By J.R. Pegg WASHINGTON, DC, January 10, 2008 (ENS) ? Concern about environmental degradation is beginning to impact the global economy, according to a new report by an international environmental research group.

The Worldwatch Institute details a lengthy and distressing list of environmental problems caused by the global economic system, but finds some evidence that the world is taking small steps toward a sustainable future.

Worldwatch president Christopher Flavin (Photo courtesy ENB)

“There are early signs that a vibrant, new sustainable economy is just beginning to be created,” Worldwatch president Christopher Flavin told reporters Wednesday at the launch of the organization’s annual “State of the World” report.

The report details how the conventional economic system is inherently self-destructive, failing to take into account the damage done to the environment by a wide range of human activities that create wealth.

But it suggests that is beginning to change.

The world’s leading corporations and investors are beginning to realize “the tremendous risks” that environmental degradation and climate change pose, Flavin explained, and starting to respond to growing demand for greener policies and technologies.

The report estimates that more than $100 billion of annual investment is directly related to environmental concerns.

Wind turbines at Middelgrunden two kilometers off shore east of Copenhagen, Denmark. (Photo courtesy DWIA)

Some $52 billion was invested in renewable energy in 2006, according to figures in the report, a 33 percent rise from 2005.

That figure seems to have jumped to $66 billion last year, Worldwatch says, and is set to rise again this year. The report also estimates carbon markets tripled in 2006 to some $30 billion.

The report notes that major corporations have taken significant steps to improve their environmental performance - largely because they have realized it is a way to save money.

“Reducing wastes typically means reducing costs and companies are increasingly finding this out,” said Gary Gardner, one of the report’s lead authors.

Gardner highlighted how chemical giant DuPont has cut its greenhouse gas emissions some 72 percent in the past 16 years and saved $3 billion in the process.

“Those numbers talk ? and get the attention of businesses,” Gardner said at Wednesday’s press briefing in Washington DC.

Clean technology is now the third largest recipient of venture capital, the report says, and new renewable energy laws and climate policies in China and Europe will “ensure these kinds of investments will continue to flow for many years to come.”

Furthermore, a majority of the world’s largest banks have endorsed new sustainable investment principles and many have announced major investments to tackle environmental concerns, according to the report.

“Innovative ideas and big money are a powerful combination,” Worldwatch says, “and the sums now moving in a green direction are eye-popping.”

Financial giant Citigroup pledged $50 billion last year to address climate change over the next decade, the report notes, and Goldman Sachs invested $1.5 billion in renewable energy technologies in 2006.

An array of Pelamis wave energy converters off the coast of Portugal (Photo courtesy Frazer-Nash)

“An extraordinary wave of innovation is being released,” Flavin told reporters. “There has been a real awakening in the past two years ? Can this wave of innovation be accelerated to the point where we have a chance of turning around the huge environmental challenges that we now face?”

“The only honest answer,” he said, “is that the jury is still out.”

The 2008 State of the World report is Worldwatch’s 25th annual assessment of global environmental conditions. Although it offers an upbeat message about green innovation, much of the report presents a sobering and worrying assessment of the state of the world’s environment, highlighting how economic indicators currently fail to adequately consider environmental degradation.

Nowhere is this more evident than climate change, the report’s authors note, citing former World Bank chief economist Lord Nicholas Stern’s comment that the impacts of rising greenhouse gases caused by human activities represent “the greatest and widest-ranging market failure ever seen.”

In the “Stern Review,” a report issued in October 2006, Stern warned that unabated climate change will cause profound impacts to societies and ecosystems across the planet and could cost the world five to 20 percent of gross domestic product, GDP, annually.

The market failure described by Stern is one “the global economy is not prepared to cope with and that most of today’s economic analysis is not able to understand,” according to Flavin.

In fact, widely used economic indicators such as GDP fail to consider how nature benefits humanity, the report explains, or the economic costs of environmental degradation, whether it be unsustainable logging, air pollution or adverse impacts to water quality.

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That must change, Flavin declared.

“Continued human progress now depends on an economic transformation that is more profound than any seen in the last century,” Flavin said. “We should be practicing a sustainable approach to economics that takes advantage of the ability of markets to allocate scarce resources while explicitly recognizing that our economy is dependent on the broader ecosystem that contains it.”

A growing number of countries are beginning to consider and implement “green accounting programs,” but Worldwatch acknowledges that the influence of such programs is still limited.

Charting course to a sustainable economy is a daunting task, Flavin told reporters, but one that humanity must embrace.

“Whether this transition occurs rapidly enough to avoid a breakdown of the global economic system and the unravelling of political systems is,” he said, “the single largest challenge facing the world today.”

Copyright Environment News Service (ENS) 2008. All rights reserved.