The Economy has a critical role to play for the Environment
Economy and Environment
It is clear that we are experiencing an environmental crisis right now and that it is not stopping.
To reduce emissions and find balance, finances are inevitably needed.
Finance is the natural fixer for a system that has destroyed the integrity of the climate and ecosystems.
The economy has the power to repair and destroy the environment, we choose the first! Economic decisions regarding environmental impact (positive or negative) are so important that they make viable not only the repair of the accumulated consequences of years without a sustainability axis, but they also provide benefit to promote innovation sectors that are based on sustainability.
So the environment is a fundamental part of the new economic policies, which are already being implemented to impact future Net-Zero Emissions goals. Goals which all the inhabitants of this planet must adopt.
A Case of Success
The economy can reverse the trends. A recent example is the creation of Sovereign Bonds in countries such as Uruguay, to cite a serious nation, that are tied to the commitment to reduce their emissions.
Prudently, Uruguay, hand in hand with its experienced Minister of Economy and Finance, Azucena Arbeleche, launched only 750 million dollars in Bonds (tied to the promise of reducing CO2 emission rates). This is an interesting solution in the world of finances.
It opens a new space within the economy in order to obtain a productive and thriving sector, and establishes a reference liquidity and a path through which to execute the energy transition depending on fossils. Uruguay has no doubts; knowing that long-term objectives are only effective if they start early.
With the help of technology there could be more, much more. The issuance of bonds at an ever lower rate if the renewable platform grows with compensations that when executed are accounted for as genuine investment.
How has the issuance of bonds increased thanks to technology?
Incorporation of Technology
The incorporation of technology in energy and environment increases the volume of the economy through this new generated flow, from which previously non-existent liquidity is obtained.
In this case, the applied technology means that climate compensations are directed straight to existing renewable projects in the country's active platform, which through geolocation increase the consumption of renewables by large emitters. Producing a double impact: immediate compensation and renewable consumption.
Objective: Finally, the equation obtains the positive result, making the compensations punctually renewable.
These compensations, directed to renewables, are generating immediate positive impacts. They are reflected in the short and medium term in a greater volume of financial liquidity, within a sector of the economy that was not relevant as a collection item.
At the same time, the impact on the environment due to the consumption of fossil fuels is reduced (which are imported and reduce the treasury of the countries' reserves when prices or international demands rise).
When countries have greater availability of national energy generation through renewables, fiscal spending is reduced and the balance of monetary policy makes sense. Yes, you are in turn being irrigated by direct compensations, the volume of availability of growing the volume of renewables rises, because the compensations are direct investments in renewables.
This produces energy independence, which is achieved for the country (reducing consumption of imports), allowing at the same time the volume of investment and genuine work in these sectors to increase.
This allows the increase in direct consumption in different areas of the population with employment access established by these new sectors and an income for the state in the collection of the benefits of these practices.
Triple Impact Economy
When we talk about the economy, we generally talk about the direct effects that it has on us and not the type of scope - positive or negative -. What can you give us?
The depth in the economy is given by the number of sectors it reaches and for that the scales are important.
In other words, a direct economy that involves few people has relative positive mobility. The industrial economy includes processes and other sectors that mobilize the chain.
The Example of Uruguay
In Uruguay, for example, the axis of the economy is not based on energy, much less on renewables.
But high energy costs liquefy company profits. If we add to this the fines for production emissions, "the productive and industrial system would be in danger".
If the Climate Compensations are directed to the renewable projects, in this way the renewable generation platform increases together with the liquidity through the compensations which are taken as investments in the sector immediately, which generates:
- Genuine employment and consumption of this new workforce.
- Reduction of subsidies and the desired energy independence is achieved (given the world's high prices for fossil fuels and the great demands for needs that they have on the European continent).
With the implementation of Efficiency plans in medium and long-term companies, we reduce the following items:
- Energy Consumption.
- General Consumption (generating awareness).
- Incorporating Habits, which reduce spending and produce savings.
- Separation and Control of Waste, through mobile tools that measure our personal footprint (incorporated as habits).
3) Economic Savings
What these individual and simultaneous practices generate is the efficiency that derives from savings.
This is the Triple Impact Economy, because in the first item we offset emissions by directing the money directly to installed, approved, active projects and generating them to the network to reduce the stress of consumption supplied by fossil fuels.
At the same time, employment and an underlying volume in the economy are generated through the liquidity in these sectors.
Efficiency in the medium and long term causes society to be more aware of finding energy and financial sustainability.
Finally, savings is the positive consequence of the economy of a country that does things objectively, following the logical steps of sovereignty over its resources.
For countries with greater sensitivity to the energy crisis, technologies were essential to correct the negative impact, turning it into a positive process. Raising funds from polluting emissions in the form of compensations, through the tokenization of emissions.
Benefits to Large Companies
Instead of punishing, it was decided to educate and provide a space for negotiation between private parties (within the framework of anti-laundering laws) to execute the compensations. For many companies it gave them a role in the choice of projects and negotiation.
The benefit of the projects was correct, "finding the necessary financing and greater than expected on some occasions".
It is important to use the benefits of technology to reduce emissions so that renewable platforms grow, paving the way for a healthier and faster transition.
"Countries must take the economic returns of the Technological tools to generate income and financial stability in sectors where the Economy did not have it visible. This allows them to carry out a control process through a panel, which sensitively compiles the changes in the sector to help in decision-making. Technology is the logical solution to reducing emissions and the consequent Climate Change, with its increase in temperatures throughout the planet. Technologies allow us to monitor this to anticipate future problems and control rates reasonable, added to previously unforeseen income".
Congratulations to Technology and to Uruguay!
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
About the author
Dr. Diego Balverde is an Economist at the European Central Bank and has extensive experience in climate finance. He is currently also an Advisory Member of the Council of Foreign Trade at The World Bank. Diego is very active on the international sustainability stage having attended COP27 as a Circular economy for Climate Change specialist and will also be attending the G20 Conference in India as part of the Energy, Sustainability and Climate Task Force. Diego holds a PhD in Foreign trade from Chapman University and an MBA degree from Cambridge Judge Business School.