Connect with us

Economy

The War for Raw Materials

Published

on

The war for raw materials amounts to a reshuffling of the power relations among Western nations, on one hand, and the emerging and/or developing nations, on the other. The rise of China, BRICS, and the growing strength of the sovereign wealth funds of Arab nations, which are oil exporters, provides the evidence. Resources are powerful weapons in economic warfare, and everything suggests that the conflict will only intensify. The International Energy Agency estimates that world demand for energy will increase by 50% from now until 2030,especially owing to the growth of India and China. Ensuring ready procurement of materials, therefore, assumes crucial importance for nations. In 2007, the Committee on Critical Mineral Impacts of the U.S. Economy published a report with a list of eleven minerals that were particularly important for the leading industrial sectors of the U.S. Economy, due to their rarity and value. The list includes rhodium, used primarily in the manufacture of catalytic converters, which is particularly abundant in Russia but also in South Africa.

As guarantor of its national economy, every nation has, in fact, drawn up a list of the resources that it considers necessary and on which a significant number of current geo-economic conflicts depends.

As Liberalist logic goes, trade should produce closer and closer integration among the economic operators in various nations, which are linked less and less to specific reference territories, while reducing the risks of conflict and the role played by the nation at the same time.

This highly ideological vision is losing credibility. Territories have resisted and, along with them, the notion of control. The financial crisis that began in 2008 seriously undermined their citizens’ trust in the market’s capacity for self-regulation. The various factors that contribute to a nation’s power include its possession and exploitation of the riches of its subsoil, sea bottoms, and arable land. In a world expected to reach a population of 9 billion by 2050,the logic of self-sufficiency or lesser dependence now drives nations to compete in guaranteeing their supply of raw materials more than ever before. Competition for the control of raw materials – which has never stopped structuring international relations – has demonstrated a particularly significant intensification in recent years. The surge in agricultural raw material prices triggered a wave of arable land-grabbing by foreign investors in 2008, predominant among which, the United States, China, Saudi Arabia, and Arab Emirates. Most of their purchases were made in the continents of Africa and Latin America, where – by no coincidence – 90% of the world’s as-yet unutilized arable land is located. Appetites like these generate tension and rivalry. Hydrocarbons, of course, remain the center of strategic interests. After acquiring the possibility to intensely exploit its reserves of shale gas, the United States has become self-sufficient. As a result, its former supplier, Saudi Arabia, has witnessed a weakening of its bonds with the U.S., its protector against Iran. Its febrile behavior during the crises in Iraq and Syria is due in part to this evolution of international relations. The case of Greenland – whose oil reserves are now estimated as being half of those of Saudi Arabia –is also exemplary. Combined with the results of the referendum regarding autonomy (75% in favor), this new circumstance will now give greater force to the movement for independence as the larger powers are already jockeying for the best bargaining positions.

One sector that will apparently be particularly significant for international tensions in the future is that of mineral resources: more and more often nations with large mineral deposits are opting for state control. Well-known documented examples are offered by China, Russia, and Bolivia, and the list might soon include Madagascar, which, after being long subjected to crushing passive exploitation by foreign mining companies, announced in 2014 the creation of a public mining company to exploit its resources at a national level.

One vital mineral resource that is indispensable to aeronautics, given that it represents between 15 and 20% of the metal used in the construction of a modern airplane, is titanium. It is no wonder that the Boeing Company and the United Technologies Corporation have decided to stockpile it.

The world’s leading titanium supplier is the Russian VSMPO group. Will these two American companies, whose decision was revealed last August, suffer retaliation in the context of the crisis in Ukraine? It must be recalled that U.S. law prohibits companies that work for its Defense Department from purchasing titanium abroad. However, the two groups produce for both the civil and the military sector.

In addition to Ukraine, another area of international tension created by resource grabbing is the China Seas, where the level of interdependence between the leading powers (South Korea, Japan, People’s Republic of China, and Taiwan) is certainly growing, and in the opinion of Paul Tourret, Director of the Higher Institute of Maritime Economics, such a mesh of interests should have reduced the risk of conflict even if – as the expert himself seems to imply – the sharing of the same geo-economic interests is of little use in guaranteeing stability in the region.

The dispute between China and Japan over the Senkaku Islands that began in 2010 and flared up again in 2012 and 2013 even led Beijing to lower its exports of rare metals to Japan. This group of 17metals, whose leading producer is unquestionably China, is indispensible to the production of products with high-technological content, one of the mainstays of the Japanese economy. Acknowledging that this reduction in exports had effectively weakened its economy, Japan wasted no time in reacting: on March 13, 2012, supported by the U.S. and the EU, Japan denounced China to the WTO, which in fact reprimanded the conduct of the Chinese government. This did not prompt Beijing to change its tune, however. In addition to putting its faith in procedures at this level, Japan recently set up the Japan Oil, Gas and Metals National Corporation (JOGMEC) and funds it with 15 billion euros annually. The entity operates on three levels: supporting Japanese mining companies abroad (particularly in their purchases or entry into foreign company shareholding structures), providing a diplomatic channel in the stipulation of long-term contracts between nations, and supporting national research in the energy and mining sector. In 2012, Japan’s Minister of Industry announced that new trading partners like Kazakhstan and Australia would help reduce its dependence on Chinese rare metals. The private sector supports the national effort: through its branches, auto manufacturer Toyota has become one of the prime investors in mining sectors in Canada and Australia as another way of weaning Japan from Chinese supplies. Nations take different approaches to the geo-economic problems posed by the procurement of metals and minerals. The first is to get back into the markets, which, as reported by certain experts, are impenetrable, fragmented, and do not offer sufficient information.

Some industrial societies resort to the expedient of financial insurance that guarantees the purchase of substances at a fixed price for a certain amount of time. However, this sometimes turns out to be a blunt instrument, however, given that nations often and willingly ignore the guarantees granted in defense of their own best interests. The second option nations take is when they become aware of the geopolitical necessities for territorial control and implement a long-term purchasing diversification strategy. Not all nations vaunt the same strategic prowess as Japan, however; Europe, in particular, demonstrates a deficit of awareness in this field.

The rising demand for metals and/or minerals stems from the arrival of a new tier of industrialized nations that includes China, India, and Brazil, which all have benefitted from the delocalization of certain European heavy industries and manufacturing companies.

In the end, future tensions regarding the availability of certain materials entail the question of national security in procuring the resources indispensible to strategic industry chains (nuclear, defense, aeronautics, electronics, the automobile sector, etc.). Nature has permitted the creation of monopolies over certain resources: China supplies 93% of the world’s magnesium and 90% of its antimony. Brazil meets 90% of the international demand for niobium, while the U.S. provides 88% of its beryllium. In order to hedge the risk of economic dependence on the holders of these raw materials, other world powers have already laid out specific strategies to ensure themselves resources deemed strategic by establishing closer diplomatic relations with the nations that have what they need. The United States, Russia, and China have implemented policies for stockpile management and flow control while taking steps to secure production areas, especially through the purchase of mineral deposits and companies operating there. The volume of investments for the mining of rare substances in Greece has grown since 2014. At the start of the same year, the NBC news network revealed that the government’s scientific agency, the U.S. Geological Survey, had conducted an aerial study of the soil in Afghanistan in 2006 that permitted the mapping of the mineral resources that the nation possesses in abundance. The American researchers estimated quantities of 2.2 billion tons of ferrous material, 1.4 million tons of rare materials (such as lanthanum, neodymium, and cerium), also aluminum, gold, zinc, mercury, and lithium. The crisis in the Ukraine has allegedly driven Russia to seriously consider the idea of establishing a rare materials cartel with China, with Russia having the largest holdings after China. Unlike most others, however, Russia has deposits of all 17such materials. Therefore, Russia would have every reason to exploit these resources, also bearing in mind that Chinese production in this sector is instead currently tailing off, obliging Beijing to import them. Russia’s idea of closer links to China is also fed by its desire for retaliation against the United States and the European Union.

Owing to their use in industrial processes, the so-called platinoids or platinum group metals (PGM) are the object of much contention among the world’s industrial powers owing to their use in industrial processes. Utilized not only in traditional petrochemical, arms, aeronautic, medical, and agrifood sectors and costume jewelry, they are also crucial to the telecommunications and information technology industries, especially in the production of cell phones and computers. Palladium, for example, is used in nearly every type of electronic device, primarily as a part of high-performance capacitors or microchips. Ruthenium and platinum instead play important roles in increasing data storage capacity on hard disks but also in producing liquid crystal displays. Platinum is also the key component of various types of fuel cell. Associated with rhodium (diesel vehicles), it plays a key role in the production of the catalytic converters that reduce exhaust gas toxicity.

In addition to their growing importance in a variety of industrial processes, these materials are rare and concentrated in only a few specific geographical areas in which a sort of semi-monopoly is held, such as South Africa and Zimbabwe. Southern Africa’s platinum-rich areas have become authentic theaters of national and international battle for the control of these materials that often degenerate into armed struggle. The fact is that no alternatives to their use have yet been found.

Competition between Anglo˗American, the world’s leading producer of PGM, and Asian, primarily Chinese competitors, in Zimbabwe’s Grand Dyke mines, is just one episode in an economic war of much wider scope. This battle is part of the long-term duel between Western nations and China for the control of Africa’s strategic resources that began with the fall of Mobutu in the Congo. After gaining control of a considerable part of the Central African Copperbelt that contains over half of the world’s reserves and mines for cobalt, an indispensable element in the production of electric batteries, China is making a similar attempt to corner the world’s supply of platinum, an essential metal for oil refineries that is mined above all in Angola.

Zimbabwe’s PGM are essential for China, which possesses only 1.1%of the world’s reserves, and play a dual role in ensuring its economic security by enabling it to set up its own complete petrochemical production chain, in this way gaining independence from Anglo˗American suppliers and by allowing Beijing to produce the catalytic converters it needs to reduce air pollution, a campaign that has turned into a national priority now that China has become the largest motor vehicle market in the world. It therefore comes as no surprise that PGM refining constituted the pivotal role of the agreement signed between China, Angola, and Zimbabwe in 2009.

This agreement poses a threat to Anglo˗American, which had until then had held a monopoly over Zimbabwe’s PGM mining. The British company continues to control the deposits in Southern Africa, which are more abundant than those of Zimbabwe, but those of the latter are distinguished in a way that makes them almost unique in their rare combination of both platinum and palladium, the two most highly desired PGM in the world.

This loss of part of the Zimbabwe reserves might spell the future end of the worldwide control of the PGM market by the Anglo˗American company, which has been the leading economic operator in Southern Africa for around two centuries.

Political instability and insecurity reign in the part of Africa that runs from Merensky Rift to Grand Dyke, where local political leaders wage wars in their attempts to gain control of the income derived from platinoid sales, basing their right to do so on their past as “freedom fighters”. In Zimbabwe, this operation is conducted by the former hero of the nation’s independence, Robert Mugabe, who adopts nationalistic, anti-imperialist rhetoric to accuse foreign companies of implementing neo-colonialism policies with support from Great Britain. He goes on to claim that the Anglo-American company has stoked political opposition against him, abetted by both the United States and the European Union. The leader of the opposition movement is Morgan Tsvangirai, formerly a company employee.

Robert Mugabe’s use of nationalist rhetoric to instrumentalize the question of international monopoly over the nation’s economy had served to both masquerade his less than exalting results in running the country and to sidestep demands for more political freedom. The fact that Mugabe’s nationalism amounted to mere rhetoric is clear from his scarcely coherent political conduct: following a hike in mineral product prices, in 2007 he proposed an Empowerment and Indigenization Bill for the economy in general and the mining sector in particular, and had it passed. Just one year later, Mugabe sold the mineral rights to an American hedge fund in exchange for a loan of around one hundred million dollars, which he then used to finance his election campaign. He proceeded in the same way in privatizing a mineral deposit that had become public property after he had previously expropriated it from Anglo˗American.

In short, Mugabe uses the nation’s mineral resources as if they were an automatic teller machine for the funding of his own political career. Also in South Africa, the ruling class that had come to power on the merits of its struggle against the previous apartheid regime has since displayed remarkable nonchalance in channeling the nation’s mineral wealth to its own advantage by stipulating agreements with foreign multinationals.

The massacre by police of miners in Marikana striking for higher wages in 2012 demonstrates the degree to which the miracle of South Africa is only a mirage for a large part of the nation’s black population.

Economy

Connectivity now. Boosting flows of people, information, energy, goods and services

Published

on

On April 8, St Petersburg hosted the 12th Northern Dimension Forum. This forum, established in 2007, is a major annual corporate business event for cooperative policy and brings business directors and potential investors from Russia and the European Union including the Baltics, and Scandinavia.

The forum was organized by the Northern Dimension Business Council in cooperation with the Association of European Businesses, the Graduate School of Management at St Petersburg State University and the Skolkovo Moscow School of Management.

This forum was devoted to the theme: “Connectivity now. Boosting flows of people, information, energy, goods and services.” It was attended by over 400 representatives of Russian and foreign business circles, government agencies and scientific, education and non-governmental organizations.

Leading business experts of the partnerships of the Northern Dimension, the Institute and the Association of European Businesses discussed topical issues and opportunities for promoting cooperation in environmental protection, the circular economy, energy efficiency, transport and logistics, healthcare digitization, efforts to overcome the aftereffects of the coronavirus pandemic and creative industries.

As expected, the forum helps to take another major step forward in discussing many strategic spheres of business between Russia and those regions. There were plenary meetings as well as sessions working groups. Despite the contradictory signals between Russia and the European Union, it was another opportunity to have some fruitful dialogue, especially in the current difficult conditions, – develop solutions on a wide range of cooperation issues in the North of Europe.

On the other hand, business institutions and the entire system of economic relations are still evolving for these years, indicating that there is no alternative to reasonable cooperation. It is however necessary to find common business language in the fields and other spheres of crucial importance for international cooperation.

Russian Foreign Ministry’s report pointed out to a diversified and multifaceted nature of regional cooperation in Northern Europe. It said the important components include the programs of cross-border and interregional cooperation between Russia and EU countries (Poland, Lithuania, Latvia, Estonia, Finland and Sweden), plus Norway.

There are programs underway within the framework of the current budget cycle that involves over 500 Russian project partners, and new programs are being prepared for the next seven-year period.

They reaffirmed their willingness to broaden versatile and mutually beneficial cooperation for the sustainable development of Europe. It emerged from a number of reports during the forum that trade and economic relations are now remarkably expanding between the European Union and Russia.

Over the years, the business growth has been driven by the efforts of the business community. This has also to do with the quality of economic exchanges and investment, businesses’ interest in expanding to new markets, and their confidence that these markets provide drivers for economic growth. Admittedly, trade decreased for various reasons since 2013, it then reached $417 billion, but later shrank to a mere $200 billion.

Continue Reading

Economy

North Macedonia’s Journey to the EU

Published

on

Prime Minister Zoran Zaev’s new cabinet is confronted with a number of economic challenges, exacerbated by the economic hit to the global economy caused by the pandemic In 2021, North Macedonia will take economic decisions that will shape the course of the country’s future.

The issues Skopje faces

Despite a modest population of 2-million, North Macedonia repeatedly makes headlines, often due to apparently  intractable disputes with neighbouring countries. Athens’s trade embargo imposed on North Macedonia in the 1990s marked the start of a 27 year deadlock between the two countries, which ultimately stalled North Macedonia’s accession to the EU. Only recently did Skopje resolve the dispute with neighbouring Greece over its official name which Greece had previously taken issue with due to the fact that ‘Macedonia’ is also a region of Greece, and the use of this name was interpreted by Greece to be an assertion of territorial ambitions in the region.

This dispute affected the country’s other diplomatic ventures. In 1999, North Macedonia was one of the first post-Yugoslav signatories of the NATO membership action plan, only to have its accession vetoed by Greece in 2008.  Ultimately, North Macedonia’s Stabilization and Association Agreement with the EU has not been the diplomatic catalyst that Skopje hoped would ease  localised tensions and draw it into a closer relationship with Brussels.

Under the leadership of Nikola Gruveski (2006-2016), corruption and state capture were endemic in North Macedonia. Gruveksi was averse to opening negotiations with mainstream governments in Greece and it was not until the centre-left Social Democratic Union of Macedonia ousted  Gruveski out of power, that there was a breakthrough. Gruveski’s successor, Zoran Zaev, capitalised on Greek Prime Minister Tsipras’s reformism to broker the controversial Prespa Agreement which settled the name dispute. Two years later, North Macedonia was finally admitted to NATO, demonstrating that Greece was the final hurdle to NATO membership.

A tamed economy

However, North Macedonia soon found that NATO membership was not a passport to joining the EU. Internal ethnic tensions have created friction with EU member states. Relations with Bulgaria soured during the election campaign for July 2020 during which the campaigns of both main political parties played on anti-Bulgarian sentiment..Zaev managed to gain power by agreeing to a coalition with the main part of the Albanian minority.  The new cabinet’s economic hurdles, specifically fiscal redistribution, could be exacerbated by renewed ethnic tensions between the Slav majority and the Albanian minority. Should tensions reach the levels of the 2001 civil conflict, the deepening of this fracture would   slow down reforms and deter investments.

Bouncing back after the fall

The Balkan countries suffered greatly during the Great Recession due to their proximity to the Greek economy at a time when Athens navigated the worst slowdown of recent history. As Greece’s second largest export partner, the RNM was particularly hard hit(Figure 3a). The region had barely entered recovery before lockdown measures crippled world economic growth. In addition, North Macedonia’s small internal market is heavily reliant  on external demand which the crisis has depleted. In Q1-Q2 2020, exports fell by 22.3% and industrial production by 14.6% compared to the same period of the previous year. Thus, GDP fell by 14.9% in Q2 of 2020 and another 3.3% in Q3 contrary to the  projected 3.2 percent growth (Figure 7). Whilst forecasts suggest growth of 5.5% in 2021, the unpredictability of the pandemic’s economic influence may yet compromise this figure.

Meanwhile, rating agencies downgraded North Macedonia’s national debt, in turn raising financing costs. the RNM’s debt was downgraded by some rating agencies, raising financing costs. Fitch, the American credit rating agency, as well as  Moody’s, another US-based credit rating agency, both value North Macedonia’s debt as a non-recommended investment asset to be reserved for short-term gain. Since May 2020 the outlook has been negative, suggesting the situation will worsen. Yet, with one of the comparatively smallest debt-GDPs of the region, these ratings are still the best in South-Eastern Europe after Bulgaria meaning the RNM has a relatively solid economic base (Figure 4).

The country’s effective response to the pandemic is in part the reason that North Macedonia is economically stronger than some of its neighbours. The caretaker government introduced a furlough scheme, worth approximately 5.5 percent of GDP, as well as a helicopter money initiative. Going forward, the government is prioritising policies that will stimulate economic growth such as slashing parafiscal charges and cutting VAT. Yet, since North Macedonia lacks the economic resources to commit to long-term reform, recovery will be slow.

North Macedonia’s Shifting Demographics

North Macedonia is contending with mass emigration in tandem with declining fertility rates  (Figure 5) — both of which reduce human capital. The official estimate of two-million residents is dubitable, with some experts hypothesising an actual figure of approximately 1.5 million. Inaccurate projections of a state’s total population jeopardises effective government decision making. In the RNM, where the resources are redistributed amongst ethnic groups pro quota, this makes fiscal management particularly difficult. If, for example, the proportion of Albanians of the total population was lower than estimated, then this group will be receiving more public resources that they are entitled to.

Given that the EU acts in a starkly-protectionist way by restricting trade with third countries, greater cooperation is in the RNM’s interest. In fact, Brussels could reduce trade barriers in the context of a stronger association with Skopje even before the latter formally joins the Union.

There are steps the government can take to encourage citizens not to emigrate . The first and most crucial step would be to improve the education system. Overall, North Macedonia spends much less of its GDP than the average EU country on education. As a result, few people complete their secondary-level education, and therefore either end up in low-paying jobs or unemployed, andare forced to emigrate for work. Another step would be investment in the underfunded Research and Development (R&D) sector. In fact, North Macedonia’s budget allocates only 0.36% of GDP to R&D, compared to an EU average of 2.2% and neighbouring Bulgaria’s 0.77%. Research and development is essential to creating high-paying  jobs, driving productivity, and boosting the economy through innovation and market competition.

Infrastructures as the drive for future growth

The silver lining in North Macedonia’s economic strategy is infrastructure development. This especially true for roads and highways. Grueveski’s administration was instrumental in the investment into road infrastructure,  starting works for two new highways in 2014.

Still, roads can be rather useless if they do lead nowhere. Thus come trade infrastructures. In addition to new road, the building of new border checkpoints and crossing points with Greece and Bulgaria, will bolster the trade infrastructure that North Macedonia shares with the EU, thereby driving trade with a global economic powerhouse. These investments will also reduce the RNM’s dependence on the Yugoslav-time north-south arteries, which currently present a barrier for the development of the “functioning market economy” that is a requirement for EU membership. To achieve this goal, the RNM needs to improve, road connections towards the west (with Albania) and the east (with Bulgaria, an important trading partner). Building better connections within the country and with non-Yugoslav neighbours will boost the country’s internal cohesion by making it easier to move from one part of the country to another proving supplemental infrastructures to foster international trade.

Figure 6 Highways represent a key segment of the RNM’s investments.

A secondary and related benefit of improving connectedness with EU trade routes is reduced economic dependence on Russia. This should reduce Moscow’s potential diplomatic leverage in future disputes in the region. As a matter of fact, pulling out of Moscow’s orbit is almost a precondition to full membership in the EU — which would bring in more funding opportunity and increase financial stability. Yet, Russia’s main asset is not trade tout court, but energy. In fact, the Balkans serve as  a strategic crossroad for oil and gas coming from Moscow and Baku through Bucharest and Ankara. Thus, North Macedonia should also consider developing its energy infrastructure as a route to closer integration with the EU. In order to reduce the Western Balkan’s dependence on Russian fossil fuels, the region needs investments. For cash-strapped countries, like North Macedonia, the opportunity to make real progress in this field may come from ‘green’ funds the EU has earmarked for energy projects in both current member states and candidate countries . In addition, Greece has established an LNG terminal on the Aegean to which links the RNM is planning to adjoin its grid. There are also talks of an electric-grid link to Albania, through which the RNM could import as much as needed and even export eventual surpluses.

Forecast: The RNM can make it… with some help

Without radical reform, the extant corruption, bureaucracy and public-sector inefficiency will stymy growth in the coming years. Luckily, the EU might be the answer to Skopje’s economic woes. The Union is expected to grant €3.3 billion to Western-Balkan countries to kickstart economic recovery following the pandemic. The package does however come with strings attached: the country will have to accelerate progress towards regulatory harmonisation with the EU. This is a notoriously difficult and resource-consuming task, which may hinder other reforms.

Furthermore, North Macedonia must confront pre-pandemic economic struggles. The government could revert to coalition infightings and therefore prolong the process of economic reform. For investors, a cautious approach is recommended, in preparation for positive economic developments.

Acknowledgments The Author thanks Charlotte Millington, parliamentary researcher at the UK House of Commons specialising in European politics and international security for her suggestions.

Continue Reading

Economy

How to incorporate the environment in economic ventures for a sustainable future?

Published

on

We are in the phase of world history where economic development and protection of environment must go side by side. People living in the developed part of the world will hardly want to give up their current lifestyle and people living in the developing part want to be more like the developed but in this process, we cannot separate environment from economy. Environment provides the incentive for economic growth and prosperity; providing the raw materials and resources we need for production of goods, certain climates and temperatures are required for the growth of specific plants and are very crucial to agriculture industry and the environment is what absorbs the pollution and waste we produce from all this industrialization. Protection of the environment means we mark ourselves safe from economic degradation and provide safe space for healthy functioning of economic and social activities. If we preserve the environment we control the risks of drought, heat waves, cold spells and floods, regulate the air quality, the temperature, the climate, the clean supply of water, the contamination of soil, cycling of nutrients in the ecosystem and management of carbon. Since agriculture can be regarded as the primary industry, crucial to feed people, people who then operate other industries, it is very important to safeguard the environment that feeds us and nurtures us and the environment that we live and grow in. Today, the world economy is facing serious environmental hazards. Climate change, loss of biodiversity and ecosystems are some of the global problems that need immediate collective action by states since this issue engulfs the whole of mankind. Therefore, economists and environmentalists have in the recent years taken this subject with full zest. How can economic growth and environmental protection go hand in hand? Environmental policies integrated with economic policies can be implemented and pursued by states to ensure sustained and prolonged environmental human well-being and continued simultaneous economic growth for states both at the national and international level, ending in a win-win situation.

Natural resources are salient to economic development but at present many prime resources and ecosystems are depleting which poses a grave situation for states and their economies. To tackle this concern, natural resources need to be used in a reasonable manner and adopting and improving technology be propagated in such a way that the use of natural resources is made more efficient and long lasting. Use of newer and modern product designing which meets the needs of the current times, needs to inculcated. The consumption of natural resources beyond the point that hampers economic growth also needs to be avoided. The vitality of technology and innovation in limiting environmental hazards is being stressed, this is also beneficial for businesses and industrialization. This is because preservation of environment is itself a form of economic development and growth. People who come up with the ideas and engineering for environmental friendly products; such as the water and air pollution control, treatment and purification technologies, make money and businesses out of these services, thus contributing to the economy. Similarly, wind mills and solar systems are now a multimillion-dollar business themselves. If environment protection is putting some older technologies and practices out of work, it is also creating incentives for modern technologies and creating more job opportunities in the field. States should thus, make an industrial shift to equipment and products that have a low carbon usage and efficiently use resources. In the real estate sector, places with better and healthier environment and surroundings are priced more than other counterparts for example, a building next to a park or green belt will have higher value than a property which is not next to any place green. This points to the concept of “hedonic pricing.” It refers to the difference in pricing due to the associated environmental aspects, in otherwise similar products. Better environment also contributes to the development of human capital. The presence of a green park will not only add to beauty and better air quality but it will also encourage a lot of people to physically exercise.

Due to the growing scarcity of resources, governments of the world should introduce the policy of “common property regime,” which avers that resources such as land, water, certain habitats and the atmosphere be made common property for all. The problem is that there are no property laws for these resources and people use it as a free dump for human waste and waste products from economic activities. This includes various water bodies for example, irrigation systems and canals, forests, fishing areas etc. Concise and clearly enforced rules should be put in place, exercising the limits put on some activities such as excessive fishing or cutting of forests, putting a limit on the accessibility to these resources, keeping a check on the carbon footprint of some groups, organizations or events or even putting some specifications on their use such as tax or making recycling or reuse mandatory. The shift from already existing practices to newer ones that are more environment-friendly will be costly and it will take time but it is more important now than ever and more beneficial for us in the long run. Environment policies of these sorts reframe the economic structure. The cost of using these resources should be closed in according to the social cost of putting the health of the public at risk. Restructuring of the economic and environmental structure helps a country’s economy by lessening the environmental hazards that the country might face and by making the state more buoyant and resilient in the face of these environmental changes and risks. This can also prove to be a powerful driving force for innovations and ideas.

States are often in the race to increase their GDP. GDP only measures the material values of goods and services and does not take into account the well-being of humans including the health and education quality, living standards, income and environmental conditions. Economic growth, nonetheless, is a prime force for improving human well-being and states incorporate social, political and environmental goals in the well-being domain through these economic activities. The Kuznets curve is a graph to explain the relationship between the growth in economy/GDP and the quality of environment. States can keep this model in mind while reformulating their economic and environmental policies, in accordance to the history of environmental degradation they have endured and the future remodelling they need to follow. It is characterized by an inverted U-shaped relation between GDP per capita and environmental quality. Since we have already crossed the point for environmental degradation, it is now time to think for the decline in the degradation. Initially, when the GDP grows, so does the degradation of environment but after a certain point, the increase in GDP no longer degrades the environment further. This is because at lower income levels, the income is completely spent on meeting the basic survival requirements. When the income increases to a certain point, people and states should start thinking of the bargain that material does with the environment, this should be reflected in their behavioural change. After this point, states should start giving up further unnecessary consumption and focus more on environmental rehabilitation. Another possibility seen through this graph is that industries might see profit in enhancing production quickly, but as demands are met and resources become scarcer, more green, cleaner and resource efficient technology is introduced. Societies, in this way, also go from agriculture-based economy to manufacturing-based economy and finally to service-based economies, releasing the lowest levels of pollution. An example can be of EU rules and regulations. Waste water used to get dumped directly into the streams or rivers, but now it gets treated first before releasing. There are barely any housings left in the EU now that are not connected to solid and water waste disposal and treatment networks.

If states and the firms operating in those states take up eco-innovations and eco-friendly measures, they will actually be at advantage because investors like banks and various funding institutes are more likely to invest in sustainable businesses that will stay operational a long time, than those that are dependent on the environment in these challenging times. Firms that run on eco-friendly terms will also stay ahead of the taxes and regulations charged on using environmental resources. This will prove to be very cost efficient for them and they will not have to change their action plans according to any new regulations or increases in costs. Greener and cleaner practices and equipment can also truly reduce the waste an industry produces, in turn increasing the output and ensuring sustainability. This adaptation to cleaner practices can also lead to innovations and new ideas and practices starting right from the household or individual level. UK is one of the countries that is high on the ranks of eco-innovations, thanks to general understanding and cooperation among firms to pursue sustainable development. Furthermore, statistics show that companies that are currently focusing more eco-innovations are growing at the rate of 15% annually while their counterparts that are not focusing on the same, are not enjoying any climb in their profits[1]. Most of these businesses (based in Europe) are small to medium scaled and they are adaptable in nature. They are benefitting from the European commission’s stance on promoting eco-friendly businesses. Public Relations advantages and marketing superiority is also pretty clear in eco-innovation ventures.

A commendable example of improving the environmental conditions while also not compromising on the GDP and economic development, is that of China. China has been time and again accused of having a huge carbon footprint, which directly impacts the ozone layer which is communal to all mankind. States that are not even at par with the fumes and industrial waste that China produces, are today in the list of states most affected by climate change and global warming, including Pakistan and many of the Gulf nations. China has thus taken the role of global leadership in the field of environmental protection. China has been standing true to its 2015 Paris agreements on cutting down of greenhouse emissions. It was able to do so by spreading awareness and education from the grass-root level. In the period of only a few years, China has drastically improved the air quality in many of its larger cities. Solid waste management and sorting is a major step taken to restrict illegal dumping of garbage. Restrictive policies and heavy fines are imposed if an individual breaks the rules. Renewable energy generators like the wind and solar panels, have been put to use to meet nationwide energy requirements, which ensures cost effective power. In the year 2017, China nationally introduced the concept of “National emissions trading system,” which formed a market for the buying and selling of carbon dioxide emissions allowances. It regulates the quantity of emissions and carbon footprints that an individual, firm or an event is allowed to produce. All of this simultaneously helps China to become more energy sufficient and assists economic reforms while also improving the quality of ground-level air. Some states in the USA are taking up the initiative of green or clean economy with full fervour. California for example, set a target to achieve carbon neutrality by the year 2045, while the clean energy sector is also opening opportunities for jobs. One of the incentive taken in the goal was stricter vehicle exhaust emission rules[2].Nevada also passed a legislation to increase the energy it makes to up to 50% through renewable energy sources, by the year 2030[3]. Rules and regulations have also bene proposed to reduce the emission of harmful air pollutants including those that are short-lived such as methane, CFCs and HFCs. Developing countries like Pakistan have also addressed the climate issue and the Pakistan Premier launched the “Billion Tree Tsunami” plantation campaign to curb deforestation, an issue rampant in the north of the country. In conclusion of this paper, in light of all the examples and recommendations, I would say that the long term benefits, mutual to all, outweigh the costs of taking a leap from existing economic practices to those that are eco-friendlier.


[1]“Eco-innovation for better business,” Business Green, accessed October 23, 2020, https://www.businessgreen.com/sponsored/2409410/eco-innovation-for-better-business

[2] “California Air Quality: Mapping the progress,” U.S News. November 6, 2019.https://www.usnews.com/news/healthiest-communities/articles/2019-11-06/california-air-quality-mapping-the-progress

[3]Chandler Green. “7 ways US states are leading climate action,” United Nations Foundation. May 30, 2019, https://unfoundation.org/blog/post/7-ways-u-s-states-are-leading-climate-action/

Continue Reading

Publications

Latest

Trending