Category:Externalities

True-costs / Environmental full-cost accounting

http://www.greenpolicy360.net/w/Environmental_full-cost_accounting

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Triple-bottom line

http://www.greenpolicy360.net/w/Triple_Bottom_Line

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Mother Nature's Invisible Hand

Mother Nature's Invisible Hand Strikes Back Against the Carbon Economy

The growing impact of climate change is exposing the key fallacy at the heart of the hydrocarbon economy: Big Oil cannot simply exempt itself from the natural economy governing all things in this closed system called planet Earth...

http://image.slidesharecdn.com/greatacceleration2015-150115075518-conversion-gate02/95/great-acceleration-2015-1-638.jpg?cb=1431802701

Externalities Über Alles

An externality is, according to Investopedia, a "consequence of an economic activity that is experienced by unrelated third parties." And externalities can be either positive or negative. It's easy to identify the positive externalities of the hydrocarbon economy. Oil has powered a higher standard of living for millions of people in the global North. Petrochemicals have generated such an agricultural bounty that the United States alone discards up to 40 percent of the food it produces annually without risking famine - yet. And cheap plastic manufacturing allows even many of the poorest members of rich economies unprecedented access to low-cost consumer goods.

On the other hand, the hydrocarbon economy has negatively externalized the impact of its business model by emitting greenhouse gases - carbon dioxide, methane, nitrous oxide and fluorinated gases - without ever paying for the actual cost of those emissions insofar as they impact the ecosystems upon which their businesses and, increasingly, the lives of their customers depend...

The Market Correction Is Coming

In 2008, the great environmental thinker Lester Brown wrote about the inherent blindness of the invisible hand. Brown lamented the "fundamental weaknesses" preventing it from incorporating "the indirect costs of producing goods" into market prices and bemoaned the fact that it doesn't "value nature's services properly." In the short term, Brown was right. But he underestimated the power of an even larger "economy" at work in the self-correcting system called "planet Earth."

In less than a decade, Mother Nature's ever more visible hand emerged as a force punishing the "market inefficiencies" and rampant externalization of the hydrocarbon economy. The best indicator of this correction is the mounting loss of "ecosystem services." These are the common goods upon which human civilization - and, truth be told, all life - depends. Yet, humans simply take them for granted.

It's the clean, clear water, life-sustaining oxygen and life-giving soil.

It's the carbon-capturing forests and carbon-retaining power of the oceans.

It's the 1/32 of the planet that is arable land.

Mother Nature is tabulating costs with each passing year as the impact of climate change compounds like bad interest.

Perhaps most pressing, it's the crucial permafrost "carbon banks" found in the earth's heretofore frozen regions. Permafrost matters because its long-frozen layers safely store greenhouse gases that slowly accumulated over the course of thousands of years. New research estimates a potential $43 trillion global economic impact should those "hundreds of billions" of tons of carbon dioxide and "billions of tons" of methane be released into the atmosphere by the rapidly warming Arctic. As Pacific Standard points out, that bill "isn't a total cost to be spread out over several decades - it's how much we'd have to set aside today to pay for the damage done by melting frozen soil, or permafrost, in the Arctic." And yet more new research shows that Arctic regions are warming twice as fast as the world average because the solar-reflecting properties of the ice and snow are diminishing with each passing year...

Also diminishing each year are the unparalleled "ecosystem services" of the oceans, forests and other food webs that sustain earth's interwoven fabric of life. Based on calculations by scientists at the United Nations University, the world forfeits a "staggering $6.3 trillion to $10.6 trillion" each year just from land degradation. That's roughly "10-17% of global GDP." What are the services lost? Properly cared for land provides "food, poverty reduction, clean water, climate and disease regulation and nutrients cycling."

Hydrocarbon-obsessed humans have long ignored these opportunity costs, but Mother Nature factors it all into her bottom line. And we are running a massive budget deficit. That's why tabulating "environmental services" is crucial to understanding the environmental deficit at the core of the hydrocarbon economy - and it's crucial if human beings want to avoid the ultimate bankruptcy of extinction.

More greenhouse gases equal more warming, equals more carbon released from permafrost, equals less carbon captured by soils, plus oceans equals more warming. On it goes until nature, like theoretically free markets, eventually enforces equilibrium.

This mother of all market corrections is coming...

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