Jeremy Rifkin: ‘What’s missing from UN climate talks is a new economic vision’

Jeremy Rifkin

This article is part of our special report Cities and regions against climate change.

The UN climate change summit (COP21), which opens in Paris next week, “will be meaningless” if it doesn’t include a positive agenda for economic growth, warns Jeremy Rifkin.

The good news is that European cities and regions are at the forefront of the internet revolution which can deliver this promise, he told EURACTIV in a wide-ranging interview.

Jeremy Rifkin is an American economist and author whose best-selling Third Industrial Revolution arguably provided the blueprint for Germany’s transition to a low-carbon economy, and China’s strategic acceptance of climate policy.

He spoke to EURACTIV’s publisher and editor, Frédéric Simon, during a recent visit to Brussels (before the Paris terrorist attacks). The interview focuses on climate change ahead of the COP 21 in Paris and is divided in two parts, the first on cities and regions, the second on agriculture.

COP21 is opening in a few days from now. You’ve been involved in advising European regions and cities about the transition to a low-carbon economy. What are your first achievements?

I chair a global group that’s made up of the leading architects, construction companies, ICT, logistics, transport and power utilities. We’ve done a number of collaborative economic plans so that the regions can begin to build out and connect infrastructure. But we’ve always come up against a wall, which are regional development funds to the European Investment Bank. Because those funds were not designed to be allocated to a paradigm shift that would change the communication, energy and transport infrastructure and create an Internet of Things.

This changed in March, during meetings held in Berlin hosted by Jean-Claude Juncker, Chancellor Merkel and Werner Hoyer. What happened is that the EIB changed their priorities. So now we can begin to lay out this infrastructure. The new priorities for the initial €340 billion that’s been committed (and then for regional funds afterwards) are in digital communications — digitalised and renewable energy; digital transport; and health and education.

So those three pillars are now fundable. With the Nord-Pas-De-Calais region in France, we’re currently deploying over €2 billion of projects. Now, they can go to the EIB and we have real projects – not pilots – to transform the whole region, which is the oldest industrial region of France.

Is this money available under the so-called Juncker Plan?

It’s more than the Juncker Plan — it’s all regional development funds that you get from the EIB. And now my team at TRI consulting are setting up a contract with Luxembourg to be the first member state to have a master plan, working with Deputy Prime Minister Etienne Schneider. We also have a contract covering almost half of the Netherlands, from the Rotterdam metropolitan region to The Hague, developing a master plan with them. And there are several more regions now looking to have similar roadmaps and start connecting cross-border.

So we began to use the subsidiarity principle for the first time. In order to put this in, Brussels can set regulations, standards, incentives and targets; the nation states can provide tax advantages and the like, but the regions are the ones actually customising this Internet of Things platform for the digital Third Industrial Revolution.

It was being said already ahead of the Copenhagen conference in 2009 that the fight against climate change will be lost or won in cities. Six years on, do you feel much progress has been made?

Allow me five minutes to explain this. At every step of the production and consumption value chain —whether mining, transport, storage, etc. ? you have to embed energy in, but you lose some in the transformation process. It’s the second law of thermodynamics. We started the second industrial revolution with 3% aggregate efficiency at every step of conversion, so 97% loss. In the US, we got up to 13% aggregate efficiency in our value chains during the 1990s, Japan go to 20%.

However, nothing’s changed since then, we’ve reached a peak.

The Third Industrial Revolution allows us to jump to 40% aggregate efficiency in the next 30 years. This is made possible with the convergence of the communication internet with a digitalised renewable energy internet and automated GPS, and driverless transport internet. These three internets are now one. And they ride on top of an Internet of Things platform, which moves across regions.

When I introduced this with Chancellor Merkel ? she’s a physicist ? she understood the huge benefits this could bring. So we have to embed sensors across regions, so we can monitor big data in the agricultural fields, the smart homes, the smart businesses, the warehouses, traffic flows, etc., and connect the human and natural environment.

How distant a prospect is this? How much time do you think it will take for these different internets to converge?

It’s technically feasible to build this infrastructure and scale it up in 30 years. And it’s already happening right now. With the Internet of Things, we start generating big data —from sensors in agricultural fields, factories, homes, vehicles warehouses —which create efficiencies in the value chain.

We’ll have ubiquitous connectivity by 2030. But it also raises dark issues such as governments and industries trying to monopolise the grid, privacy issues, data security, cybercrime, cyberterrorism, etc.

The governance of the Internet all of a sudden becomes a highly political issue…

It’s the political struggle of the next half century: how do we ensure network neutrality, privacy, data security, creative content, and prevent cybercrime and terrorism.

But you can’t immediately focus on the dark side, because you’ll never get to the benefits. The benefit is the whole human race with cheap mobile technology now can go up on an Internet of Things platform and have a transparent picture of all the economic data in the world.

Anyone can be a player now and directly engage each other on a global internet without the middle man and the vertically-integrated organisations where profits go to a third party and political control goes to the top.

As we’ve seen with Uber, the social disruption and resistance from established economic actors can be high, though.

Indeed, there are regulatory questions. Digitalisation takes us to very low marginal cost. If you’re a business, you can go up on an Internet of Things platform, and cut out your big data applying your own analytics and creating your own algorithms and apps. So you can dramatically increase your aggregate efficiency at every step of conversion in your value chain, increase your productivity, and reduce your marginal costs to stay competitive in a smart capitalist market.

When the marginal cost approaches zero, that’s when the sharing economy grows.

With the Internet of Things, does that require more high-performance computing capacity?

No. In distributed systems, the computing power can be distributed much more effectively.

So crunching this massive amount of data does not seem like an emerging issue?

One of the big issues is who is going to control that data…

Back to COP21, what benefits do you see with the Internet of Things in terms of the environment?

If you have seven billion people armed with mobile technology, they’re constantly finding ways to increase their marginal efficiency and productivity while reducing cost. This is the zero marginal cost society, which is the ultimate metric for reducing your ecological footprint.

More of us are using less of the earth, getting more energy efficiency out of it, and producing less waste.  Digitalisation also allows us to share at zero marginal cost — share the vehicles with car-sharing, toys, etc. So the digitalisation of communications, energy and transport is giving rise to a sharing economy, which is transforming capitalism.

What we’re beginning to see is a hybrid economic system. Part of the day, people are buyers and sellers, owners and workers producing goods and services for a profit on the market. And part of the day, people are producing and sharing all sorts of virtual goods at near-zero marginal cost beyond the market.

We’ve seen whole industries being disrupted by the first internet — music, newspapers, books, and magazines gone. But thousands of new enterprises, not just Google, are making the platforms and the networks and the apps — all that at higher efficiency, and lower ecological footprint.

Now it’s crossing into the physical world with the Internet of Things. There are millions of people producing renewable energy. The fixed costs are plummeting at an exponential rate. The marginal cost in Germany is zero. Sometimes there is so much energy going into the grid that we have negative prices during the day.

When do you see a zero marginal cost for energy?

Germany will be at 40% solar and wind power across the grid within seven years. We’ll be at 100% well before 2040. So imagine when you can plug into a system with zero marginal cost energy. Then you put in a transport grid —driverless automated transport and drones ?and you’re again reducing the cost of transporting goods and services.

This completely wipes out the business model of energy utilities.

It already has. Ten years ago, we thought the four major power companies in Germany – EnBW, RWE, Vattenfall and E.ON —were invincible. They were vertically integrated global organisations. What happened to them in the last ten years is what happened to the music industry, newspapers and the media. People started creating electricity cooperatives ? farmers came together, urban dwellers, small businesses. Every one of them got low interest loans from the banks. No one was turned down because the banks knew they could pay back from the premium energy they could re-sell to the grid.

And the power utilities can’t scale laterally in the same way. Their ideal for centralised energy requires vertical organisations but these new energies require cooperatives which allow for everyone to collect little amounts of wind or solar where they are. And this is overwhelming for the old power utilities. So the power companies are already out of it. They know they can’t compete with zero marginal cost.

What we told the power companies seven years ago is that they need a new business model. You’re not leaving the second industrial revolution tomorrow morning, but you have to be in the third industrial revolution at the same time with a completely different business model.

That means entering people’s homes, with smart meters, smart grids, etc.

That’s right. You have to digitalise the electricity grid so you have an energy internet. And the way you make money is by selling less and less electricity. You set up partnerships with thousands of enterprises of all sorts, you manage the big data on the energy internet, you help them with their algorithms and their apps so they can increase their efficiency and reduce their marginal cost. Then the utilities share the productivity gains with you — it’s called performance contracting.

Six years ago, E.ON asked me to debate their chairman on this very model. We spent three hours talking. He said it will never happen. Now, they did it this spring: they sold off their fossil fuel and nuclear and are moving into energy management. They want to help manage the energy Internet. If they don’t, everyone else will do it ? the Schneider group wants to do it, IBM would like to do it, start-up companies, everybody. It’s an open field. So imagine what this does in terms of efficiency. A company makes more money by selling less energy. And this is non-carbon, it does not require targets or carbon-trading schemes that are like punishments.

Now, E.ON has joined us. In Nord-Pas-de-Calais, we’re making it happen. The CEO of ErDF Henri Proglio called to say we’re with you. They’re working with us also at RWE. They’re not leaving nuclear tomorrow but they’re smart enough to see where the currents are going. GDF-Suez has joined us too. So it’s not academic and it’s not either/or, it’s the exponential curve.

Again, the sharing economy is crucial because if everyone is armed with cheap mobile technology, we are really reducing our ecological footprint. If we share everything, we are in circular economy redistribution systems that web technology allows us to get together and do.

This is the only way I know.

Does this mean you’re optimistic about COP21?

I think we’re late on climate change. I’ve been engaged in this since 1973, and I got it wrong, I thought we had more time. What none of us anticipated is how dramatic this change would be on the water cycles. What climate change does, for every one degree Celsius, is 7% more precipitation, and more violent water events.

We are terrified now by the violent winter snows, the violent spring flooding or summer droughts, the wildfires, hurricanes like the one that hit the Philippines last week, which was the most powerful in history. We had floods in the Carolinas last year, a thousand year flood. It’s the new normal.

The water cycles are taking us to extinction this century. Here is the fatal flaw in the climate change talks: Leaders come to those talks for the 21st time. And every time, they have bad body language because their economies are contracting and they see the targets as punishments. GDP is slowing everywhere because productivity has been declining for 20 years. Because the platform we’re working on is mature. And now we have climate change, which is creating even more issues for the economy.

What’s missing from those climate talks is a new economic vision, which can be put in place in every region and customised. Then you can put people back to work, all the industries combined ?telecoms, cable, ICT, transport, construction, real estate, etc ? and take two generations to build this out.

If you don’t have that, all of that climate talk in December, even if they agree to everything, it will be meaningless. We’re still going to double the temperature comparable to what we had 50 million years ago. There could be a massive extinction by the end of this century.

So COP21 is just a parlour game. Talk is cheap. You should see what’s happening in Nord-Pas-de-Calais. There is an entire region totally mobilised —3,000 businesses have gone through seminars, we’re laying out these grids, the universities are changing their entire pedagogy. We’re taking 850 million euros of loans, and leveraging with private money to retrofit and turn every high school into a power plant that connects to the grid. Almost 1 billion euros just for the high schools! What I’m saying is if a region like Nord-Pas-de-Calais can do this, every region in the world can do it.

One big trend is the ever-greater urbanisation which is happening in Europe and globally. With that comes greater demand for energy and transport, because urban areas are increasingly fragmented and scattered. So despite all the efficiencies, demand for energy keeps going up, not down.

I’m going to have to disagree on that. You need dense urban areas, up to a certain limit. Car-sharing works in dense urban areas, in suburban area, it even works in rural areas. There will not be more demand for transportation ? we’re going to eliminate 80% of the vehicles in the next generation for sure.

Larry Burns, the former corporate VP for research at General Motors did a study. Every car shared is fifteen cars eliminated. Starting with the Millennials, they will never own cars again. Never, ever — I can guarantee that. The transportation industry knows this. They know their job is going to be selling less cars and manage the transportation logistics, the internet that is automated and driverless. This is where it’s all heading.

Still, expanding urban areas require more concrete, more built environment, which is highly polluting.

This is where we have a different model. We have some of the greatest architectural firms in our group. And we’ve studied this for years. The first industrial revolution encouraged vertically-integrated dense urban areas because trains had to go hub-to-hub, they couldn’t go everywhere. The second industrial revolution, with road systems, you could move towards more suburban build-up, and have these large metropolitan regions that sprawled. The third industrial revolution, which is open, collaborative and laterally-scaled, allows you to have not so hugely dense urban areas, because your transaction costs are near zero for managing communications and transport.

What we envision is not just the urban area, it’s also the surrounding region. The whole region has to preserve its swath of the biosphere. You’ll never get global centralisation to manage the biosphere. It won’t work.

So you believe there is a natural limit to urban sprawl?

There will be a natural limit to the spread of metropolitan regions. I just came back from China where we’re discussing this with the real estate industry there. There is a need to rethink zoning, regulations, how we develop. This third industrial revolution platform allows for some dense areas where you have cities of 500,000 to 2 or 3 million, and then lots of open space.

So you distribute your living patterns more. Then you have to envision every building as not just a habitat but as a node. This means retrofitted buildings, turned into a big data centre, a micro power plant around the site to generate electricity, and a transport hub for electric charging fuel cells and GPS cars. Then you connect the nodes across regions.

We would like metropolitan areas nestled into regions, because each region has to ‘re-wild’ its biosphere, so that biodiversity comes back and helps sustain the more spread out metropolitan areas. If you end up with concrete-to-concrete, and destroy the biodiversity that allows the biosphere to operate, we’re all dead.

It’s a challenge for sure, but I think the new platform allows us to do that with very low cost to manage power and move economic life.

You said urban sprawl will naturally reach its limits.

It won’t come just naturally. You need a new consciousness about preserving the biosphere, you need regulations, zoning, conservation easement. You also have to have biosphere reserves which UNESCO has been trying to do. You take whole parts of land and put them into conservation easement that you cannot sell for development. It means the wildlife can come back.

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