Towards A Prosperous, Healthy World

By: Ryan McGuine

In the year 2000, the United Nations (UN) adopted the United Nations Millennium Declaration, a document that established the eight Millennium Development Goals (MDGs) for the world to accomplish by 2015. Although not every goal was accomplished, many acknowledge the value of delineating a set of targets, which galvanized international efforts and helped concentrate aid. With this in mind, the UN replaced the MDGs with the Sustainable Development Goals (SDGs), a set of objectives designed to “end poverty, protect the planet, and ensure prosperity for all,” and intended to be completed by 2030. At 17 goals and 169 targets, the SDGs as a whole are notoriously expansive and, like all UN initiatives, non-binding. Among the goals are SDG9: “Industry, Innovation, and Infrastructure”—which includes among its targets increasing industry’s share of GDP, facilitating sustainable and resilient infrastructure, and supporting domestic technical development—and SDG13: “Climate Action”—which has targets aimed at strengthening adaptive capacity to deal with climate-related disasters, and mobilizing funding to assist developing countries with mitigation efforts. These two goals in particular have the potential to secure enormous gains towards ensuring prosperity while protecting the planet.

Economic growth is one of the most effective means of widespread poverty reduction. While growth can be generated in the short term in a number of ways, such as increasing the savings rate or reducing the capital depreciation rate, long term economic growth requires continuous productivity growth, typically the result of technological change and innovation. Productivity growth is most easily achievable in industrial sectors like manufacturing and construction, so, over time, these sectors’ share of GDP tend to increase, which leads to per-capita income growth. However, one need not rely on economic theory to demonstrate that it is possible to decrease poverty via industrialization. The number of people living below the World Bank’s $1.25/day poverty line was more than halved between 1990 and 2015, with close to three-quarters of the achievement attributable to economic growth in China. The “Asian Tigers”—Hong Kong, South Korea, Singapore, and Taiwan—and other East Asian countries including Japan, Indonesia, Malaysia, and Thailand have increased measures of wellbeing by many multiples over the course of a few lifetimes, despite receiving less attention. India is on track to accomplish comparable results in the decades to come. While this success is virtually unparalleled in the course of human history, little about these countries’ trajectories should come as a surprise, given their commitment to productivity-promoting strategies.

If industrialization has the potential to increase human development outcomes, what does it mean to do so sustainably? “Sustainable development,” first coined by the UN Brundtland Commission in 1987, and solidified as Agenda 21 by the UN Earth Summit in 1992, is defined as development that “meets the needs of the present without compromising the ability of future generations to meet their own needs.” Natural capital, the stock of resources and environmental conditions consumed in order to meet the basic needs of humans, must by definition be depleted by humans. However, if it is depleted faster than it is produced, subsequent generations will be worse off than their predecessors. Natural capital can be depleted in a number of ways. Most obviously, a certain resource like timber or minerals can be removed from the natural environment and used to produce a certain good. However, the production of carbon dioxide emissions also represents a depletion of natural capital, in that over time, the associated changes in weather patterns make it more difficult to meet the basic needs of Earth’s population.  For example, while many Chinese citizens are better off than a few decades ago because of affordable manufactured goods, increased car ownership, and more buildings with air conditioning; its massive increase in carbon dioxide emissions contribute to lower crop yields by Chinese farmers—something that becomes increasingly important as fewer people are employed in agriculture.

Even though self-interested countries have some incentive to reduce their carbon emissions in order to ensure the possibility of continued natural capital production, in almost no case do the negative externalities of carbon emissions entirely outweigh the benefit to society associated with the use of fossil fuels.  As such, there must be some optimal level of carbon emissions. For developing countries in particular, the relative value of emissions mitigation versus increased emissions is quite low. In the short term then, sustainable development means low-carbon development, not carbon-free development, and the challenge becomes how to achieve SDG9 and SDG13 simultaneously. Fortunately, countries interested in replicating Asia’s economic success can do so without the same extent of carbon emissions, since a few key interventions can go a long way towards reducing carbon emissions.

It is first worth considering whether paths to industrialization are necessarily so carbon intensive, since structurally avoiding emissions throughout development is easier (read: cheaper) than reducing them by replacing technology down the road. Historically, the industrialization progression has followed a path from agriculture to manufacturing to services as the dominant sector of the economy. While the general path is likely unalterable, it is possible to modify the pattern of change within the manufacturing phase. The traditional manufacturing phase has transitioned from textiles to heavy industry—iron, steel, and chemical products—to electronics manufacturing. Digging deeper, textiles and electronics manufacturing both require mainly electricity as an input, which can be produced with comparatively low emissions. Developing countries, then, would do well in choosing such industries over areas of heavy manufacturing. Today, an opportunity exists for developing countries. Transportation costs are declining and heavy industry sectors have already been established. These two factors make it possible for developing countries to establish an engineering sector without producing iron and steel domestically and produce chemicals without refining crude oil domestically. This is useful for keeping carbon emissions low, since heavy industry products require huge amounts of energy that is typically met by fossil fuel combustion, and developed countries have decades of learning and expertise in energy efficiency. Beyond that, there is mounting evidence that import-substitution industrialization strategies—developing certain domestic industries behind trade barriers in order to avoid competition from foreign firms—have been less successful than strategies based on pursuing a country’s comparative advantage.

In addition to adjusting a country’s industrialization path, its carbon emissions can be brought down by electrifying processes that currently rely on other primary sources of energy like natural gas, coal, or coke. Electric mechanisms are more efficient than fossil fuel-powered ones, including electric vehicles instead of internal combustion cars for transportation, induction stovetops instead of gas stoves in homes, and electric boilers instead of coal fired ones for industrial applications. It is unlikely that electricity will be able to completely replace fossil fuels in certain applications like steel and cement, but with some additional effort, it has the potential to replace fossil fuels across many sectors in years to come. Despite better efficiency, electrifying such large swaths of the economy will surely result in an expansion of electricity generation. Fortunately, though, electricity has the benefit of being relatively easy to decarbonise. Toward this end, natural gas—which emits about half as much carbon dioxide than coal when burned, and can utilize a more efficient process to to generate electricity than coal—is cheaper to produce than ever before. Even more, innovations in technology are reducing costs for renewables and energy storage faster than many thought was possible, and electricity market reform is facilitating the integration of that intermittent renewable generation into the grid. Last year in the US, carbon emissions from the power sector fell below those of the transportation sector for the first time ever.

There has been much effort towards increasing energy access. Nearly two billion people around the world lack access to electricity or rely on poor electric service, while another three billion use biofuel like animal dung and firewood for cooking and heating. In 2011, former UN Secretary-General Ban Ki-Moon launched the initiative Sustainable Energy For All with the explicit goal of achieving universal access to energy by 2030. The initiative played a significant role in the inclusion of SDG7: “Affordable and Clean Energy”—whose targets focus on ensuring access to modern energy sources, as well as enhancing international energy technology transfer and expanding the infrastructure necessary to provide energy in developing countries. Venture capital-backed companies have recently joined aid organizations in the fight against rural energy poverty with distributed renewable energy sources like solar photovoltaic (PV) paired with batteries for energy storage. Since systems are installed one household or community at a time, though, on the aggregate, rural electricity schemes have barely managed to keep pace with population growth.

Considering that economy-wide electrification requires an expansion of electricity generation, it turns out that it is one of the best ways to meaningfully address the energy access targets under SDG7 while improving welfare. Even if it were possible to provide universal access to modern energy technology, that alone is unlikely to dramatically improve development outcomes. Since gaining access to distributed energy sources usually does not get translated into productivity gains, energy consumption, not merely energy access, is much more closely correlated with better living conditions. Residential applications certainly increase utility—lighting allows children to study after dark without worrying about spilling kerosene and getting burned, and using electric stoves instead of open fires quantifiably reduces cases of lung and heart disease in women. However, large-scale, productive enterprises like agricultural processing facilities and manufacturing factories create a load large enough to necessitate cost-effective power generation and distribution, while simultaneously creating incomes large enough to raise energy consumption.

Finally, since most high-productivity sectors cluster in cities, industrialization tends to drive urbanization. Cities are home to around half the world’s population (and growing) and account for two-thirds of world energy demand, so building them well is crucial. Many inputs necessary for infrastructure like concrete, steel, and the operation of fossil fuel-powered heavy machinery are incredibly carbon intensive. However, since much of it will be used for decades, the vast majority of infrastructure’s carbon emissions result from its usage, rather than its construction.  A manufacturing plant with automated controls and energy efficient machines results in less net carbon emissions over its lifetime than one with no attention paid to efficiency, and a subway network results in less net carbon emissions over its lifetime than a street network driven on by millions of internal combustion engines. This phenomenon, known as carbon lock-in, means that the world is already committed to carbon emissions due to infrastructure built in the past, and makes planning infrastructure built today essential to achieving the SDG13 in 2030.

There are many established best practices in urban planning to avoid carbon lock-in. For example, neighborhoods should pursue functionally-balanced, mixed-use development plans that incorporate office, residential, and commercial facilities in a high-density space, while also offering functional public spaces. This reduces the distance people need to travel and makes it easier to utilize human-powered means of transportation like walking and cycling. Since people will inevitably need to travel beyond their neighborhoods, though, well-connected mass transit networks can reduce the usage of private motorized vehicles, thereby reducing per-capita carbon emissions.  Electrifying mass transit systems could further drive down carbon emissions because electricity is more efficient at transferring energy than fossil fuel and reduces carbon emissions faster than many other sectors. Finally, public works projects should take advantage of possibilities to use waste from services offered out of necessity. Recyclable materials can be broken down and used as inputs for other products; biodegradable waste can be sent to digesters to produce methane for energy; and combined heat and power (CHP) networks use some of the steam initially produced for power generation in industrial processes or heating and cooling applications, which increases total energy efficiency.

By including a goal about industrialization as one of the 17 SDGs, the United Nations has recognized the importance of structural change in widespread poverty reduction. However, in order to meet the needs of the present without compromising the ability of future generations to meet their own, all facets of that industrialization must be planned and carried out with a mind to minimizing carbon emissions. While mitigating climate change seems daunting, significant reductions can be made by taking steps today that are both identifiable and technically feasible, or at least close to being so.

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