by Walter R. Stahel
Today’s industrial economies are confronted with the challenge of promoting renewable energies to mitigate climate change, of ageing populations, rising sovereign debt and high youth and long-term under-employment, to name but a few.
The industrial revolution has been instrumental to overcome scarcities in resources, food and goods, but cannot cope with today’s situation of an abundance of cheap materials, food and goods imported from countries with low-cost labour.
This article promotes a circular economy—a low-carbon low- resource alternative to the industrial throughput economy, based on the smart management of existing stocks of manufactured assets—with a focus on maintaining the performance,
value and quality of existing stock, in synergy with manufacturing innovative new systems (Stahel 2010). Managing stock is based on caring; caring is labour-intensive, skilled and local.
To promote sustainable development, new approaches should have a holistic focus; legislators should define policies which are simple, convincing and cross-cutting with the objective of preserving stock. Sustainable taxation is a point in case (Stahel 2013):
- do not tax renewable resources, noting that human labour is renewable, but exclusively tax non- renewable resources, wastes and emissions,
- do not subsidise the production and consumption of non-renewable resources,
- do not levy value added tax (VAT) on the value preservation of stock (such as reuse and service-life extension activities),
- give carbon credits to carbon emission prevention (smart stock management) at the same rate as to carbon emission reductions (cleaner flow).
Sustainable framework conditions create societal and corporate resilience. A non-taxation of all renewable resources including work would promote all caring activities (looking after people’s health, looking after natural and cultural capital) cheaper and manufactured (physical) stock management activities more competitive.
It must be emphasised that the proposal here is for a shift in the tax base rather than an increase in tax levels. A fiscal policy of sustainable taxation could make many subsidy policies redundant; taxing non- renewable resources instead of labour would give clear incentives to economic actors to shift from flow to stock business models. In addition, it would make all stock management activities (looking after people’s health, looking after natural and cultural capital) more competitive.
Not taxing labour but non-renewable resources instead has to be adapted to national characteristics; in the USA, eleven States do not tax labour (human capital) but flow (the construction industry in Florida, the oil and gas industry in Texas). In Canada, the move in British Columbia towards taxing GHG emissions (B.C. 2013) appears to be having effects which are both environmentally and economically beneficial (Elgie and Clay 2013). In addition, creating more jobs by not taxing labour will reduce a number of public expense items, for instance in mental health costs (OECD 2015).
Not subsidising the production and consumption of fossil fuels world-wide would save all Nation-States between USD 0,5 and 5 trillion annually.
Not levying VAT on value preservation activities would give goods in the circular economy a substantial cost advantage over new goods (around 20 per cent in most EU countries), giving economic actors again a clear incentive to change from flow to stock management.
Giving carbon credits also to prevented emissions would create a level playing field between efficiency and sufficiency approaches and benefit the circular economy for its substantial reduction of environmental impairment.
The emphasis on work is ethically justified as people are the only resource with a qualitative and creative capability which can be developed but which deteriorates if not used. A ton of coal left in the ground for another ten years does not deteriorate; human labour left unused for ten years may lose all skills.
Unemployment has a high and hidden cost for society (unemployment benefits, loss of opportunity and wealth for individuals and the economy). More people at work directly reduce this cost. Sustainable taxation is the most efficient lever to create new regional jobs of all skills.
Walter R. Stahel
Professor, University of Surrey
Walter Stahel is the founder-director of The Product-Life Institute Geneva, which is the oldest established consultancy in Europe devoted to developing sustainable strategies and policies; with partner institutes in Tokyo and Vienna, founded in 1983.
Stahel is the Head of Research for Extreme Events and Climate Risk at The Geneva Association, and was previously the Head of risk management research and Vice Secretary General.
In 2015 Stahel was elected Finalist of the Fortune Award for Circular Economy Leadership. In 2014 he was nominated as a Member of the Global Agenda Councils of the World Economic Forum. In 2013 he was elected as a Full Member of the Club of Rome. In 2012 he was awarded Doctor of the University, honoris causa, in recognition of his outstanding contribution to the field of Sustainability, from the University of Surrey (UK).
Some of Stahel’s most recent publications include ‘The business angle of circular economy, higher competitiveness, higher resource security and material efficiency’; in Ellen MacArthur Foundation (ed) A New Dynamic, effective business in a circular economy, and the second edition of ‘The Performance Economy’, (2010).
Stahel worked as an architect in London and Switzerland after graduating in architecture in 1971from ETH, the Swiss Federal Institute of Technology, in Zurich.