MakingItIndustry for Development

1st quarter 2012

Ourlow-carbon future

n Jeremy Rifkin n Climate change,

climate action n WindMade n ‘Homeland security’ n Slovenia

A quarterly magazine. Stimulating, criticaland constructive. A forum for discussionand exchange about the intersection ofindustry and development.

NUMBER 1, DECEMBER 2009lWe must let nature inspire us –Gunter Pauli presents analternative business model that isenvironmentally friendly andsustainable lHot Topic: Is itpossible to have prosperitywithout growth? Is ‘green growth’really possible?

NUMBER 2, APRIL 2010lThe International EnergyAgency’s Nobuo Tanaka looks atenergy transitions for industry l Energy for all – KandehYumkella and Leena Srivastavaon what needs to be done toimprove energy access

NUMBER 3, JULY 2010l China’s stunning economicrise: interview with minister ofcommerce, Chen Deming l Towards a more productivedebate – Ha-Joon Chang calls foran acceptance that industrialpolicy can work

NUMBER 4, NOVEMBER 2010l Strengthening productivecapacity – Cheick Sidi Diarraargues that the LDCs should –and can – produce more, andbetter quality, goods l PatriciaFrancis on climate change andtrade l Hot topic: The relevanceof entrepreneurship

NUMBER 5, FEBRUARY 2011lA window of opportunity forworld trade? – Peter Sutherlandassesses the prospects for theconclusion of a multilateral tradeagreement l A path to mutualprosperity –Xiao Ye on tradebetween sub-Saharan Africa andChina

NUMBER 6, APRIL 2011l Feeding a crowded world –IFAD’s Kanayo Nwanze arguesthat smallholder farmers musthave opportunities to beentrepreneurs l Nestlé CEOPaul Bulcke on ‘Creating SharedValue’ l Hot Topic: Does energyefficiency lead to increasedenergy consumption?

NUMBER 7, JULY 2011lThe globalization paradox –Dani Rodrik l Unfair share –Thomas Pogge on affluentcountries’ responsibility forincreasing global poverty l Hot topic: Is nuclear powernecessary for a carbon-freefuture?

NUMBER 8, NOVEMBER 2011l Closing the gender gaps –Michelle Bachelet onovercoming the barriers thatprevent women from seizingeconomic opportunitiesl Engineering eco-friendlysolutions – Carolina Guerra onhazardous waste in Colombial Hot topic: Growth: the end ofthe world as we know it?

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EditorialImagine a future where the power of green technology drives a neweconomic revolution, and where everyone, all over the world, hasaccess to clean, safe, and affordable energy services. Does this soundfar-fetched? Not according to our contributors. Jeremy Rifkin, whoselatest book, The Third Industrial Revolution, is making a big impact,sees developments in renewable energy and communicationsplatforms coming together to form a economic paradigm which willdrive humanity to more sustainable horizons. Kandeh K. Yumkellaand Morgan Bazilian see the Sustainable Energy for All and GreenIndustry initiatives as key steps in an essential transition to aninclusive new economy.

With the International Energy Agency warning that the world isheading for irreversible climate change in less than five years, thereis no time to waste. Elsewhere in this issue of Making It, Soogil Youngexplains how the Republic of Korea is one of the countries settingthe pace in the drive to build a green economy. Jigar Shah from theCarbon War Room writes that business has a major role to play, too,and Morten Albaek of the WindMade group introduces one way thatthe private sector is taking action to try and secure our future.

How realistic is this vision of an innovative economic modelbased on renewable energy, and how can we reach it? Read on. This isour low-carbon future.

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Editor: Charles Arthureditor@makingitmagazine.netEditorial committee: Ralf Bredel,Tillmann Günther, Sarwar Hobohm,Kazuki Kitaoka, Wilfried Lütkenhorst(chair), Cormac O’Reilly and Jo Roetzer-SweetlandEditorial assistance, website andoutreach: Lauren Brassawoutreach@makingitmagazine.netCover illustration: Mike KingDesign: Smith+Bell, UK –www.smithplusbell.comThanks for assistance to Donna ColemanPrinted byGutenberg PressLtd, Malta –www.gutenberg.com.mton FSC certified paper To view this publication online and toparticipate in discussions aboutindustry for development, please visitwww.makingitmagazine.netTo subscribe and receive future issuesof Making It, please send an emailwith your name and address tosubscriptions@makingitmagazine.netMaking It: Industry for Developmentis published by the United NationsIndustrial Development Organization(UNIDO),Vienna International Centre, P.O. Box 300, 1400 Vienna, AustriaTelephone: (+43-1) 26026-0, Fax: (+43-1) 26926-69E-mail: unido@unido.orgCopyright © 2012 The UnitedNations Industrial DevelopmentOrganization No part of this publication can beused or reproduced without priorpermission from the editorISSN 2076-8508

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GLOBAL FORUM6 Letters8 WindMade and the case for transparency –Morten Albæk introduces the first globalconsumer label identifying corporations andproducts made with wind energy12 Hot Topic: Climate change, climate action –Mary Robinson and Corinne Schoch on inclusive sustainable development andrethinking climate security

16 Business matters – news and trends

FEATURES18 Building the architecture for greengrowth – Soogil Young explains how theRepublic of Korea is leading the way in de-linking economic growth andenvironmental degradation20 No place to plug in –The Carbon War Room’s Jigar Shah sees small solutions to big problems

KEYNOTE FEATURE22 A new economic narrative –Jeremy Rifkin explainshow the five pillars of athird energy-communicationsrevolution will createthe foundations for thenext great wave of economicgrowth, while Morgan Bazilian andKandeh K. Yumkella see uniqueopport unities arising from thecreation of a radically differentenergy system

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The designations employed and thepresentation of the material in this magazinedo not imply the expression of any opinionwhatsoever on the part of the Secretariat of theUnited Nations Industrial DevelopmentOrganization (UNIDO) concerning the legalstatus of any country, territory, city or area or ofits authorities, or concerning the delimitationof its frontiers or boundaries, or its economicsystem or degree of development. Designationssuch as “developed”, “industrialized” and“developing” are intended for statisticalconvenience and do not necessarily express ajudgment about the stage reached by aparticular country or area in the developmentprocess. Mention of firm names or commercialproducts does not constitute an endorsementby UNIDO.The opinions, statistical data and estimatescontained in signed articles are theresponsibility of the author(s), including thosewho are UNIDO members of staff, and shouldnot be considered as reflecting the views orbearing the endorsement of UNIDO.This document has been produced withoutformal United Nations editing.

Contents

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Number 9, 1st quarter 2012

32 Sustainability: a lever for economic growth –European Commissioner Antonio Tajaniexplains how the European Union is findingsolutions that compromise neither growthnor the climate and the environment34 Country feature: Slovenia – Successful andinnovative – Interview with His ExcellencyDanilo Türk, President of the Republic ofSlovenia38 A case of ‘homeland security’ – AlejandroLitovsky and Paulina Villalpando look at howthe risks of investing in farmland createopportunities for sustainability

POLICY BRIEF42 Networks for prosperity 44 Carbon capture and storage in industrialapplications

46 Endpiece – Sumi Dhanarajan considers howthe pharmaceutical industry can improve accessto medicines in developing countries

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LETTERS

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Non-hazardousI truly enjoyed reading“Engineering eco-friendlysolutions”, (Making It, issue 8).The article captures a realsense of innovation within theindustry, and illustrates wellhow entrepreneurial activitiescan work. The article leaves mewith two questions: The firstthing that comes to mind is thequestion of other producersaround the world. Sincealuminum is produced andused in many parts of theworld, what do otherproducers do with thealuminum dross? Is it recycledin a similar way, or is this abusiness model that can beexpanded to other countries’markets?

The second questionconcerns safety. The articlestates that aluminum dross is ahazardous waste material, yetgoes on to explain how the by-product of the aluminumdross is used for buildingmaterial, benches, and fenceposts. If at one point thematerial is hazardous, at whatstage does it become non-hazardous? l Émile Potolsky, websitecomment

Good to read about a womanmaking a success of industrialwaste recycling “Engineeringeco-friendly solutions”,(Making It, issue 8). Why don’tyou feature some more women

eco-entrepreneurs? Two cometo mind.

One is Lorna Rutto, who wonthe Cartier Women’s InitiativeAward 2011 for sub-SaharanAfrica. Her company, EcoPost,in Kenya, uses 100% recycledplastics to manufactureaesthetic, durable, andenvironmentally friendlyfencing posts and customlumber profiles.

The other is Majora Carter,whose Sustainable SouthBronx pushed both for eco-friendly practices and, equallyimportant, job training andgreen-related economicdevelopment for her vibrantneighbourhood in New York.She now runs the economicconsulting and planning firm,the Majora Carter Group,putting the green economyand green economic tools touse, unlocking the potential ofevery place – from urban citiesand rural communities, touniversities, governmentprojects, businesses andcorporations.

There must be loads more.l Stacia Grove, websitecomment

TheenvironmentalbrinkRe: “On the road again – with anew roadmap”, (Making It,issue 8), it’s great that theCommissioner is tellingindustry to be more resource-efficient. He needs to do moreof this and less of trying to

make consumers the problem(and the solution). He wasrecently in Poland launchingthe “Generation Awake. Yourchoices make a world ofdifference!” programme, whichwants to encourage citizens tothink about their impact onthe planet when makingpurchasing decisions. This isall very well, but as Gar Lipow, a long-time environmentalactivist who has spent yearsimmersed in the subject ofefficiency and renewableenergy, recently wrote: “We didnot get into this mess viaindividual consumer choice,and we won’t get out of it thatway either.”

Setting an example by doingsome simple, logical things toreduce an individualenvironmental footprint iswonderful, but ultimately, wewill not make up, throughprivate spending or lifestylechanges, for the fact that it isthe state and the private sectorthat are to blame for bringingus to the environmental brink.

The answer to collective

political failure is politicalaction.l Desmond Attis, websitecomment

Solar SisterI like this, “Solar Sister:empowering women with lightand opportunity”, (Making It,issue 7). It’s clear that poorpeople can make savings byhaving a solar lantern ratherthan paying for kerosene, butthe article doesn’t make it clearhow poor people can find theUS$20 to buy the lamp. Thisseems a lot of money for onesingle outlay for people tryingto live on less than two dollarsa day. Or maybe they can pay ininstallments?lAlice Postlewaith, websitecomment

Katherine Lucey, CEO of SolarSister, replies: We find that our customers havean acute appreciation of the valueproposition of a one-timeexpenditure of US$20 versus theweekly expenditure of US$2 or

The Global Forum section of Making It is a space for interaction anddiscussion, and we welcome reactions and responses from readers aboutany of the issues raised in the magazine. Letters for publication inMaking It should be marked ‘For publication’, and sent either by email to:editor@makingitmagazine.net or by post to: The Editor, Making It, Room D2142, UNIDO, PO Box 300, 1400 Wien, Austria. (Letters/emails may be edited for reasons of space).

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more for kerosene. The family savesover US$80 in the first year, whichcan be spent on other importantexpenses, typically on education,health care and better nutrition.

One of the misconceptionsabout those living ‘on less than twodollars a day’ is that the incomesomehow arrives in a regularstream and must be managed on aweekly basis, as if they are getting apaycheque each week. In reality,the true challenge is managing alow level of income that is alsounpredictable and variable. Afamily will earn US$100 whenthey harvest their coffee beans, andthen nothing for three or fourmonths. Or the father will move tothe city for work, and send homemoney every few months. 

Managing the slowexpenditure of money (the US$2

per week for kerosene) that has beenreceived all at once is extremelydifficult, especially in a culturewhere it is expected that you sharewhat you have. As one of ourcustomers told us: “When I havemoney, I like to invest it, but I don’ttrust the banks. They have fees thateat my money. A solar lamp is agood investment. When I invest ina solar lamp, I make money. Andmy brother can enjoy the light, buthe does not reach in my pocket.” Inthe perverse economics of poverty,the one-time expenditure isactually a better fit to incomepatterns and levels.

China’s growthThe two main centres of theworld economy, the UnitedStates and the European Union,

seem to be slowing down to anear standstill, or worse. Therecovery (if we can call it that)from the recession of 2008-9seems to have run into thesand.

Worse is the slow evaporationof the illusion that theemerging market economies,headed by China, will come tothe rescue of the decliningWest. Certainly, China’s robustrecovery from the depths of theslump in 2008-9 has poweredgrowth in economies supplyingit with manufactures, food andraw materials, and encourageda more general flow of capitalinto the Global South. But DaniRodrik (“The GlobalizationParadox” in Making It, issue 7,was a fascinating article)warned recently on the Harvard

University website againstenthusiastic forecasts that thisgrowth will continue:

“These predictions arelargely extrapolations from therecent past and they overlookserious structural constraints.China’s problems are alreadywell recognized. The country’sgrowth has been fuelled overthe past decade by an ever-growing trade surplus that hasreached unsustainable levels.China’s leaders must refocusits economy away from export-oriented manufacturing andtowards domestic sources ofdemand, while managing thejob losses and social unrestthis restructuring is likely togenerate.”lGraham Roberts, Brussels,received by email

For further discussion of theissues raised in Making It, pleasevisit the magazine website atwww.makingitmagazine.net andthe social networking Facebooksite. Readers are encouraged tosurf on over to these sites to joinin the online discussion anddebate about industry fordevelopment.

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I am writing to share a story of how acertain historic initiative came to be. Thisinitiative goes above and beyond the statusquo of energy policy and development toshow the world that so much more isneeded. This initiative gathers the voicesof an impressive and diverse set ofstakeholders who know all too well that itis time for us to finally reach ourrenewable energy goals. This initiativedemonstrates how corporate,philanthropic dollars can be allocated innew, powerful ways. And this initiative willallow our billions of global citizens toclearly and directly inform their favouritebrands that they want more. I am writing

to introduce you to WindMade.About 18 months ago, a couple of my

colleagues at Vestas and I started mullingover an idea to create a global consumerlabel for wind energy. We had noticed thata growing number of non-utilitycompanies were becoming moresophisticated energy users and purchasers.In fact, companies were following severalpaths for energy procurement, fromsourcing clean energy via certificates, tosigning power purchase agreements withutilities and developers, buying windturbines for on-site installations, and eveninvesting in wind farms directly. Webelieved that the more consumers knew

about what their favourite brands weredoing with respect to procuring cleanenergy, the more these consumers wouldbuy products from that brand, thusencouraging companies to procure evenmore renewable energy. Global labels likeFair Trade and FSC (Forest StewardshipCouncil) have proved that labels canindeed create these cycles, but we werefairly confident that a global label did notyet exist for renewable energy. Ourobservations eventually transformed intoconviction, and we decided it was time tomould our ideas into something real.

I am excited and proud to announce thatWindMade is now a real organization,

WindMade and thecase for transparency

MORTEN ALBÆK is GroupSenior Vice President, GlobalMarketing and Customer Insight,Vestas Wind Systems A/S. Vestasis a Danish manufacturer, seller,installer, and servicer of windturbines. It is the largest supplierof wind turbines in the world. InJanuary 2011, Vestas was awardedthe Zayed Future Energy Prize.

Morten Albæk introduces the first globalconsumer label identifying corporationsand products made with wind energy.

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issuing real labels, to real members. It is thefirst global consumer label for brands andproducts made with wind energy. It took agreat deal of work and creativity to reachthis point, and we could not have pulled itoff without the tremendous support fromseveral partners. Last year, we gathered animpressive group of founding partners tocreate an independent non-profitorganization for this historic initiative.Each founder represents an importantstakeholder group and ensures thatWindMade takes a comprehensiveapproach.lVestas is the lead sponsor and pioneeringorganization behind WindMade;lWWF offers expertise as the leadingglobal sustainability organization, and hasalready developed many certificationstandards;lUN Global Compact represents the globalpolicy sector, and has proclaimedWindMade the first global consumer labelever endorsed by the United Nations;l The Global Wind Energy Council (GWEC)represents the voice of, and support from,the global wind industry’s members;l PricewaterhouseCoopers serves as theverification expert to ensure that the thirdparty audit process is credible andfunctional;lBloomberg is the official data provider forWindMade; l The LEGO Group represents WindMade’starget audience: forward-thinkingconsumer brands.

The founding partners also appointed agroup of respected sustainability experts todevelop a certification standard that isrigorous yet practical for today’s corporatesustainability officers. Finally, we workedwith our cutting-edge, creative partner,Droga5, to develop a sleek and concise labelthat delivers consumer-savvy style,supported by a credible foundation.

The WindMade label shows consumersexactly how much renewable energy their

favourite brands use to run theiroperations. To accurately communicatethe different approaches to clean energyprocurement, WindMade has created afamily of labels. The first label, which wasrevealed on October 10th, displays howmuch wind generated electricity isconsumed as a share of a company’soverall electricity consumption. In 2012,WindMade will also start issuing labelsthat can be placed on actual products toinform customers about how much windelectricity was used in its production.

At the time of writing, we had not yetannounced our most excitingdevelopment to date: the unveiling of ourfirst group of WindMade companies.However, by the time you read this, ourlaunch event will have taken place, soplease find out about our first globalWindMade brands at www.windmade.org.They represent a diverse cross-section ofglobal industries, further enforcing thefact that renewable energy is no longer aniche corporate purpose. They alsohighlight the fact that there are numerousoptions and methods for clean energyprocurement around the world, provingthat any country in the world can procurehigh-quality, clean energy, if it wants to.

At Vestas, we understand that WindMadeis historic in more ways than one becauseit also demonstrates a new model forcorporate philanthropy. Vestas believed sostrongly in the power of a credible andusable consumer label for renewableenergy that we chose to devote a full-timeteam to the idea, gathered a distinguishedgroup of founding partners, and thenfunded a non-governmental organizationthat Vestas no longer controls. In otherwords, Vestas invested money, humancapital, and our brand reputation, to createa global organization that aims to grow ourentire industry, only to hand it back tosociety. While some might call this anoverly complicated marketing strategy, we ‰

“The WindMade label showsconsumers exactly how muchrenewable energy theirfavourite brands use to runtheir operations.”

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consider it to be a cutting-edgephilanthropic model that will significantlycontribute to the continued growth of thewind industry.

Additionally, since WindMade was createdon the basis of our perceptions concerningthe topic of corporate renewable energystrategies, Vestas also saw the need to devotemore resources to the collection of concretedata about the corporate sustainabilitytrends. This information is being handedback to the world, because we believe thattransparency is essential to accelerate thegrowth of renewable energy.

To contribute to our greater vision oftransparency, we partnered with BloombergNew Energy Finance to develop theCorporate Renewable Energy Index (CREX)to document and track the growth incorporate renewable energy trends. TheCREX sheds light not only on the number ofcompanies that procure renewable energy,but also reveals how much and from whatsource. The CREX is the first index of itskind, providing transparency to globalpurchases of renewable energy by creating alevel of transparency that has never existedbefore.

We also commissioned TNS Gallup toconduct a global consumer wind study tounderstand the growing demand from theconsumer side. In the largest survey of itskind, 31,000 consumers in 26 countries wereasked about their opinions on topics such asrenewable energy, products made withrenewable energy, and about how corporateactions impact consumer behaviour. Keyfindings from this survey showed that notonly do a majority of consumers considerclimate change as the greatest single globalchallenge, but 90% of consumers worldwidewant more renewable energy, and 79%would have a more positive perception ofbrands produced with renewable energy.

In the future, Vestas will continue toupdate and refresh the data for the CREXand the Global Consumer Wind Study (GCWS).

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For now, we look forward to seeing thenumber of WindMade members grow. Thefirst WindMade companies are critical forstrengthening the WindMade brandbecause they will demonstrate to the worldthat wind and other renewable energyindustries are not only here to stay, but arealso becoming increasingly relevant andattractive to a growing group of globalstakeholders.

The lack of clarity about how markets fortechnologies, like wind and solar, areevolving is creating barriers for futuregrowth. In fact, WindMade, CREX, and theGCWS, grew out of a firm belief thathumankind is born sensible. And thesethree initiatives will continue to besupported by Vestas and our partners dueto another firm belief: that activating thissensibility, through transparency, willfoster the needed positive behaviouralchange. We believe that increasedtransparency will unveil the facts aboutwhat consumers and companies want,which will encourage increasedinvestment in the global supply ofrenewable energy. WindMade, the CREXand the GCWS combine to form apowerful triumvirate of transparency,providing communication tools for globalcorporations and their stakeholders to seethe truth behind the demand and supplyof renewable energy. n

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consumers consider climatechange as the greatest singleglobal challenge, but 90% ofconsumers worldwide wantmore renewable energy, and79% would have a morepositive perception ofbrands produced withrenewable energy.”

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MARY ROBINSON aims to put justice forthe poor and the forgotten at the heart ofthe climate debate and to empower themarginalized to achieve sustainable andpeople-centred development.

The year 2012 brings with it freshopportunities to reframe action on climatechange in a positive light – to focus on thebenefits – economic, social andenvironmental – of a low carbon greeneconomy. 2012 is UN Year of SustainableEnergy for All and, in the middle of theyear, all eyes will focus on Rio – 20 years onfrom the World Conference on SustainableDevelopment – when we will have a longhard look at how we have developed, whohas benefited, and at what cost. Rio+20provides an opportunity to look at how wecan all grow and prosper, withoutoverstretching our limited naturalresources and without compromising thelives of many, for the benefit of a few. Weneed to mould economic, social andenvironmental development into a newmodel of inclusive development.

My approach to these issues isencapsulated in the climate justiceapproach I am dedicated to, and which my

Foundation, the Mary RobinsonFoundation – Climate Justice (MRFCJ), iscommitted to delivering. Climate justicelinks human rights and development toachieve a human-centred approach,safeguarding the rights of the mostvulnerable, and sharing the burdens andbenefits of climate change, and itsresolution, equitably and fairly.

Developing countriesIn the context of the next industrialrevolution, it will be critical to ensure thatbenefits are shared equitably and fairly.Developing countries, and marginalizedcommunities within these countries, mustbe enabled to actively participate in andbenefit from the next wave of economicgrowth and opportunity. In many ways,developing countries have an advantage –as they are starting with a clean slate. Theywill be building infrastructure for the firsttime, rather than retrofitting. They areembarking on new fiscal and developmentpolicies, which can deliver a climateresilient, low-carbon economy. And theyhave growing, young, and increasinglyeducated populations to power this greeneconomic revolution.

Climate change, climate action

Climate justice: inclusivesustainable development

MARY ROBINSON served as the seventh,and first female, President of Ireland (1990-1997), and as the United Nations HighCommissioner for Human Rights (1997-2002), and was founder and President ofRealizing Rights: The Ethical GlobalizationInitiative (2002-2010). She is currently thePresident of the Mary RobinsonFoundation – Climate Justice (MRFCJ).

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There is an urgent need to capture thispotential now, so that developingcountries can be part of the supply-sidesolutions, and part of the innovation andcreativity that will inform a new wave ofgrowth. Developing countries should notbe mere consumers of green technology –they need to be empowered to be theengineers, designers, producers andmarketers of the technologies thatrespond to their needs and facilitate theirgrowth. This requires us to do thingsdifferently, to make brave investmentchoices, and to see the potential ofinnovators and entrepreneurs indeveloping countries. Business as usualwill not do it, and we should see 2012 asthe year where we make the choice tochange direction, embrace opportunity,and bring some new actors onto the scene.

Real partnershipsWe cannot assume that greentechnologies and policies will trickledown to benefit the poor andmarginalized. Specific, targetedapproaches will be needed to bring thoseat the bottom of the economic pyramidinto the green economy – to enable themto contribute to, and to reap the economicand social benefits of, inclusive greengrowth. Without a doubt, the billions ofpeople without access to modern forms ofenergy constitute a significant potentialmarket for clean energy – but marketforces alone will not deliver what theyneed. We need to work in realpartnerships with developing countrypolicymakers, researchers, andentrepreneurs to design energy solutionsto complement and safeguard livelihoods,to improve social well-being, and toprovide opportunity.

Women will be key users, and hopefullydesigners, of green technology, and canmake a significant contribution tosustainable green growth. The World

Development Report 2012 reminds us that“women now represent 40% of the globallabour force, 43% of the world’sagricultural labour force, and more thanhalf the world’s university students.”Capturing this contribution would boostproductivity and drive the green economy– “eliminating barriers that discriminateagainst women working in certain sectorsor occupations could increase labourproductivity by as much as 25% in somecountries.”

In addition, women have a great sense ofinter-generational equity, seeing life interms of not just their lives, but those oftheir children and grandchildren.Harnessing this ability for long-termplanning, with the productive value oftheir contribution to economic life, wouldprovide a powerful engine for sustainablelow-carbon and climate-resilient growth.

Women’s leadershipWith this in mind, I am working toharness women’s leadership from the

grassroots to the international level tomaximize the potential of women asagents of change, innovators, investors,and entrepreneurs. To enable this we needto provide women with access toeducation and credit, active participationat all levels of decision-making, and thechance to have their contribution valued.We have an opportunity to make 2012 theyear we finally register the fact thatwomen and men will power the nextindustrial revolution, and that inclusivesustainable development means investingfor the long term, while making surebenefits flow to the vulnerable andmarginalized. We have many untappedresources, and I am not just talking aboutwind and waves!

If we start to value the things we take forgranted, everything from the power of thesun to the contribution of women tosociety – we will be able to power a newinclusive sustainable future for ourselvesand, most importantly, for our childrenand grandchildren. n ‰

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CORINNE SCHOCH asks if militarizingclimate change might harm thosecommunities most affected by theproblem.

Once upon a time, climate change wasstrictly an environment and developmentissue. Today, it has become a matter ofnational and international security. Effortsto link climate change with violent conflictmay not be based on solid evidence, butthey have certainly captured the attentionof governments. They have played a vitalrole in raising the much needed awarenessof climate change as an issue that deservesglobal action, but at what cost?

Focusing on climate change as a securitythreat alone risks devolving humanitarianresponsibilities to the military, ignoringkey challenges, and losing sight of thoseclimate vulnerable communities thatstand most in need of protection.

Over the past five years, climate changehas moved from being a purelyenvironment and development issue tobeing a matter of national andinternational security.

For years, we have understood that civilwars generally break out as a result ofpolitical instability, a poor nationaleconomy, weakened infrastructures and, inthe case of African states, the collapse ofthe Cold War. Now, it seems thatenvironmental shocks can be added to thatlist – journalists, academics, policymakers,security institutions, and heads of statesrepeatedly tell us that the impacts ofclimate change pose a grave securitythreat.

As a result, the idea that prolonged heatwaves, rising sea levels, more variableclimates, and more frequent disasters –such as cyclones or droughts – will resultin more civil conflicts has taken firm rootin the public’s imagination. The popularbelief that climate change will soon spark‘water wars’ between water-scarce regionsand countries is just one example.

But while the notion that climate changecould lead to conflict is widespread, it isbased on very little evidence andquestionable sources. The debate tends tobe characterized by conjecture,extrapolations, and a limited set of factsthat make assumptions about how theclimate will change in years to come, andhow people will respond – for example,that increased climate variabilityautomatically causes inter- and intrastatemigration, or that a drop in rainfall is whatled to the Darfur crisis. The links betweenwhat causes conflict have been simplified.

The truth is that there are, as yet, noconcrete examples of violent conflictsinduced by climate change, and a limitedunderstanding of what the future holds.Take the example of water wars: manyresearchers argue that it is not climatechange that is to blame, but rather it isissues such as poor governance of waterresources that are the driving factorbehind such conflicts.

Just how useful is it to reframe theclimate change debate as a security issue?

A seat at the tableThe debate on links between climatechange, diminishing resources, violent

conflict and security is not new, but itwasn’t until the fall of the Soviet Unionthat discussions around them reallybecame possible.

Up until the early 1990s, security agendason both sides of the Atlantic weredominated by measures to protect thestate and support military institutions. Butin the aftermath of the Cold War, the newpolitical landscape demanded a broader,wider approach to the term “security”. A1994 report by the UN DevelopmentProgramme articulated this need, and gavebirth to the term “human security”,shifting the emphasis away from a state-centric approach towards one that focuseson securing individual people.

This created the space to incorporate“non-traditional” threats – such as theenvironment, health, and human rights –into the security agenda, alongsidelongstanding issues of military defenceand state interests. In this way, climatechange was “securitized”.

Attaching a security label to climatechange has certain advantages. For a start,it gives the state or government power overthe issue, and can end up mobilizing vastamounts of political and financialresources to address it.

But perhaps the biggest “win” insecuritizing climate change has beenraising awareness of this environmentalissue and capturing the attention ofNorthern [developed] countries. There islittle doubt that climate change is nowfirmly in the sights of decision makers atall levels – in a way that would have beenmuch harder to achieve with an

Rethinking climate security

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environment and development frameworkalone. Prominent leaders, includingBarack Obama, Al Gore, Nicolas Sarkozy,and Ban Ki-moon, have all cited climatechange as an international security threat.

Within the global security community,climate change has also been given a seat atthe table – it was discussed within the UNSecurity Council, both in 2007 and 2011.On both occasions, the push to includeclimate change under the council’s remitmet with fierce opposition from China,Russia, and much of the developing world.

Despite the reticence from somecountries, the world has embarked upon apath that will be difficult to turn back on. Itis true that securitization can, in theory, be“reversed”. But in practice, becausesecurity institutions, such as NATO andothers, have begun actively engaging in thedebate, new political power dynamics aretaking shape that will make it hard tosimply take climate change off the securityagenda.

By turning climate change into a securityissue, advocates may have got the attentionof governments, but the question we mustask is: at what cost?

Climate change is filled with uncertainty.As with other highly politicized debates,uncertainty tends to breed anxiety, whichcould lead to fear and result in a set ofpolicies that merely mirror sensationalistacademic and media headlines.

The military of Northern countriesargue that the world cannot afford to waitfor 100% certainty before it acts todiminish the climate change securitythreat. But what form that action shouldtake is already being discussed in manyforums, such as the annual UN climatenegotiations. Bypassing these to bringenforceable action through the UNSecurity Council would leave many of themost climate-vulnerable countries, whoare not part of the council, out of thedecision-making process.

Focus on peopleThere are other risks associated withturning climate change into a securityissue, particularly when it comes toaddressing the full spectrum of challengesposed by climate change. Deciding actionbased on the engagement of a limited poolof security institutions, risks sidelining ormissing out completely issues such asadaptation, mitigation, development,economic growth, equity, justice andresilience, which do not figure as prioritieson the security agenda but which areintegral to addressing climate change.

In today’s world – filled with talk about“human induced climate change”,“compensation”, “responsibility” and“global justice” – it is also important to askourselves to what extent the reframedclimate-security debate is tackling the realdrivers of climate change. And we mustsimilarly ask ourselves whose interests weare serving. The impacts of climate change

will be felt first and foremost by some of themost vulnerable communities across theglobe. The IPCC, for example, warns thatAfrica is one of the most vulnerablecontinents to climate change: agriculturalyields could fall by up to 50% by 2050 insome countries and, by 2020, up to 250million people are projected to faceincreased water stress due to climate change.

Will steps to involve security institutionsand the military protect the interests of themost vulnerable – or merely the interests ofthe powerful? To what extent are weprepared to devolve responsibilities of ahumanitarian or developmental nature tothese new actors?

Ensuring that the most vulnerable areprotected is not just a moral obligation butis a question of justice and equity. There issurely a great risk that the human securityneeds of the most vulnerable could beundermined.

Next steps Perhaps the first step in moving forwardmust be to gather more evidence about thelinks between climate change and violentconflict. Stepping up the research in thisarea would enable policymakers, heads ofstate and security institutions to garner amuch more accurate understanding of theissues at hand and allow for more informeddecision making.

There is also a clear need to reshape theclimate change and security debate to focuson protecting not ourselves but those mostvulnerable to future impacts.

Climate change is not the first issue to belinked to security: issues such as HIV/AIDSand migration have both also been cast as asecurity matter in the past. Reflecting onthese experiences – teasing out whatworked, where and why, the impacts ondifferent stakeholders, the politicalramifications – could provide importantlessons for ensuring the success ofsecuritizing climate change. n

CORINNE SCHOCH is a researcher in theClimate Change Group at the InternationalInstitute for Environment andDevelopment (IIED).

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nMany companies are activelyintegrating sustainabilityprinciples into their businesses,according to a recent McKinseysurvey, and they are doing so bypursuing goals that go farbeyond earlier concern forreputation management – forexample, saving energy,developing green products, andretaining and motivatingemployees, all of which helpcompanies capture valuethrough growth and return oncapital. In McKinsey’s sixth

extractive industries, andtransportation – report thattheir companies are taking amore active approach thanthose in other sectors, probablyas a result of those industries’potential regulatory andnatural-resource constraints.

See: The business ofsustainability: McKinsey GlobalSurvey results (McKinseyQuarterly)

nAsia and the Pacific regioncountries should find ways toaccelerate infrastructureinvestment to help maintaingrowth at a time of significantdownside risk to the globaleconomy, Asian Development

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BUSINESS MATTERS

survey of executives on how theircompanies understand andmanage issues related tosustainability, the year 2011’sresults show that larger shares ofexecutives say sustainabilityprogrammes make a positivecontribution to their companies’short and long-term value.

This survey explored why andhow companies are addressingsustainability and to what extentexecutives believe it affects theircompanies’ bottom line, nowand over the next five years.

On the whole, respondentsreport a more well-roundedunderstanding of sustainabilityand its expected benefits thanin prior surveys. As in the past,they see the potential forsupporting corporatereputation, but they also expectoperational and growth-oriented benefits in the areas ofcutting costs and pursuingopportunities in new marketsand products. Furthermore,respondents in certainindustries – energy, the

Safety and security – Societiesplagued by threats to nationalsecurity and personal safetycannot foster growth in averagelevels of income or well-being.

Personal freedom – Whencitizens enjoy their rights toexpression, belief, organization,and personal autonomy in a

society welcoming of diversity,their country enjoys higher levelsof income and social well-being.

Social capital – Socialnetworks and the cohesion that asociety experiences when peopletrust one another have a directeffect on the prosperity of acountry.

An index that ranks countries onboth wealth and well-beingshows Norway ranked numberone out of the 110 countriesassessed, narrowly ahead ofDenmark and Australia. TheLegatum Prosperity Indexprovides the world’s only globalassessment of nationalprosperity based on both wealthand well-being.

Traditional measures ofnational prosperity are basedentirely on indicators of acountry’s income. Yet for manypeople, ‘prosperity’ is not justabout money, it is aboutsatisfaction with our lives andour future prospects. The Indexdefines prosperity as both wealthand well-being, and finds thatthe most prosperous nations inthe world are not necessarilythose that have only a high GDP,but are those that also havehappy, healthy, and free citizens.

The Legatum Prosperity Indexassesses 110 countries,accounting for over 90% of theworld’s population, and is basedon 89 different variables, each of

The prosperity indexwhich has a demonstrated effecton economic growth or onpersonal well-being. The Indexconsists of eight sub-indexes,each of which represents afundamental aspect ofprosperity:

Economy – Stable and growingeconomies increase per capitaincome and promote the overallwell-being of its citizens.

Entrepreneurship andopportunity – A strongentrepreneurial climate in whichcitizens can pursue new ideasand opportunities for improvingtheir lives leads to higher levelsof income and well-being.

Governance – Well-governedsocieties enjoy nationaleconomic growth and citizenwell-being.

Education – Education is abuilding block for prosperoussocieties.

Health – A strong health careinfrastructure in which citizensare able to enjoy good physicaland mental health leads tohigher levels of income and well-being.

Top five: Sub-Saharan AfricaBotswana, South Africa, Ghana, Namibia, Mali

Top five: Middle East and North AfricaUnited Arab Emirates, Kuwait, Israel, Saudi Arabia, Tunisia

Top five: The AmericasCanada, United States, Uruguay, Chile, Costa Rica

Top five: Asia-Pacific regionAustralia, New Zealand, Singapore, China –Hong Kong SAR, China – Taiwan province

Top five: EuropeNorway, Denmark, Sweden, Finland,Switzerland

www.prosperity.com

Legatum Prosperity Index 2011 rankings:

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Bank (ADB) PresidentHaruhiko Kuroda told the Asia-Pacific Economic Cooperation(APEC) group’s 18th annualmeeting of finance ministers inHonolulu, in November 2011.

Asia’s booming economieshave been supported by therapid roll-out of newinfrastructure but investmentsestimated at around US$8trnare needed between now and2020. This will requiresubstantial support from theprivate sector, and Kuroda saidgovernments must continueregulatory and policy reformsto encourage international anddomestic investors, as well aspublic-private partnerships.

The ADB president alsostressed the need for Asia to stepup its efforts to rebalance itseconomies, putting more focuson domestic and regionallydriven demand. He noted thatthis will require both demandand supply-side policymeasures, including support forthe development of small andmedium-sized enterprises.

nThe Executive Secretary of theEconomic Commission forLatin America and theCaribbean (ECLAC), AliciaBárcena, reaffirmed theimportance of improvingregional integration in order todeal with global economic

turbulence. Addressing theLatin American IntegrationAssociation (ALADI) inMontevideo, Uruguay, inNovember 2011, Bárcena askedthe countries for greaterintegration and a joint LatinAmerican response to deal withthe problems of the economiccrisis. She called for more inter-regional trade and for fiscalmatters, investment, innovationand social policies to beprioritized. At the same time,she said that in the event of anew recession in developedcountries or a new globalfinancial crisis, emergingcountries’ room for manoeuvrewill depend on their external

balance and their internationalreserves, their fiscal andmonetary policy space and thestructure of their foreign tradein terms of products andmarkets.

The Executive Secretary ofECLAC stressed that the regionfaces this situation with greatassets, but also significantweaknesses, such as currentaccount deficit, a production andexports structure based on staticcomparative advantages ratherthan dynamic comparativeadvantages, low investment andlags in innovation, science andtechnology, education andinfrastructure, and high costs ofinsecurity and violence.

Reese Fernandez-Ruiz, co-founder of Rags2Riches Inc. aneco-ethical business based inManila, the Philippines, won theYoung Entrepreneur Award at theWorld Entrepreneurship Forum2011, held in Singapore, inNovember 2011. She wasselected as an entrepreneurunder the age of 35 whoseentrepreneurial achievementand commitment to societymakes her a role-model forentrepreneurship that createswealth and social justice.

Rags2Riches, founded in2007, creates eco-ethical fashionand home accessories out ofrecycled scrap cloth, organicmaterials, and indigenousfabrics, by working with womenliving near Payatas – one of thePhilippines' biggest rubbishdump sites.

Reese Fernandez-Ruiz wasteaching children when shediscovered that women at thedump site were scavenging thewaste to find and recycle scrappieces of fabric so that theycould participate in handicraft

production like rug and rag-weaving, while taking care oftheir children at home. Aninformal cottage industry ofrug-weavers had developed but,over time, a series ofmiddlemen had moved in totake control of both the supplyof scrap fabric and the women'saccess to the market. Thiscreated an unfair value chain forthe women who, at the end ofthe day, earned only pennies perfinished product.

Rags2Riches Inc. was createdto provide these women withfair access to the market and theformal economy, as well as withadditional skills-based,financial, and health training, sothat they can maximize theircareer potential and take stepstowards long-term financial andpersonal well-being. Itintegrated a design solution bypartnering with well-knownlocal fashion designers, like RajoLaurel, Amina Aranaz-Alunan,

and Oliver Tolentino, turningthese rags into foot rugs, a lineof small purses and bags, andhigher-end designerhandbags.

Fernandez-Ruiz says that sheexpects Rags2Riches to growfrom working with 450 womentoday to 5,000 in the next fiveyears. “It's not about lack oftalent or determination,” shetold Fast Company. “Peopleneed opportunities to be ableto get out of poverty.”

Rags to riches Reese Fernandez-Ruiz (left),co-founder of Rags2Riches,receiving the YoungEntrepreneur Award at theWorld EntrepreneurshipForum 2011.

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The Republic of Korea’s green growth policieswere formally launched on August 15, 2008,when President Lee Myung-bak declared inhis speech marking the 60th anniversary ofthe founding of the country’s modern gov-ernment that “low-carbon green growth”should be the core of the new developmentvision for the next 60 years. In this speech,President Lee defined ‘green growth’ as“achieving sustainable growth by reducinggreenhouse gas emission and environmentalpollution.” How would this be possible? Heanswered this question by saying, “Greengrowth is a new development paradigm thatcreates new growth engines and jobs withgreen technologies and clean energies.”

In the following one and a half years, thegovernment set up the institutional frame-work to implement President Lee’s declara-tion of the green growth strategy. It consists offour key pillars:

The Presidential Committee on Green GrowthThis is an advisory institution for the presi-dent, consisting of 14 ministers and 36 ap-pointed members from the private sector withprofessional backgrounds relevant to greengrowth, which is co-chaired by the primeminister and an appointed chairman. It servesas the highest level venue for inter-minister-ial coordination of policies, as well as forpublic-private sector consultation on thosepolicies.

The Green Growth Strategy and the Five-Year PlanThe Strategy, prepared by the PresidentialCommittee, envisages the Republic of Korea(hereafter, Korea) becoming one of the topseven ranked green economies by 2020 andone of the top five by 2050. It has three parts:first, to reduce greenhouse gas emissionswhile adapting to climate change; second, tocreate new growth engines from green tech-nologies; and third, to improve the quality oflife by greening lifestyles, while becoming aninternational role model as a green growthcountry.

The Strategy should show that Korea’sgreen growth is indeed a new developmentmodel. It is far broader in scope than energyor environmental policies, though it does notgo far enough to also address social policygoals.

emissions target management system, and theplanned introduction of the emissions rightstrading system in 2015.

The Framework Act for Low-Carbon Green GrowthThis legislation, enacted in April 2010, permitsthe government to intervene in the market inorder to address market failures in promotinggreen growth. Among other things, it makesprovisions for the emissions rights tradingsystem.

Green business boom Since the formal launching of green growthpolicies in Korea in 2008, there has been agreen business boom. All major businessgroups have made green business a high pri-ority for investment in their short and long-term plans. Between 2008 and 2010, thecombined total of such investment by the 30largest business groups recorded an annualgrowth rate of 75% and amounted to 15.1 tril-lion won (about US$13bn). Investment is fo-cused on new and renewable energyequipment, high-efficiency electric equipment,green cars, and climate change adaptation.

Small and medium-size enterprises, too,have been joining in the green rush. For example, some of them are already emergingas champions in the global market for partsand components for solar and wind powersystems.

The Five-Year Plan assigns 2% of annualGDP to green investment by the government– double the level recommended to govern-ments by United Nations Environment Pro-gramme (UNEP).

As President Lee has indicated, the key tosustained green growth will be a pervasive andcontinuing process of innovation, in both thetechnological and the institutional sense. Therole of this innovation will be to de-link eco-nomic growth and environmental degrada-tion, most crucially by stimulating investmentin the de-carbonization of energies, as well asin saving and recycling natural resources.

The National Greenhouse Gas EmissionsReduction TargetGiven the country’s highly energy-intensive in-dustrial structure, which makes its economyvulnerable to international energy crises andpossible carbon reg-ulations, the mainfocus of green inno-vation is on cuttingdown CO2 emiss -ions. The determination to reduce greenhousegas emissions is the major driver of the greeninnovation that Korea needs.

In November 2009, after several months ofnational debate, the government adopted amedium-term emissions reduction target of30%, relative to ‘business-as-usual’, by 2020. Thefollowing month, at COP15, in Copenhagen,President Lee made this an international polit-ical commitment by declaring that Korea wouldpursue this target unilaterally and voluntarily,in what he called the ‘me-first’ spirit.

The country’s business community ex-pressed a strong objection to this target, con-sidering it overly ambitious and fearing itsimpact on the competitiveness of industry.However, the Presidential Committee consid-ered an ambitious target necessary in order tostimulate a broad range of clean technologyinnovation for greater energy efficiency acrossthe economy, as well as for the deployment ofrenewable energies.

The unilateral adoption of the emissionsreduction target has allowed Korea to becomean ‘early mover’ for green growth, withouthaving to wait for others to do the same.

The government has been playing a criti-cal role in triggering, facilitating and sustain-ing the green innovation process withregulatory and supportive measures, especiallyin regard to research and development andcreating the initial market. Among measuresbeing implemented to achieve the emissionsreduction target are the so-called sectoral

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Soogil Young explains howthe Republic of Korea isleading the way in de-linkingeconomic growth andenvironmental degradation

Dr. SOOGIL YOUNG is a Korean economist,who has been serving as Chairman of thePresidential Committee on Green Growth sinceJuly 2010. He is also the founding Chairman ofthe Green Investment Korea Forum.

Building the

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The government itself has been a leading in-vestor in green growth, especially in green in-frastructure. Two leading examples are a majorconstruction project to restore four major riversand a project to create a nationwide network ofhigh-speed railways in order to induce a modalshift of people from road to the rail.

By any measure, green growth policies inKorea have been a success. Businesses are ac-tively exploring opportunities in green growth,and local governments are pursuing visions ofgreen communities. There is enthusiastic sup-port for green lifestyles and green growthamong the public.

Secrets of green growth success thus farThe success of Korea’s green growth can beattributed to at least three factors, includingthe visionary leadership of a political leaderfirmly committed to a new green growthstrategy; the ‘me-first’ approach to carbonemissions reduction and environmental pro-

tection; and an effective coordination amongall the relevant ministries.

The challenge now is to sustain progresstoward the realization of the emissions reduc-tion target and environmental protection goals.This is no small challenge, considering indus-try’s constant concern with its internationalcompetitiveness and the political uncertainties,which will heighten as the presidential electionof December 2012 approaches.

Towards a global architecture for green growthOne of the objectives of Korea’s green growthpolicies is to promote the adoption of a greengrowth strategy in all countries, especially thedeveloping ones. A global architecture forgreen growth will enhance the effectiveness ofnational green growth policies, offer a founda-tion for global sustainable development, andfacilitate international cooperation for the mit-igation of climate change.

To this end, the government has taken anumber of international initiatives: l In 2008, annual work programmes werelaunched to help developing countries in Asiaundertake green growth projects under the EastAsian Climate Partnership (EACP) Initiative . l In 2010, Korea formally acceded to the Or-ganization for Economic Cooperation and De-velopment’s Development AssistanceCommittee and declared that the countrywould continue to increase its Official Devel-opment Assistance (ODA) commitment, withfocus on green ODA, including the EACP Ini-tiative, to meet the level of the OECD averageratio of ODA to GNI by 2020. l In June 2010, the Global Green Growth In-stitute (GGGI) was launched as an internationalthink tank to advise developing countries ontheir green growth policies, as well as to helpthem with specific green growth projects. TheGGGI is run by an international board of di-rectors, and draws financial resources fromKorea and other advanced partner countries. Asof October 2011, eleven countries, including sixdeveloping countries, have joined GGGI as part-ner countries. It also partners with many inter-national organizations and institutions. l In 2009, the OECD accepted Korea’s proposalto conduct a study of the green growth strategy,and a two-year project was begun. When thefinal report was released in May 2010, the OECDdeclared its intention to push the green growthstrategy with its member countries, as well aswith non-member countries. The OECD hasbegun to collaborate on green growth withother international organizations and institu-tions such as UNEP and the World Bank. Koreawill continue to work closely with all these in-stitutions to promote global green growth. lThe government is preparing to launch a GreenTechnology Centre, which will promote interna-tional green technology cooperation in general,and for developing countries, in particular.

All these efforts will contribute to the cre-ation of a global architecture for green growthfor the benefit of all countries, and help facili-tate sustainable development and climatechange cooperation. n

architecture forgreen growth

Songdo International Business District (IBD) is asustainable city currently under construction on 1,500acres near Incheon, The Republic of Korea. Sustainabledesign practices are incorporating the latest designstandards and technologies that reduce energyconsumption, increase energy efficiency, utilize recycledand natural materials, and generate clean or renewableelectricity. By its completion date in 2015, Songdo IBDwill have more than 40% of its area reserved for greenspace, including a park of 100 acres, 16 miles of cyclelanes, numerous charging stations for electric vehicles,and a waste collection system that eliminates the needfor garbage trucks.

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The most important innovation in the pastdecade related to wealth creation and develop-ment has been the growth of the mobile phoneindustry. There are 5.3 billion mobile sub-scribers worldwide – yet, according to GreenPower For Mobile: Charging Choices by the GSMADevelopment Fund, nearly 500 million of thesefolks do not have a means of charging a mobilephone.

While the statistics are devastating andstaggering, I believe that this and other energychallenges are the wealth opportunities of ourlifetime. I call this ‘impact investing’. This isinvesting that is socially responsible and de-livers compelling financial returns.

By leveraging the explosive growth trajec-tory of mobile communications, we can createentire industries that solve critical issues andcreate hundreds of billions, if not trillions, inmarket value.

Our lack of charging stations can actuallycharge a new market which will achieve foursignificant goals:1. Make an impact by solving a pressing prob-lem of our time;2. Generate compelling returns for investors; 3. Generate growth for economies; and4. Generate prosperity for developed and de-veloping nations.

So, let’s look at the simple, yet growing,problem of cell phones with no place to plugin. It has actually pushed entrepreneurs tofind solutions, and to find new business op-portunities. For example, in just the past fewyears, new solar-powered cell phones haveevolved for impoverished places like CentralAmerica, the Caribbean, and the South Pacific,where there is no grid and no plug. And lastyear, wireless mobile phone carrier, Vodafone,introduced a solar-powered mobile handset

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Solar visionary Jigar Shah seessmall solutions to big problems.

JIGAR SHAH is the CEO of the Carbon War Room,and the founder of SunEdison. He is a successfulclean tech entrepreneur who is leading the CarbonWar Room’s crusade in making gigaton savings incarbon, while at the same time creating wealth, jobsand growth. The Carbon War Room harnesses thepower of entrepreneurs to implement market-drivensolutions to climate change. The War Room’s uniqueapproach focuses on bringing together successfulentrepreneurs, business leaders, policy experts,researchers, and thought leaders to focus onmarket-driven solutions.

Noplacetoplugin

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for India, where a third of the population doesnot have access to the power grid.

If we think about these big problems, thesolution is not a silver bullet. For example,cell phones solutions are often numerous andsmall in scale, such as solar phones, solarchargers, wind-up chargers, base stationcharging or village changing stations. Theseanswers are all practical examples of minia-turizing power sources – a trend that startedback in the 1970s. This miniaturization trendhas accelerated in other areas, such as cleanwater, transportation, and agriculture.

With regard to power sources for electric-ity, the answers have become miniaturized bytapping sources, like solar and wind – off-grid.

I found this out first hand at SunEdison, acompany I founded in Beltsville, Maryland,USA, in 2003. SunEdison employed a businesssolution, a power purchase agreement (PPA);

to sell solar power to businesses as a service,not to sell a power plant. In doing so, it madeit sense for leading US retailers like Walmart,Staples, Kohl’s, Whole Foods, and others, tohave an energy source right on their rooftops.

With SunEdison installing, owning andoperating the solar power plants on rooftops,customers sign power purchase agreementslocking in electricity prices for as long as 20years.

This has created an affordable way forcustomers to use (very) locally generated,clean, miniaturized power (compared to thegrid) for their businesses. They replaced peakenergy delivered from the grid with point-of-use solar energy. It made real the theorythat Amory Lovins, Chairman and Chief Sci-entist of the Rocky Mountain Institute, de-picted in his book, Small Is Profitable. Thebook uncovered proper accounting for the

economic benefits of “distributed” (decen-tralized) electrical resources. Part of this isavoiding social costs. A recent case in point isthe social cost we just witnessed with thetsunami in Japan, which led to the meltdownof a nuclear reactor.

Before we attempt to invent new tech-nologies, we need to unlock business solu-tions that will deploy distributed energysolutions – as we found with the PPA for solarthat unleashed a multi-billion dollar industry.

So, ‘Job One’ is to make business sense outof existing technologies that are not yet de-ployed. This is what we did with solar, and itis the opportunity that Vodafone is trying torealize with the growth of global cell phones.

Another example is how, at the CarbonWar Room, we have just helped organize amulti-billion dollar market without govern-ment money. We have launched a new con-sortium that will unlock billions of dollars ofinvestment in renewable energy and energyefficiency technologies for United States com-mercial real estate. With the consortium, theCarbon War Room is deploying simple de-veloped technologies that were not being de-ployed to improve efficiency of buildings.

The consortium released incentive legis-lation that was sitting dormant. The PropertyAssessed Clean Energy (PACE) legislation en-ables property owners to accept a voluntarytax assessment as a means of repaying up-front financing of energy efficiency and re-newable energy improvements.

The business consortium, that includesLockheed Martin and Barclays Bank, plans toinvest as much as US$650 million over thenext few years to cut the energy consumptionof older buildings in Miami, Florida, andSacramento, California. These cities’ pro-grammes alone could stimulate US$2.3bn andcreate more than 17,000 jobs.

A key point is that the implementation isin buildings, one-at-a-time – a miniaturizedsolution.

The answers are here. The answers arethrough miniaturization. From the cellphone that is solar-powered, to the buildingthat is solar-powered.

We are at the threshold of the next greatindustrial revolution through thousands ofdeployments – first, using our existing tech-nologies. While there is no magic solution tomeeting our energy demand by using cleanfuels, we can win it a thousand cuts at a time.

Five hundred million cell phone userswith no place to plug in is just one multi-bil-lion dollar opportunity in the ‘Third Indus-trial Economy’.n

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A new economic

In a two-part keynote, Jeremy Rifkinopensthe door to a post-carbon future, whileKandeh K. Yumkellaand Morgan Bazilianexplore the challenges of inclusivity.

narrative

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Our industrial civilization is at a crossroads. Oil andthe other fossil fuel energies that make up the indus-trial way of life are dwindling, and the technologiesmade from and propelled by these energies are anti-quated. The entire industrial infrastructure built onfossil fuels is aging and in disrepair. The result is thatunemployment is rising to dangerous levels all overthe world. Governments, businesses and consumersare awash in debt, and living standards are plum-meting everywhere. A record one billion humanbeings – nearly one seventh of the human race – facehunger and starvation.

Worse, climate change from fossil fuel-basedindustrial activity looms on the horizon. Our scien-tists warn that we face a potentially cataclysmicchange in the temperature and chemistry of theplanet, which threatens to destabilize ecosystemsaround the world. We may be on the brink of a massextinction of plant and animal life by the end of thecentury, imperilling our own species’ ability to

survive. It is becoming increasingly clear that we needa new economic narrative that can take us into a moreequitable and sustainable future.

A new convergence of communication andenergyBy the 1980s, the evidence was mounting that thefossil fuel-driven industrial revolution was peakingand that human-induced climate change was forcinga planetary crisis of untold proportions. For the past30 years, I have been searching for a new paradigmthat could usher in a post-carbon era. I came to real-ize that the great economic revolutions in historyoccur when new communication technologiesconverge with new energy systems. New energyregimes make possible the creation of more interde-pendent economic activity and expandedcommercial exchange, as well as facilitating moredense and inclusive social relationships. The accom-panying communication revolutions become themeans to organize and manage the new temporal andspatial dynamics that arise from new energy systems.

In the 19th century, steam-powered print technol-ogy became the communication medium to managethe coal-fired rail infrastructure and the incipientnational markets of the First Industrial Revolution.In the 20th century, electronic communications – thetelephone and later, radio and television – became thecommunication medium to manage and market theoil-powered auto age and the mass consumer cultureof the Second Industrial Revolution.

An “energy Internet”In the mid-1990s, it dawned on me that a new conver-gence of communication and energy was in the

The

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Internet technology and renewable energies are merging to create a powerful newinfrastructure. Jeremy Rifkin explains how thefive pillars of a third energy-communicationsrevolution will create the foundations for thenext great wave of economic growth.

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offing. Internet technology and renewable energieswere about to merge to create a powerful new infra-structure for a Third Industrial Revolution thatwould change the world. In the coming era,hundreds of millions of people will produce theirown green energy in their homes, offices, and facto-ries, and share it with each other in an “energyInternet,” just like we now create and share informa-tion online. The democratization of energy will bringwith it a fundamental reordering of human relation-ships, impacting the very way we conduct business,govern society, educate our children, and engage incivic life.

In 2006, I began working with the leadership ofthe European Parliament in drafting a Third Indus-trial Revolution economic development plan. Then,in May 2007, the European Parliament issued aformal written declaration endorsing the ThirdIndustrial Revolution as the long-term economicvision and road map for the European Union (EU).This is now being implemented by the various agen-cies within the European Commission, as well as inthe member states.

The five pillarsThe establishment of a Third Industrial Revolutioninfrastructure will create thousands of new busi-nesses and millions of jobs, and lay the basis for asustainable global economy in the 21st century.However, let me add a cautionary note. Like everyother communication and energy infrastructure inhistory, the various pillars of a Third Industrial Revo-lution must be laid down simultaneously or thefoundation will not hold. That’s because each pillarcan only function in relationship to the others. The

five pillars of the Third Industrial Revolution are: 1) shifting to renewable energy; 2) transforming the building stock of every continentinto micro-power plants to collect renewable ener-gies on-site; 3) deploying hydrogen and other storage technolo-gies in every building and throughout theinfrastructure to store intermittent energies; 4) using Internet technology to transform the powergrid of every continent into an energy-sharing inter-grid that acts just like the Internet (when millions ofbuildings are generating a small amount of energylocally, on-site, they can sell surplus back to the gridand share electricity with their continental neigh-bours); and 5) transitioning the transport fleet to electric plug-inand fuel cell vehicles that can buy and sell electricityon a smart, continental, interactive power grid.

Integrate and harmonizeThe critical need to integrate and harmonize thesefive pillars at every level and stage of developmentbecame clear to the EU in the fall of 2010. A leakedEuropean Commission document warned that theEU would need to spend €1trn between 2010 and2020 on updating its electricity grid to accommodatean influx of renewable energy. The internal docu-ment noted that “Europe is still lacking theinfrastructure to enable renewables to develop andcompete on an equal footing with traditionalsources.”

The EU is expected to draw one-third of its elec-tricity from green sources by 2020. This means thatthe power grid must be digitized and made intelli-gent to handle the intermittent renewable energies‰

“The great economicrevolutions in history occurwhen new communicationtechnologies converge withnew energy systems”

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being fed to the grid from tens of thousands oflocal producers of energy.

Of course, it will also be essential to quicklydevelop and deploy hydrogen and other storage tech-nologies across the EU’s infrastructure when theamount of intermittent renewable energy exceeds15% of the electricity generation, or much of that elec-tricity will be lost. Similarly, it is important to incen-tivize the construction and real estate sectors withlow-interest green loans and mortgages to encour-age the conversion of millions of buildings in the EUto mini power plants that can harness renewableenergies on-site and send surpluses back to the smartgrid. And unless these other steps are taken, the EUwon’t be able to provide enough green electricity topower millions of electric plug-in and hydrogen fuelcell vehicles being readied for the market. If any ofthe five pillars fall behind the rest in their develop-ment, the others will be stymied and the infrastruc-ture itself will be compromised.

A new economic paradigm The creation of a renewable energy regime, loadedby buildings, partially stored in the form of hydrogen,distributed via smart intergrids, and connected toplug-in, zero-emission transport, opens the door to aThird Industrial Revolution. The entire system isinteractive, integrated, and seamless. When these fivepillars come together, they make up an indivisibletechnological platform – an emergent system whoseproperties and functions are qualitatively differentfrom the sum of its parts. In other words, the syner-gies between the pillars create a new economicparadigm that can transform the world.

The conventional, centralized business operations

of the First and Second Industrial Revolutions willincreasingly be subsumed by the distributed busi-ness practices of the Third Industrial Revolution; andthe traditional, hierarchical organization ofeconomic and political power will give way to lateralpower organized nodally across society.

At first blush, the very notion of lateral powerseems so contradictory to how we have experiencedpower relations through much of history. Power, afterall, has traditionally been organized pyramidicallyfrom top to bottom. Today, however, the collabora-tive power unleashed by the coming together ofInternet technology and renewable energies, funda-mentally restructures human relationships, from topto bottom, from side to side, with profound implica-tions for the future of society.

The music industry didn’t understand distributedpower until millions of young people began sharingmusic online, and corporate revenues tumbled in lessthan a decade. Encyclopedia Britannica did not appre-ciate the distributed and collaborative power thatmade Wikipedia the leading reference source in theworld. Nor did the newspapers take seriously thedistributed power of the ‘blogosphere’; now manypublications are either going out of business ortransferring much of their activities online. Theimplications of people sharing distributed energy inan open commons are even more far-reaching.

The democratization of energyTo appreciate how disruptive the Third IndustrialRevolution is to the existing way we organizeeconomic life, consider the profound changes thathave taken place in just the past twenty years with theintroduction of the Internet revolution. The democ-

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“The creation of a renewable energy regime, loaded bybuildings, partially stored in the form of hydrogen, distributedvia smart intergrids, and connected to plug-in, zero-emissiontransport, opens the door to a Third Industrial Revolution”

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ratization of information and communication hasaltered the very nature of global commerce and socialrelations as significantly as the print revolution inthe early modern era. Now, imagine the impact thatthe democratization of energy across all of society islikely to have when managed by Internet technology.

The Third Industrial Revolution build-out isparticularly relevant for the poorer countries in thedeveloping world. We need to keep in mind that 40%of the human race stills lives on two dollars a day orless, in dire poverty, and the vast majority have no elec-tricity. Without access to electricity they remain“powerless,” literally and figuratively. The single mostimportant factor in raising hundreds of millions ofpeople out of poverty is having reliable and affordable,green electricity. All other economic development isimpossible in its absence. Universal access to elec-tricity is the indispensable starting point for improv-ing the lives of the poorest populations of the world.

Because renewable energy – solar, wind, geother-mal, hydro and biomass – is widely distributed, aThird Industrial Revolution is ideally suited to takeoff in the developing world. Although a lack of infra-structure is often viewed as an impediment to devel-opment, what we are finding is that because manydeveloping nations are not saddled with an agingelectrical grid, they can potentially “leapfrog” into aThird Industrial Revolution. In other words, bybuilding a new, distributed electricity system fromscratch, rather than continuing to patch up an oldand outworn grid, developing countries significantlyreduce the time and expense in transitioning into anew energy era. Moreover, because of the distributed

nature of the Third Industrial Revolution infrastruc-ture, risk can be more widely diffused, with localitiesand regions pooling resources to establish local gridnetworks, and then connecting with other nodesacross regions. This is the very essence of lateralpower.

Energy regimes shape the nature of civilizations –how they are organized, how the fruits of commerceand trade are distributed, how political power is exer-cised, and how social relations are conducted. In the21st century, the locus of control over energy produc-tion and distribution is going to tilt from giant fossilfuel-based centralized energy companies to millionsof small producers who will generate their ownrenewable energies in their dwellings and tradesurpluses in an info-energy commons.

But in order to facilitate this transition it will benecessary to provide a favourable playing field, andthat means financial aid, technology transfer, andtraining programs to assist emerging countries.What’s going on in developing nations heralds ahistoric transformation, as households jump fromthe pre-electricity era directly into the Third Indus-trial Revolution age. This process represents thedemocratization of energy in the world’s poorestcommunities.

The Third Industrial Revolution offers the hopethat we can arrive at a sustainable post-carbon era bymid-century. We have the science, the technology,and the game plan to make it happen. Now it is aquestion of whether we will recognize the economicpossibilities that lie ahead and muster the will to getthere in time. n

JEREMY RIFKIN is president of the Foundation on Economic Trends, and the author ofmore than twenty bestselling books on the impact of scientific and technological changeson the economy, the workforce, society, and the environment. His most recent booksinclude The Third Industrial Revolution: How Lateral Power Is Transforming Energy, theEconomy, and the World; The Empathic Civilization: The Race to Global Consciousness Ina World In Crisis; and The Hydrogen Economy: The Creation of the Worldwide Energy Weband the Redistribution of Power on Earth. Jeremy Rifkin has been an advisor to theEuropean Union for the past decade and is the principle architect of the European Union’sThird Industrial Revolution long-term economic sustainability plan to address the triplechallenge of the global economic crisis, energy security, and climate change.

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In this issue of Making It, Jeremy Rifkin cites numer-ous interacting crises as the impetus for a neweconomic narrative, which he terms the “Third Indus-trial Revolution”. He sees the seeds of this narrative inthe confluence of “new communication technologies[and] new energy systems”. The label, “Third Indus-trial Revolution”, is indeed attractive from a number ofperspectives. It helps to form in the mind an image ofthe potential transformative power of the communi-cation/energy nexus. Others have begun to use it too.In October 2011, Christiana Figueres, the Director ofthe UN Framework Convention on Climate Change(UNFCCC), used the phrase to help motivate the busi-ness community to take action on climate change. Shedescribed it in this way:

“A low-carbon economy necessitates a multifacetedparadigm shift across a broad spectrum, from indi-

vidual behaviour to national policies. But let me assureyou that the shift will not be a clean straight line. We arebarely putting in the foundations of the new economy.We are constructing it, and all construction sites aremessy.”

The First Industrial Revolution was not premedi-tated as an inclusive, global movement that wouldbring prosperity to all. While it brought untold tech-nologies and unimagined riches, it also left in its trailan unhappy history of inequity and exploitation ofboth people and natural resources. The advances of thepast century have led to a world more interdependentthan ever in terms of trade, finance and movement oflabour, yet the great unfairness remains: the First andSecond Industrial Revolutions were not designed withthe poor in mind. Clearly, therefore, in transitioningto a new economy, based on a radically different energysystem, we have the unique opportunity to make thenext industrial revolution an inclusive one.

Sustainable Energy for AllLet us examine in more detail the critical role of energyin the next industrial revolution. Energy powershuman progress, from job generation to economiccompetitiveness. From strengthening security toempowering women, energy is the great integrator, itcuts across all sectors, and lies at the heart of all coun-tries’ core interests. Now more than ever, the worldneeds to ensure that the benefits of modern energy areavailable to all and that energy is provided as cleanlyand efficiently as possible. This is a matter of justice,first and foremost, but it is also an issue of urgent, prac-tical importance – and this is the impetus for the UNSecretary-General’s new Sustainable Energy for Allinitiative.

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economy:

Morgan BazilianandKandeh K. Yumkellasee unique opport unitiesarising from the creationof a radically differentenergy system

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The initiative can be viewed as a firm commitmentby the UN and its partners to make sure the nextindustrial revolution is powered for the poor, not bythe poor. It has been launched in a time of greateconomic uncertainty, great inequity, high urbaniza-tion and high youth unemployment. But it is also atime when there is finally an emerging consensus onthe need to act cohesively towards global issues such assustainable development. We are not, however, start-ing from scratch. New technologies ranging fromimproved photovoltaic cells, to advanced metering, toelectric vehicles and smart grids, give us a strong foun-dation on which to build. How we capture theseopportunities for wealth and job creation, for educa-tion and local manufacturing, will be the key tounlocking any real revolution.

Three linked objectives underpin the goal of achiev-ing Sustainable Energy for All by 2030: lEnsuring universal access to modern energy services– access to electricity and to modern fuels and tech-nologies for cooking, heating, and productive uses. l Doubling the rate of improvement in energy effi-ciency – increasing the current pace of improvementto 2.5% per year, achieving a 40% reduction by 2030,measured in terms of global energy intensity.l Doubling the share of renewable energy in theglobal energy mix – increasing the current renewableenergy share of global energy consumption to 30%.

These three objectives are mutually reinforcing.Increasingly affordable renewable energy technologiesare bringing modern energy services to poor ruralcommunities where extension of the conventionalelectric power grid would be prohibitively expensiveand impractical. More efficient devices for lighting andother applications require less energy, and thus reduce

the amount of power needed to support them.Increased efficiency in the production and use of elec-tricity relieves strained power grids, allowing them tostretch further and reach more households and busi-nesses.

Does this sound far-fetched? Consider the alterna-tive: unconstrained expansion of today’s conventionalfossil fuel-based energy systems, locking in a long-terminfrastructure commitment to an unsustainable emis-sions path for the world’s climate.

An action agendaThe UN Secretary-General has formed a high-levelgroup to design an action agenda and providemomentum to the goal of providing SustainableEnergy for All. This will require catalyzing action froma broad array of stakeholders to help meet its statedobjectives by 2030. The Secretary-General, in an inputto the 2012 UN Conference on Sustainable Develop-ment (Rio+20) process, described the Initiative asfollows:

“At Rio+20 we will ask all stakeholders to make aglobal commitment to achieving Sustainable Energyfor All by the year 2030. Reaching this goal will requireaction by all countries and all sectors to shape thepolicy and investment decisions needed for a brighterenergy future. Industrialized countries must acceler-ate the transition to low-emission technologies. Devel-oping countries, many of them growing rapidly and atlarge scale, have the opportunity to leapfrog conven-tional energy options and move directly to cleanerenergy alternatives that will enhance economic andsocial development.”

The action agenda will be a “living document” thatestablishes clear actions and commitments over‰

“From strengthening security toempowering women, energy isthe great integrator, it cuts acrossall sectors, and lies at the heart ofall countries’ core interests”

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time that will dramatically shift current energy path-ways onto new trajectories that will: l establish firm political commitment l create stable policy and regulatory frameworks l finance the transformationl strengthen local capacity and forge global partner-shipsl ensure accountability and transparent reporting l strengthen the analytical foundationl disseminate information

Within the UN system we are working closelythrough the UN-Energy mechanism, which is foster-ing new partnerships and better communication, andfacilitating effective action on the ground. We want theUN to bring the energy benefits of the next industrialrevolution to all parts of the globe.

Green economy and green industryIn the run-up to Rio+20, there is growing agreementthat in a resource and carbon-constrained world anyThird Industrial Revolution should be rooted in agreen economy. However, such a shift cannot be madeat the expense of the developmental priorities of devel-oping countries, and any definition of ‘green economy’will need to provide diverse opportunities for botheconomic development and poverty alleviation.

In response to these challenges, UNIDO created its‘Green Industry Initiative’, which aims to accelerate thegreen growth of the manufacturing and related sectors.It provides the international community and nationalgovernments with a platform to foster the positive roleof industry in achieving sustainable development.‘Greening’ industrial development is thus an integral

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“Any definition of ‘greeneconomy’ will need to providediverse opportunities for botheconomic development andpoverty alleviation”

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pillar of the ‘green economy’ concept, as it provides aframework for developing countries to ‘green’ theirindustrialization process and to promote businessesthat provide environmental goods and services. Aholistic framing of the global energy issue is requiredto underpin this work.

While these issues resonate in both developed anddeveloping economies, the impact on the Least Devel-oped Countries is a matter of which we are acutelyaware. Even within these countries, good precedentsfor national action exist: Rwanda and Ethiopia areprime examples. These countries are putting togethersophisticated national plans to address sustainabilityissues for the entire economy.

For a model of transformative change that hasreached every corner of the world, we can look to themobile phone and the ICT sector. This precedent isnow influencing the possibilities for smart grids, evenin the most remote corners of the world. In the future,“Smart and Just Grids” for developing countries couldprovide similar functionality to smart grids in indus-trialized countries, even though they are likely to followa different pathway and timeframe. This will requireattention to constraints, such as lack of good gover-nance, limited investment capital, largely inadequateinfrastructure and lack of well-trained power sectorpersonnel. Such impediments are most likely stiflinginnovative practices that could already be occurringorganically in developing countries. For the next indus-trial revolution to take hold, these must be overcome.

The massive electricity infrastructure requirementsto reach universal access offer a unique opportunity tolearn from the nexus between ICT and energy systems,and move forward without necessarily repeating allprevious development stages.

An important yearThe UN General Assembly named 2012 as the Inter-national Year of Sustainable Energy for All, thus placingenergy at the heart of the multilateral process. It is anenormous opportunity to share models that work, arescalable, and can help fill gaps in existing funding orcapacity. It is also a chance to ensure that the politicalmomentum currently focused on this area is main-tained.

We must do considerably more than scratch thesurface if we want to make the new industrial revo-lution an inclusive and sustainable one. This willmean commitment from many different stakehold-ers. On the energy side, emerging partnerships, suchas the Norwegian Energy+ and the UN-Energy/Global Sustainable Electricity Partnership,offer conduits for multi-stakeholder engagementand dialogue, as well as for real action on the ground.Meanwhile, Rio+20 offers UN member states andagencies the opportunity to reframe the very conceptof development in the context of sustainability andgreen growth, with an eye on global commitmentsbeyond 2015. The Third Industrial Revolution startshere. n

MORGAN BAZILIAN is the Special Advisor to theDirector-General of the United Nations IndustrialDevelopment Organization (UNIDO) on internationalenergy and climate policy. In this role, he helps shapethe United Nations approach to energy fordevelopment. Previously, he served as Senior Advisoron energy and climate change to the Irish energyminister. He has been the lead climate changenegotiator for the European Union on low-carbontechnology, and a member of the UNFCCC’s ExpertGroup on Technology Transfer.

KANDEH K. YUMKELLA is the Director-General of UNIDO. He is also Chair of UN-Energy and Co-chair of the High-level Groupon Sustainable Energy for All, consisting of 46 global leaders in business, finance,government and civil society. Previously, heserved as Chair of the UN Secretary-General’sAdvisory Group on Energy and ClimateChange. Prior to joining UNIDO, he served as Minister of Trade, Industry and StateEnterprises for the Republic of Sierra Leone.

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One of the biggest societal challenges facingthe European Union (EU) in these times offinancial and economic crisis is how to delivermuch needed growth and jobs, while doingthe right thing by the planet. This is a chal-lenge that by no means is isolated to the EU.The economic and environmental mecha-nisms are globally interlinked, and whathappens on one side of our globe can havedramatic consequences on the other side ofthe planet.

Acknowledging that, to a large degree, weshare the same challenges, and that ouractions have an impact on other nations, wealso have an opportunity to learn from eachother and create new global markets. Thesmarter development of our industries andtechnologies in Europe will make us betterequipped to combat the pressure onresources, an ageing population, climatechange, and a threatened environment. But,first and foremost, setting up the right condi-tions for investment in promising sectors willfoster the immediate recovery from the crisis.

As Commissioner for Industry and Entre-preneurship, I am proud to spearhead themaking of an even stronger and morecompetitive European industry. The Commis-sion’s Europe 2020 strategy sets out a vision ofhow we can turn the European Union into asmart, sustainable, and inclusive economy,with strong growth rates, delivering employ-ment, productivity, and social cohesion.

With sustainable growth being one of thethree priorities of Europe 2020, we want topromote a more resource-efficient, greener,and more competitive economy. In doing so,we try to keep our heads clear when assessingthe impacts of our policy actions. We mustensure that green is compatible with – anddoes not compromise – growth.

Sustainable industry should not beperceived as the domain of certain environ-mental industries. It has, on the contrary,become the business of all businesses. Thetransition to more sustainable means ofproduction, or more sustainable products andservices, can offer opportunities, but we mustkeep in mind that it requires a prior invest-ment, which may not be affordable in theshort term. We are therefore striving to makeclear, coherent, and well-conceived industrial,climate, energy, and related policies thatpromote eco-innovation, without leading toindustrial outsourcing and the loss of jobsand prosperity. And it is for this reason that,in 2011, we launched the Sustainable IndustryLow Carbon initiative, which is a practical,industry-based initiative at EU level for ‘tradi-

by a desire to invest in a greener planet, butthey make changes to their business conceptsbecause green production has becomeeconomically sound.

Indeed, industry is a core driving forcebehind the technical and technological inno-vation required for greater sustainability andresource efficiency. Although eco-innovationremains under-exploited, public and privateinvestment in this area in the EU has contin-uously increased over the last 10-20 years.

The eco-industries sector has grown tobecome a sector equivalent (in terms ofemployment) to chemicals or electrical andoptical equipment. Annual employmentgrowth in this sector between 1999 and 2008has averaged approximately 180,000 jobs per

tional’ manufacturing industries, aiming tostimulate innovation to reduce the carbonintensity of energy-intensive manufacturingprocesses.

Sustainable growth and resource efficiencyare opportunities for EU industryFinding solutions that neither compromisegrowth nor the climate and environment is –I must admit – not always an easy task. Butalthough at first this merging of interestsmight seem like a marriage of convenience,we often see that many of them turn out to befruitful relationships. There is, in fact, agrowing tendency among businesses toproduce in more resource-efficient ways.These businesses are not necessarily driven

Antonio Tajani explainshow the European Union is finding solutions that

neither compromisegrowth nor the climate and environment.

Sustainability:a lever foreconomicgrowth

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year, representing over 7% annual growth, andin 2008 it was estimated to employ 3.4 millionpeople across the EU.

Furthermore, our 2020 energy goals canresult in €60bn less in oil and gas imports, andover 1 million new jobs in the field of renew-able energy and energy efficiency.

A key driver for sustainable industry is theCommission’s product policy. The first ninemeasures under the Ecodesign and EnergyLabelling Directives are expected to reduceannual energy consumption by some 340 TWhby 2020. This is equivalent to 12% of the total elec-tricity consumption in the European Union orthe entire electricity consumption of Italy in 2007.

Whereas some sectors will meet few barri-ers in changing to a more sustainable produc-

tion, others will be confronted with high invest-ment costs in new technologies and innova-tion. This is especially a problem for small andmedium-size enterprises (SMEs) which lacktime, information, and human and financialresources and miss out on the opportunitiesoffered by efficient products and services interms of a reduced energy bill and greater effec-tiveness. In February 2011, the Commissionrevised the so-called ‘Small Business Act’, andshifted the focus to helping SMEs with thetransition to resource-efficient growth.

The future of European sustainable industrialpolicyAdditional investments will be needed if Euro-pean industry is to move further in the direc-tion of resource efficiency. The starting pointsvary widely in different European regions. Thisis why the Commission is supporting invest-ments in infrastructure, and is helping to kick-start economic development in the differentregions.

Finding new ways to reduce inputs formanufacturing industry, to improve manage-ment of resource stocks, to optimize produc-tion processes, and to make the best usage ofwaste, are just some examples showing howincreasing resource efficiency can also bringeconomic opportunities for companies. Thiswill help stimulate technological innovation,boost employment in the fast developing greentechnology sector, and open up new markets.

It is important to me and to my colleaguesin the Commission to be open to new ideasand to consider new ways of dealing with oureconomic and environmental challenges. It is,after all, my first and finest priority to work fora flourishing and viable European Union – acompetitive society which leaves a healthyenvironment for future generations. n

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“Industry is a core drivingforce behind the technicaland technologicalinnovation required forgreater sustainability andresource efficiency.”

ANTONIO TAJANI isVice-President of theEuropean Commissionand Commissioner for Industry andEntrepreneurship.

Sheep grazing in a solarpark in Waghaeusel, 12 miles southeast ofKarlsruhe, Germany.

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A country with spectacular mountains, thickforests, and a short Adriatic coastline,Slovenia was always the most prosperous andliberal corner of Yugoslavia. Multi-partyelections in 1990 were followed by areferendum that chose independence, andsince going it alone in 1991, the country hasprospered. It moved quickly from a centrallyplanned economy to a market one, andembraced free trade, making it a model ofeconomic success and stability for the region.Slovenia joined the European Union (EU) inMay 2004, and was the first of the newcomersto adopt the euro currency in 2007.

Slovenia is, by a wide margin, the richestcountry in eastern central Europe, well aheadof its Balkan neighbours, and even ahead ofPortugal, which has been a member of the EUsince 1986. The high living standards enjoyedby the two million-strong population arelargely a legacy of the past, when Slovenia wasYugoslavia’s trading arm. In the 1970s and1980s, a large number of Slovenianmanufacturing concerns obtained westerntechnology through licensing agreements,and this enabled them to become

internationally competitive. Sinceindependence, and especially since thecountry joined the EU, traditional industries,such as textiles and truck-making, havecontracted, but at the same time, there hasbeen an increase in light manufacturing andhigher value-added sectors, such aspharmaceuticals and electrical engineering.

Industries with strong links to WesternEuropean economies, and those that arehighly export-oriented, have performedstrongly. The best example is Revoz, theSlovenian subsidiary of the French carmaker,Renault, which for many years has been thetop Slovenian exporter. Production increasedby around 40% between 1998 and 2009.Despite the financial and economic crisis,2009 was a record-breaking year for the Revozplant, which produced 212,680 cars, 7% morethan in the previous year. Since 2007, Revozhas been the first and only Renault plant tomanufacture the Twingo model. The plant,which is located in the town of Novo Mesto,40 miles south-east of the capital, Ljubljana,was awarded the most environmentally-awarecompany prize by Slovenia's EnvironmentalDevelopment Fund in 2003.

Apart from cars and car components, otherimportant sectors of Slovenia’s strong anddiversified manufacturing base are domesticappliances and other electrical items,pharmaceuticals, and metal-processing.Services have grown in importance sinceindependence, reflecting a broader economy-wide shift away from traditional ‘smokestack’industries. Investment in infrastructure andgreater quality in the tourism industry have ledto healthy growth in tourism services receipts.

Machinery and chemical products areamong Slovenia’s main exports, with

SloveniaCOUNTRYFEATURE

Germany its main market. In 2010,machinery and transport equipmentrepresented 39% of total exports,manufactures 22%, and chemicals 16%.

At home and abroad, Slovenian companieshave produced and marketed successful andhighly innovative products. For example,Elan is among the top manufacturers of skisand snowboards; Seaway is one of theworld's leading boat developmentcompanies; Pipistrel is a successful lightaircraft manufacturer; and Gorenje is amanufacturer of high-quality, design-oriented, domestic appliances.

Following years of uninterrupted growth,to a large extent fuelled by a rapid increasein investments and exports, Slovenia wasone of the central European countries worstaffected by the international economic andfinancial crisis. In 2009, the country’sexport-oriented economy was hit hard,shrinking by 8%. Economic growthreturned in 2010, with the recovery drivenby an upturn in demand, particularly in theEU and Balkan markets, but this slowedagain in 2011.

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Interview with His Excellency Danilo Türk, President of the Republic of Slovenia

Looking at the current global situation – withthe financial crisis, climate crisis, fuel crisis,food crisis – one could paint a gloomy picture.Has globalization failed us? First, globalization is an old process that hasbeen going on for centuries. For example, inthe 19th century already globalizationprogressed with various innovations, includ-ing telecommunications and expanded navi-gation. The specific feature of the currentphase of globalization is that it affects morepeople, in more places, at a much faster pacethan in any other phase of globalization before.This is, to a large extent, due to the operationsof today’s global markets for goods and serv-ices. Today, we should ask ourselves whetherthese markets are really put in the rightnormative framework?

This is the second question, which is at thecentre of the globalization debate now. As youknow, there has been a period during the past30 years when deregulation was the primaryorder of the day. Regulation was seen as inim-ical to market forces and it was therefore notpromoted. I think these times have passed andwe are entering into a phase when the questionof regulation has to be put on the global agendaand considered very seriously – and in fact, thisis already happening. In 2009, after the firstwave of the financial crisis, market regulationand global economic governance issues were atthe centre of the debate, and have stayed thereever since. In the fields of financial services andglobal financial regulations in particular, thereis a very serious need for a new era of sophisti-

cated regulation, which should not stifle thedynamism of finance, but rather put the finan-cial system into a framework, which will ensureits orderly functioning.Coming to the impact of all these importantglobal shifts, what can be done at the locallevel to mitigate these crises? Is regional inte-gration a response to controlling the impactsof globalization?This is an interesting question, particularly asit is a real challenge nowadays to define whatis local. Of course, people live and act locally,but very often their local action is part of amuch larger system. For example, if you go toa factory in Ljubljana that produces automo-tive light systems, it is, at the same time, a localproduction system and part of a global systemof automotive manufacturing. So, the localmanufacturers need to consider global trendsand issues when thinking about their locallogistical or managerial problems.

Globalization has really changed the under-standing of what is local and what is global.The question of what can be done at the locallevel to mitigate global problems can thereforenot be answered easily. The fact remains,however, that individual actions are happen-ing locally rather than globally. If you take theemission of greenhouse gases, for example,much can be done through regulating andorganizing local traffic, especially in largecities. Here, one cannot expect specific answersfrom global or even national regulators. Veryoften, the decisive response comes from thecities themselves. They themselves ‰

Dr DANILO TÜRK was born in 1952 in Maribor,Slovenia. He studied law, and followed an academiccareer at the Faculty of Law, University of Ljubljana,Slovenia. After Slovenia’s declaration ofindependence, Dr Türk took an active role in itsdiplomatic activity, and in 1992 he assumed theposition of Ambassador of the Republic of Sloveniato the United Nations.

From 2000 to 2005, he served as UN AssistantSecretary-General for Political Affairs. In 2005, hereturned to Slovenia, becoming professor ofinternational law and vice dean of student affairs atthe Faculty of Law of the University of Ljubljana.

He ran as an independent candidate in the 2007presidential election and, with the backing of centre-left parties, won 68% of the vote, becoming the thirdpresident of Slovenia on December 22, 2007.

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SloveniaCOUNTRYFEATURE

contribute to a large part of global green-house gas emissions, and they themselves canchange that. So, much can be done locally, butone needs to use imagination and see how thatfits into a larger scheme of things.

As far as the European Union (EU) isconcerned regarding the regional frameworkfor Slovenia, we appreciate the development ofenvironmental standards in the EU. They helpnational policymakers to design stricter andmore seriously conceived standards thanwould otherwise be the case. This, combinedwith the direction of the financial resources ofthe EU to related local infrastructure develop-ment, is very helpful indeed.

And again, in Europe everything regional isalso local. To give you an example: a few weeksago, I opened a new sports centre in Mokro-nog, a small town in the south-east of Slove-nia. The centre has been built withenvironmentally friendly material and in anenergy-efficient way. A part of the resourcescame from the EU, and EU standards wereapplied. As a consequence, local people at theopening talked a lot about the EU as a “local”actor in their local development efforts. Yousee, these are interplays that nowadays exist.Overall, I think that the EU has a very crucialrole to play in mitigating global problems andenvironmental challenges. In view of this positive appraisal, could the EUserve as a model for other regions as well?Probably not – one needs to be realistic aboutthese things and understand that circum-stances vary considerably from one place toanother. If you take the EU with its 500 millionpeople and compare it to India, for example,with more than one billion people and a very

governance today is to make these differentapproaches converge.

But we are still in a long learning processin this regard. Take the experience of Copen-hagen 2009 for example; you can see the diffi-culties because it was not yet clear then howone can put these different policymakingsystems together. We need global rules and aglobal regulatory system, but we cannot simplysay that we need to have a single legal frame-work with a compulsory power – this has notworked so far. But this does not mean that weshould rule out the possibility for a coordi-nated regulatory system to emerge in the

different level of development, one can veryeasily understand that the same model of envi-ronmental protection or economic and socialdevelopment is not conceivable. What needs tobe done is to figure out how one can work atthe global level to improve the performance ofmitigation of environmental impact in differ-ent circumstances. How to combine differentpolicy models into a workable globalprogramme? One must not deny the differ-ences but work with them.

In fact, this question exemplifies theincreasing complexity of today’s global gover-nance system, which functions without asingle global centre of power, as we do nothave a central global government. We will needto find a clever combination of the variousnormative, financial, and policymaking instru-ments, to make them suitable for the diverselocal and regional circumstances and situa-tions in our world. In Europe, we will largelycoordinate these instruments within theframework of the EU. In India, it will benational policymaking, and the same willapply to China. This does not mean that allthese governance instruments cannot be puttogether in a coherent fashion. On thecontrary, I think, the challenge for global

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future, with the full understanding and partic-ipation of large national systems, such as India,China, Brazil, and other big players. In the current network governance system,many people are expecting the G20 to be ananswer to many global problems, as it is oftenseen as fast and decisive. Is this the way for-ward in global network governance?Well, I think that one has to be very realisticabout the G20. The G20 proved to be quiteeffective in 2009, and that produced a greatdegree of encouragement everywhere in theworld. This shows that it is very important tohave leadership – leadership with the appro-priate amount of power – so that things can bemoved forward.

However, in 2010 and 2011, we have discov-ered that the G20 has also lost a lot of steamand hasn’t been able to perform, just whenmuch of the global economy is entering a newphase of the crisis. I believe that this should bea very clear sign to the G20 to remobilize.

Remobilization, of course, cannot be theend of the story. Once the main direction offuture governance is developed, it needs to beput into a proper normative framework, andthat normative framework will have to be legit-imate. I therefore think the G20 – and I believethe members of the G20 understand thisperfectly well – will have to operate within suchnormative systems as the United Nations andthe International Monetary Fund. That iswhere the norms and rules of the game willhave to be elaborated and determined in aparticipatory process.

A two-phase approach is therefore unavoid-able. The first phase is the remobilization of theG20, and the second phase is norm-setting andlegitimization of norms through appropriateinstitutions such as the UN and the IMF.Looking at Rio+20 in 2012 in this context –what would be, in your view, the best recipefor success?Rio+20 is coming very fast, and we do not havemuch time. The questions are whether the

experience of the past years will be properlyabsorbed, and whether the most appropriateand realistic outcome will be envisaged in duetime. I think that the time is really very short.

We, in Slovenia, will obviously be looking atthe European Commission’s leadership, whichhas been fully involved in the negotiations andvarious conferences from Cancun to Durbanand beyond. Therefore, the EU countries willcoordinate their policies within the frameworkof the Union, and the Commission will leadthe process.

EU countries understand that Rio in itselfwas a huge success with its Agenda 21, theclimate change framework, and biodiversity asa major task. But the follow-up was rathervaried, and did not succeed in every respect. Itis important that the preparatory processtowards Rio+20 finds a timely definition ofsustainable development priorities and goalsfor the next decade. UNIDO and others are looking at a new, sus-tainable industrial revolution. Would youagree with such an approach, which alsomeans a stronger involvement of the privatesector in the problem-solving processes?Absolutely. I think that a new industrial revo-lution is not only called for but indeed isalready happening. In this context, we shouldvery carefully examine countries such as theRepublic of Korea or China – very different insize but very similar in their ambition tochange towards environmentally friendly tech-nologies and green growth. That, I think,should be the priority.

Obviously, the private sector has a majorrole to play on such a development path. Theprivate sector has been the driving force intechnological change in the past and willremain so in the future.

In this context, UNIDO has shown aremarkable capacity to adapt – it has gonethrough several stages in a very short period of

time. Now, I think, there is a real opportunityfor UNIDO to play a coordinating role inbringing together all these different policiesand models aiming at green growth. And, ofcourse, many of these models and policies arebased on private sector engagement.

This is not new. At the recent 50th anniver-sary of the OECD, I saw a very clear directiontowards green growth. Indeed, wherever onegoes, green growth is talked about as thedesired policy direction. The main questionremains whether the international communityis sufficiently well-organized for defining thisdirection to move ahead. We have sophisti-cated methods for promoting this directionand, I believe, UNIDO can play a very criticalrole in this context. Coming back to the local impact and re-sponses to global sustainability challenges:where is Slovenia in all this?First of all, Slovenia is a member of the EU. So,for us, its standards apply, and policies aredesigned in conformity with EU policies. Now,where we are lagging behind is in the use ofour own natural resources for the purpose oftechnological change. For example, we are aheavily forested country. About 60% of ourterritory is covered by forests. I think that weare not using enough the opportunities ofbiomass for the production of energy. We arenot using enough our wood as a material forenergy-efficient houses. So, in certain areas, weare lagging behind. But, in others, we are doingbetter than average, for instance in the produc-tion and use of solar panels, which is some-what surprising because we are an Alpinecountry. We are also doing better in areas suchas water protection and purification, and soforth. You can see that this is a varied picture –in some technological fields we are moreadvanced, in some we are not. Our focus,however, should be on those technology areaswhere we lag behind and where we need tomake more progress.l Interview by Kazuki Kitaoka, UNIDO.

“If you go to a factory inLjubljana that producesautomotive light systems,it is, at the same time, alocal production systemand part of a global systemof automotivemanufacturing.”

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Acaseof‘homelandsecurity’Alejandro Litovsky and Paulina Villalpandolook at how the risks of investing in farmlandcreate opportunities for sustainability.

How agricultural land is owned, what isgrown on it, and by whom, will probablydetermine much of the next century’s profits,politics and, possibly, revolutions. As the agri-cultural paradigm of industrial productivityfaces growing social, economic, and gover-nance pressures, investors seeking to managethe resulting risks will require an unconven-tional approach to risk management: insert-ing ecological limits and human security intothe agricultural equation.

Food commodity prices are on a steadyrise. Much of the planet’s arable land is beingcultivated, and large proportions of it arebeing used to grow biofuels and crops to feedlivestock. The extraordinary amounts ofwater needed for irrigation further competewith increasing human water consumptionand with the needs of hydropower plants. Asthe world’s population continues to grow,‘land’ is quickly becoming the nexus that

holds all the trade-offs together. Add recur-ring droughts, and one begins to understandwhy the United States military calls climatechange a “threat amplifier”.

Land securityInvestors are flocking to land-based assets asa more secure alternative to the volatile stockand bond markets; and for countries likeSaudi Arabia and China, food and commod-ity supplies are becoming a matter ofnational security. Both trends are resultingin large-scale acquisitions of land in regionswhere the soil is still fertile and water stillavailable. In sub-Saharan Africa alone, in justten years, over 200 million hectares havebeen leased to investors for agriculturaldevelopment by governments that oftenignore the interests of communities livingon the land, leading to forced evictions andsocial instability.

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The results are direct reputational andpolitical risks for investors that underminethe long-term viability of investments.Conventional risk management approacheswill struggle. What is needed is for companiesand investors to align agricultural productiv-ity, human rights, and ecological limits as anintegrated investment strategy.

Just as large carmakers have turned toelectric cars, large agribusiness firms willturn to organic farming. Just as new compa-nies are being created on the basis of provid-ing services through distributed networks,like car-sharing schemes in large cities, sotoo, agribusiness must better integrate therole of smallholder farmers into a radicalrethink of its business models. Incentives forpursuing these innovations are more likelyto arise from fully understanding the secu-rity and risk challenges involved in thecurrent model, than from appeals to global

sustainability. The sort of security frameworkthat is emerging combines three inter-related types of risk:

ProductivityIn the United States, to cite one example, anexponential growth in pests that have effec-tively adapted to pesticides such asglyphosate is leaving US farmers eitherunable to shoulder the costs of additionalchemicals or having to experiment withuntested chemical cocktails that are likely toincrease the toxicity of water supplies and thesoil. Investment analysts have signalled thatthe growing resistance of pests to chemicalpesticides is a cause for concern for investorsin agrochemical companies.

Ecological limits are forcing farmers toacknowledge the importance that a healthyenvironment has on long-term agriculturalproductivity. Organic methods that shy ‰

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away from the heavy use of chemicals andgenetic modification to, for example,strengthen biodiversity of crops and croprotation as a strategy to challenge pests, haveproven to be effective.

Recently, after 30 years of scientificresearch, the Rodale Institute in the UnitedStates has found that organic farming,although providing lower yields in the firstyears, in the long term outperforms conven-tional chemical farming in terms of cropyields, sustainability and profit. It is thelongest-running scientific comparisonbetween organic and conventional agriculture.

A part of this paradigm shift impliesconceiving the fertility of the soil and thediversity of supporting ecosystems as‘natural assets’ that must be taken intoaccount in the agricultural economic equa-tion. In sub-Saharan Africa, where farmersare either too poor to afford chemicaloptions or the distribution models are notsufficiently developed, natural ways of fixingnitrogen into the soil are driving agriculturalinnovation which can offer considerableinsight to the research capabilities of moredeveloped nations. One example is ‘fertilizertree systems’: by planting certain types ofnitrogen-fixing trees alongside crops,farmers have managed to boost crop fertility,while increasing the biological diversityneeded to face climate changes, such as morefrequent droughts.

In light of the long-tem risks involved foragricultural productivity, when transitioningfrom ‘Green Revolution’ to ‘Green Economy’,it will probably make economic sense forcompanies and investors to assume theshort-term costs of switching to environ-mentally friendly agriculture.

Human securityThe generally low levels of governmentaccountability in sub-Saharan Africa meanthat large-scale land investment deals made

between governments and investors, even ifby well-meaning investors, are likely toincrease the vulnerability of poor communi-ties. The risks to human security are signifi-cant, whether because communities areforcibly evicted from the public lands theyhave cultivated, usually without formal rights,for various generations, or because new watercanals, meant to improve large-scale irriga-tion, jeopardize water availability for small-scale subsistence farming. The growing socialinstability and vulnerability created by thisbooming industry is growing in visibility, anda few high-profile cases have shown just howmaterial these reputational and political risksare for investors and companies.

Taking human security into account willbecome a norm for farmland investments,even if that means going beyond legalcompliance. Ethiopia, for example, recentlyoffered to lease 3 million hectares to foreigninvestors for agricultural production at atime when 2.8 million Ethiopians are suffer-ing from hunger in one of the worst faminesin history. These investment deals may boostfood or commodity exports, but human secu-rity concerns and land-related conflicts willmake their way to the top of the business andinvestment agenda.

Blaming unaccountable governments isnot likely to be enough to get investors ‘offthe hook’. They will have to take proactivemeasures to ensure the transparency ofinvestment deals and bridge the gap betweenprivate and informal land tenure by commu-nities. History shows that, as with other areaswhere governments have been slow torespond or just sloppy – for example, in rela-tion to labour standards or Apple’s recentstandoff over the environmental footprint ofits supply chain in China – the private sectorwill be held to account. It is reasonable tothink that a proactive approach to riskmanagement must include ways of involvingand benefitting local communities, not just

through an their informed and prior consentto these deals, but also with options thatbuild their capacity and livelihood to partic-ipate in development.

Ecological limitsThe situation in Mali illustrates the chal-lenges that lie ahead. A recent study aggre-gated all the new land deals entered into bythe government of Mali, and found that, ifthey all fully developed, there won’t beenough water in the Niger River to irrigatethem. The availability of water and waterrights that come with land rights will be themain point of contention. Currently, twolarge investments are said to require morethan half of the critical reserve of water forthe dry season, and have exclusivity of servicein emergency situation. Some of the newcontracts take water rights for granted. Alarge irrigation canal is being built by Libyaninvestors to cater for the needs of industrial-scale agriculture. This canal is said to affectthe water supply for more than 90,000hectares of land used by small-holder farmsfor subsistence (of one or two hectares perperson), as well as cut routes of passage forlivestock. Given the impending waterscarcity, analysts foresee a serious problemarising both in terms of water availability foragriculture, as well as water-related conflicts.Climate change and recurrent droughts,which are increasingly difficult to predict, arelikely to aggravate the situation.

Land contracts that grant preferentialaccess to water resources, or fail to considerwater rights, should concern investors – asshould the overall institutional capacity putin place by government agencies to managethe aggregated demands of agriculturaldevelopments on limited water resources.

Further unintended consequences fromsurpassing these ecological limits pose addi-tional risks for investors. For example, since2004, Saudi Arabia has leased more than

“Investment deals mayboost food or commodityexports, but humansecurity concerns andland-related conflicts willmake their way to the topof the business andinvestment agenda.”

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376,000 hectares from the Sudanese govern-ment to grow rice, a water-intensive crop.Weak water regulation has forced theSudanese government to halt its wheatproduction because of water scarcity, whichin turn has reduced grain supplies andincreased its price on the local market.Another example is Tanzania, where waterdemand from land investments has had adetrimental effect on electricity supply, whichin turn has affected the country’s entireeconomy since more than half of Tanzania’selectricity is generated by hydropower.

It is reasonable to assume that thesetrade-offs and externalities, which willincreasingly translate into costs to bewritten-off the balance sheet, are re-defininghow to assess the long-term productivity andrisk of land and agricultural investments.

Where next?While progress depends on host govern-ments getting good governance and landplanning right, the costs of inaction willundoubtedly land on the balance sheets ofcompanies and investors. Avoiding theserisks requires some foresight. Two areas ofopportunity to move this agenda forward are:

TransparencyPressures for greater transparency areincreasing. Within civil society, a researchpartnership between the International LandCoalition and a number of developmentagencies aims to become the world’s largestdatabase on large-scale land investments.Increasing transparency by investors cancreate virtuous circles with governments andcommunities, but transparency will not be aneasy subject, especially due to competitivepressures within the investment sector.Initial steps are being taken however throughthe Principles for Responsible Investment’s(PRI) Farmland Working Group, where sixpension funds are pooling their combined

US$1.3 trillion in assets to explore how todrive more responsible investments. Opera-tionalizing a commitment to transparency isamong their main interests. Considerableopportunities exist for cooperation, butprecisely how investors operationalize trans-parency is an area where the first mover willhave the advantage.

Agribusiness beyond complianceObtaining prior and informed consent fromlocal communities for large-scale invest-ments is becoming a central demand of civilsociety to both governments and investors.Framing this in terms of compliance isimportant, but more important from a busi-ness perspective will be to create more inclu-sive value chains and offer local communitiesways to be involved in development. As theglobal media becomes increasingly interestedin this agenda, investors are likely to continueto be exposed when promises are not kept, aswas recently the case with biofuel investments

in Tanzania. Ensuring there is a long-termview of a community’s development is likelyto feature centrally on this agenda.

With global financial markets in turmoil,investors regard land-assets as a more stableopportunity. Many will think it is unfair fora broader human rights and sustainabilityagenda to be coupled with investment focus,but, incorporating productivity risks, humansecurity and ecological limits into the equa-tion is essential to fully understand what liesahead. Managing these risks proactivelyoffers not only an extraordinary opportunityto move the sustainability agenda forward,but also one that looks at productivity in anew way. Time is of the essence, and every-one has a stake in trying to make the landagenda work for the long-term.

l Alejandro Litovsky is Founder and Director ofthe Earth Security Initiative; Paulina Villalpando isan Associate at the Earth Security Initiative.www.earthsecurity.org

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By KAZUKI KITAOKA, Programme ManagementOfficer, UNIDO

While not a new phenomenon, knowledgenetworking and network governance havegained importance with the rapidglobalization in all spheres of our societies:a country’s economic success, socialcohesion, and environmental sustainabilitydepend more than ever on the performanceand behaviour of its neighbours, regionalleaders, and global economic powers. Thisknowledge, with a focus on the driver ofdevelopment – private enterprise, hastherefore become of crucial importance,and knowledge management andknowledge networking are important topicsfor change agents and policymakers.

A joint publication by UNIDO and theLeuven Centre for Global GovernanceStudies, Networks for Prosperity – AchievingDevelopment Goals through KnowledgeSharing, lays the basis for the developmentof knowledge networking concepts that willhelp developing countries to acquire andadapt private sector development (PSD)-relevant knowledge to their specificcontexts and needs, and enhance theknowledge capabilities of the UnitedNations system and its nationalcounterparts and partners in the field ofPSD policy. UNIDO was requested toprepare the publication as the technicalconvenor agency of the funding window,‘Development and the Private Sector’ of theSpanish MDG Achievement Fund (MDG-F).

The report first explains why informationand knowledge networks are important,differentiating between learning,

Networks for prosperity

“The ‘connectedness’ of acountry has a strongpositive correlation withvarious aspects of itseconomic performance,justifying the growinginterest of policy-makers inknowledge networks.”

information and knowledge creationnetworks. It then explores the empiricalevidence in a global “Connectedness Index”,which ranks countries in accordance withtheir internal and international knowledgenetworking capacities. Using this initialranking, the top 20 connected countries are:1 Switzerland2 Sweden3 Netherlands4 United States5 Finland6 Singapore7 Norway8 Canada9 Germany10 United Kingdom11 France12 Australia13 Japan14 Malaysia15 Czech Republic16 New Zealand17 Israel18 Slovenia19 Korea, Republic of20 Thailand

The report clearly shows that the‘connectedness’ of a country has a strongpositive correlation with various aspects ofits economic performance, justifying thegrowing interest of policymakers inknowledge networks. Specific issuesrelated to the governance of international,inter-organizational and intra-organizational networks are discussed inseparate chapters. These are illustratedwith detailed examples from a wide rangeof developing countries and transitioneconomies.

What stands out in all cases is that thereare great benefits from ensuring thatknowledge networks are successfullyembedded in the structures and networksrelated to development policy. But vibrantknowledge networking needs more thanthat. It requires a living ‘institutionalecosystem’, with new organisms providingnew knowledge and opportunities; and itimplies the development of solid, durablenetworks, which are built on trust, as wellas constant movement between relevantnetworks to capture new information.

The report makes the followingrecommendations:1. The international community shouldactively promote knowledge networkingand network governance structures forachieving local, regional and globaldevelopment objectives. This may include:

– Fostering international, national andlocal knowledge networking approachesin all capacity-development activities;

– Improving national ownershipthrough multi-stakeholder networkingarrangements in the policymakingprocesses at all levels;

– Making the international system moreinclusive through the engagement ofmore countries and institutions insolution-finding processes; and

– Supporting networking arrangementswith the goal of enhancing innovationand private sector development.

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POLICY BRIEF

2. Member states of the United Nationsshould encourage and facilitate theinternational knowledge networkingcapacities of their public and privateinstitutions. This may include:

– Formulating networking strategiesfor the achievement of developmentobjectives and reforms;

– Supporting regional policy andresearch network participation;

– Investing in institutionalinfrastructure and innovation networksdomestically and internationally(South-South and ‘triangular’);

– Upgrading the knowledgenetworking capacities and capabilitiesof domestic institutions; and

– Providing incentives for theformation of new networks in specificfields of strategic interest.3. International organizations shouldimprove their inter-institutionalinformation and knowledge exchangesystems and facilitate better knowledgenetworking among their members. Thismay include:

– Improving thematic informationexchange in communities of practice toprovide more user-friendly platformsfor knowledge sharing amongmembers;

– Seeking the involvement of non-state actors in policy developmentprocesses; and

– Supporting knowledge networkdevelopment in relevant fields. 4. An international and cross-sectoralresearch and policy network should beestablished to further develop the initialfindings on connectedness andknowledge networking for theachievement of development goals. Itshould recommend measures andprogrammes that enhance developmenteffectiveness through increasedknowledge networking, in particular inthe field of private sector development. n

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POLICY BRIEF

By the International Energy Agency Energy (IEA)Technology Policy Division and the UnitedNations Industrial Development Organization(UNIDO) Energy and Climate Change Branch

Current options for reducing CO2emissions from industrial sources will notbe sufficient to achieve deep emissionsreduction in industry, so new technologiesare required. Recognizing the importanceof carbon capture and storage (CCS), the IEAand UNIDO have collaborated to develop atechnology roadmap for the application ofCCS in industry.

Key findings Carbon capture and storage is a key cost-effective option for reducing carbon dioxide(CO2) emissions from industrialapplications. Whereas the power sector cantake advantage of alternatives to fossil fuels,in several industries deep emissionreductions can only be achieved throughCCS.

CCS could reduce CO2 emissions by up to4.0 gigatonnes annually by 2050 inindustrial applications, accounting forabout 9% of the reductions needed to halveenergy-related CO2 emissions by 2050. Toachieve this target, 20% to 40% of allfacilities need to be equipped with CCS by2050.

High-purity sources, such as natural gasprocessing; hydrogen production fromnatural gas, coal or biomass; ethylene oxideproduction; coal-to-liquids; and ammonia

demonstration programmes efficientlybetween power generation and industrialproduction processes.

CCS in industry needs more specificsupport, including financial assistance forinvesting and operating CCS. Over time,however, incentives for CCS technologiesshould be linked primarily to their ability toreduce CO2 emissions.

Additional capital investments of aboutUS$256bn would be required for industrialCCS between 2010 and 2030. Of this total,US$172bn will be needed in developingcountries. This high additional capital costis one of the main barriers toimplementation.

For developing countries, CCS could bepart of a low-carbon industrial developmentstrategy. If CCS can be implementedthrough the United Nations FrameworkConvention on Climate Change (UNFCCC),Clean Development Mechanism (CDM), orother new global climate mechanisms, thecost barrier could be partly overcome. It islikely that if CCS moves forward under theCDM, the first projects will be in industry.

Key actions in the next 10 yearsGovernments need to ensure adequatefunding for CCS demonstration projects inmajor industrial and fuel transformationsectors such as ammonia, gas processing,biomass conversion, refineries, iron andsteel, and cement manufacturing. By 2020,investment worth US$27bn will be neededto fund about 60 early large-scale projects.

production, offer an early opportunity todemonstrate CCS. If this opportunity canbe linked to enhanced oil recovery, costscould be lower than US$10 per tonne ofCO2, or even negative.

As with CCS in general, incentives andregulatory measures will be required tofacilitate industrial applications of CCS.The mechanisms should be selectedaccording to the maturity of the technology,and should distribute funding for CCS

Carbon capture and storage inindustrial applications

“For developing countries,carbon capture and storagecould be part of a low-carbonindustrial developmentstrategy.”

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POLICY BRIEF

If additional operating costs, transportationand storage are included, the totaladditional cost would reach an estimatedUS$45bn.

Governments and financiers need toensure funding mechanisms are in place tosupport demonstration and deployment ofCCS in developing countries, where thelargest opportunities exist for CO2 capturein industrial applications.

To enable a deeper understanding of thepotential for CCS in industrial applications,more data need to be made available onemissions, technologies, costs andprojections. Governments need to reviewthe opportunities for industrial CCS intheir countries and ensure that industrialCCS is given prominence in the short term,especially in low-cost applications.

Although industry will eventually need toimplement the technology, public researchand development programmes on CCS inindustrial applications are required tobring more information into the publicdomain.

Best practices for CCS in industrialapplications need to be developed anddisseminated, so that interested parties canlearn faster how to apply the relevanttechnologies.

CCS opportunities in industrialapplications need to be mapped better andmore consistently at the national and locallevel, including CO2 storage opportunitiesin enhanced oil recovery operations.lTechnology Roadmap – Carbon Capture andStorage in Industrial Applications, © TheOECD/International Energy Agency and UnitedNations Industrial Development Organization,2011, page 5

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Looking ahead to the next issue of Making It,which focuses on industry and health, SUMI DHANARAJAN considers how thepharmaceutical industry can improve access tomedicines in developing countries.

It has been a challenging decade for thepharmaceutical industry. With patentsexpiring in high numbers, new-productpipelines drying up, and intensifyingcompetition from generics, brandedpharmaceuticals have beenhaemorrhaging value.

At the same time, traditional markets arebecoming saturated. Stark realities inindustrialized countries – such as theimpact of aging populations on tax-basedand employer-funded health-care models– are leading governments to adoptregulatory regimes that demand moreeconomical, value-based, and transparentdrug pricing.

Under these circumstances, emergingmarkets present a new frontier. Originallyattractive for offering low-cost production,developing countries now present a viablemarket for multinational corporations. Thepharmaceutical industry has been eyeingthis trend for a while. A recent studypredicts that sales in 17 ‘pharmerging’countries – including India, Indonesia,Pakistan, Thailand, and Vietnam – will “inaggregate expand by US$90 billion during2009-2013.”

But in many emerging economies, alarge proportion of the population is poor,and those who are not, remain vulnerableto falling into poverty in times of crisis.Health care is financed largely out-ofpocket – up to 60% in Asia – and manycountries shoulder a “triple diseaseburden” of “old” diseases like tuberculosis

and malaria, new infectious diseases likeInfluenza A (H1N1), and a “silent pandemic”in the form of non-communicable diseasessuch as diabetes and cancer. The challengessurrounding access to medicines remaincritical, and, indeed, relevant to theindustry’s business model.

Philanthropic approaches to the problemhave achieved little systemic change. Drugdonations by companies have beencriticized for being mostly unsustainable.Often, the medicines are unsuitable forpatients, unfamiliar to local prescribers, donot match national clinical guidelines, orare near expiry.

Because supplies of donated medicinescan be unpredictable, they can create chaosin the market by preventing accuratequantification of needs and thus affecting

planning. Donated supplies also have theoverarching negative effect ofundermining market competition – evengenerics cannot compete with freemedicines. Price discounts have beenmore effective, though their effect islimited by their focus on specific high-profile diseases and least developedcountries (LDCs).

Advocates of improved access tomedicines have posed three demands ofthe pharmaceutical industry:lTransparent pricing schemes thatsystematically address the challenge ofaffordability;l Investment in research anddevelopment that is relevant to thediseases affecting developing countries,and in medicines suitable for resource-poor contexts (for example, heat-stableformulations or fixed combination drugs);andl A flexible approach to intellectualproperty (IP) rights, in recognition of therole that generics play in vastly reducingmedicine prices.

Leading companies are starting tounderstand how integrating theseconcerns into core business practices mayhold the answer to sustainable long-termprofitability in emerging markets.Reliance on the traditional “blockbuster”model, which targets the elite, is provingunfeasible and short-sighted.

For starters, it limits the size of theconsumer base. More importantly, themodel’s dependence on aggressive defenceof patents and high profit margins, inorder to generate the all-importantUS$1bn per annum, keeps companiesfrom serving target markets effectively byproviding products that are relevant,

The new pharmaceutical frontier

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“The challenges surroundingaccess to medicines remaincritical, and relevant to theindustry’s business model.”

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affordable, and accessible. Many arguethat the perverse incentives created bythe blockbuster model discourageinnovation.

Finally, governments of the developingcountries are beginning to prioritizehealth care and are seeking cost-efficientoutcomes, as well as the means toeffectively manage disease burdens. Inthese countries, building access tomedicine into companies’ core businessmodels has become vital to securing alicense to operate.

At the end of 2008, one companyattempted to beat a new path. The chiefexecutive of GlaxoSmithKline (GSK)unveiled a four-point plan that includeda commitment to cap prices for patentedmedicines in LDCs at 25% of the price inthe developed world. In middle-incomecountries, prices would more closelyreflect a country’s ability to pay (forexample, GSK cut the price of its cervicalcancer vaccine, Cervarix, by 60% in thePhilippines and gained a 14-fold increasein volume sales). Further, it proposed theestablishment of an LDC patent pool forneglected tropical diseases and donatedto it 13,500 compounds for malariavaccines.

Slowly, other companies are followingsuit. Sanofi-Aventis recently announcedthat it would halve the price of its diabetesdrug, Lantus, and cancer treatment,Taxotere, in Indonesia and the Philippines.The Japanese firm Eisai dropped its pricefor Aricept, an Alzheimer’s treatment in sixAsian countries.

Other companies are experimentingwith base-of-pyramid models that seekto boost sales. Novartis’s Arogya Parivar

model sells medicines in smaller, moreaffordable package sizes. The jury is stillout on whether or not these newapproaches deliver systemic change, andwhether companies are adopting a“serve” rather than “capture” marketstrategy, but at least the issue of access tomedicines is no longer being viewed atarm’s length.

More needs to be done on the issue ofintellectual property (IP) rights – thesacred cow of the pharmaceuticalindustry. Governments of developingcountries continue to go head-to-headwith ‘Big Pharma’ in battles overcompulsory licensing and patentlegislation. There is serious questioningof whether IP rights are actually aneffective incentive for drug development,especially with respect to medicines thatare relevant to diseases in developingcountries, given the current dearth ofresearch and development into thesediseases.

New models are being tested.UNITAID’s patent pool for AIDSmedicines, for example, allows genericsproducers to make cheaper versions ofpatented medicines by enabling patentholders to license their technology inexchange for royalties. Ultimately,generics remain the current front-runnerin terms of delivering affordablemedicines. Formulating policies thatenable generic competition with thebranded pharmaceutical industry willrequire creative measures that emphasisethe imperative of maximizing publichealth.l Copyright: Project Syndicate, 2010.www.project-syndicate.org

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Economic Commission for Latin America and theCaribbean (ECLAC) – The Economics of ClimateChange in the Caribbean Summary Report

Ford, Martin – The Lights in the Tunnel: Automation,Accelerating Technology and the Economy of theFuture

Heinberg, Richard and Lerch, David (eds) – The PostCarbon Reader: Managing the 21st Century’sSustainability Crises

Kugelman, Michael and Levenstein, Susan (eds) – LandGrab? The Race for the World’s Farmland

Lovins, Amory – Reinventing Fire: Bold BusinessSolutions for the New Energy Era

Martenson, Chris – The Crash Course: TheUnsustainable Future of Our Economy, Energy, andEnvironment

Palast, Greg – Vultures’ Picnic: In Pursuit of PetroleumPigs, Power Pirates and High-Finance Carnivores

Parenti, Christian – Tropic of Chaos: Climate Changeand the New Geography of Violence

Srinivasan, Ancha, Ling, Frank, Nishioka ,Shuzo andMori, Hideyuki Mori (eds) – Transition to Low-Carbon and Climate-Resilient Economies in Asia:Challenges and Opportunities

Yergin, Daniel – The Quest: Energy, Security, and theRemaking of the Modern World

http://cleanenergysolutions.org – The Clean EnergySolutions Centre helps governments turn cleanenergy visions into reality.

http://regions20.org – A coalition of partners led byregional governments, working to develop, finance,implement, evaluate and replicate low-carbon andclimate-resilient projects

www.carbonwarroom.com – The Carbon War Roomharnesses the power of entrepreneurs to implementmarket-driven solutions to climate change.

www.chinadialogue.net – The world’s first fully bilingualwebsite devoted to the environment that aims topromote direct dialogue and the search for solutionsto our shared environmental challenges.

www.earthsecurity.org – The Earth Security Initiativeexplores new cross-sector responses to the risk andopportunity of the ecological limits thatfundamentally challenge the security of people,economies and nations.

www.foet.org – The Foundation on Economic Trendsexamines emerging trends in science andtechnology, and their impacts on the environment,the economy, culture, and society.

www.gggi.org – The Global Green Growth Institute isdedicated to pioneering and diffusing a new modelof economic growth, known as "green growth."

www.mrfcj.org – The Mary Robinson Foundation –Climate Justice is a centre for thought leadership,education and advocacy.

www.rmi.org – Rocky Mountain Institute is anindependent, entrepreneurial, non-profit think-and-do tank, co-founded by Amory Lovins.

www.sustainableenergyforall.org – The InternationalYear of Sustainable Energy for All promotes action onenergy issues at the local, national, regional andinternational levels.

www.windmade.org – An initiative leading to the firstglobal consumer label identifying products andcompanies made with wind energy.

www.un-energy.org – UN-Energy is a mechanism topromote coherence within the United Nations familyof organizations in the energy field.

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SUMI DHANARAJAN is an independent consultant specializing in thefield of business, human rights and sustainable development. SinceAugust 2009, she has been based in Singapore. From 1998 to 2008, shewas Head of the Private Sector Team at Oxfam GB, the internationaldevelopment organization addressing poverty issues worldwide.

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