Economic and environmental devastation is all around us

Action Against Hunger identifies climate change as a determining factor behind the rise of world hunger. It says the number of undernourished people has grown by 150 million over the last three years. 

In the face of this most pressing of challenges, political and economic leaders must respond or face inevitable uprisings, as we have already started to see around the world.  And today, just as it was for Marie Antoinette, a response similar to qu'ils mangent de la brioche will undoubtedly increase the likelihood of people being removed from positions of power. 

Energy crisis
Energy supplies are also unquestionably more vulnerable because the realities of climate change were not dealt with early enough, creating the second great source of economic fallout. Upward inflationary pressure, without government controls, is likely to push millions around the world into absolute poverty and the difficult choice between heating and eating this winter. 

Britain’s war-time prime minister, Winston Churchill, once said, “those who fail to learn from history, are doomed to repeat it.”  With global energy supplies, the warning signs have been known for decades.  Several incidents took place that incentivised a shift towards renewable energy, but unfortunately it did not achieve a longer lasting global response. 

Most of our energy still comes from non-renewable finite sources.  Decades ago, that might have been someone else’s problem. But now the time has come for us to be the generation that must worry about it. 

A failure by most countries to move to local, renewable energy supplies has left many facing the distinct possibilities of blackouts this winter.  Germany has been most obviously hit after Russia’s decision to cut off gas supplies via the Nord Stream 1 gas pipeline. 

This followed Berlin’s previous commitment to switch off nuclear power and move to renewables, meaning immediate action was required to minimise the threat of potential blackouts and power rationing — a phenomenon sadly all too well known, over several years, in other parts of the world.   

As recently as 2021, Russia supplied 55% of Germany’s gas imports (World Economic Forum, August 2022), which had already more than halved by June 2022.  

And while the obvious solution is to plough on with proposals to become more reliant on green energy, in the short term, the Germans, like many, face immediate pressure from their people and businesses for reliable sources of energy amid hyper inflationary increases in fuel costs. 

The need to sit on stocks of gas supplies to get through the winter is causing self-perpetuating spirals in inflation — even after the Germans had already made moves in April to move closer to renewable energy prominence.  

Robert Habeck, Germany’s Vice Chancellor, told reporters: "On the one hand, the climate crisis is coming to a head. On the other hand, Russia's invasion shows how important it is to phase out fossil fuels and promote the expansion of renewables." 

Reforms sought to more than double Germany’s green energy use from 40% to 100% by 2035, up from a previous target of 65%. Proposals, such as increases in offshore wind production, were set to provide the equivalent capacity of 10 nuclear plants by 2030.   

But in the meantime, the country is looking to traditional energy sources for salvation. Stress tests are being carried out on the state’s three nuclear reactors, which provide the country with 6% of its energy, and a law has been passed to bring back coal and oil-fired power plants as a reserve measure. 

The spree to buy alternative sources of Liquified Natural Gas (LNG) for storage has added to inflation — not only on consumers and businesses in Europe and North America, but globally. 

Countries like Pakistan — who were tied into contracts for the supply of LNG at reasonable rates — were already facing the consequences of defaulting suppliers and having to purchase at far higher spot rates. 

If anyone thinks this is only happening because of the fall-out of Russia’s war in Ukraine, they are wrong.  Energy security concerns have long existed because of climate change.   

In October 2021, the International Energy Agency commented on what were then record highs of gas, coal and electricity prices, saying: “governments have not been pursuing strong enough policies to scale up clean energy sources and technologies to fill the gap [of oil and natural gas].” 

Energy cost increases are a major contributing factor to inflation in every corner of the world.  No nation is immune.  Significant fiscal measures are being taken to reduce the burden on households and businesses, where governments can afford to introduce some form of price control measures or subsidies.   

But while this is an absolute necessity to stave off starvation, it is all too likely to divert money away from long-term investment in renewable energy sources that could be our salvation in the years to come.   

Without fiscal and monetary controls in place — which themselves will bite even harder in the next year or two — we will see inflation potentially spiralling as employees seek to match the increases in costs by demanding higher salaries.   

Businesses will face the burden of impossibly high costs for materials, trading, energy and labour, which could cause further delays in global supply, and even gaps, which could cause even further cost increases. 

Call to action 
The International Monetary Fund raised its inflation forecast in its World Economic Outlook publication in July due to food and energy costs, to almost 10% in developing economies.  

It predicted that the disinflationary monetary policies of central banks would help limit global growth to just 2.9%, with, “a plausible alternative scenario in which risks materialise, inflation rises further, and global growth declines to about 2.6% and 2% in 2022 and 2023, respectively,” which the IMF states would, “put growth in the bottom 10% of outcomes since 1970.” 

But like all wars, they end.  And economically, they have been catalysts for economic transformation.   

Politically, there is a need for a reset from the post-truth, polarised and populist world that we have become — one where just half the world sees the desperate need to work as one with our planet or face economic and environmental devastation. 

There is hope, however.  

If the globe can respond positively and enterprisingly, we could ensure that growth can be fuelled not by fossil fuels but by renewables. We could move from intensive to sustainable farming and towards a future where we treat water as the most critically precious resource we have for the sustainment of life on our planet.   

Political leaders have always sought to continue to grow economies, but at what cost?   

A greener outlook on economic management as part of this reset is absolutely needed to ensure we learn from the mistakes of our past and provide the sustainable growth which people around the world both deserve and desire.