May 8, 2009

“Ecoflation”: a barrier or an opportunity?

In today's Financial Post, Diane Francis brings up the term "ecoflation" first reported in a December 2008 article by Deborah Zabarenko, Environment Correspondent for Reuters.

In essence, the argument states that a barrage of environmental legislation, regulations and taxes to address environmental degradation and global warming will significantly raise the price of consumer goods and hurt the profitability of the companies that manufacture them. This view is strongly held by many business leaders. And it is a crucial perceptual barrier to any major progress on moving to a sustainable society.

To this argument, I respond by reiterating UK’s Lord Stern’s position that the long-term cost to the planet as a whole will be dramatically higher if we don't put these measures in place to address global warming.

As our project "Making it happen" demonstrates, we do need to change the way we run our economy, use resources, and build our infrastructures, if we want to become a sustainable society. And what we have been doing is looking at what are the barriers to achieve this.

But the more pertinent question here is whether those changes in infrastructure, in our manufacturing processes, and in the creation of new "green" industries and businesses, would lead to a more resilient economy.

Never mind the fact that the Arctic ice cap is melting 30% faster than any previous projection. The urgency for re-examining some of our traditional concepts of economic growth comes from another corner. The largest corporations in the United States, including GM (not to mention the Phoenix Coyotes) are on the brink of bankruptcy, something that was unheard of a year or two ago. Whatever happened to that old adage "What is good for GM is good for America"?

And here is the challenge to all of those researching what a green economy in Canada might look like: can we demonstrate persuasively that “ecoflation”, what Diane Francis and Deborah Summer consider to be a curse, might in fact be the pathway to the economic salvation and long term sustainability?

Can we be creative and find ways to devise new business models, new concepts of community, and longer-term security as a result of this transition?

1 comment:

Anonymous said...

I am convinced that GM is crumbling because of its own lobbying successes. It tried so hard to exclude fuel efficiency and alternative sources of energy into its car designs, that it failed to see that the environment issue was a sign of an upcoming opportunity. Now the world has moved on, buying greener cars while GM struggles to play catch up, perhaps too late. This should be a lesson learned for businesses out there claiming that the environment issue will reduce their profit margins.