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Technologies, Industrialization and International Environment Issues Ann Rappaport 31 May 2006 Environment and Technology: from local to international issues Environment is a critically important dimension of science, technology and international affairs. As populations increase and urbanize, it becomes impossible to provide food, shelter, employment and mobility without compromising the environment. Even when sustainability is a shared goal, environmental tradeoffs are inevitable given current technology for resource extraction, manufacturing, and energy generation. Historically these tradeoffs were treated as local and sub-national decisions, but beginning in the 1970s, there emerged an understanding that resolution of problems associated with development often required a national approach. In subsequent years, an increasing number of environmental issues have been elevated to international concerns. A challenging question for decision makers is determining when tradeoffs are local or national, when local or national decisions have international implications, and when environmental issues are inherently international. This discussion provides examples of technologies and the internationalization of environmental issues, and explores briefly the role of transnational corporations in this dynamic. Finally, an approach to teaching these concepts to graduate students is offered. Environment and technology have a complex relationship: technologies are essential to detecting, preventing or reducing damage to the environment. At the same time, technologies also damage the environment during their development, manufacture, use and disposal. Regulatory regimes to protect the environment have actively promoted technological innovation. In some cases the innovation was a logical consequence of the regulatory regime and in others it was an explicit policy goal. This latter regulatory strategy, often called technology-forcing, requires a delicate balancing of factors to be effective.1 The regulatory approach now in vogue relies on market-based strategies to achieve environmental goals; whether or not market based strategies are equally effective in stimulating innovation remains to be seen. Effects to the environment are associated with every aspect of human settlement, and with the production and distribution of goods and services. For any activity or product, there are upstream effects including those associated with raw material extraction, conversion of raw materials (e.g. primary metals processing, or oil refining), effects in the manufacturing phase, and downstream effects, that is, effects that are associated with recycling and or disposing the product at the end of its useful life. Please see Figure 1, a very simple schematic showing that environmental effects occur throughout the life cycle. 1 Access to natural resources, their extraction and their processing into energy, food and goods have had strategic value even before the advent of nation states. The environmental impacts of extraction, particularly fossil fuels and metals, can have international implications, but the damage to the environment is primarily local and regional. The following example illustrates how an extraction activity can become internationalized. There is a general tendency to think of high technology as clean, but even a cursory assessment of upstream and downstream effects of a product such as a computer will destroy this myth. For example, the computer contains some copper. Using satellite images available on the internet,2 it is possible to see both the magnitude and the extent of environmental damage caused by the Freeport McMoRan Mine in West Papua, Indonesia, the world’s largest gold mine and the world’s third largest copper mine. Freeport, a US corporation, states in its 2005 sustainable development report that, “The copper concentrate from our mining complex in Papua, Indonesia, and the copper products from our wholly owned Atlantic Copper, S.A. smelter in Spain and our 25percent-owned smelter in Indonesia are essential for the communications, transportation, electronics and other industries on which the world relies.”3 Details of the mine’s history and its environmental and social profile up till 1995 are available in a Harvard Business School case. The case portrays an indigenous community around the mine whose lives have been altered irrevocably, royalties paid by Freeport going to the government in Jakarta, and failing to reach the population whose lives are affected, a surrounding forest extremely rich in flora and fauna that may be compromised by mining operations, and a military accused of human rights violations that provides security to the company. 4 The case can be updated using the Freeport web site and materials generated by nongovernment organizations, also available on the internet. The computer also contains plastic, the origins of which are not benign. Most plastics are petrochemicals, and the extraction, transport and manufacture of petrochemicals can have significant local and regional effects on the environment. Nigeria is one example of a country in which it is claimed that oil profits are retained by the central government and the area devastated by oil extraction remains poor and uncompensated for damage.5 Political unrest in oil producing regions and responses of military regimes have sparked concerns about human rights for decades, and periodically these issues flare to the point where multinational corporations operating in Nigeria reduce or stop production. Both the human rights issues and the supply interruptions have obvious implications for international relations. So far the discussion has focused on raw materials extraction, but in many cases the manufacturing phase has been an environmental concern, leading to the pollution haven hypothesis in the 1970s, well before the advent of what we now consider to be globalization. Environmentalists saw companies pursuing a strategy of locating manufacturing operations in countries where environmental rules were lax or not enforced and accused transnational companies and countries, particularly in the developing world, of partnering in a “race to the bottom.” One consequence of this phenomenon was increasing pressure on companies from their stakeholders (both internal 2 and external) to develop company standards that provided substantially equivalent protection in all of their countries of operation.6 Looking downstream to product disposal there are a host of concerns captured by the local-international paradox referred to by Prof. Horwitch. When the cost of disposing hazardous wastes increased in developed countries due to strict regulations, some companies in the US began sending wastes to developing countries. The international environmental community was deeply concerned that dangerous waste materials would not be handled with appropriate technology, endangering people and contaminating the environment; the goal of the Basel Convention was to stop the flow of hazardous waste from developed to developing countries. Less well known, and of less concern to environmentalists is the volume of hazardous waste that moves across the national borders of developed countries.7 Countries have different ideas about how products should be treated at the end of their lives. This is exemplified by initiatives such as the recent European Union ban on mercury in products. The ban is motivated by concern that mercury enters the environment regardless of the disposal method used. We can expect an increasing number of bans related to heavy metals as their human health effects become better documented and as their fate and transport in the environment are fully quantified (all made possible by the development of sophisticated technology). Clearly these bans will affect the decisions of companies that want to sell goods in EU countries, and may have cascade effects as more nations consider end of product life implications. Up till this point, many of the effects to environment and human health mentioned are local and regional, although the examples make clear that international concerns also can emerge. The issues that transform local and regional environmental decisions into international issues fall into broad categories: Concern that vulnerable human populations are being exploited or exposed to unacceptable risk or contamination Fear that natural resource exploitation and/or pollution may endanger human health or ecosystems, and Evidence that contamination or waste has or may cross political boundaries. Inherently international issues High technology came squarely up against inherently international environmental issues in the 1980s with the accumulation of scientific evidence that certain chemicals were depleting the ozone layer. This was the first time that manufacturers were faced with the concept of global pollutants: it did not matter where the pollutants were released, they affected the stratospheric ozone layer equally regardless of their geographic origin. One group of these chemicals was widely used in the electronics industry (primarily for cleaning), but DuPont, the leading manufacturer of chlorofluorocarbons, had conducted research on alternatives and was able to bring substitutes to market quickly. Several factors contributed to the success of the Montreal Protocol including the availability of 3 substitutes, some of which were less costly than the original ozone depleting chemicals, the small number of companies producing the chemicals, and the relatively small number of commercial uses for these chemicals.8 Technology transfer was an element of the Montreal Protocol, and for some applications the technology being transferred was open source. Returning to Figure 1, there is a block called “product use” that warrants attention. We are well aware of the local and regional air quality and land use implications of using internal combustion engine technology in cars and trucks, but only recently have we started to think about their global effects and more broadly, the implications of our use of fossil fuels on global welfare. This set of concerns has enormous implications for international relations. The issue that will change the balance of power among countries is power, or the urgent need to operate our technologies with clean energy. Our global use of fossil fuels is releasing carbon dioxide into the atmosphere at an unprecedented rate. The United Nations Intergovernmental Panel on Climate Change (IPCC) states: Human activities—primarily burning of fossil fuels and changes in land cover—are modifying the concentration of atmospheric constituents or properties of the Earth’s surface that absorb or scatter radiant energy. In particular, increases in the concentrations of greenhouse gases (GHGs) and aerosols are strongly implicated as contributors to climatic changes observed during the 20th century and are expected to contribute to further changes in climate in the 21st century and beyond. These changes in atmospheric composition are likely to alter temperatures, precipitation patterns, sea level, extreme events, and other aspects of climate on which the natural environment and human systems depend.9 Like the ozone depletion problem, the anthropogenic release of climate altering gases to the atmosphere has a negative effect no matter where the releases occur. It is the opposite of pollution havens because there is nowhere to hide. Unlike the ozone depletion problem, the processes that generate heat trapping gases are ubiquitous. The wealth of developed countries currently rests on their having carbon-intensive economies. To address climate change there is an urgent need to decarbonize our energy sources and an equally urgent interest to ensure that those who are developing do so in a fashion that is radically different from the path followed by the countries currently in the top tier. Every time a new oil or coal fired power plant goes on line, the global community will have to pay the consequences. Not just in the short term, but over the 30-50 year life of the facility and decades beyond.10 This is an enormous international concern because rapidly industrializing economies such as China have very ambitious plans for new power plant development, some of which may be fueled by coal. Similar issues are raised by the desire on the part of people in India and China to acquire personal vehicles. Unless the vehicles are not reliant on fossil fuels, the carbon dioxide emissions of both these economies will increase rapidly to the detriment of the global environment. 4 How can the fossil fuel producing countries of the world, among which Russia and the United States are both important players, be motivated to decrease our own reliance on and use of these resources? This is a vastly different conceptual challenge than the one nations face with conventional pollution. Climate change responses require that fossil fuel rich countries maintain their standard of living and their economic vitality while at the same time declining to use a source of wealth on which their power is based. An article in the Economist begins: “The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.” This intriguing prediction is often heard in energy circles these days. If greens were the only people to be expressing such thoughts, the notion might be dismissed as Utopian. However, the quotation is from Sheikh Zaki Yamani, a Saudi Arabian who served as his country’s oil minister three decades ago.11 When and under what circumstances will the transformation away from the oil age achieve momentum? There are several ways in which the transformation might be framed. Rationales for fossil fuel rich nations to make significant investments now in zero carbon renewable energy include: Competitive advantage—use the substantial pool of intellectual capital, particularly in science and technology, to develop technologies that will supplant the outmoded fossil fuel technologies now in place. Economic development—establish and maintain capacity to manufacture for both domestic use and for export the technology needed for transformation to a zero carbon renewable energy global economy. Social responsibility and equity—those most affected by climate change are likely to be those who contributed least to the problem. This is particularly the case for poor people in developing countries whose lack of resources makes them more vulnerable to extreme weather events and less resilient when problems arise. Transferring zero carbon renewable energy to developing countries is a humanitarian act and thus desirable, and at the same time it confers collective benefits. Self interest—nations that currently rely on fossil fuel as a source of export revenue will need to find another revenue source. Consider the example of Texas in the US. For decades Texas relied on oil and gas as its source of wealth, but in the early 1990s, the state became a net energy importer as supplies began to dwindle. The state has since taken a strategic decision to develop its renewable energy sources and is currently focusing on wind development capacity. Texas officials are, in fact, so excited about the long term prospects for windbased electricity that they have been prodding President Bush and Congress to take steps that would simplify export of Texas-based wind electricity to other states and Mexico in future decades. “Ultimately, Texas will be the nation’s 5 largest renewable energy supplier,” noted one interest group leader with close ties to the former Governor. “We have always been an energy state and will always be an energy state.”12 High long term cost of pursuing business as usual—organizations that experiment early with zero carbon renewable energy technologies may capture first mover advantage in several realms including experience in implementation, credibility in affecting regulatory decisions, and access to markets with new technology products. The strategy of pursuing business as usual may be riskier than it seems, particularly if shareholders divest carbon intensive holdings13 and markets devalue companies whose core business is energy from fossil fuels. Climate change has become a focus of an increasing number of shareholder resolutions, over 80 of which were filed in 2003-2005, making this an important issue for socially responsible investors.14 The concept of a triple bottom line (economic prosperity, environmental quality and social justice) articulated by Elkington15 and embraced by transnational companies and investors has created an impetus for companies to exceed the minimal requirements of government regulations. Leading companies in Western Europe and the United States are already pursuing strategies to reduce their reliance on fossil fuels to signal to their stakeholders and to the investment community that they recognize the importance of taking action on climate change. Educating for the future Given that climate solutions will change the balance of power among countries, a challenge to academics is to educate our students for a very different world. One approach is to engage in action learning, and to use the local-international paradox as a framework. Tufts University made a commitment in 1999 to meet or beat the emission reductions in the Kyoto Protocol. We know that the Kyoto goals fall short of the carbon reductions needed, but the international agreement has great pedagogical value in helping students consider their actions in a larger context. We have transformed the university into a learning laboratory to understand the implications of taking action, using the same basic steps that a nation will take: Conducting an emissions inventory Developing a strategy Taking action Evaluating emission reductions A university’s emissions profile is different from that of a nation, and understanding the differences can be an important learning opportunity. Other opportunities for learning are vast and include distinguishing between actions that can be considered “no regrets” approaches for a nation or an institution from actions that are most effectively taken collectively as a nation or as a global community. At the university actions taken to 6 reduce emission of heat trapping gas are similar to those that would be taken by transnational corporations or by nations. They include: Changing fuels Using renewable energy Increasing efficiency Reducing demand Students at Tufts have been engaged in conducting feasibility assessments, recommending courses of action, implementing social marketing campaigns, and evaluating emission reductions. The university is making progress toward the Kyoto goal even though the campus is growing by adding square feet of building space. Achieving goals set by the Kyoto Protocol is just the first step for our university. We will take more aggressive reductions as resources become available. To date we have satisfied ourselves that meeting the Kyoto reductions is entirely possible with proven technology.16 Next steps are more important. They include taking more aggressive emission reductions on campus and nurturing more technological innovation. Data presented by Margolis and Kammen show that in 1995 research and development spending in the US by industry sectors varied from over 10% in drugs and medicine and professional and scientific instruments to about 1% for the energy sector.17 These data suggest that strategic investments in zero carbon renewable energy research will significantly accelerate the development of technology and will unquestionably influence the balance of power among nations. Decades of academic inquiry related to the environment have produced decision making tools such as Life Cycle Assessment18 that allow developers of new technologies to consider carefully the effects to the environment over the full life cycle of a technology’s development, manufacture, use and ultimate disposal. This is a very different situation than the one faced by developers of fossil fuel technology or even nuclear technology. Universities can position themselves and their students to advocate for additional investments in research and development related to zero carbon renewable energy research, to conduct research, assess the full range of effects of the technology on the environment, and to use their campuses as a venue for pilot scale testing of emerging technologies. All of these activities confer benefits on the university in both the long and short term. At the same time that we develop the knowledge and abilities of our students, our universities can be the setting for development of strategies that will transform our economies from their current dependence on fossil fuel to a future that is powered by zero carbon renewable energy. And our graduates can consider the implications of shifting the balance of power among nations as zero carbon renewable energy technologies are developed, transferred and widely implemented. 7 Raw material extraction Manufacturing Product use End of product life Ultimate disposal Figure 1: Environmental consequences occur throughout the product life cycle 1 Ann Rappaport. 1993. Development and Transfer of Pollution Prevention Technology. Westport, CT: Quorum. 2 NASA Earth Observatory. Available from World Wide Web: http://eobglossary.gsfc.nasa.gov/Newsroom/NewImages/images.php3?img_id=16650 3 Freeport McMoRan,. The Elements of Sustainability 2005. Available from World Wide Web: http://www.fcx.com/envir/wtsdeng.htm 4 Richard H.K Vietor. 1996. Freeport Indonesia. Harvard Business School Case 9-796-124. The case can be updated using the Freeport web site and materials generated by non-government organizations, also available on the internet. 5 A teaching case that examines these issues is “Royal Dutch/Shell in Nigeria (A)” Harvard Business School case 9-399-126. 6 Ann Rappaport and Margaret Fresher Flaherty. 1992. Corporate Responses to Environmental Challenges: Initiatives by Multinational Management. Westport, CT: Quorum. 7 Kate O’Neill. 2000. Waste Trading among Rich Nations: Building a new theory of environmental regulation. Cambridge: MIT Press. 8 David Levy. 1997. Business and International Environmental Treaties: Ozone Depletion and Climate Change. California Management Review, vol. 39, no. 3. 9 Intergovernmental Panel on Climate Change. 2001. Climate Change 2001: Working Group II: Impacts, Adaptation and Vulnerability, Section 1.1 “Overview of the Assessment”, United Nations Environment Program and World Meteorological Association. Available from World Wide Web: www.grida.no/climate/ipcc_tar/wg2/055.htm 10 Even if we were to immediately stop all anthropogenic emissions of heat trapping gases, their concentrations in the atmosphere would continue to rise for decades before they level off. This large delay in the system is not factored into the current policy discourse around climate change. 11 “The End of the Oil Age,” Economist, October 23, 2003. Available from World Wide Web: http://www.economist.com/opinion/displayStory.cfm?story_id=2155717 8 12 Barry G. Rabe. 2002. Greenhouse and Statehouse: The Evolving State Government Role in Climate Change. Pew Center on Global Climate Change. Available from World Wide Web: http://www.pewclimate.org/global-warming-in-depth/all_reports/greenhouse_and_statehouse_/index.cfm 13 CERES argues that climate change represents a multi-billion dollar risk to a wide range of businesses and that fiduciaries who overlook this source of risk are abdicating their responsibility. See CERES 2004. Value at Risk: Climate Change and the Future of Governance [online]. Boston: 2002. Available from World Wide Web: http://www.ceres.org/reports/main.htm 14 Social Investment Forum, “2005 Report on Socially Responsible Investing Trends in the United States: 10 year Review,” January 24, 2006. Available from World Wide Web: http://www.socialinvest.org/ 15 John Elkington. 1998. Cannibals with Forks: the Triple Bottom Line of 21 st Century Business. Stony Creek, CT: New Society Publishers. 16 For additional discussion see Ann Rappaport and Sarah Hammond Creighton. (in press). Cooling the Ivory Tower: University Leadership to Slow Global Warming. Cambridge, MA: MIT Press. 17 Robert M. Margolis and Daniel M. Kammen. 2002. “Energy R&D and Innovation: Challenges and Opportunities.” In Schneider et al., Climate Change Policy: A Survey. Washington, DC: Island Press. 18 See for example US Environmental Protection Agency. Life Cycle Assessment. Available from World Wide Web: http://www.epa.gov/ORD/NRMRL/lcaccess/ 9