Prepared Comments by Lee H. Stein
Dubai Week, 2008 - Sustaining Our Oasis of Prosperity in a Turbulent World
Dubai International Financial Center

Natural Capital

In the capital world, Dubai is an example of magnificent human achievement. Its leaders had a vision for transforming miles of arid, previously uninhabitable land into something spectacular – an exciting city, a prime tourist destination and an economic hub for the Middle East. Dubai is a model for having the courage and determination to set the course, harness the resources and talent from around the world, and create immense value where none existed before. The same approach can be applied to transforming different parts of the world while preserving our most precious resources and creating a new currency built on Natural Capital.

Natural Capital is the stock of natural ecosystems that yields a flow of goods or services into the future. For example, a stock of fish provides a flow of new fish, a flow which can be sustained indefinitely. While Traditional Capital relies on technology for profit, Natural Capital relies on the ecosystems’ own natural sustainability that becomes profitable when applied to proven sustainable endeavors. The most prominent of these endeavors include: carbon offsets, profit through protection, and ecotourism. By investing in these forms of Natural Capital, world leaders and pioneers invest in profitable sustainability while simultaneously benefiting life on Earth now and long into the future – an admirable return on investment.

Some experts believe that we are currently experiencing the greatest rate of extinction since the dawn of man. We have inherited economic systems and infrastructures in which sustainability was never a consideration. Nature was never a concern. Now, population growth, combined with new prosperity in China and India are driving demand for resources around the world. This global competition is contributing to more aggressive harvesting of forests and mines worldwide and the continued decline in plant and animal life, destroying nature. Human needs for energy, growth and a rising standard of living are colliding with nature. It is time for a fundamental change. It is time to create peace with nature. And it is time to develop a new operating system for the world.

We need to start thinking not only in terms of return on investment, but in terms of sustainability. Is it possible that some day fishermen will drop a fishing line in the ocean and there will be no fish? We accept that oceans around the world have dead zones. What about future dead zones on land? We have 6 billion people on this planet – soon to reach 9 billion – and they are all demanding resources.

Where will nature go? Is there a tipping point? We must have areas where fish and animals can survive and thrive. If we have a greater vision, as they did in Dubai, can we find new places around the world where we can create special nature reserves? Can we find ways to tie those reserves to commercial ventures that make sense for both nature and the economy? Will it be possible for people around the world to invest in nature, and then reap the benefits of their investment both monetarily and in interacting with nature, through eco-tourism and global education programs?

The people gathered here — The leaders of cities, countries, and global companies — can help set into motion a vision for the future in achieving our dreams with nature and natural capital.

Since time began, humans have extracted resources from the environment and built great machines, advanced technology and created magnificent cities. But in getting where we are today, we have relied on an infrastructure that goes back a century. Inefficiency and wastefulness are built into this infrastructure. We need to take a new approach and take into account how the world is advancing technologically and economically. We need to be at peace with nature and not take it for granted. If trends continue as they are today, we will be destroying that which sustains us.

This is our time to act. The people in this room today have the talent, the vision, the power, and the capital to take us beyond the old ways — the old infrastructure, the unnecessary harvesting of resources, and operating without sustainability.

To create peace with nature, humankind – as the aggressor and occupying force – must formalize its intention by creating a Peace Treaty with Nature. This treaty would create a state called “The State of Nature”, one with legal jurisdiction where the courts and zoning are designed to enhance the laws of Natural Capital. Think in terms of green development zones; places where man can live, work and prosper, but only if he exists in harmony with nature. This, of course, begs the question: can such a place exist? And can such a place generate profits for investors, doing well by doing good?

The answers are YES and YES.

We should begin by protecting what has already been given to us. The Peace Treaty with Nature should start in places that are still pure, biologically intense, and where nature and humans still live in harmony. We have found one example of Natural Capital at work — the Osa Peninsula in Costa Rica.

This is a place where the success of sustainable business can already be seen with such endeavors as the Lapa Rios Ecolodge, an ecolodge that is one of only two hotels that appears on both the Condé Nast’s Gold list and Green list and has received the highest possible distinction from Costa Rica’s national Sustainable Tourism Certifier. It is a place that Price-WaterhouseCoopers defined as the best example of sustainable development in the world.

Local governments are at work on agreements to protect the Osa Peninsula — a rare gem of land and marine territory whose value will increase significantly, if the balance of nature is maintained. Its value would be lost with the destruction of species, unrelenting development, increasing population growth and the consequences of climate change. In years to come, people will be attracted to visit natural wonders such as these all over the world. We need to be proactive in investing in the State of Nature. All of us can become curators with nature and generate a long-term return on investment – financially, psychologically and spiritually.

It is time to generate a global movement for creating a new operating system with Natural Capital as the driving force — where value is created where none existed, but all the while protecting natural resources. Developments in this new operating system will be renewable and sustainable. They will be financed by governments, institutions and the world’s largest companies, all operating under the first Peace Treaty with Nature. Traditional approaches to developing infrastructures and major developments will be replaced by those with Natural Capital in mind. The visionaries and leaders in this room can set a new standard. Think about the Nobel Peace Prize in the year 2020 being awarded collectively to everyone in this room for being the catalysts and financial engines for creating a new operating system.

It is time to create a peace treaty with nature and the operating system to make it a reality.

Since we are in Dubai, and this is a financial meeting, let’s turn to energy and technologies to be showcased in the State of Nature.

Well, simply, humans have designed a system where we take molecules of hydrocarbons, use ships, and sometimes pipelines, to move the molecules long distances to a large centralized plant to convert them to electrons, have some heat loss, capture some heat for reuse, then move the electrons over wires with transmission loss and turn them back to heat. This system pollutes by dumping externalities on nature and on society. This system is inefficient. Nature is not inefficient.

Those living in the United States hear a mantra chanted by certain politicians and their supporters: “Drill, Baby, Drill”.

Others chant “NO”…..”No drilling in the continental shelf, NO drilling in Anwar, NO oil shale”; “No, No, No”.

Both sides debate, actually, argue vehemently, and both are so wrong. They have framed their argument over the supply side, but the debate is silent regarding energy efficiency, technically termed the demand side.

Ask yourself one simple, fundamental, business question: Is it better business to use more energy or to use less energy? There is a concept I would like to introduce: NEGA-WATT. It is two words connected: NEGATIVE & WATTS, NEGA-WATT. Avory Lovins coined the term.

Essentially, it means that we invent and apply technologies so that we can use less energy to have the same or greater quality of life, NEGA-WATT. How much does a WATT cost, and how much does the technology cost to be efficient and not need a watt? Then ask, how many jobs can be created by inventing, manufacturing, and operating energy efficiency.

An operating example occurred in California where there are approximately 3 times the number of refrigerators that were in use in 1990. That is not surprising, but the surprising statistic is that triple the number of units use approximately 50%? of the annual watts that were used in 1990. We did this with technology and efficiency. We need to show that energy efficiency is a form of supply. This will also help nature.

If we look at the cost of energy from a dirty coal plant and look at the fully amortized cost of a highly efficient energy system, we can arbitrage the savings and add to GDP. We can turn energy efficiency into profits.

Our current energy systems were designed to be reliable. They were not designed to be efficient.

Energy efficiency has been antithetical to sales of energy producers. If an automobile, train, bus, or plane doubled its mileage, then the energy company sales, and the sales of the sovereign nations in this room would drop by 50%. Not a very good business practice. But, the future will find us asking, how few watts can we use for the same or better quality of life? And using less energy will be good business in the emerging carbon regulatory regimes which are emerging.

Unfortunately, every entity within the energy production and sales chain has an incentive to avoid any discussion of effiency. This is not new. General Motors, in its heyday, bought the Redline
in Los Angeles, a spectacular public transportation system. It shut it down.

However, the system which has emerged is imposing costs to our natural systems. Humans have done this before: the Sumarians, the Maya, Indus Valley, the Mycenaean Greeks, and more. We can no longer talk about energy without talking about nature. They have collided and our economic systems ignore the collision. The 16 October 2008 issue of NewScientist Magazine highlighted this issue recently with the title, “How our economy is killing the Earth”. As banks and markets crash, what can science do to reshape economics and make it fit for a finite world? From magazine issue 2678 Labeled: Opinion Special.

We have to include nature in our energy decisions. We have to get efficient. We have to treat efficiency as a form of supply. We have to increase all forms of supply from every vertical, and we have to do so in Peace With Nature. Let us stop for a moment and ask who was the person who cut the last tree on Easter Island, and what was he thinking?

I am a capitalist. This is no touchy feely tree hugging discussion. We must enable every vertical of potential supply, and every vertical of demand reduction.

This is not merely a conversation about energy. It is about nature; it is about life. We must incorporate efficient technologies in places that operate under the laws of Natural Capital and the laws of sustainability. Remember, nature is efficient.

It is time for us to act — to do a Nobel act — for the well-being of the world and of our children. It is time to create a Peace Treaty with Nature and the operating system to make it a reality.

Invest in Natural Capital! It redefines ROI for business, people and nature.

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