I am going to be drawing heavily from the latest book Plan B 2.0 and I will be making three points. The first, why we have to change and do it quickly; two, an example of what might happen if we don’t; and three, sort of a case study of how we can restructure the economy in a way that will sustain economic progress.

Those of us who have been working on environmental issues for many years have been saying for some time that we need to build a new global economy, but we haven’t convinced enough of the world yet. But what’s happening in China I think may begin to convince many people that we will have to restructure the world economy quickly if we are to sustain economic progress.

Almost ever since I can remember, we have been saying that the United States with 5% of the world’s people has been consuming a third to 40% of the earth’s resources. Today China consumes more of most basic resources than does the United States. For example, when we look at the basic commodities like grain and meat in agriculture, oil and coal in the energy economy, and steel in the industrial economy, China now consumes more than the United States of all except oil. China’s meat consumption is nearly double that of the United States and its steel consumption is triple.

If China’s economy expands at 8% a year, it will catch up to the U.S. in consumption per person by 2031. China’s 1.4 or 5 billion people in 2031 will be consuming the equivalent of two-thirds of the current world grain harvest. Their paper consumption at U.S. per capita level will be double current world paper production, and there go the world’s forests. If China has three cars for every four people in 2031, its oil consumption will be 99 million barrels a day. The current world production of oil is 84 million barrels a day and it may never be much more than that.

What China is teaching us is that the Western economic model—the fossil fuel-based, automobile-centered, throwaway economy—is not going to work for China. If it doesn’t work for China, it will not work for India, which by 2031 may have an even larger population, nor will it work for the other three billion people in the developing countries who are also dreaming the American dream. And in an increasingly integrated global economy where we all depend on the same oil, grain and steel, it will not work for us in the industrial countries either.

Our challenge is to replace the old economy with a new economy—one that is powered largely by renewable sources of energy, one that has a much more diversified transport system, and one that reuses and recycles everything. The good news is that we can see glimpses of the new economy beginning to emerge in various parts of the world. We see it for example in the wind farms of Western Europe. We see it in the solar rooftops of Japan, in the growing fleet of gas electric hybrid cars in the United States, in the reforested mountains of South Korea, and in the bicycle friendly transport systems in Amsterdam and Copenhagen. The challenge is to accelerate the evolution of the new economy because we do not have a lot of time.

After studying earlier civilizations that moved on to an economic path that was not environmentally sustainable, I have asked myself what might be the warning signs that we are in trouble as a civilization. One of the indicators that I think deserves our attention is the price of oil. The price of oil is rising. Oil is the lifeblood of our early 21st century civilization, and it is being depleted.

We have long been concerned with the effect of rising oil prices on the cost of food production. That remains a legitimate concern, but of more concern to me is the effect of rising oil prices on the demand for agricultural commodities. Once the price of oil gets above 60 dollars a barrel, it becomes profitable to convert agricultural commodities, whether it be wheat, corn, rice, soybeans or sugar cane into fuel for automobiles. Almost everything we eat can be converted either into ethanol or bio-diesel for automotive fuel.

During the last year and a half there has been an explosion in the investment in ethanol distilleries in Brazil and in the United States and to a lesser degree in Europe and also in bio-diesel refineries converting vegetable oils into bio-diesel. What we are beginning to see is rising commodity prices as a result of the growing use of these agricultural commodities to produce fuel for cars. For example the price of sugar which a year ago was 7 cents a pound is now 17 cents a pound. It is now at the highest level in the last 25 years.

The U.S. Department of Agriculture, in its first estimate of this year’s world grain harvest, pointed out that it expects 55 million tons of corn from the next corn harvest in September to be converted into ethanol. This exceeds the total grain harvest of Canada, so it is not a trivial amount that is being converted into fuel.

We are setting up competition between the 800 million people in the world who own automobiles and the two billion poorest people in the world, many of whom are spending half or more of their income on food. This is an entirely new international, social and political issue, one that I don’t think the world has yet even fully recognized much less figured out how to respond to. The unfortunate reality is that the world’s total agricultural capacity looms very small compared with the almost infinite demand for automotive fuel.

If grain prices were to double as sugar prices already have, it could create political instability in low-income countries that import a large share of their grain supply. This political instability in countries like Indonesia, Nigeria, Mexico, dozens of other countries, could disrupt global economic progress. How does the international community deal with the growing competition between automobiles and people for the same food resources?

Let me describe an alternative automotive fuel economy that we now have the technologies to create. If we decide we want to dramatically reduce our use of oil and cut carbon emissions in the United States, we could do it by shifting over in the next ten years to gas electric hybrids like the Toyota Prius, which gets 55 miles per gallon compared with 22 miles per gallon of an average car in the United States. We could easily cut gasoline use in half—no change in the number of cars; no change in the miles driven; just using the most efficient technology now on the market to operate our automobiles.

Shifting to gas electric hybrids opens up an exciting new option. If we take a gas electric hybrid like a Toyota Prius and add a second storage battery and a plug in capacity, then we can do our short distance driving—the daily commute, grocery shopping and so forth—almost entirely with electricity.

If at the same time, in the United States, we invest not in hundreds but in thousands of wind farms feeding cheap electricity into the grid, we can then run our cars largely on wind energy. The exciting thing for Americans in this case about wind energy is that it’s inexpensive, inexhaustible and it’s ours. No one can cut off the supply, and no one can increase the price of the fuel. This system would deliver the electricity equivalent of a gallon of gasoline for 50 cents.

My concluding point is this. In order to restructure the global economy, we need to incorporate the environmental cost in the prices of products. For example, in the United States, a gallon of gasoline costs $3. But if we include the indirect costs—the cost of air pollution and treating respiratory illnesses, the cost of damage from acid rain, the cost of climate change, and the cost to maintaining a military establishment in the Middle East—then the price of a gallon of gasoline should not be $3 but $10. The way to incorporate this is to restructure the tax system: lower income taxes and offset that with a rise in energy taxes. No change in the amount of tax we pay, but just shifting the things that we tax. The key is to get the market to tell the environmental truth.

Oystein Dahle, former Vice President of Exxon, Norway, after the collapse of the Soviet Union said that socialism collapsed because it did not allow the market to tell the economic truth. Capitalism may collapse because it does not allow the market to tell the ecological truth.