Professor Udo E. Simonis
Science Center Berlin
Federal Republic of Germany
INTRODUCTION
At a forum on "Industry and the Environment" in New Delhi, Stephan Paulus gave the following definition of ecological modernization: "Ecological modernization focuses on prevention, innovation and structural change towards ecologically sound industrial development ... It relies on clean technology, recycling, and renewable resources ... To introduce such a concept into the economy, it is necessry to coordinate various policy areas, such as industrial, fiscal, energy, transport and environmental policies."1
This is actually a rather broad and demanding definition of a concept, proposed to achieve better harmony between economy and ecology. I will, therefore, concentrate on only some aspects of such a concept. First, I am going to present some empirical evidence on the relationship between economic structure and environmental impacts; second, I shall point to some of the deficiencies of environmental policy, and third, I shall put forward some ideas on how to integrate environmental considerations into economic policy.
ECOLOGICAL STRUCTURAL CHANGE OF THE ECONOMY
In both the East and the West, economists, planners and engineers are seeking a solution to the problem of how to change the traditional patterns of resource use. "Perestroika" and "modernization" are two actual catch-words in this process, and new environmental priorities play a part in the envisaged conversion of the economy. Harmonizing ecology and economy in a specific sense relies on the premise that a reduction in the resource input of production (structural change), will lead to an ex ante reduction in the amount of emissions and wastes that have a negative impact on the natural environment (ecological structural change).
In order to clarify the relationship between economic structure, structural change, and environmental impacts, one needs suitable information concerning the material side of production. Environmental protection and resource conservation by the economy (and thus its long-term sustainability) cannot appropriately be described in such terms as income or final consumption. One possibility is to select and compare some indicators describing the environmentally relevant features of the production process. The availability of environmental indicators such as emission and immission data relating to "representative" pollutants - such as sulphur dioxide (SO2) and nitrogen oxide (NOx) - has grown recently (e.g., the Annual Reports on the Environment by several industrial nations, by UNEP and the OECD).2 These indicators concern certain negative environmental effects of production.
Less substantial, so far, has been the research on the environmental
relevance of the input factors in industrial production, or on the question of what
indicators provide environmentally significant information about the structure of the
economy. Given the present state of statistics, only a few such indicators can be tested
in a cross-national comparison of eastern and western countries.
De-linking Economic Growth from Environmentally Relevant Inputs
Using a set of four indicators (input factors), Janicke et al. have studied 31
countries of both COMECON and OECD with regard to the relationship between economic
structure and environmental impacts.3 The four factors
whose direct and indirect environmental significance is thought to be self-evident were:
energy, steel, cement, and freight transport. Regarding their patterns of production and
consumption, these are environmentally "hard" factors, characteristic of a
certain structure and/or stage of economic development.
The main hypothesis of the research was a simple one: Positive environmental effects of structural change of the economy are to be expected by actively de-linking economic growth from the use of environmentally relevant inputs (resources). Such de-linking or (ecological structural policy) would:
- result in a decrease of resource depletion and/or environmental
pollution;
- mean ex ante instead of ex post (end-of-pipe technology) environmental protection; and,
- promote those integrated technologies which touch upon several environmental effects
(pollutants) at the same time.
Structural change as a shift of input factors to more
intelligent uses, can be conceived as a process of successive de-linking: the contribution
of traditional (hard) input factors to the national product decreases, i.e., they change
or lose their function in the development process.
Examples of Successful and Deficient De-linking
Taking the Federal Republic of Germany as an example, Figure 1 illustrates a five-fold de-linking from the growth of the Gross Domestic Product (GDP): The de-linking of energy and cement consumption and weight of freight transport from the GDP became apparent during the 1970s, and was fully established by the end of that decade. Regarding steel, the de-linking process began already in the 1960s. In this way, the structural change of the economy generated environmental gratis effects of various kinds:
Source: Janicke et al.
Figure 1: Structural Economic Change in the Federal Republic of Germany,
1960-1987 (1960 = 100).
- The stagnating consumption of primary energy led to a reduction of
harmful emissions (pollutants);
- The decline in the weight of freight transport indicates that the volume of materials
employed was reduced rather than increased;
- The fall in cement production represents a direct gratis effect as far as the emissions
from cement factories are concerned; with regard to the environmental effects of the
construction industry, this decrease coincided with the trend towards labor-intensive
renovation of the housing stock, as compared to new construction in the 1950s and 1960s;
- The decrease in steel consumption accounts for a considerable reduction in harmful
emissions as far as production and processing are concerned; this drop was strongly marked
and partly due to increased recycling activities.
Environmental gratis effects occur when the rate of usage of the input factors (resources) having a (strong) negative impact on the environment remains below the growth rate of the GNP. Comparing the rates of usage of the four slected input factors with the growth rate of the GNP, Janicke et al.4 discovered three different development patterns:
- The factors having impacts on the environment decline absolutely;
i.e., absolute structural improvements are induced corresponding to absolute environmental
gratis effects;
- The factors having impacts on the environment remain constant, or increase, but with a
lower growth rate than the GNP; i.e., relative structural improvements, corresponding to
relative environmental gratis effects;
- The factors having impacts on the environment increase at a higher growth rate than the
GNP; i.e., structural deterioration, corresponding to absolute negative environmental
effects of economic growth.
In Table 1, 16 out of the 31 countries studied are grouped according to these three development patterns.
Of all the industrial countries investigated by Janicke et al., Sweden went through the most rapid structural change. The drastic reduction in cement production (-41%), the decreasing use of crude steel (-38%), and the decrease in the weight of freight transport (-21%) add up to notable environmental gratis effects absolute structural improvement.
In Japan, the process of de-linking was partly neutralized by the rapid growth in industrial production and thus only resulted in "relative structural improvement."
In Czechoslovakia, no significant de-linking of economic growth from the four input factors was discernible (Figure 2). The development profile of this country, with sluggish or even lacking structural change is, to some extent, representative of the other economies of Eastern Europe. The group of countries characterized by "structural deterioration" consists, for the most part, of industrial late-comers. However, Czechoslovakia is a relatively old industrial nation which suffers from high environmental impacts of production.
Source: Janicke et al.
Figure 2: Structural Economic Change in the CSSR, 1970 - 1975 (1970 =
100).
Trends Towards Industrial Restructuring
Despite certain analytical limitations of such empirical research - e.g. the selection of
only four input factors, several conclusions can be drawn from this international
comparison as regards the trends of industrial restructuring.5
- Structural change in the form of de-linking economic growth from
environmentally relevant inputs was evident in most, but not all, of the countries
studied. Fewer than half of them still clung to the traditional modes of quantitiative
growth;
- Several countries enjoyed environmental gratis effects as a result of active structural
change. In some cases, especially Sweden, these effects were quite considerable;
- In other countries, the possible beneficial environmental effects of structural change
were levelled off by the rapid industrial growth pursued. This was especially true for
Japan;
- The strong correlation between the level of production (GNP) and environmental impacts,
still evident in the 1970s, had dissolved in the 1980s. The high-income countries featured
fairly rapid structural change;
- In the medium-income countries, a distinct pattern emerged that there were cases of
rapid quantitative growth and cases of qualitative growth, i.e., economic growth with
constant or decreasing resource input.
All in all, it is therefore not yet possible to speak of one dominant
trend towards industrial restructuring. However, the environmental gratis effects of
active structural change are highly evident and thus provide one strategic element of
ecological modernization.
PREVENTIVE ENVIRONMENTAL POLICY
Theoretically speaking, environmental policy could be defined as "...the sum
of objectives and measures designed to regulate society's interaction with the environment
as a natural system: it comprises aspects of rehabilitation, conservation, and structural
adjustment."6 Practice, however, does not conform to
such a broad definition. Only parts of the interaction between society and environment
become the subject of policy. So far, environmental policy has mostly been designed as
react-and-cure strategies concerning air and water quality, noise and waste disposal, with
emphasis on the rehabilitation and conservation aspect.
For a variety of reasons, this conventional environmental policy was, and still is, meaningful and very much necessary. It has, however, a number of deficits, some of which are cited in the following, along with some suggestions for overcoming them through preventive environmental policy, i.e., "anticipate-and-prevent strategies."
Environmental Expenditures - Environmental Damages
Since the beginning of the 1970s, when systematic records first began to keep track of the funds allocated for environmental protection, in the industrialized countries the sum of the respective public and private investments has reached large proportions. The industrial society thus appears to be paying through the nose - backpayments for the negative environmental costs of production accumulated in the past.7
In the Federal Republic of Germany, for instance, this sum has come to the handsome total of over 250 billion Deutschmarks (or about 140 billion US Dollars). In a detailed study, Leipert et al. from the International Institute for Environment and Society (IIES) have computed and classified all existing data on investments and expenditures aimed at repairing and protecting the environment. Table 2 shows the total and sectoral environmental protection investments for the manufacturing sector of the German economy for the years 1975 to 1985. Table 3 shows the total costs of environmental protection (current expenditures and depreciations) for both industry and government for the years 1975 to 1985.
Figures like these, however, are ambivalent. On the one hand, they give cause for proud political statements about the successes of environmental protection according to the motto, "the more, the better". On the other hand, they are the absolute minimum of what is necessary to secure the very basis for society's sustainability. At the same time, they symbolize a serious structural deficit of industrial society. Environmental protection expenditures are spent when damage to the natural environment has occurred and can no longer be denied. Belated, they are repairs to the process of economic growth, signs of a "post-fact" policy that reacts to damages (and must react to them) but does not, or cannot, prevent them. Therefore, it seems to be in order to confront the "success stories" with figures on the environmental damage itself. This means, not looking at the current environmental protection expenditures but at the actual damages to the environment.
Again taking the Federal Republic of Germany as an example, a recent estimation by Wicke et al. from the Federal Protection Agency showed that the annual damage to the natural environment is above DM103 billion, or in the order of 6% of the GNP, and not 3% as the OECD had estimated for the industrial countries a few years ago.8
Table 4 is based on different estimation methods, using data on actual damage costs and findings from willingness-to-pay studies. Though the results must be taken with some care, the table gives an idea that despite high annual environmental protection expenditures still being enormously high, environmental damages occur annually. Of course, this situation may not only be true for Germany but for many other countries as well.
There are more shortcomings of environmental policy.9 To name a few: Conventional environmental policy usually identifies the given problem too late, so that the ecosystems affected can no longer be saved. As it is pursued as a media-specific policy, i.e., regulating air and water quality, noise or waste, it also runs the risk of lacking coordination between its specific goals, measures and institutions. This, then, may result in shifting a problem from one environmental medium to another, e.g., from air to water or soil, or from one place to another, as is the case with long-range, trans-boundary pollution. In addition, environmental policy often becomes entangled in a debate on principles. If measures must quickly be taken, the argument gets shifted from the "polluter-pays-principle" -- which is advocated in general -- to the "taxpayer-pays-principle", thus switching the burden of environmental protection from the individual polluter to the community, to government or to society at large.
Thus, innovations in planning and implementation are needed. With the concept of preventive environmental policy, it seems one can counter the shortcomings of conventional environmental policy. In order to switch to preventive policy, several conceptual as well as practical constraints have to be overcome.10
A first constraint has to do with the particular history of an
environmental impact. In cases of yesterday's wastes (or Altlasten), where damage has
already occurred, a curative strategy is probably the only conceivable option. In cases
where no damage has occurred as yet, but where damage is expected in the future, the
choice between a preventive and a curative strategy is basically open. In such a
situation, the anticipatory principle means to encourage the first option. As practice
often is a mixture between the existing and the new, most policies will actually also
include a mixture of prevention and cure. Demanding preventive environmental policy will
then mean seeking a better balance between the anticipatory and the reactive component
within the policy action.
Basic Conditions for Preventive Environmental Policy
According to Scimemi and Winsemius, one can look at three factors as concomitant
policy relevant processes in time: The accumulation of environmental damage; the
acquisition of technical knowledge; and the rise in public awareness. The time sequence of
these processes, especially the relative timing of their critical level, is decisive for
the whole issue of preventive environmental policy. To illustrate the relationship between
these three factors, Scimemi has redrawn a diagram suggested by Winsemius, using three
separate functions: Level of Damage, Level of Technical Knowledge, Level of Public
Awareness.11 The relative position and the shape of these
functions depends, of course, on the specific circumstances (country, environmental
sector, historical phase) under consideration. The common case is illustrated in Figure 3.
Within these concomitant processes, a certain stage becomes important - critical level. As illustrated, the technical understanding of the issue reaches a critical level, t, thus ensuring the first of two conditions required for effective policy action, i.e., technical rationality. Public awareness also reaches a critical level, p; at that time the second condition for effective decision-making, i.e., political viability, is fulfilled. It is at this stage that action will be undertaken to avoid the occurrence of further damage.
Source: Scimemi.
Figure 3: Factors of the Environmental Policy Cycle: Damage, Technical
Knowledge, Public Awareness
Line D1-D2 indicates the accumulation of environmental damage over time. The accumulation of damage starts at a given point in history (in the diagram somewhere between time 0 and 10). At that point, neither the scientific community nor the general public is yet aware that anything of importance is happening. Line T1-T2 indicates the process of gathering technical knowledge. This process may not start until some time after damage has begun to accumulate (in the diagram somewhere between time 10 and 20), and proceeds gradually. During that phase the public is still unaware of the hazard. Somewhere between time 20 and 30, while technical knowledge increases further, public awareness starts to rise, as indicated by the line P1-P2.
Anyone familiar with developments in environmental policy at national or international level, will be able to recall a number of instances where the process evolved very much in conformity with Scimemi's theoretical interpretation. In this sense, the diagram may thus be considered to be a true representation of real events. (There may be cases, however, where public awareness - line P1-P2 starts earlier than technical knowledge - line T1-T2).
What are now the opportunities to influence these basic conditions of policy action in favor of preventive environmental policy? Figure 3 helps to formulate three general and two specific options.12
General options:
- Retarding damage accumulation (i.e., sliding the D1-D curve to the
right);
- Accelerating technical knowledge (i.e., sliding the T1-T2 curve to the left and/or
raising its slope);
- Increasing public awareness (i.e., sliding the P1-P2 curve to the left and/or raising is
slope).
Specific options:
- Dynamic environmental standard setting (i.e., lowering threshold t);
- Dynamic public participation (i.e., lowering of threshold p).
Source: Scimemi.
Figure 4: Accelerating the Generation of Technical Knowledge and/or the
Development of Public Awareness
These various options all have the effect of making policy decisions
possible at a stage when the level of environmental damage is still relatively low or
damage is even non-existent. One of these options is illustrated in Figure 4.13
Environmental Impact Assessment as Part of Preventive Policy
Acceleration of knowledge and awareness can be promoted through a variety of
approaches and methods and depends a great deal on the specific environmental issue at
hand. Environmental Impact Assessments (EIA) are increasingly being applied, not only for
public but also for private investment projects. They entail efforts to learn more about
possible environmental impacts, and are intended to allow appropriate action to be taken
before damage has occurred. In that sense, environmental impact assessments can be
classified as part and parcel of preventive environmental policy.14
During the last years, some headway has been made to institutionalize and standardize EIA procedures nationally, and to a minor extent also internationally. As the EIA procedure is particularly fitting for specific investment projects it allows for the "accelerating effort" to be targeted, and generally also permits the burden of such efforts to be imposed upon the project initiator himself, thus conforming to a precondition of preventive environmental policy, i.e., the polluter-pays-principle. A big deficit, however, remains in how to implement EIA as a preventive procedure in cases of global change, like climate warming or ocean pollution.
The required levels (thresholds) regarding technical knowledge and/or public participation in environmental decision-making, differ widely from one environmental medium and country to the other.15 The question of "how much knowledge/awareness is enough" normally falls upon the political decision-maker (the European Commission, the government, the environmental protections agency), even if the scientific community (or parts of it) is ready to say "we know enough" and the public (or parts of it) demanding "something must be done." Therefore, stalemates in decision-making on environmental issues are quite frequent. Eventually, this situation can be exploited by opposing agencies, parties, or nations. The dispute between Germany and England on the acid rain problem is just a case in point. The positions of these two countries are reversed when asbestos rather than sulphur is at issue.
What is "enough knowledge/awareness" for one country (agency, party) may not be enough for the other. The normal outcome of such a situation is a compromise over the emission standards to be implemented. They will be weaker than technically/politically feasible because knowledge/awareness on cause-effect relationships or social priorities is said to be insufficient. Eminent cases in point are the emission standards for SO2 and NOx in the air pollution field, and the nitrate standard in the water pollution field. Thus, the dilemma of setting stricter emission standards is serious. Meanwhile the forests may continue to die back, and the water may continue to get contaminated.
The conclusion, therefore, is that environmental standard setting must be conceived as a continuous process. With growing knowledge/awareness on actual and probable environmental damages the thresholds for action must be consecutively lowered, i.e., standard setting must by dynamized to make industrial restructuring for sustainable development possible.
This need to come to terms with the future is not unique to
environmental policy, as Scimemi rightly observed. Implementing the prevention principle
is especially requested in all other domains of policy where collective interests are at
stake. One such major domain we have to address when discussing the possibilities and
impediments of the concept of ecological modernization is, of course, economic policy.
ECOLOGY AND ECONOMIC POLICY
Conflicts Between Economy and Ecology
"Ecology in essence means the necessary and feasible harmony between man and
nature, society and environment" (C.F. von Weizsacker). Economy, however, in general,
means disharmony with nature. Use is made of nature both directly and indirectly when raw
materials are processed into products, and nature is polluted by the emissions and wastes
generated by industrial production. These are, then, the two processes in which nature
remains the loser. She exchanges natural raw materials for produced waste materials.
Besides labor and capital, nature is the truly quiescent and exploited third production
factor. How, then, can nature's position in the "economy game" be strengthened,
her rights guaranteed and her protection provided?16
The use of raw materials and the generation of emissions and wastes are of course old issues. Scientific and technological development, however, has made it possible to increasingly exploit the depletable resources, and has led to an ever-increasing accumulation of harmful emissions and non-decomposable wastes. Nature is no longer able to absorb all of these substances, many of which are not only toxic to flora and fauna but to human beings as well.
Efforts to hide harmful emissions and toxic wastes - in dumping-grounds, in intermediate or permanent storage-places, to spread them - through high smokestacks and incinerators, or to dump them - into water bodies and abroad, have at best been temporarily successful because many emissions and wastes are "mobile poisons" or reappear in different forms. These activities lead to what Johan Galtun called "linearization of ecological cycles", i.e., the natural diversity is reduced, the robustness of ecosystems declines, ecological symbioses and equilibria break down. As a consequence, environmental degradation increases and the absorption capacity of the natural environment decreases.
Accordingly, the conflict between ecology and economy can be attributed to two (actual or possible) incompatible basic principles: The ecological principle of "stability", as a precondition for the sustainability of ecological systems, and the economic principle of "growth", as the inherent logic of economic systems - more precisely: the principles of business profitability, national economic growth, and world market expansion.
Given the actual and the pending ecological crisis, the question on
whether these economic principles can be changed, reshaped and finally brought into
harmony with ecological principles, on which level, in what way, and at what time, is, of
course, a controversial question in both theory and practice, and a challenge to the
social sciences. The answer depends, first of all, upon the respective individual and
societal constellation of interests. The answer particularly depends upon the ability of
and the willingness for social innovations, i.e., on (a) whether the potential of an
ecological self-regulation of the economy is used, and (b) how the possibility of an
ecological re-orientation of economic policy is implemented.17
Ecological Self-Regulation of the Economy
One may start with a general statement: most certainly, only a small fraction of the
current environmental problems would exist if the economic contexts would have remained so
comprehensible, that producers and consumers would personally be able and liable to
recognize and perceive the consequences of their own decisions towads depleting resources
and polluting naure. Or, if business profitability, national economic growth, and the
expansion on world markets could not be increased by externalizing parts of the ensuing
costs. This is the old but still relevant - because unresolved - problem of the external
effects of production. Scientific and technological development has been, and still is,
coupled with negative external effects, i.e., the shifting of costs to society, future
generations, and nature. With respect to the environmental problem, all these components
of external effects are relevant.
Let us take acid rain and the ensuing damage to the forests as an example of recent public debate in Europe:
- First, this example shows the shifting of a part of the costs of
industrial production, i.e., not sufficiently reduced air pollutants, onto nature, which
is resistant only up to certain levels: the forests are dying.
- Second, this example shows the shifting of costs onto the succeeding generations, i.e.,
a future with less or even no forests, and a limited reproduction capacity of the soil.
- Third, this example shows the shifting of costs onto third parties (i.e., partial
expropriation of the forest owners) and onto society, in the sense that economic and
technical decisions of individual polluters (especially emissions from power plants, cars,
trans-boundary pollution) impair the well-being and the physical health of the population.
Thus, the economic system evidently makes incorrect calculations with respect to the "ecosystem forest". Both business accounting and national accounting do not provide sufficient and adequate signals which may prevent pollution levels that are not tolerable for the ecological system. Conventional accounting shows favorable balances for the productions of energy, for the automobile producers, and for the exporters of pollutants (just to stay with the three sources of pollution mentioned above), although the "ecosystem forest" is definitely being damaged by the emissions from these economic sectors. Losses here - profits there, a compensation does not take place nor is it provided for.
One of the pending tasks both for theory and practice can easily be described: internal and external effects of production, shift the costs back to the economic units that cause the environmental problem, and include the "ecological component" into all investment decision-making. Drastically reducing the external effects of production on society, nature, and future generations would be a necessary step towards regaining harmony between economy and ecology. But, how to proceed in practice and where to put the priorities?
To organize the economy as a materially integrated cycle would, first of all, mean to reduce systematically the use of depletable resources and the generation of polluting emissions and wastes - and this is in contradiction to an economy being organized for quick "throughput". In practice, recycling and clean technology is still at an incipient stage and not a systematic economic undertaking. Especially, the step from simply disposing waste towards an integrated waste management has been made only in a few cases.
Certainly, this is, in part, because many waste products cannot be recycled or only at high cost. But it is also true because the right price and cost signals have not been set. Preventing waste generation and conserving depletable resources are not being sufficiently promoted. This state of affairs, however, has also to do with the structural deficits of the economic accounting procedures which do not adequately measure diminishing stocks. The final outcome may thus consist of two contradictory trends: increasing monetary income - decreasing natural stock.
Approaches towards ecological accounting at the factory level and integration of environmental aspects into the national accounts, however, are promising and have sufficiently been tested. With ecological accounting the amount of energy, materials, waste, land use etc. are computed and, by simulating the given shortage, accounting units are determined which then enter the accounts. Thus a measure is developed which not only may guide private investment decision-making, but at the same time provide a public information instrument for determining and promoting qualitiative economic processes.
Another ecological principle is no longer adhered to, that of the sustainability of resource use. Traditionally, forest owners, for instance, have followed the rule, "Do not cut down more wood than can be regrown." This rule is being undermined: externally produced "acid rain" collides with internal resource conservation; accumulated external debt lead to over-exploitation of internal resources. Sustaining the yield of the forest capital is being replaced by indirect expropriation and direct exportation.
One basic principle to be re-established for the sectors and units of the economy is that of responsibility or liability. With respect to environmental problems, the legal system, and also economic behavior, in most countries is marked by the strict proof of causality. Only when the injured (damaged party) can prove who caused the damage (polluting party) then the polluter is held liable for compensation. Instead, in some countries and for some cases statistical probability is sufficient for obligating industry to compensate for damages (collective liability). Once this principle is established by the courts and through legislation, it would quickly help to improve environmental quality through ecological self-regulation of business activities. In addition, it would strengthen the anticipate-and-prevent strategy in environmental policy, and shift the technical solutions for environmental problems from ex-post to ex-ante approaches, i.e., from controlling or end-of-pipe technology towards low emission or integrated technology.
To implement the principle of responsibility or liability in practice,
small steps or big leaps could be taken: from continuous reporting on wastes or automatic
monitoring of emissions, to collective funds and strict environmental liability.
Ecological Re-orientation of Economic Policy
Confronted with serious environmental damage, conventional economic policy is
increasingly being challenged. Its guiding principles, goals, instruments, and
institutions are being questioned, and a new concept is emerging: ecological economic
policy.
Conventional economic policy is based on the guiding principle of maximizing flows: volume of production, income, profits, turnover. Fifteen years ago, Kenneth Boulding called this the "throughput economy" and opposed it by proposing the "spaceship economy". Writing today, he probably would speak of the "ecological economy". This paradigm is based on a different guiding principle, i.e., "increasing efficiency and maintaining substance!" Aspects such as environmental compatibility and resource conservation become important, and structural adjustment of products and technologies according to ecological considerations becomes the task.
With respect to the goals, it seems necessary to redefine and supplement the conventional economic policy goals, especially to re-assess the growth target and to include "environmental stability" into the catalogue of economic policy goals.18 The conventional policy goal indicators were developed at a time when environmental pollution was already a problem but not yet a public issue, and since then they have not really been readjusted. Economic growth is still being measured in terms of goods and income categories only (GNP - Gross National Product), while the effects of this on the stock and the quality of the resources (natural capital) are not adequately considered. In the conventional concept of economic growth, all monetary transactions are summed up independent of their specific function; also, increasingly more expenditures are included which are solely being spent for the (necessary) compensation for damage previously caused by the production process ("compensatory or defensive expenditures").
Qualified goal indicators for economic policy can be defined in various ways: through computations of the compensatory expenditure, i.e., assessment of an environmentally-related net product (ENP - Eco National Product); through combined growth and distribution indices (RWG - Redistribution With Growth); through an integrated system of economic and environmental indicators ("Satellite System"), etc..
Regarding the instruments, conventional economic policy relies strongly on two main instruments, variations of interest rates and of tax rates. From an ecological point of view, new taxes and charges are required which, to some extent, should replace traditional taxes. Highly relevant in a situation of structural unemployment and environmental pollution is the introduction of resource taxes (as, e.g., an energy tax) and emission charges (as, e.g., a charge on sulphur dioxide emissions), and a definite decrease of wage taxes. Such a structural tax reform would change the existing incentives in the economy towards accelerating resource efficiency and increasing employment opportunities.
Economic policy manifests itself in, and works through, particular institutions. Therefore, an ecological orientation of economic policy also requires creating new institutions, and abolishing or redefining old ones. The current debate on the negative environmental effects of decisions by the World Bank and the IMF, and the call for necessary reforms, are just a case in point. The actual and pending environmental crisis seems to require a structural institutional reform by which economic institutions would have to incorporate ecological perspectives, and environmental institutions would have to improve their competence, and by which environmental impact assessments would become integrated into all major economic decision-making.
CONCLUSION
According to the deliberations in the preceding chapters, industrial restructuring for sustainable development of ecological modernization obviously is a demanding concept, both methodologicaly and practically. Its implementation requires a far-reaching conversion of the economy, a re-orientation of environmental policy, and a replenishment of economic policy: "Ecological structural change of the economy," "preventive environmental policy", and "ecological orientation of economic policy" seem to me to be the three main strategic elements to reconcile the interests of man and nature, society and environment. The social sciences - economics, sociology, jurisprudence, political science, psychology - have to develop further the methodological foundations and to improve the institutional arrangements for a successful praticial implementation of such a concept.
REFERENCES
Professor Udo Simonis is a research professor in environmental policy at the Science Centre Berlin and former member of the German Advisory Council on Global Environment Change. He studied economics at the University of Mainz and the University of Freiburg, and received a Ph.D. from the University of Kiel. His previous positions include Personal Advisor to the President of Zambia, Research Fellow at the University of Tokyo, Professor of Economics at the Technical University of Berlin, Visiting Professor at the Chinese University of Hong Kong and Director of the International Institute for Environment and Society at the Science Centre Berlin. Professor Simonis is the Chairman of the Association of German Scientists and a member of the Advisory Committee of the Development and Peace Foundation.