to green investment – twice the amount recommended by the United Nations. Even though this goes way beyond what most countries can afford, green growth is not only applicable to wealthy, developed countries. The seventh World Future Energy Summit in Abu Dhabi revealed the increasing potential for green growth in Africa, in agriculture and renewable energy.

Sustainability must be driven in the way we build and expand our infrastructure, by considering renewables to be an integral part of a country’s capital infrastructure, making buildings and appliances smarter and more efficient via adherence to standards, and providing public transportation alternatives. As an example of building efficiency, the new Siemens building at Masdar City (the UAE’s ultra-low carbon flagship project established in 2006), is a world leader.

Sustainability must also be driven in the way we use and dispose of our resources (energy, water, materials and waste). Ideally, energy smart-grids would be everywhere, with more LED street-lighting and sensors strategically located to, for instance, identify which garbage containers needed to be emptied. Also, consider that when consumers are provided with fuller analyses of their utility bills, they become much more responsible regarding their energy use. In 2012, Abu Dhabi Distribution Company redesigned utility bills, informing customers about whether their consumption was in the green or the red, and eliciting a good customer response.

Innovation in sustainability has resulted from collaboration between business and academia. A good example from our region (and demonstrating that a green economy attempts to deliver more low-carbon mobility) is BIOjet Abu Dhabi, a multistakeholder initiative to establish a sustainable aviation biofuel industry in the UAE, including Total, ADNOC’s Takreer, Boeing, Etihad Airways and Abu Dhabi’s Masdar Institute of Science & Technology, with the last three organizations spearheading research in using salt-tolerant plants (such as mangroves) as a feedstock for lower-carbon biofuels.

Meanwhile, Masdar Institute recently developed a new, multi-junction, solar-tech cell. Overall, the institute currently has about 25 outstanding patent requests in clean energy and related technologies. It’s not just in the UAE: in the Netherlands, Dr Marjoline Helder and her team are attempting to commercialize their method of generating electricity from living plants. In each of these cases, new IP has either been created, or could be quite close.

It is worth mentioning that Masdar Institute is also working on the concept of a sustainable energy transition (SET), underlining the required political alignment and popular buy-in; they also remind us that “there are a number of studies that demonstrate the feasibility of SET paths”. While there are admittedly short-term costs to backing sustainability, there are genuine medium- to long-term benefits that can be crucial in securing a nation’s lasting viability.

How helpful can the markets be in facilitating the raising of capital for sustainability? According to Bloomberg, 2013 saw share prices for clean energy equities increase by 54% (after a period of overcapacity). Solar was the main driver at more than 70%. “Green bond” issuance was at a new high in 2013, at about $14 billion, although this is quite small in absolute terms.

While the appetite for clean energy from institutional investors has improved, it remains very low as a percentage of global institutional assets under management. However, institutional investors have been more willing to buy into renewables operations when they are up and running. Wind farms and industrial-scale solar plants typically have power-purchasing agreements with electric utilities, and such investments have proven capable of generating 8-10% yields, comfortably above corporate bonds.

The world’s development banks (such as the World Bank) have continued to invest in clean energy, especially in the developing world. The Abu Dhabi Fund for Development (in partnership with the International Renewable Energy Agency) established the UAE-Pacific Partnership Fund to make grants for renewable-energy projects in developing Pacific countries. The establishment of the UK’s Green Investment Bank, the first of its kind globally, is especially welcome.

Mercer Investments, the consultants, point out how companies practising sustainability have tended to outperform their respective equity index benchmarks. This makes sense, given that “responsible” companies tend to be better managed. They also show leadership in product design, employee policies, environmental protection and human rights.

Renewables, as a group, have grown proportionately within the global energy mix, although they still make up only a very small portion. Much more needs to be done and massive investments made. Renewables’ investments, typically in the mega-watt range, cumulatively make a difference; more projects in the giga-watt range would be desirable. Meanwhile, the world needs more Masdars, especially providing the crucial education-innovation link.

In the short term, sustainability might very well cost jobs (in coal mining, for instance), although dwelling on this is short-sighted. To quote the 2008 Korean National Strategy for Green Growth: “One distinctive characteristic of the plan is the creation of jobs for both skilled and unskilled labourers. Skilled jobs include greenhouse gas emissions certifiers, emissions permits trading certifiers, green building evaluators and certifiers, and green building certifiers … Unskilled labourers will be able to find jobs in forestation, green landscaping along the waterways and construction of small- and medium-sized dams, among others.”

Sustainability and the green economy must not be a fad; it must become a reality, before too much irreparable damage is done.

More on sustainability

Why renewables are not mission impossible
Why it pays to join the circular economy
Sustainability: more than fossil fuels
Can sustainability be profitable?

Author: Mohamed O. Balfaqeeh is an undersecretary at the Abu Dhabi Department of Economic Development, United Arab Emirates.

Image: A wind turbine is seen near the village of Piansano, 90 km (60 miles) north of Rome, April 16, 2012. REUTERS/Max Rossi