What Price Our Planet? Can We Grow the Economy and Reduce Poverty without Self-Destructing ?

~ “Hindsight is always twenty-twenty.” ~ Billy Wilder, 1979
~ “I remembered the line from the Hindu scripture, the Bhagavad Gita……
‘I am become death, the destroyer of worlds.’ ” ~ J. Robert Oppenheimer, 1945
~ “I have called this principle, by which each slight variation, if useful, is preserved, by the term of Natural Selection, in order to mark its relation to man’s power of selection.” ~ Charles Darwin, 1859
~ “Picture a pasture open to all…The rational herdsman concludes that the only sensible course for him is to add another animal to his herd. And another; and another…But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit – in a world that is limited.” ~ Garrett Hardin, 1968
~ “If humanity were to try to replace the free services of the natural economy with substitutes of its own manufacture, the global GNP would have to be raised by at least $33 trillion. The exercise cannot be performed, except as a thought experiment. To supplant natural ecosystems entirely, even mostly, is an economic and even physical impossibility, and we would certainly die if we tried.” ~ E.O. Wilson, 2002
~ “At JBS we recognize our business is only possible due to the precious natural resources provided by our planet. As such, environmental stewardship is a key pillar in our sustainability approach to responsibly meeting the needs of today, while empowering future generations to responsibly meet their needs tomorrow.” ~ JBS Company, 2015
~ “Conservation is about more than leaving things alone: it is about hard choices with economic consequences. Focusing on natural capital is a way of ensuring that the value of nature is embedded in our economy. By making a choice a price is being put on nature.” ~ Dieter Helm, 2015
“ In theMiddle East, nearly 2 mb/d of crude oil and oil products are used to generate electricitywhen, in the absence of subsidies, the main renewable energy technologies would becompetitive with oil-fired power plants. In Saudi Arabia, the additional upfront cost of acar twice as fuel-efficient as the current average would, at present, take about 16 yearsto recover through lower spending on fuel: this payback period would shrink to 3 yearsif gasoline were not subsidised. “ ~ International Energy Agency, 2014

After a few better years when trends seemed to be reversing and things were starting to improve somewhat, this year is looking a bit grim once more for our planet’s natural environment. Later this year the USA and other major nations will meet in Paris for UN Climate Change Conference with aim of agreeing actions to save our Planet for future generations by keeping global temperature rise below 2 degrees Celsius. The last year or so has seen major new challenges to achieving this coupled with new progress. On the one hand, the USA and China agreed actions to reduce emissions. Against that, after several years of progress in containing it, deforestation of the Amazon rainforest in Brazil accelerated once more in 2014. This despite efforts by some businesses to aid conservation. Meanwhile, ominously, the huge 50% drop in crude oil prices in 2014 has dramatically changed the world’s energy outlook. All this means that the prospects for the world addressing its already pressing long-term climate, growth and sustainability challenges, are much more uncertain than a year ago.
Key Questions: What are the challenges immediately facing the nations of the world, especially the largest carbon emitters, now that oil prices seem set to remain low for years? What actions can individual nations take to preserve the environment while fostering economic growth? What should private businesses’ role be in this and why? Is it possible to “price” nature as a basis for “costing” what we must pay for conservation? Or is nature inherently beyond price?
Today’s Challenges: The massive drop in crude oil prices in 2014 is now expected to continue for a decade at least. This could complicate efforts to diversify the world’s energy mix away from fossil fuels and towards renewables and low-to-no carbon alternatives. It is further complicated by continuing major subsidies for gasoline consumption – notably in Middle East – reducing incentives for conversion to more energy efficient technologies and vehicles. The risk is that switching to renewables will drop – especially as more countries cut subsidies for renewables (as has started already in Europe, notably in Germany and the U.K.) – at the same time as fossil fuels’ prices have seen such big declines. Natural gas prices are still lower than oil – in terms of energy equivalence – which means an intermediate strategy of substituting cleaner gas for dirtier oil will continue to have advantages. But efforts to adopt carbon taxes still face major obstacles in many places – even while interest in them is growing. British Columbia in Canada launched a successful carbon tax in 2007, only to freeze its implementation in 2012. Meanwhile, similar efforts in California and prospectively in Vermont are controversial and mired in implementation difficulties.
Environmental Conservation: As U.S. biologist E.O. Wilson has noted, already by end 20th century, the USA – and many other advanced nations – had experienced massive sustained long term economic growth that had dramatically changed their natural environments – beyond all recognition. This trend has now continued to major developing nations – notably China and India. Already by 1997, the world population’s dependence upon free natural services from the environment – wood, fish, minerals etc. – was estimated at a staggering $33 trillion – or almost double the world’s entire income (GDP) at that time. Yet, as U.S. biologist Garrett Hardin noted in 1968 in his artlcle on the “tragedy of the commons”, open unregulated access to natural resources available publicly at no cost to the user almost inevitably leads to a perverse dynamic of unsustainable over-exploitation. In this way, such things as fish stocks in the world’s oceans, as well as grazing lands, eventually become so low as to risk total exhaustion. Meanwhile, priceless – or free – pollution by private firms and homes, and commercial exploitation of the natural environment – rivers, forests, oceans etc. – could aggravate natural disasters as well as cause unsustainable climate change – as the UN-IPCC has documented. By 2050 the world population is projected to be 50% larger, and by 2100 it could be double, what it is today. And world income (GDP) could be 15-30 times larger. With far larger food demand, further degradation of the natural environment looks likely to far outweigh the already massive changes our planet has undergone in the twentieth century.
Private Business’ Responses : Generally, until now, in many nations business has regarded conservation and anti-pollution measures – such as the U.S. Clean Air and clean water laws and regulations – as a burden and have resisted their adoption and implementation. However, increasingly private businesses around the world are coming to realize the stake they have long-term in maintaining the natural environment for their own sustainability and success. In Brazil for example the giant meat packing company JBS (see above quote) adopted a policy of not buying from farms expanding through deforestation in the Amazon. By 2015, this had led to a major reduction in deforestation by their suppliers.
“Pricing” The Planet : There can be little doubt that how we, as a species, manage the ever scarcer natural resources of our planet in the 21st century will largely determine whether we continue to prosper and develop, or come under increasing ecological pressures that could threaten our existence. Following a major environment white paper in 2011, the U.K. Government established a Natural Capital Council (NCC) – composed of leading scientists, economists, and financial experts – with a mandate to propose measures to preserve and strengthen the nation’s natural environment, that had been much degraded in previous decades through pollution and over-exploitation.
One initiative of the NCC, spearheaded by its chairman, Oxford environmental economist Dieter Helm, has been to benchmark the stock of natural capital assets in the U.K. economy and to propose specific measures to ensure that the natural environment be maintained, and hopefully restored to earlier higher levels, into the long-term future. In an interesting and provocative new book – “Natural Capital : Valuing the Planet” (2015) – Helm attempts to set out a conceptual framework for measuring and costing the actions required to maintain the environment. The goal is to enable policy-makers, businesses and families better to make choices and decisions and to prioritize highest return environmental protection measures in terms of long-run sustainability. They include maintaining fish and wildlife stocks, and forests, and air and water quality, above threshold levels especially for those most at risk. This would be done through a combination of compensation payments by users for using up non-renewable resources and for depleting renewable resources; taxation of pollution; and regulations to protect the vulnerable commons.
Already the “natural capital” approach has met with some success in the U.K. through specific annual action plans laid out by the NCC. These have included habitat restoration, wetlands and marsh remediation, wildlife and fish stock protection, among others. However, while the “natural capital” model is bold and ambitious, so far it has been used for moderate localized undertakings. Whether it can be scaled up to the national – let alone the global – level without running afoul of escalating complexity, vested interest resistance and politics, is very much an open question.
Perhaps more fundamentally, by setting the overarching goal of preserving the nation’s – and ultimately the world’s – “aggregate natural capital” and using economic costing as a basis for that, it implicitly assumes humans have sufficient mastery of their natural environment. However, as Charles Darwin told us (see above quote), natural selection is a far more potent force in evolution than man’s own selection process. It is unclear, for example, how we could ever adequately “cost” the potential catastrophe of loss of the major glaciers of the world – eighty percent of which are already receding dangerously. As E.O. Wilson told us, too, Man still has way too insufficient capability to recreate the natural environment entirely in the aftermath of “civilization-ending catastrophe”. Meanwhile, the weakness of cost-benefit analysis is that it assumes a rate of return achieved over a relatively short timeframe (10-20 years) where the benefits are far less in the outer years due to discounting. But it is precisely the outer years – the very long term – that will be crucial for maintaining the planet’s environment.
Conclusions : By now, confirmed science leaves us in little doubt that our planet’s climate is undergoing inexorable and rapid change. And the natural capital of the world is continuing to be depleted at an accelerating rate, as the world’s population grows and its economy expands. While there have been some positive developments in recent years, and we know a lot more about the nature and scope of the challenges, thus far the political will to tackle them adequately has been wanting. I, for one, hope that our political and business leaders – and our fellow citizens of the world – have the good sense to unite in taking timely action. The price of failure is too grim to contemplate – particularly for coming generations, as yet unborn and thus with no voice in the debate.

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