Wrap Your Mind Around This Idea

We live in a world that's running out of stuff including the stuff that keeps you alive - clean air and fresh water for starters. There is not enough to meet our insatiable and persistently growing demand. The Global Footprint Network that studies these things has worked out that mankind now uses renewable resources (water, air, biomass) at 1.7 times the Earth's replenishment rate, its carrying capacity.

That means we're neck deep in a major resource deficit. The shortfall is visible, tangible, palpable and manifests in countless forms. It's evident in lakes that have dried out, rivers that no longer run to the sea, aquifers that have been rapaciously drained and now stand empty, vast and expanding tracts of deforestation, spreading desertification encroaching on once productive land, even cities. It's evident in increasing contamination and pollution of our waterways and coastlines observed in algae blooms and oceanic "dead zones." It's inescapable in the collapse of global fisheries as the industrial fleet chases species after species, "fishing down the food chain." It's evident in loss of natural habitat and biodiversity, the extinction of species terrestrial and aquatic. It's everywhere. You have to close your eyes not to see it.

Keep all of that in mind when you consider that a lot of what we're running out of is consumed, free of charge, by the same industrial sector that has given us so much crap that ends up obsolete or unworkable in such short order. In fact a recent study finds that none of the world's top industries would realize any profit if they had to pay for the resources they consume at no charge.

Coming from a civilization which, for most of its 12,000 year history, enjoyed a bountiful surplus of natural resources, we're not accustomed to seeing those resources in terms of ownership or value. We have to get our minds around the idea that assets are property and, if they don't belong to you personally, they very much belong to your society or, in the case of the atmosphere, to humankind in general. Then understand that your society, with the collusion of your political caste, is getting grievously shortchanged.

The notion of “externalities” has become familiar in environmental circles. It refers to costs imposed by businesses that are not paid for by those businesses. For instance, industrial processes can put pollutants in the air that increase public health costs, but the public, not the polluting businesses, picks up the tab. In this way, businesses privatize profits and publicize costs.

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check out a recent report [PDF] done by environmental consultancy Trucost on behalf of The Economics of Ecosystems and Biodiversity (TEEB) program sponsored by United Nations Environmental Program. TEEB asked Trucost to tally up the total “unpriced natural capital” consumed by the world’s top industrial sectors. (“Natural capital” refers to ecological materials and services like, say, clean water or a stable atmosphere; “unpriced” means that businesses don’t pay to consume them.)

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The majority of unpriced natural capital costs are from greenhouse gas emissions (38%), followed by water use (25%), land use (24%), air pollution (7%), land and water pollution (5%), and waste (1%).

So how much is that costing us? Trucost’s headline results are fairly stunning.

First, the total unpriced natural capital consumed by the more than 1,000 “global primary production and primary processing region-sectors” amounts to $7.3 trillion a year — 13 percent of 2009 global GDP.

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Of the top 20 region-sectors ranked by environmental impacts, none would be profitable if environmental costs were fully integrated. Ponder that for a moment: None of the world’s top industrial sectors would be profitable if they were paying their full freight. Zero.

That amounts to an global industrial system built on sleight of hand. As Paul Hawken likes to put it, we are stealing the future, selling it in the present, and calling it GDP.

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The distance between today’s industrial systems and truly sustainable industrial systems — systems that do not spend down stored natural capital but instead integrate into current energy and material flows — is not one of degree, but one of kind. What’s needed is not just better accounting but a new global industrial system, a new way of providing for human wellbeing, and fast. That means a revolution.

Of course the contrarians will say that, if we priced that natural capital and forced industry to pay, that would be passed along in ever higher prices. Not so fast. That overlooks what would happen to both production and consumption. 

Free resources are freely consumed, subject to availability, and freely squandered. They're free after all. When those resources are priced, when they come with a cost, the competitor that uses them most wisely, with the least waste, has a market advantage.  

Also, when the price increases, consumers will become less tolerant of shoddy manufacture, planned obsolescence and shortened lifespans, products that cannot be repaired or upgraded.  Imagine if your appliances, out of the box, were good for 25 to 30 years. I've been in my current house for about 15-years and I'm already on my third stove. When the first two failed I was outraged to be told that the essential parts needed to repair them were no longer available.

Pricing natural capital is an essential step in transitioning to a steady state economy. It's not a nice idea. It's not an option. If we don't take that leap we won't have an economy. 

If you're interested in this idea of pricing natural capital there are several good books you can find in your library. A good starting point is "Natural Capital and Human Economic Survival," a 1995 book edited by Thomas Prugh and containing essays by Robert Costanza, John Cumberland, Herman Daly, Robert Goodland and Richard Norgaard.  If nothing else you'll discover how we're all getting shortchanged by neoliberal governments. You'll also realize that continuing on with the status quo is not an option. If we don't change, and soon, we will be changed.

We Need New Ways of Pricing Natural Capital

A case in point.  This summer's B.C. spot prawn season got derailed - by Asia.  Delicious local prawns that usually would go for 8-9 dollars a pound were suddenly demanding prices of 38-39 dollars a pound, head on, in Vancouver.

What happened?  Apparently Asia's (China's) shrimp/prawn stocks succumbed to some sort of environmental disorder.  Asian buyers flocked to buy up British Columbia's prawn catch (and Dungeness crabs to boot), sending market prices through the roof.  Vancouver restaurants were reported to have taken them off the menu, substituting far more affordable Atlantic lobster instead.

In the midst of this I wound up at my doctor's office.  I sat beside a fellow in the waiting room who had brought a plastic bag full of something.  It turned out he was a prawn fisherman who had brought a bag of his finest as a gift for the same doctor I see. 

We began a discussion about the prawn market and this fellow was giddy at the windfall profits he was raking in.  At this point I asked the fisherman what the people of British Columbia got out of the prawns he was flogging to Asia?  After all, I said, weren't those prawns really the property of the province and people of British Columbia?  These were wild sea life.  The harvesters didn't operate prawn hatcheries.  They didn't feed the creatures.  All they did was show up to harvest and sell our prawns, my prawns.  So, when prices go through the roof for my prawns, high enough that I and most of my fellow British Columbians are priced out of the market, why then should the market windfall at least not belong to us, not the harvester?

It strikes me that we've become a little too lax in allowing those who really do little besides harvesting, packaging and distributing commodities based on public property, natural resources, to accede to ownership at below market prices.  If the market price escalates, so too should the public's share of that enhanced value.  In the case of seafood, such a provision could easily be incorporated into our licensing regime. 

Products such as freshwater would require different treatment.  Water is often one of those great government give-aways especially for big business.  Yet water has a value.  We often hear today that it's the "new oil".  What would happen if we priced it fairly to take into account not only its inherent value but also the purpose to which it was being used and how it was treated afterward?  For example, there should be a far higher price if it is to wind up as an environmental contaminant in some massive tailing pond than if it was to be returned to nature in a clean state.  Likewise, those who seek to commodify it, for example as bottled water, should remit an amount commensurate with its retail value. 

This conundrum is so multi-faceted that it defies specific rules beyond core principles and individual applications.  Yet, in a world running scarce of so many things, we have to safeguard the public purse if only to buffer ourselves against volatile market forces that we're going to face one way or the other.

Valuing natural capital realistically isn't anti-business.  It's merely putting the public-business relationship on a fair footing.  It's also putting an end to the vast transfer of unearned wealth out of the public purse and into private pockets. 

The Gordion Knot of Modern Industrialism - Pricing Natural Capital

 

"Natural capital" comprises things from nature that belong to no one and to everyone - things like the atmosphere.   Other types of natural capital are considered national assets, like a country's groundwater.

Natural capital is what allows us to go for lovely walks through the forest or camping in national parks.  It is also what sustains almost all life on the planet.

Yet throughout the history of mankind and, particularly ever since the Industrial Revolution, industry has treated natural capital as its own and a freebie at that.

In a world in which the demand for natural capital is now rapidly outpacing supply there is a growing awareness that this should not be anyone's to access for free and especially not enterprises that use natural capital to generate wealth for their exclusive benefit.

In classical economics, natural capital is lumped into what are called "externalities."  It never finds its way onto corporation balance sheets.   New research shows that, if it did, the bottom line for even profitable companies would tank.   From David Roberts at Grist.com:

"...check out a recent report [PDF] done by environmental consultancy Trucost on behalf of The Economics of Ecosystems and Biodiversity (TEEB) program sponsored by United Nations Environmental Program. TEEB asked Trucost to tally up the total “unpriced natural capital” consumed by the world’s top industrial sectors. (“Natural capital” refers to ecological materials and services like, say, clean water or a stable atmosphere; “unpriced” means that businesses don’t pay to consume them.)

"Here’s how those costs break down:

The majority of unpriced natural capital costs are from greenhouse gas emissions (38%), followed by water use (25%), land use (24%), air pollution (7%), land and water pollution (5%), and waste (1%).

"So how much is that costing us? Trucost’s headline results are fairly stunning.
"First, the total unpriced natural capital consumed by the more than 1,000 “global primary production and primary processing region-sectors” amounts to $7.3 trillion dollars a year — 13 percent of 2009 global GDP."

And the biggest villain?  Of course, it's coal.

Trucost’s third big finding is the coup de grace. Of the top 20 region-sectors ranked by environmental impacts, none would be profitable if environmental costs were fully integrated. Ponder that for a moment. None of the world’s top industrial sectors would be profitable if they were paying their full freight. None!
That amounts to an entire global industrial system built on sleight of hand. As legendary environmentalist Paul Hawken put it, “We are stealing the future, selling it in the present, and calling it GDP.”

"...the UNEP report makes clear that what’s going on today is more than a few accounting oversights here and there. The distance between today’s industrial systems and truly sustainable industrial systems — systems that do not spend down stored natural capital but instead integrate into current energy and material flows — is not one of degree, but one of kind. What we need is not just better accounting, it is a new global industrial system, a new way of providing for human wellbeing, a new way of relating to our planet. We need a revolution."

World Bank, Countries Must Value Their Natural Capital

Hey, Steve Harper, are you listening?   The World Bank is calling.   They want Canada, and every other country, to start putting values, okay price tags, on all their natural capital.  

Forests, peatlands, coasts, water, wildlife - everything should be costed out.   That way you can do a bit of math and figure out the mega-billion giveaways you've been doling out as freebies to industry- outfits like the Tar Sanders.   You should be handing them an invoice, payment due in 30-days.

It's not a tax, nothing of the sort.  It's simply them paying the value of what they're getting that belongs to Canada and the Canadian people.   Yes it may be reflected in somewhat higher prices but that should be more than offset by the funds remitted by the users of our natural capital.

"Placing a monetary value on natural ecosystems is a key step on the road to "green" economic growth, according to the World Bank, which published a report on green growth on Wednesday at a conference in Seoul, Korea.

"By making such estimates, countries can develop policies that ensure the pursuit of economic growth does not occur at the expense of future growth potential, by destroying natural assets such as water sources or polluting air, rivers and soil.

"Rachel Kyte, vice president for sustainable development at the bank, said that the patterns on which economic growth had been achieved in recent decades were unsustainable, because of the amount of environmental degradation involved.

"She said: 'At current rates, we are in danger of undermining the basis on which growth has been achieved in the last decades. We do not believe that current growth patterns are sustainable.'"

And let's not forget, Steve, to start putting realistic prices on carbon emissions and the second part, collecting that from major emitters.   And you can start all this in the Athabasca Tar fields.   Those suckers have got a huge water bill coming and a bigger bill for environmental degradation costs and for impacts on forests and wildlife (don't forget to bill the pipelines) and for imperilling coastal British Columbia.   What?   That would shut the whole thing down?   Why, of course it will.  That's because this is all a giant Ponzi scheme in which you're robbing Peter, the Canadian people, to line the pockets of Paul, the fossil fuelers.