Rio+20: A Momentum for Resource Economics

06/01/2012 12:58 pm ET | Updated Aug 01, 2012

Growth. Even before the concept is defined, we know what's on the agenda. It's not about plant growth, hair growth or growth in quality of life, it's about economic growth. And the kind that is measured in GDP. However, Rio+20 might mark a paradigm shift in the way we measure growth and wealth.

This month's summit in Rio de Janeiro marks the 20-year anniversary of the first Earth Summit on sustainable development. Back then, the summit attracted unprecedented media coverage and generated a range of landmark conventions on sustainability, biodiversity and climate change. The latter laid the foundation for the institutional architecture of the COP-processes, which in 1997 led to the Kyoto-protocol that ends later this year.

The prospects for Rio+20 look somewhat different. Of the approximately 400 paragraphs in the 160 page negotiation paper, only about 20 paragraphs have been agreed on. And to pre-empt the risk of failure, the U.N. Conference on Sustainable Development (CSD), which is arranging the summit, has added another five days of negotiations. "Let's be frank," said CSDs General-secretary Sha Zukang recently, "currently, the negotiating text is a far cry from a focused political document." But even though it is difficult to see light at the end of the tunnel, agreement on the importance of a transition towards a green economy is starting to come to light.

According to EU Commissioner on Climate Action, Connie Hedegaard, the current overconsumption of critical resources, and growing energy and food prices require that the current economic models change. "The 21st century must have an intelligent growth model. We are in a period where resources are becoming more and more expensive. Oil prices are going up, food prices are going up, and many other commodities going up. We need to address this," says Connie Hedegaard. She thinks, for this year's meeting to have the same long-term consequences as its predecessor, world governments need to sign up for a declaration on new ways of measuring growth and economic wealth.

Planning in uncertainty

Discussions on growth first really took off when Dennis Meadows and his colleagues at the Massachusetts Institute of Technology in 1972 published The Limits to Growth, essentially carrying the message that unlimited growth is impossible in a world with limited resources. The critics accused the authors of scare-mongering and actual economic growth did its part in disproving the book, ensuring that the ideas never took footing among mainstream economists.

A polarized debate between economic growth and the environment followed in the 1970s and 1980s, when the Bundtland report, Our Common Future, in 1987 created common ground between the two positions and introduced the concept of sustainable growth defined as "a development that meets the needs of the present without compromising the ability of future generations to meet their own needs".

The disagreement between the two positions in the growth-debate crystallized in 1980, when the American biologist, Paul Ehrlich, and the American economist, Julian Simon, made a bet. The bet concerned the price development of five different types of metals (copper, chromium, nickel, tin, and tungsten) between 1980 and 1990. Ehrlich argued that population growth and the pressure on resources would grow faster than the supply of commodities; meanwhile Simon thought that the free market would be able to solve the challenge. Even though the population grew by approximately 800 million people that decade, Ehrlich lost the bet and the growth-economic thinking won. Had they expanded the time period till today, Ehrlich would have won.

The goal-setting model

Connie Hedegaard, who also leads EU's contentious battle to price CO2-emission in European airspace, actively works to gather support to the U.N.-led initiative on the development of so-called Sustainable Development Goals. The idea is based on experiences from the U.N.'s Millennium Development Goals that world governments agreed on in 2000, and has shown that the world community actually can set goals and meet some of them. Among the proposed Sustainable Development Goals are goals covering food safety, access to water, and sustainable production and consumption models.

At a U.N-meeting on the state of the world economy in New York last month, U.N. General Secretary Ban Ki-moon, several times stressed the need for better ways to measure progress than GDP, and the apparent need for a paradigm shift in the current understanding of growth: "It is time to recognize that human capital and natural capital are every bit as important as financial capital," said Ki-moon, and pointed out that an agreement on Sustainable Development Goals at Rio+20 would influence the growth-agenda for many years to come. "Rio+20 is our opportunity to establish a new paradigm for growth -- building on what works, discarding what does not. We need nothing less than a revolution in our thinking about the foundations of dynamic growth and the well-being of future generations."