Climate change poses highly uncertain but potentially destabilizing costs on society!

Green Economy Macroeconomic Model and Accounts (GEMMA) framework.

One of the most important challenges facing economics today is the need for economic activity to remain within ecological limits. The rising threat of climate change, alarming losses in biodiversity and emerging scarcities in essential natural resources all represent a significant threat to the integrity of ecological systems and all who depend on them. They also threaten the stability of economic systems.

Developing a demographic sub-model and an Input-Output Structure for the Green Economy Macro-Model and Accounts (GEMMA) Framework

From the original article “Developing an Ecological Macroeconomics!” by Centre for International Governance Innovation (CIGI)



a stock-flow consistent financial framework within GEMMA. This framework is an essential prerequisite for answering the difficult questions about financial viability raised by the investment needs of the transition to a green economy.


Climate change poses highly uncertain but potentially destabilizing costs on society. The cost of not acting against climate change could be equivalent to losing between five and 20 percent of GDP each year, indefinitely, according to the influential Stern Review. But the costs of addressing climate change are not inconsequential either. The International Energy Agency (IEA) estimates that the transition away from fossil fuels will require additional investment of at least US$11 trillion between now and 2030. Meeting climate change targets could render existing fossil fuel investments “stranded assets,” essentially worthless in financial terms. Some fund managers are already beginning to exclude such holdings from their portfolios.

Responding to the dilemma of remaining within ecological limits in a growth-based society has often been construed primarily as a microeconomic task — one that governments can address with conventional fiscal instruments of tax and subsidy. The “external” costs associated with environmental and social factors should be “internalized” in market prices, according to familiar axioms. Incorporating “shadow prices” for environmental goods into market prices will send a clear signal to consumers and investors about the real costs of resource consumption and ecological damage, and incentivize investment in alternatives, according to this conventional wisdom.

But this prescription has been hard to implement over the last few decades. Even before the crisis, it proved difficult either to forge agreement on fiscal measures to internalize environmental costs or indeed to stimulate appropriate levels of private investment in alternative technologies. The financial crisis has certainly made both of these tasks harder. Despite an early focus on “green stimulus” as a way of invigorating the global economy, subsequent responses have failed consistently to address the ecological challenges.

Fears of damaging economic growth have led politicians to shy away from both ecological taxation and green investment. In fact, fragile private and public sector balance sheets have slowed down investment in the real economy generally, let alone the additional (and less familiar) investment needed to make a transition to a low-carbon economy. Conventional responses have focussed instead on cutting public spending (austerity) and stimulating consumption growth (consumer spending) as the basis for economic recovery. Unfortunately, these responses tend to ignore the structural problems of the conventional paradigm and delay the investment needed in the green economy.

Climate change poses highly uncertain but potentially destabilizing costs on society.
The scale and nature of this dilemma suggest that the combined challenges of climate change and resource scarcity require macroeconomic as well as microeconomic responses. In fact, there is a need to develop a fully consistent “ecological macroeconomics” in which it is possible to maintain economic stability, ensure full employment and yet remain within the ecological constraints and resource limits of a finite planet.

This task — to develop an ecological macroeconomics — is the one we set ourselves three years ago. Working together from clear first principles, we began to build our Green Economy Macroeconomic Model and Accounts (GEMMA) framework. The fundamental building blocks of our approach were three-fold.

First, we wanted our model to reflect accurately the basic structure of the real economy — that is, to provide an account of incomes, spending, investment, taxation, demography and the structure of industry consistent with the United Nations System of National Accounts for any given country. Second, we wanted our framework to make a full and proper account of the ecological and resource constraints on the global economy — as they applied at the scale of the national economy. Finally, we wanted our model to incorporate a consistent description of the financial economy, including the supply of money from and to economic actors, and the effect of the money supply on both nominal and real demand. An ecological macroeconomics must show us not only how much investment is needed, for instance, in order to reach ecological goals, but also how that investment is to be financed.

This last goal was particularly important in the wake of the financial crisis. One of the main shortcomings of conventional economics was its failure to anticipate the impact of fragile balance sheets on the stability of the economy. In fact, most conventional economic models virtually ignore the balance sheet structure of the national economy, in spite of warnings by some far-sighted economists of its importance for economic stability.


Tim Jackson and Peter Victor’s final CIGI-INET report is Developing a Demographic Sub-model and an Input-Output Structure for the Green Economy Macro-Model and Accounts (GEMMA) Framework.


Tim Jackson is Professor of Sustainable Development at the University of Surrey and Director of the Sustainable Lifestyles Research Group. From 2004 to 2011 he was Economics Commissioner on the UK Sustainable Development Commission, where his work culminated in the publication ofProsperity without Growth.  

Peter Victor is Professor in Environmental Studies at York University. He is an economist who has worked on environmental issues for over 40 years as an academic, consultant and public servant. His book Managing without Growth was published in 2008. In 2011, he was awarded Canada Council’s prestigious Molson Prize.



Building an Enduring Environmental Movement!


Building  a world of resilient communities


The current focus of environmentalism leaves little hope of successfully defeating the ecologically destructive political, economic, and cultural forces that undermine the very foundations of life. It will require a dramatic reboot if the movement is going to reverse Earth’s rapid transformation and help create a truly sustainable future—or at least help humanity get through the ugly ecological transition that most likely lies ahead.

Are Today’s Environmental Organizations Succeeding?


SOW13 Cover HiRes_5


Many campaigns focus on treating environmental problems rather than addressing their roots, and they typically do so in ways that fail to build an alternative vision for a species not in a permanent state of conflict with the planet.

What is more, most environmental organizations, including Worldwatch Institute, receive funding from affluent donors, foundations, and corporations that depend on a growing economy to keep their endowments robust enough to continue their philanthropy. Ironically, if environmental groups actually succeed in building a sustainable, equitable, steadystate economy, there is a good chance that their donors’ philanthropic giving would shrink as wealth is better distributed and as stock markets stop growing. And if environmentalists fail in their mission, there’s also a good chance the economy will contract: a 2012 report by DARA International projects that gross domestic product worldwide will shrink 3.2 percent a year by 2030 if climate change and air pollution are not dealt with. A shrinking economy is rarely a boon to philanthropy.


Getting from Vision to Reality!


The odds are that the state of the world is going to get really bad—and much sooner than we think. Reports about the fallout from climate change alone make it clear that the twenty-first century is unlikely to follow a linear path of more growth, more progress, more “development.” There are probably going to be major political, social, and economic disruptions, a flood of failing states, the dislocation of millions of people. Will people in environmental organizations simply close their doors as things unravel, as their funding dries up, and turn instead to simply surviving—taking any job still available in order to feed their families? Who will serve as a voice for Earth? Who will help steer us through this historically unique global ecological transition? Will it be fundamentalist religious institutions that read the unraveling ecosystems as signs of the end times? Or authoritarian governments that offer security in exchange for the last remnants of freedom?

Let us hope that centuries from now an ecocentric civilization — celebrating its nurturing niche on a once-again flourishing planet—tells stories of the bold individuals and communities that changed humanity’s path in such a glorious way.


Distributed Capitalism through distributed collaborative knowledge!

Jeremy Rifkin on global issues and the future of our planet!

Jeremy Rifkin2

“This is not a financial crisis or a banks crisis or a deregulated market crisis … that are just the results of the real problem: the delusional debt-based culture of America is the underlying problem and has global impact on production, consumption and welfare. The American consumption behaviour may never come back as the 3rd industrial revolution is on life-support!”

We are going through 3 crises which are feeding from each other:

  • the economic meltdown
  • the energy crisis
  • the real-time impact of climate change: not being able to feed the world

“We may experience a potential demise of our species in 30, 40 years or within a century at the most … and we are really asleep, all across the world!”

Industrial revolutions have been marked through the combination of improvements in knowledge and technology in energy and enhanced means of communication.

We are at the stage where both components are ready for the 3rd industrial revolution:

  • distributed communication is available through all the new technology at the hands of almost everyone on earth
  • distributed energy is ready to withstand the energy crisis

“We continue to underestimate the speed of climate change, because we continue to mis-acknowledge the aftermath of what is happening today and that triggers the next stage. We have to radically change civilization!” – Jeremy Rifkin

The third industrial revolution has to be based on 4 pillars:

  1. the production of renewable energy
  2. the refurbishment of the buildings so that they are responsible for their own energy consumption and reduce their carbon emissions
  3. energy storage to sudden failure of the power grid to prevent
  4. the distribution of energy through smart grids where each user becomes a supplier.

To make this 3rd industrial revolution happen, we need to take the burocratic red tape off, stop investing in stuck 2nd revolution industries and enable financial incentives which stimulate the direction.

“We need to move from geopolitics to biosphere politics, through global consciousness, involving and engaging true global humanity as we are all interdependent and connected, creating an emphatic civilization!” – Jeremy Rifkin