The Development of this publication has been made possible by a Grant from the Purves Environmental Fund.

Cents and Sustainability (OCF20+) Précis and Rationale
	1	Address important and significant barriers to achieving Sustainable Development
	2	Demonstrate it is possible to have economic growth and reduce environmental pressures
	3	Demonstrate that a Socially Sustainable form of Economic Growth can be achieved
	4	Start to address some of the effective ways to reduce poverty and lift economic prosperity in the developing world
	5	Demonstrate in detail how to decouple economic growth from environmental pressure through a renewed focus on resource productivity
	6	Show how threats and limiting factors to economic growth such as high oil prices (the peaking of world oil production) can be turned into an opportunity to reduce oil dependency, improve global security and help economic growth
	7	Bring new clarity to other key environmental issues and debates
	8	Provide policy guidance to help nations achieve a socially and environmentally sustainable form of economic growth and provide an economic case for effective institutional reform
	9	Improve integration of sustainable development into the central agencies of government
	10	Provide an overview about the coalitions forming to promote sustainable development

This publication seeks to build on from the 1987 book, Our Common Future, and our 2005 book, The Natural Advantage of Nations, to make a contribution to furthering the understanding on why current development is unsustainable, and use this as a base to explain how to overcome such barriers to achieving sustainable development. Since this is such a broad topic, this publication, Cents and Sustainability, focuses specifically why so little progress has been made on the key debates about whether seeking to achieve sustainable development will help or harm economic growth and jobs.

Our Common Future was one of the first books to suggest that it is possible to reconcile economic growth and sustainable development, but at the time it was written there was relatively little data to resolve such a complex issue. At the time the book was criticised for this positive view of the potential of economic growth to be made environmentally sustainable. Twenty years on, there is now far more data to analyse this complex question around which there is still so much confusion. It is important to seek to resolve this debate because now, twenty years on from the publishing of Our Common Future, many business leaders, politicians and decision makers still assume that significant trade offs between achieving sustainable development and economic growth and jobs are inevitable. This publication, like Our Common Future , challenges these assumptions, supported by the latest reports, case studies, surveys and literature.

This publication will focus on this issue because the single most significant barrier to achieving sustainable development has been the predominance of the belief that the more one does to help the economy the worse off the environmental and social outcomes will be, and the more one does for the environment or society the worse off the economy will be. This has meant that in the past corporations, businesses, governments, research institutions have not had much encouragement to explore paths to an ecologically sustainable economy. This debate is of relevance to all countries. As Frances Cairncross, recently retired editor of The Economist magazine, wrote in her book Green Inc. in 1995:

"Traditionally many leaders of developing countries have been reluctant to embrace sustainability because they fear it will slow development, growth and business investment in their country . [The assumption that an inevitable] compromise [is needed between sustainability and economic growth] is especially important in the case of developing countries, where the trade-off between economic growth and greenery often seems particularly stark. Not only are their people the poorest; their numbers are growing the fastest. Their governments are unlikely to welcome policy proposals that appear to deprive them of the chance to improve living standards." [1]

Also historically many politicians and economists have assumed that efforts to build community, improve and invest in social capital often would lead to a trade off with economic growth. This perspective sees development and economic growth as a tough process full of trials and tribulations. This perspective demands that "soft" options such as government spending to look after the poor and the vulnerable, and protecting and restoring the environment and other luxuries can only be supported "later on" after a certain level of economic growth has been achieved. This perspective does not see how investments in social and natural capital can assist economic growth. Hence the importance of addressing these beliefs and mindsets which lead to many decision makers, in the past, opposing sustainable development. Cents and Sustainability does this in detail in the first three sections.

The success of an economy and of a society cannot be separated from the lives that members of the society are able to lead . we not only value living well and satisfactorily but also appreciate having control over our lives.

Amartya Sen, 1999[8]

This section asks if, instead of pursuing economic growth at all costs, governments also pursued strong social-sustainability goals what would be the effect economic growth? These goals include reducing corruption and inequality; improving labour and health standards; seeking to create higher employment; and addressing the aging population crisis, whilst seeking to end extreme global poverty. The next section, Section 3 considers what is the effect of pursuing strong environmentally sustainable goals on economic growth. An executive summary of some of the key empirical studies on each topic is provided at the start of Section 2 and 3 to provide the reader with a succinct overview.

If the empirical evidence outlined in this section shows that through focusing on achieving social sustainability, higher economic growth can be achieved as well as better national well-being, then this provides half of the case to prove that it is possible to have a form of economic growth that is socially and environmentally sustainable. It will also have significant political implications demonstrating the value to politicians that achieving best practise in social sustainability can help economic growth rather than harm it. By examining these questions this section will, at the very least, better inform these discussions on the best way to achieve win-win economic and social results. Properly understood sustainable development is all about seeking to find ways to achieve economic, social and environmental benefits with no major trade offs both in developing and developed countries. This book like Our Common Future through this discussion seeks to provide a valuable resource to help and encourage such social sustainability efforts around the world. Let's consider an example a social sustainability such as reducing corruption. The problem of corruption highlights more clearly than any other issue that economic growth and social and environmental sustainability need not be mutually exclusive. Corruption is widely regarded as one of the biggest impediments to economic growth and social and environmental sustainability. The World Bank has ' identified corruption as the single greatest obstacle to economic and social development'[9] In 1995, Mauro[10] presented empirical evidence to help prove the negative relationship between corruption and long-term economic growth. In 2003 Kofi Annan, United Nations Secretary-General, in his statement on the adoption by the General Assembly of the United Nations Convention against Corruption stated; ' Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a government's ability to provide basic services, feeding inequality and injustice, and discouraging foreign investment and aid.'[11]

Addressing corruption would not only help economic growth and social sustainability goals, it would also allow the environmental sustainability goals to be achieved. Some of the most compelling evidence for this comes from simply comparing Transparency International's (TI) 2000 Corruption Perceptions Index (CPI), which ranks 90 countries, with the performance of these same countries in the Environmental Sustainability Index (ESI). The 2000 TI CPI revealed a 0.75 correlation with ranking of environmental performance.[12] 'Corruption and environmental destruction go hand in hand', TI Chairman Prof. Dr. Peter Eigen said. ' The ESI underscores that the battle to preserve the world's natural heritage can only be won if there is transparent and accountable government ', Eigen said at the World Economic Forum in Davos in 2001.

A closer examination of social sustainability goals finds many such win win synergies with environmental and economic goals. Take for instance the economic goal common to many cities and businesses of seeking to attract the most creative business leaders and workers. What attracts workers with such talents? How do they make their residential decisions? Why have some cities been unable to attract talented technology workers? Quantitative research shows that a key criteria is the quality of a cities environment in determining whether such creative and talented people choose to settle into a city or not These people are highly mobile and will seek out cities and regions with good environments and social services. Hence, many of the cities and regions that are succeeding are those that care about their environment and their most precious resource: their people.

Other synergies between social, economic and environmental goals that are discussed and shown to be valid in Section 2 include the following;

That investments in natural capital are key to ensuring poor and developing countries can achieve lasting economic growth without destroying their environment. In the Section 3 and 4 of the book decoupling economic growth from environmental pressures and better managing and restoring natural resources as well as biodiversity, to create sustainable prosperity, is discussed in detail.

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4. Start to address some of the effective ways to reduce poverty and lift economic prosperity in the developing world

Another of Our Common Future's significant achievements and legacies was bringing environmental, development and poverty reduction issues together to present a clear way forward for humanity that left no one behind. Hence the focus on poverty reduction in this 20 year update and its inclusion as one of the main social sustainability goals in this book. The common perception persists that it would be economically prohibitive to end extreme poverty. Yet, as Section 2 will show, the economists disagree with this perception. Jeffrey Sachs for instance, in The End of Poverty , brings together the case that it is possible and extremely affordable to end extreme world poverty by 2025 and thus help numerous countries which currently experience negative economic growth to achieve a transition to positive economic growth. He writes:

The truth is that the cost now [of ending extreme poverty] is.. small. Most importantly, the task can be achieved within the limits that the rich world has already committed: 0.7% of the gross national product of the high-income world, a mere 7 cents out of every $10 in income. All the incessant debate about development assistance, and whether the rich are doing enough to help the poor, actually concerns less than 1% of rich-world income.[13]

Econometric studies show that the US economy, growing at 1.9% per annum, would reach the same level of increased prosperity in May 1 of 2010 paying 0.7% of GDP rather than January 1, 2010 if it continues paying 0.15%. These issues and such studies will be discussed in detail in Section 2 of Cents and Sustainability. The unfortunate truth, that Sachs himself points this out in The End of Poverty, is that governments have been making commitments to the 0.7% of GDP target on and off now for decades with few governments ever delivering on that promise. Such a commitment is needed to ensure that those countries currently in a poverty trap are able to build up their social, environmental, financial and institutional capital to escape being trapped in poverty and be resilient to future shocks to keep building their economy sustainably.

This pattern of the poverty trap and how to break it is outlined in detail in The End of Poverty[14]. In this book Jeffrey Sachs shows that the extreme poor find themselves trapped in poverty because the ratio of capital per person (GDP per capita) actually falls from generation to generation because of depreciation of what little capital they have and loss of natural capital. To paraphrase Sachs, whether capital is accumulated and the poverty trap is broken fundamentally depends on whether households and business are able to save some of their current income or contribute some taxes to government at a higher rate than that which capital depreciates. Capital is diminished or depreciated as a result of the passage of time, wear and tear of equipment for instance, or the death of skilled workers.

Also the amount of capital per person declines when the population is growing faster than when capital is being accumulated. So even if there is net positive capital accumulation whether this translates into rising income/economic growth per capita depends on whether the net capital accumulation is large enough to keep up with population growth. Much faster population growth in most developing countries is offsetting comparatively faster GNP growth, causing GNP per capita growth rates in these countries to be low or even negative. When countries get their foot on the ladder of development they are then able to continue an upward climb. The problem is that currently most poverty occurs globally because nations are not even on the first rung of development. Once countries and the extremely poor can be assisted up the first rung then virtuous cycles can be created. If people and nations are trapped below the first rung on the ladder of development as the simple economic model above shows they will simply slide into deeper and more extreme poverty due to depreciation, population growth, greater vulnerability to disease, outside shocks (such as climate change) and the pressures this puts on increasingly scarce natural resources and ecosystems.

'Even if well-governed countries stuck in a poverty trap mobilize domestic resources to pay for the interventions, they will not be able to afford the entire cost, and the difference must be borne by the developed world,' writes Sachs, whilst the director of The Earth Institute at Columbia University and of the United Nations Millennium Project.

Sachs outlines how helping those countries in the poverty trap to pursue sustainable development is key to ending poverty because sustainable development takes an inclusive approach that does not ignore any current or future problems like environmental degradation. Environmental degradation from deforestation, flooding, drought, desertification, land degradation, loss of fisheries and climate change can devastate the lives of the poor and vulnerable globally. Sachs shows how a sustainable development approach looks for synergistic ways to address multiple problems which build natural and social capital to communities. Sachs outlines clearly in The End of Poverty how in the past some have underestimated the complexity of the task of poverty reduction. He explains clearly why ' a differential diagnosis approach, which some other economists call an inclusive wealth approach, is needed to deeply understand the causes and solutions of poverty' . This book will show where such approaches are being applied in the world and what progress has been achieved to date.

In The Natural Advantage of Nations publication, we outlined how now over 50 of the largest 100 economic entities are no longer nations, but corporations. Hence the private sector also has responsibilities as their decisions and practices effect the lives of millions living in poverty. Much has been written on both the negative and positive practices of corporations around the world in developing countries. One of the best overviews of the latest thinking on how best the private sector can play a positive role to reduce poverty in this area is outlined in Jane Nelson and Dave Prescott's report Business and the Millennium Development Goals: A Framework for Action[15]. In their report they cover the myriad of ways that private sector can and is already starting to play its part to help achieve the UN Millennium Development Goals and thereby help reduce poverty. Another key recent publication in this field that this book will reference comes from Stu Hart. Responding to the realization that ' the strategies we pursue over the next decade or two will determine the future of our species and the trajectory of the planet for the foreseeable future ', Stu Hart in his new book, Capitalism at the Crossroads , takes the time to go back over the base principles and concepts of sustainable business practices, to then strengthens this expanding body of knowledge with leading examples that combine international attention and capital with the ingenuity and aspiration of those in the developing world.

This publication Cents and Sustainability will discuss some of these exciting ways that the private sector, government, institutions and NGOs can work together to make a difference. A stunning example of such co-operation is shown by the results of the solar barefoot engineering program in North West India. At the Barefoot Engineering College woman have been trained to make circuits for solar lighting and also how to install and maintain hand pumps, water tanks, solar cooking heaters and pipelines. Just one of the Barefoot engineering products, solar lanterns, has transformed community life. Traditionally, only the boys have been able to get an education with the young girls needing to work in the fields during the day for the families to survive. Now thanks to solar lanterns they are now able to run a school in the evening, after dark, so the young girls can learn to read and write after their work during the day. Finally, still more profound changes in the community have evolved. The female Barefoot solar engineers are now so respected by the communities in north-east India that they are being asked to represent the region in government.[16] The Indian government and overseas aid has now enabled over half a million such solar lanterns to now be in use throughout India.[17]

Examples like this also allow us to show where there are genuine opportunities for the private sector to make a difference. Whilst clearly there is much that governments through Overseas Development Aid (ODA) can do here, there is also a significant opportunity here for the private sector to help alleviate poverty. Significant entry points exists for the private sector such as the fact that globally millions of tonnes of kerosene are consumed per year to meet the growing energy demands in developing countries around the world. This kerosene market is worth US$48 billion/year.[18] Kerosene, disposable batteries and imported fossil fuels for running small generators have many economic disadvantages, as indigenous people struggle with high energy prices. A third of the world's population uses kerosene based lighting with 2 billion people without access to electricity. The inefficient use of current energy resources creates a significant opportunity into which the latest energy efficient and renewable energy technologies can play a significant role to reduce poverty.

This has been recognized in the prestigious Science journal in 2005 where Mills, from the US Lawrence Berkeley Labs wrote that, "An emerging opportunity for reducing the global costs and greenhouse gas emissions associated with this highly inefficient form of lighting energy use is to replace fuel-based lamps with white solid-state ("WLED") LED lighting which can be affordably solar-powered. Doing so would allow those without access to electricity in the developing world to affordably leapfrog over the prevailing incandescent and fluorescent lighting technologies in use today throughout the electrified world."[19] Once the system is installed, the WLED powered lamps should last for 20-40 years. The extreme efficiency of LEDs allows them to be powered or their batteries recharged through many renewable energy methods - microhydro, wind, solar, biofuels, biomass - for relatively low cost. Also due to the kerosene market there are already distribution networks in place throughout the developing world for LEDs and renewable energy technologies. New organizations like Lighting Up the World and Barefoot Power are forming to help the public and private sectors realize this opportunity respectively. A rapid scaling up is technically possible and would already be profitable for the private sector.

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5. Demonstrate in detail how to decouple economic growth from environmental pressure through a renewed focus on resource productivity

In the past, economic development has periodically faced one or more limiting factors, including the availability of workers, energy resources and financial capital. Technological innovation has overcome the lack of labour as a limiting factor by increasing labour productivity over 100 fold in just three hundred years. A lack of financial capital was addressed by the formation of central banks, credit, stock exchanges and currency exchange mechanisms. A lack of cheap energy was overcome with the discovery and refinement of oil.

This new book asks the critical question of what will be the threats and limiting factors on economic growth in the 21st century, how can they be addressed and instead turned into opportunities for greater prosperity? Economic growth fundamentally comes from increasing productivity gains. This publication in Section 1 and then in Section 3 and 4 demonstrates the value of a renewed focus on resource productivity in combination with a focus on traditional sources of productivity improvement to achieve still higher productivity gains and economic growth for decades to come. This book will show that taking this broader approach to productivity gains allows the potential for dramatic improvements in productivity of business and the economy whilst also addressing threats to long term prosperity such as the potential crisis from climate change and the threat of high oil prices.

Resource productivity gains that, in principle, can help economic growth can be achieved through the following areas, in addition to energy efficiency: eco-efficiencies; leasing services rather than selling products; recycling and re-manufacturing; lean thinking; green buildings; greater efficiencies in the built environment; better urban design; materials choice; whole system design; designing out toxic chemicals; bio-remediation; utilising ecosystem services - eco-machines; innovation inspired by nature - Biomimicry; supporting local economies; practising good soil conservation techniques; and encouraging fair and sustainable trade, to name a few.

The wise implementation of resource efficient and effective strategies can, therefore, be cost effective in both the short and longer terms. By reducing, remanufacturing, recycling, and reclaiming or on-selling, businesses can realise immediate cost savings. As well as providing new ways to cut costs and improve productivity, the challenge of improving resource productivity also provides firms with a new opportunity to differentiate their products and gain market share based on the environmental attributes of their products and processes.

Fundamentally, the reason that these sources of 'green' resource productivity growth opportunities could, in principle, deliver higher economic growth than business as usual is that if business, government, citizens and consumers simply tinker with current systems of production-consumption then the productivity gains will be small. There is now a significant body of evidence that shows that large resource and labour productivity gains can often cost less than small productivity gains through what are called design for sustainability/whole system design and lean thinking approaches.[20] Design for sustainability strategies can help achieve higher profits and economic growth than business as usual.

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6. Show how threats and limiting factors to economic growth such as high oil prices (the peaking of world oil production) can be turned into an opportunity to reduce oil dependency, improve global security and help economic growth

Section 3 will also discuss issues such as how there is a significant threat to the world's capacity to achieve long term economic growth emerging from the end of 'cheap oil', the peaking of world oil production and unpredictable oil prices. The price of oil has and will have a significant effect on short and long term prosperity. Alan Greenspan has pointed out that "All economic downturns in the US since 1973 have been preceded by sharp increases in the price of oil."[21] There is concern that a peaking of world oil production is approaching and that it could have negative economic effects. The Natural Advantage of Nations referred[22] anew significant study by Rocky Mountain Institute (RMI) called Winning the Oil Endgame: Innovation for Profits, Jobs, and Security[23] , a Pentagon co-funded blueprint for making the US oil-free within fifty years. The plan outlines how US industry can restore competitiveness and boost profits by mobilising modern technologies and smart business strategies to displace oil. The route RMI outlines shows how the transition beyond oil can be led by private sector for profit working in partnership with R&D bodies and with effective economic incentives from government. The strategy integrates four technological ways to displace oil: using oil twice as efficiently, then substituting biofuels, saved natural gas, and, optionally, hydrogen. (See Figure 2)

Figure 2: Strategies to reduce Oil Dependency.

Source: RMI (2005)

There are additional studies to those referenced in RMI's significant report. These reports show the value of investing in sustainable transport and public transport for purely economic growth reasons. For instance, it's long been believed that building roads is good for the economy of cities while public transport is a financial drain. A 1999 report to the World Bank (published in Sustainability and Cities and summarised by the researchers in The Natural Advantage of Nations ) prepared by world leading transport experts is turning this way of thinking on its head. Using the largest global database ever assembled on cities and transport they found 'that cities which emphasise walking, cycling and public transport are healthier financially and spend less of their wealth on transport costs. Their work also explains why this is the case.

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7. Bring new clarity to other key environmental issues and debates

The new book focuses on bringing clarity to the core debates on trade offs between economic growth, profits, society and the environment because by doing so it can help bring clarity to other debates on specific environmental and social issues. Consider the issue of climate change and global warming. Increasingly, people are aware that the IPCC has recommended that a reduction of 60% in greenhouse gas emissions by 2050. At the same time, the International Energy Agency forecasts that, 'if policies remain unchanged, world energy demand is projected to increase by over 50% between now and 2030'.[24]

There is now, therefore, great interest in how to achieve significant decoupling of economic growth and greenhouse gas reductions, This book focuses on past efforts to decouple economic growth from environmental pressures because it is important to apply these lessons to the issue of decoupling economic growth and greenhouse gas pollution. This book focuses on learning the lessons of success of past efforts to achieve significant decoupling, such as efforts to reduce sulphur dioxide by 90%, as few leaders believe that such reductions of greenhouse gas will be possible.

In late 2005, even Tony Blair, one of the most articulate political world leaders on the topic of the need to achieve deep cuts to greenhouse gas emissions has stated that he does not think nations will sign up to a Post Kyoto Framework, because he is not convinced that it won't harm a nation's economic growth.[25] Many other political leaders have shared Tony Blair's concerns. Therefore it will be impossible politically to make progress on the climate change debates and build political will for a Deep Cuts Post Kyoto Framework without addressing these political concerns about the risk of loss of economic growth. Section 4 of this new book will focus on addressing these concerns and using the results from Sections 1-3 to help clarify debates about whether addressing global warming will help or harm economic growth. Section 4 will highlight for instance how many economists do not share the fears of our world leaders. In 1997, a group of about 2500 economists, including 6 Nobel Laureates led by Kenneth Arrow and Robert Solow, issued the following declaration at a January 1997 meeting of the American Economics Association:

The balance of evidence suggests discernible human influence on global climate. As economists, we believe that global climate change carries with it significant environmental, economic, social and geopolitical risks and that preventative steps are justified . Economic studies have found that there are many potential policies to reduce greenhouse gas emissions for which the total benefits outweigh the total costs. For the United States in particular, sound economic analysis shows that there are policy options that would slow climate change without harming American living standards, and these measures may in fact improve U.S. productivity in the longer run.[26]

This book will provide an easy to understand layperson's overview of this to help clarify this issue once and for all. Also this section will demonstrate how the significant decoupling of greenhouse gas emissions from economic growth is possible. There is now great interest in this topic, especially since Al Gore's film An Inconvenient Truth and the publication of the UK Stern Review. This book's focus on solutions to the challenge of human induced climate change leads off from where both Al Gore's film and the UK Stern Review left off.

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8. Provide policy guidance to help nations achieve a socially and environmentally sustainable form of economic growth and provide an economic case for effective institutional reform

Many people still believe that once a country has achieved a certain level of development and economic growth that country automatically aspires for loftier environmental and social goals and standards. But, in fact, it is not true.[27] The evidence to date is overwhelming that the only cases of significant decoupling of environmental pressure to economic growth have occurred when there has been appropriate policy settings from government that have underpinned effective business, government and civil society partnerships and action. The Brundtland report, Our Common Future , outlined many aspects of an environmentally sustainable form of economic growth. But one of the report's weaknesses was the lack of attention to the critical role of policy and institutional change in achieving sustainable development. Researchers have addressed this over the last 18 years and now we know in detail what is required.[28] Also, researchers are now aware of the range of policy processes and products, so that no matter what the political climate there are politically viable ways forward.

The OECD has done significant work on this question. In a recent review of progress amongst the OECD to achieve decoupling, undertaken in 2004, the OECD stated that current policy settings throughout the OECD are insufficient. The report stated that: Overall, it finds that countries have made a good start in a number of areas, but much more ambitious measures will be needed if the strategy is to be fully implemented by 2010. Current policies are insufficient to adequately protect biodiversity or address climate change, and the decoupling of environmental pressures from economic growth in key sectors is proceeding too slowly. A number of obstacles to environmental policy reform are identified in the report--including political obstacles, such as poor policy integration, and inadequate information--which will need to be faced. Increasingly, OECD environment ministers will have to work together with colleagues in other ministries, colleagues in other countries, and with partners from business and civil society in order to ensure that appropriate environmental policies can be developed and implemented.[29]

All the evidence points to the need for determined public policy developed through 'good' public policy processes--defined by Professor Steve Dovers in Environment and Sustainability Policy: Creation, Implementation, Evaluation [30] as being comprehensive, purposeful, open and informed. Our team will work closely with a number of mentors including Professor Dovers to develop Section 5 of this publication and bring together for the first time an array of case studies that demonstrate the benefits of smart regulation and other policy mechanisms needed to achieve a socially and environmentally sustainable form of economic growth. The significant e xamples to be studied include; Dealing with Vehicle Emissions in California ; Driving the Uptake of the Best Available Technology in Germany ; and The Rapid Transition in Fuel Shifting in Delhi . One of the main goals will be to provide robust frameworks and policies to overcome even the strongest blocking coalitions. In Machiavelli's famous book "The Prince", published in 1513, he wrote famously about how vested interests can dig in to slow down and even prevent change. A good example of how effective policy and regulatory reform can help overcome entrenched vested interests is shown by electric utility regulations.

"Electric utility experts have recognised for a long time that under regulatory structures (eg: traditional rate-of-return regulation, rate caps etc) utilities do not have an economic incentive to provide programs to help their customers be more energy-efficient. In fact, they typically have a dis-incentive because reduced energy sales reduce utility revenues and earnings. The financial incentives are very much tilted in favour of increased electricity sales and expanding supply side systems."[31] Hence in the past, electric utilities have often opposed and lobbied against sustainable development type initiatives such as a utility run customer energy efficiency program and carbon emissions trading schemes. A new report, Aligning Utility Interests with Energy Efficiency Objectives: A Review of Recent Efforts at Decoupling and Performance Incentives[32] has investigated how to re-align incentives and regulations to ensure that electric utilities and customers win from sustainable development.

Their report has found at least 25 states in the USA with serious utility ratepayer-funded energy efficiency programs in operation all with very positive results. All of these states have addressed the traditional disincentives, by having approved some type of cost recovery mechanism for these energy efficiency programs for the electric utility (eg: a public benefits charge plus the ability to recover additional energy efficiency costs in rates). These include:

•  Decoupling of utility revenues and profits through legislation to reward utilities for selling less energy. Generally in these new regulatory frameworks customers received 85% of those savings as lower bills, while the utility's shareholders received the rest-as extra profits, not to mention the direct savings in infrastructure from the reduced peak load generation requirement: the perfect win-win option for the energy supply sector. This was brought in first in California in 1992. For example, ' retaining 15% of the savings inspired Pacific Gas and Electric (PG&E) in 1992, the U.S. 's largest private utility, to put a halt to building or planning any new conventional power plants. Using this method in California in 1992, PG&E[33] invested over US$170 million to help customers save electricity more cheaply than the utility could make it. That investment created US$300-400 million worth of savings. Customers received 85% of those savings as lower bills, while the utility's shareholders received the rest-over US$40 million."[34] 7 states now in the USA have such decoupling mechanisms now in place'.[35]

Providing shareholder "performance incentives" for achieving energy efficiency program objectives. These can take several forms such as ' providing utilities with a specific reward for meeting certain targets, allowing utilities to earn a rate of return on energy efficiency investments equal to supply side and other capital investments or providing utilities with an increased rate of return either on the energy efficiency investment specifically or overall.'[36] Hence, this book seeks to be a resource to show how interests of almost all can be served through a sustainable development agenda, how to make this happen, and who is already in the lead.

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9. Improve integration of sustainable development into the central agencies of government

Our Common Future emphasized the need for such policy and institutional reform writing that, " Governments, pressured by their citizens, saw the need to clean up the mess..and established agencies to do this in the 1970s.but much of their work has.. been after-the-fact and repair of the damage once it is done. The mandates of the central economic and sectoral ministries are also often too narrow, too concerned with quantities of production or growth. The present challenge is to give the central economic and sectoral ministries the responsibility for the quality of those parts of the environment affected by their decisions, and to give the environmental agencies more power to cope with the effects of unsustainable development. Twenty years on the central agencies of government of most OECD governments are just as concerned with achieving higher economic growth and higher levels of production and experts as they were in 1987. Twenty years on few Treasury departments have embraced new ways to ensure that their decisions take into account potential future environmental negative externalities. Hence probably the most important function that this book will serve is to improve the under-standing and communication between economists and non-economists of how a better understanding of how to decoupling economic growth from environmental pressures can help national well being and prosperity significantly over the longer term. Through such an understanding economists will be able to then see new ways to improve decision making in the central agencies to better factor in social and environmental considerations of their decision making and planning ."

Improving decision making will require improved information to measure and track the performance of new policy and measures. Over the last decade new measures of well being such as the genuine progress indicator(GPI)[37] and inclusive wealth framework[38] which measure sustainable development have been developed. These new measures do show that, once the negative externalities such as the cost of health, pollution, remediation etc are internalised, they show that nations are not achieving much genuine progress. This trend has been shown now in many countries, especially since the 1970s.

This is one reason why it is that academics and much of the environment movement have formed a view that economic growth (e.g. expansion in the size of the monetized economy) is a generally bad thing. This is also one reason why politicians have been traditionally reluctant to use a Green GDP. Politicians are obviously reluctant to adopt a new indicator that will show the national well being has improved less than what currently the GDP shows. In addition, if politicians believe that there are inevitably significant trade offs between seeking better economic, social and environmental outcomes then they will be reluctant to adopt new Green GDP type measures. The good news is that this is starting to change. In response to the UN recommendations the Japanese Economic Planning Agency in 1995 released its first estimates of the Japanese SEEA and Green GDP covering the period 1985 to 1990. Three years later, the Agency revised its estimates and extended the period to 1970-1995.

Taking these developments into consideration, the United Nations University Institute of Advanced Studies (UNU/IAS) launched a project on Trade, Industrialisation and the Environment in 1997. The project sought to measure the environmental impacts resulting from industrialization and trade in Asia, especially China , Indonesia and Japan , within a framework that explores the interactions between the economy and the environment. As part of its research activities, the project compiled preliminary estimates of SEEA and Green GDP for China and Indonesia , based on method employed in Japan . The results of this have been published in " Green GDP Estimates in China , Indonesia , and Japan : An Application of the UN Environmental and Economic Accounting System " edited by Takahiro Akita and Yoichi Nakamura.[39]

Inspired by this the Chinese government now plans to set up a green GDP system in 3-5 years. Xu Xianchun, director-general of the department of national accounts of the National Bureau of Statistics (NBS) of China stated in 2004 that at the first stage, the NBS plans to adopt the calculation methods the United Nations enshrined in its comprehensive environmental economic account system.[40] Xu stated that " the Chinese government is paying more attention to the importance of environment and resources in the economic growth. The change can be seen in the NBS's latest publication, Statistical Communique of the People's Republic of China on the 2003 National Economic and Social Development. " He said, for the first time, the Communique added a special section on resources and environment, briefing the influence of economic development on resources and environment. China is facing the problems of over-consumption of resources in pursuit of rapid economic growth, said Xu, adding that the pure concept of GDP fails to reflect the influence of economic growth on the resources and environment. Xu said the green GDP deducts from the traditional GDP the costs of resources consumption and environmental loss due to economic activities, and it reflects a different national economic growth rate with the GDP. Xu said the green GDP can help people understand the costs of resources and environment during the economic development, urging people to realize that it is unreasonable to purely seek economic growth while ignoring the importance of the resources and environment.

Whilst this may seem encouraging it is worth remembering that for instance a country like Norway has been calculating the costs of resources and environment since 1978. Resources and environmental pollution included in its calculations are mainly mineral, biological, fluid (water power), land, environmental resources and air pollution, and two water pollutants (nitrogen and phosphorous). A comprehensive statistical system has been established that includes energy, existing fishes and forests, air emissions, wastewater (mainly domestic sewage and polluted water from farming), recycling and environmental expenditure. This lays a solid foundation for a Green GDP statistical system.

Also in North America, Canada has adopted new range of indicators. This was discussed in detail in The Natural Advantage of Nations . This is indicative of an emerging trend around the world as more and more societies and politicians are increasingly aware of the limitations of the GDP measure and are seeking to supplement it with additional measurements. Whist there is this emerging trend, case studies like China and Canada are the exception rather than the rule. In most countries still politicians are reluctant to trial let alone take as their central measures of well being these new measures. Fundamentally the mental barrier for politicians is that they believe that there is a there are inevitably significant trade offs between seeking better economic, social and environmental outcomes? If politicians assume that major trade-offs are inevitable then they will be reluctant to ever use the GPI or Inclusive Wealth Frameworks. Hence the importance given in this book to showing that major trade offs are not inevitable and ca