Can economists be our ticket to global clean energy?
by Amy Larkin
June 25, 2013
© Greenpeace / Wu Di
In 1978, when I first saw Greenpeaces astonishing actions against whaling, I thought that these brave people were doing what I wanted to do in my heart. Basically I was inspired and determined -- Im with them. I spent most of the subsequent 35 years volunteering or working for Greenpeace. To my absolute surprise, there are now some new actors that also inspire me to feel, Im with them. Accountants, businesspeople and economists, or revolutionaries in suits as I call them, have an opportunity to change the world. There are two sides of the financial ledger profit and loss, cost and expense. But there is a basic piece of the financial picture that is not yet on the books cause and effect. Every financial transaction affects the environment. And the environment is embedded in every financial transaction. Every transaction. No such thing as free carbon The financial and environmental crises are connected. The full costs of coal extraction and combustion on top of the coal companies costs were between $350 - 500 billion aa year in the United States alone, according to a 2011 Harvard study. These hundreds of billions of dollars, called externalities in economics, represent actual bills paid by local and federal governments, fisheries, businesses, schools, and unwitting families and their healthcare providers. Despite conventional wisdom, coal is not a cheap energy. Its retail price is cheap only because it is subsidized by its own victims. Two similar studies estimate the externalities of oil in the United States at over $800 billion annually. Add together the external costs of coal and oil, and it is well over $1.1 trillion, the annual 2012 United States deficit. Sequester this. These externalities are what I call, environmental debt in my new book. Chinas Ministry of Environmental Protection now estimates the costs of environmental degradation at $230 billion for 2010, or about 3.5 percent of its Gross Domestic Product. The United States has made no such calculation. But as Americans, we are a large part of Chinas professed problem both the causes and the solutions. [caption id="attachment_17174" align="alignright" width="300"] A girl and her mother wear respirator masks in Beijing.[/caption] Round-the-clock manufacturing factories fired by coal cause much of Chinas pollution. What are those churning and burning factories making? Cheap goods exported to the US. In fact, 25 percent of Chinas exports heads straight for the US meaning American consumption causes a quarter of Chinese pollution. If a DVD player or a pair of shoes or cheap furniture cost their full cost, we would not buy them at the rate we do. These are the new cause and effect columns that must enter all business and government. Global growth through clean technology There is a global effort to integrate social and environmental costs into all business accounting. Puma created the first ever Environmental Profit & Loss statement and continues to improve and expand this reporting. But currently, this is only information, not real costs. But until the information is at hand, the costs cannot be assigned and there is no financial motive to eliminate the costs. The rules must change so that the biggest polluter no longer makes the biggest profit. And this effort -- to assign the costs -- is being led by revolutionaries in suits at the Global Reporting Initiative, UNEP-FI, Integrated Reporting, Earth Track. Indeed, financial engineering is now inspiring. (My favorite chapter in Environmental Debt is on accounting.) The global economy is now based on the pricing of goods at this artificially low level the economys transition to a sustainable model will be no cakewalk. OK.we still gotta do it. The era of cheap goods is over. No nature, no business In my new book, I offer three fundamental principles for the 21st century -- the Nature Means Business Framework.
- Pollution can no longer be free or subsidized.
- The long view must guide all decision making and accounting.
- Government plays a vital role in catalyzing clean technology and growth while preventing environmental destruction.