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Green Business Ideas: India gives a PAT to Inclusive Wealth Report 2012

Whatever said and done; the Prime Minister of India Dr. Manmohan Singh has the best sense of timing when it comes to providing impetus to the Economy, launching PAT under NMEEE this week, is one such achievement. Let us look at how such green initiatives are going to be one of the best bet in boosting the Green Economy not only in India but world-wide.

A direct link can easily be established between India’s NAPCC agenda (of which PAT is a part) and IWR’s core thought. I had dealt in greater detail on what is NAPCC in – Green Business Ideas : India should promote NSM & NMSH to make NMEEE a success. So I will only bring out the thought which resonates with the IWR in this article. Below are some of the very recent remarks found on the News, post the culmination of UNFCCC‘s summit at Rio and excerpts from the UNU-IHDP’s & UNEP’s report IWR 2012 .

guardian.co.uk – The bizarre weather of early summer in the US – from heatwave, wildfires, drought to freak storms – is just a sampling of what is to come for 2012 and a window to the future under climate change…..

green-buzz.net – Global warming will mess up with attempts to save the Amazon rainforest, based on a negative new research that predicts that a third of its trees will be wiped out by even small temperature rises. …

guardian.co.uk – Whenever an episode of extreme weather – heat wave, flood, drought, etc – hits the headlines, someone somewhere is sure to point the finger of blame at human-induced climate change….

bbc.co.uk – Leaves are getting narrower on some plant species as a result of changes to the climate, a study has suggested.

In the last decade, almost one million people have been killed by disasters and more than one trillion dollars have been lost. Yet only 1% of international aid is spent to minimise the impact of these disasters : UNDP

The remark of UNDP simply reinforces the scope and depth of opportunity global business has in extracting itself out of the morass of economic slowdown and begin towards a newer and dynamic economic model based on the lines of a B-Corp, a recent and fast catching phenomenon around the western hemisphere. And presently the slow down of world economy is partly due to the slowdown in ideas and direction in the EU and lets not forget the Lehman Brothers very soon, lest the USA makes similar mistake again, in its present climb-up the ladder of economic well-being.

“IWI is among a range of potential replacements which world leaders can consider as a way of bringing great precision to assessing wealth generation in order to realize sustainable development and eradicate poverty,”said UN Under-Secretary General and UNEP Executive Director Achim Steiner, during the launch of the Inclusive Wealth Report 2012 (IWR), a joint initiative launched at Rio+20 by the “International Human Dimensions Programme on Global Environmental Change (UNU-IHDP) hosted by the United Nations University and the United Nations Environment Programme (UNEP).

Wealth accounting, the concept behind the IWI, draws up a balance sheet for nations and shows countries where their wealth lies. By taking into account a wide array of capital assets a nation has at its disposal to secure society’s well-being, it presents a more comprehensive picture and informs policy makers on the importance of maintaining their nation’s capital base for future generations. The importance of keeping an eye on the full range of a country’s capital assets becomes particularly evident when population growth is factored in.

Key findings from the report are:

While 19 out of the 20 countries experienced a decline in natural capital, six also saw a decline in their inclusive wealth, putting them on an unsustainable track, Russia, Venezuela, Saudi Arabia, Colombia, South Africa and Nigeria were the nations that failed to grow. The remaining 70 per cent of countries show IWI per-capita growth, indicating sustainability.
High population growth with respect to IWI growth created unsustainable conditions in five of the six countries mentioned above. Russia’s lack of growth was due largely to a drop in manufactured capital
25 per cent of countries which showed a positive trend when measured by GDP per capita and HDI were found to have a negative IWI per capita. The primary driver of the difference in performance was the decline in natural capital
With the exception of France, Germany, Japan, Norway, the United Kingdom and the United States, all countries surveyed have a higher share of natural capital than manufactured capital, highlighting its importance
Human capital has increased in every country and is the prime capital form that offsets the decline in natural capital in most economies
There are clear signs of trade-off effects between the different forms of capital
Technological innovation and/or oil capital gains (due to rising prices) outweigh decline in natural capital and damages from climate change, moving a number of countries – Russia, Nigeria, Saudi Arabia and Venezuela – from an unsustainable to a sustainable trajectory
Estimates of inclusive wealth can be improved significantly with better data on the stocks of natural, human and social capital and their values for human well-being.

Recommendations

While inclusive wealth has increased for most countries, the report shows that an examination of natural capital is crucial for policy makers.

Even though a reduction in natural capital can be offset by the accumulation of manufactured and human capital, which are reproducible, many natural resources such as oil and minerals cannot be replaced. As a result, a more inclusive definition of wealth that will secure a legacy for future generations is urgently needed in the discussion of sustainable economic and social development.

The report, which will be produced every two years, makes the following specific recommendations:

Countries witnessing diminishing returns in natural capital should invest in renewable natural capital to improve their IWI and the well-being of their citizens. Example investments include reforestation and agricultural biodiversity
Nations should incorporate the IWI within planning and development ministries to encourage the creation of sustainable policies
Countries should speed up the process of moving from an income-based accounting framework to a wealth accounting framework
Macroeconomic policies should be evaluated on the basis of IWI rather than GDP per capita
Governments and international organizations should establish research programmes to value key components of natural capital, in particular ecosystems.

UN Under-Secretary General and Rector of the United Nations University, Prof. Konrad Osterwalder, concluded that using the IWI would safeguard the interests of many developing nations.

If one reads the document of NAPCC and compares it with the MDG’s which reads- “The Millennium Development Goals (MDGs) have functioned as an important tool to focus international attention and action around key pressing global issues,” he said. “As 2015 fast approaches, the deadline for meeting the MDGs, it is clear that the opportunities for many developing countries to achieve their goals may be compromised if the present rates of decline of various crucial ecosystem services continue.” – one would find a lot of commonalities.

And in the recently launched PAT document India is moving another step in the right direction towards inclusive wealth generation. – Designated Consumers (DCs) account for 25% of the national gross domestic product (GDP) and about 45% of commercial energy use in India. In order to further accelerate as well as incentivize energy efficiency, the Government of India is designing a Perform Achieve and Trade (PAT) Scheme. PAT is a market based mechanism to enhance cost effectiveness of improvements in energy efficiency in energy intensive large industries and facilities, through certification of energy savings that could be traded. The genesis of the PAT mechanism flows out of the provision of the Energy Conservation Act, 2001.

By this one very act, if implemented properly business all-over the world would get a boost. An an Emerging Economy India needs to develop and for that it has to create capacity in the core fields of – 9 industrial sectors namely Thermal
Power Plants, Fertilizer, Cement, Pulp and Paper, Textiles, Chlor-Alkali, Iron & Steel, Aluminium and Railways.

To bring in energy efficiency in these core sectors Indian Industry would be looking at the West which whatever be the current economic scenario, still lead in R&D in many areas and has off-the shelf solutions for most industrial machinery. They have the state of art product design and solution and a need a wider market which can absorb the supply. The BRIC Nations are the ones which can rise up to the occasion and with PAT, India can attain leadership position by 2015, in this space. NMEEE can be divided into PAT; MTEE; EEFP & FEED and together they would not only be able to have a positive impact on the GDP but their implementation shall have a direct positive effect on various service sectors and create the much needed jobs all around.

Let us take the most important and controversial sector of Thermal Power Plants – it is one of the greatest concern for Environmentalist all over the planet and if this sector itself has to reduce its SEC, serious thought would be applied to overcome the challenges. And through PAT it shall be addressed because conventional thermal power fuel is coal, which although a natural capital is also a potential GHG hazard and to extract it we need to deplete the most important wealth of any Nation – the forest cover.

The Indian Industry through the CII is already geared up for this challenge and ground work has already started. The CII – Sohrabji Godrej Green Business Centre [CII Godrej GBC] is promoting the concept of ‘Make Indian thermal power plants world class’. The main aim is to bring the industry together to exchange views and meet new technologies, facilitate continuous performance improvement in thermal power plants and thereby achieve world class standards. I am confident that given the stakes, a green economy with long term wealth generation vs “gone” ecology, the present Thermal Power plants which are coal fired and GHG intensive would take on the new avatar of CSP driven thermal power plants.

To the common person who associate Thermal power plants to polluting coal and do not want to see them existing any-more, the coal is just a fuel that is used to boil the water to steam, which runs the turbines and generates electricity. In technical terms all that is required is to switch the fuel from the GHG intensive Coal to Concentrated Solar Power or CSP. The era of Solar Aided Power Generation from Conventional Fossil Fuelled Power Stations has already arrived.

In the Middle East and North Africa (MENA) region a great concept towards renewable energy is taking shape The DESERTEC concept which will be an astronomical step towards sustainable supply of green energy at a global dimension. It is estimated that CSP plants in MENA can generate up to 470, 000 MW by 2050. Similarly in the USA, Bright Source Energy’s tower solar collector in the Mojave Desert would supply up to 900 megawatts of clean energy to California in the next decade. The new technology will use several “power towers” at each commercial plant. An array of hundreds of mirrors known as heliostats will reflect sunlight onto a boiler atop each tower, and the resulting steam will power a turbine.

The above illustrates the great changes that are occurring in the Industry and Economy of the world. And we have in the India context only touched the first of the 9-DC’s considered under PAT. Rest assured, the green economy model would soon encompass all sectors of industry mentioned. And it would be the best thing than can happen to this planet.