tag:theconversation.com,2011:/us/topics/environmental-economics-10712/articlesEnvironmental economics – The Conversation2024-02-01T19:03:42Ztag:theconversation.com,2011:article/2195962024-02-01T19:03:42Z2024-02-01T19:03:42ZConsulting firms provided low-quality research on crucial water policies. It shows we have a deeper problem<figure><img src="https://images.theconversation.com/files/572682/original/file-20240201-17-j9u2l0.jpg?ixlib=rb-1.1.0&rect=28%2C17%2C3805%2C2138&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/agriculture-irrigation-silhouette-farmer-tablet-walks-2330622729">maxim ibragimov, Shutterstock</a></span></figcaption></figure><p>Management <a href="https://www.ibisworld.com/au/industry/management-consulting/1896/#IndustryStatisticsAndTrends">consulting revenue</a> in Australia has grown from less than A$33 billion in 2010 to more than $47 billion in 2023. The increasing use of consultants, as well as the <a href="https://theconversation.com/beyond-the-pwc-scandal-theres-a-growing-case-for-a-royal-commission-into-australias-ruthless-corporate-greed-214474">PwC scandal</a>, highlights serious issues with vested interests, integrity and <a href="https://www.theguardian.com/commentisfree/2023/may/18/why-does-australia-rely-on-consulting-firms-such-as-pwc-and-not-on-its-own-public-servants">transparency</a>. </p>
<p>Consequently, a <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Finance_and_Public_Administration/Consultingservices">Senate inquiry</a> is investigating the management and integrity of consulting services. The deadline for the Senate committee’s final report has been extended twice, partly due to the <a href="https://www.themandarin.com.au/236738-the-big-fours-revelations-in-senate-estimates/">various revelations</a>, to March 28. So far, all the big consulting groups in Australia have appeared before the committee. </p>
<p>Our <a href="https://www.sciencedirect.com/science/article/pii/S1462901123003039">recent review</a> of research in the Murray-Darling Basin points to other serious concerns about the use of consulting studies, which are increasingly relied upon for policy-making, especially in water. Of the studies we examined, 65 were on the economic consequences of water recovery. Almost half of these were low-quality studies, mainly from consultancies but also by think tanks and government departments. The low-quality studies were more likely to overestimate negative impacts on the economy and community from buying water back for the environment. </p>
<p>Unfortunately, these poor-quality studies were used to justify changes to water policy. Buying back water rights from “willing sellers” is a <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/1467-8489.12001">cost-effective way</a> to redistribute water entitlements. But buybacks were halted under the former Coalition government. The policy <a href="https://minister.dcceew.gov.au/plibersek/media-releases/getting-straight-work-restore-murray-darling-rivers">will now be restored</a> under Labor in the form of “voluntary water purchases”. </p>
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Read more:
<a href="https://theconversation.com/water-buybacks-are-back-on-the-table-in-the-murray-darling-basin-heres-a-refresher-on-how-they-work-200529">Water buybacks are back on the table in the Murray-Darling Basin. Here's a refresher on how they work</a>
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<h2>Contested research into water buybacks</h2>
<p>The $13 billion basin plan seeks to improve the health of our nation’s largest river system by returning water from irrigation to the environment. </p>
<p>But such water reallocation has been blamed for <a href="https://www.theguardian.com/australia-news/2023/oct/18/murray-darling-basin-water-buyback-plan-farmers-claim-rural-job-losses">huge job losses, reductions in irrigated production and consequently, economic decline in rural towns</a>. </p>
<p>There are many groups with different interests in the basin. Research results are often contested.</p>
<p>To provide an objective assessment and comparison of the quality of basin water economic study results, we developed and applied a <a href="https://www.sciencedirect.com/science/article/pii/S1462901123003039">new economic quality assessment framework</a>. This was inspired by health research, which has long applied grading systems to ensure robustness in research findings (such as <a href="https://www.nhmrc.gov.au/guidelinesforguidelines/develop/assessing-certainty-evidence">the Grading of Recommendations Assessment, Development and Evaluation</a>. </p>
<p>Our framework enables studies to be classified as low, medium or high quality, to suggest how robust each study’s results may be. </p>
<p>Nearly half (45 per cent) of the 65 water recovery studies in our review were classified as low quality. These low quality studies were much more likely to suggest large negative impacts on economic values from water recovery than higher quality studies. They were also more likely to be consulting studies. </p>
<p>The high quality studies (26 per cent) were peer-reviewed, employed sophisticated modelling and extensive analysis. The estimated impact of water recovery ranged from none to small or modest. None of these studies were funded by industry. </p>
<h2>Why is there such a difference in results?</h2>
<p>The method used in each study is a major factor determining research quality. Consultants often rely on simple methods such as “input-output modelling” or “multipliers” to assess economic impact. These are models that often rely upon simplistic assumptions and links within sectors in the economy to predict changes in job numbers or production. These models are not able to consider all possible influences of change. </p>
<p>Input-output modelling is <a href="https://www.abs.gov.au/statistics/detailed-methodology-information/concepts-sources-methods/australian-system-national-accounts-concepts-sources-and-methods/2020-21/chapter-22-input-output-tables/using-i-o-tables-analysis">heavily criticised as inappropriate by the Australian Bureau of Statistics</a> and many treasury departments. Given this modelling is used across many areas and subjects within Australia to illustrate “economic impact”, its use and application needs greater scrutiny. </p>
<p>Higher quality studies use methods that allow for dynamic feedback and adaptation. They also account for other factors that influence outcomes such as climate or prices. As a result, higher quality studies in our review do not find anywhere near the same large decrease in jobs or economic impact from reduced water extraction. </p>
<p>For example, some feedbacks that can occur when farmers sell water include that the money is reinvested on the farm, increasing profits, or that the farm switches from irrigated to dryland agriculture, so production continues. Alternatively water recovery may increase community welfare through an improved environment, or better downstream water conditions for other farmers. Simplistic modelling approaches often ignore these other benefits.</p>
<p>Our <a href="https://www.sciencedirect.com/science/article/pii/S1462901123003039?via%3Dihub">review</a> also indicated a relative lack of study in the basin on other downstream and Indigenous benefits and costs, as well as a need to pay closer attention to transition and adjustment issues within some small irrigation-intensive communities. </p>
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<h2>We need quality standards for water research</h2>
<p>Basin communities will increasingly need to adapt and adjust as the climate changes. We need better ways to cope with such transitions, especially in the face of future upheavals from drought and extreme weather events.</p>
<p>Hopefully the recently released funding and other <a href="https://consult.dcceew.gov.au/draft-restoring-our-rivers-framework">support for communities</a> announced in the amended <a href="https://www.dcceew.gov.au/water/policy/restoring-our-rivers-act">water law</a> will help communities adjust to the reallocation of water. To date, such funds have <a href="https://www.pc.gov.au/inquiries/completed/basin-plan/report">not been allocated</a> to areas most in need.</p>
<p>The negative socio-economic impacts predicted by low-quality studies are often used to justify changed water policies. We, along with other <a href="https://www.pc.gov.au/__data/assets/pdf_file/0007/369142/sub104-basin-plan-2023.pdf">water economic professors</a>, are calling for greater quality standards when it comes to government-funded research into the affects of water reallocation. The government is now <a href="https://storage.googleapis.com/files-au-climate/climate-au/p/prj2a8f4464525d140f6d670/public_assets/Draft450Framework.pdf">required</a> to update the impact analysis for the basin plan. It is essential that any assessment of impact is robust and defensible, following strict quality standards.</p>
<p>These quality standards could also be applied widely, across a variety of policies and areas. Although high quality research is difficult and takes time, relying on inadequate research can have serious consequences. </p>
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Read more:
<a href="https://theconversation.com/suicide-rates-increased-after-extreme-drought-in-the-murray-darling-basin-we-have-to-do-better-as-climate-change-intensifies-211107">Suicide rates increased after extreme drought in the Murray-Darling Basin – we have to do better as climate change intensifies</a>
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<img src="https://counter.theconversation.com/content/219596/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>An Australian Research Council discovery grant and the Murray-Darling Basin Authority provided funding for this research.</span></em></p><p class="fine-print"><em><span>Alec Zuo receives funding from an Australian Research Council discovery grant and the Murray-Darling Basin Authority provided funding for this research.</span></em></p>A comprehensive review of research into the economic consequences of controversial water buybacks in the Murray-Darling Basin reveals many studies are of poor quality. Better standards are needed.Sarah Ann Wheeler, Professor in Water Economics, University of AdelaideAlec Zuo, Associate Professor, School of Economics and Public Policy, University of AdelaideYing Xu, Research Fellow, School of Economics and Public Policy, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2055712023-07-02T20:02:18Z2023-07-02T20:02:18ZThe Murray-Darling Basin shows why the ‘social cost of water’ concept won’t work<figure><img src="https://images.theconversation.com/files/533850/original/file-20230625-98671-sa646o.jpeg?ixlib=rb-1.1.0&rect=31%2C3%2C2066%2C1394&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source"> Kate McBride</span></span></figcaption></figure><p>Access to safe, clean water is a basic <a href="https://www.unwater.org/water-facts/human-rights-water-and-sanitation">human right</a>. But water scarcity or barriers to access can cause conflict within and between countries. </p>
<p>Fights over water can be expected to <a href="https://www.un.org/en/climatechange/science/climate-issues/water">intensify as the world warms</a>, evaporation increases and rainfall becomes less predictable. So we’ll need to work even harder to resolve disputes and share this precious resource. </p>
<p>Earlier this year, for the first time in almost half a century, the <a href="https://www.unwater.org/news/un-2023-water-conference">United Nations held a conference squarely focused on water</a>. Thousands of water experts gathered in New York for three days in March, to chart a way forward. </p>
<p>We were among the delegates. Since then, we have discussed and debated ideas that surfaced at this international meeting. Some were worthwhile, but others were wrong. In particular, we challenge the concept of a global “social cost of water”. </p>
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<a href="https://images.theconversation.com/files/532807/original/file-20230620-46525-4a5amn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Infographic outlining the UN 2023 Water Conference vision statement" src="https://images.theconversation.com/files/532807/original/file-20230620-46525-4a5amn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/532807/original/file-20230620-46525-4a5amn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=424&fit=crop&dpr=1 600w, https://images.theconversation.com/files/532807/original/file-20230620-46525-4a5amn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=424&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/532807/original/file-20230620-46525-4a5amn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=424&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/532807/original/file-20230620-46525-4a5amn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=533&fit=crop&dpr=1 754w, https://images.theconversation.com/files/532807/original/file-20230620-46525-4a5amn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=533&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/532807/original/file-20230620-46525-4a5amn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=533&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Picturing The UN 2023 Water Conference vision.</span>
<span class="attribution"><a class="source" href="https://www.unwater.org/news/un-2023-water-conference">UN 2023 Water Conference</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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Read more:
<a href="https://theconversation.com/were-ignoring-the-value-of-water-and-that-means-were-devaluing-it-207936">We're ignoring the value of water – and that means we're devaluing it</a>
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<h2>What is a global social cost of water?</h2>
<p>One of the big ideas that came up at the conference was the need for a “new economics of water as a common good”, which includes the “social cost of water”. </p>
<p>Elaborating on his idea <a href="https://www.nature.com/articles/d41586-023-00800-z">in the journal Nature</a>, Swedish scientist Johan Rockström and colleagues wrote:</p>
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<p>[Researchers] must assess the ‘social cost of water’, akin to the ‘social cost of carbon’, which considers the costs to society of loss and damage caused by water extremes and not meeting the basic provision of water for human needs.</p>
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<p>The <a href="https://www.rff.org/publications/explainers/social-cost-carbon-101/">social cost of carbon</a> is an estimate, in dollars, of the economic damages that would result from emitting one additional tonne of carbon dioxide into the atmosphere. It’s a decision-making tool used by governments, especially in the United States, for cost-benefit analysis of climate policy. </p>
<p>The social cost of water concept proposes valuing all types of water, including water vapour in the atmosphere that later falls as rain. This means attempting to put a dollar value on moisture flowing across borders, and implicitly creating world water markets. According to this logic, if <a href="https://www.nature.com/articles/d41586-023-00800-z">most of Nigeria’s rain</a> comes from forests in central Africa, then Nigeria should be prepared to pay central African nations to maintain the source of this moisture generation. </p>
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<p>But we believe the concept of a global social cost of water is fundamentally flawed, as we explained in our <a href="https://www.nature.com/articles/d41586-023-01564-2/">correspondence in Nature</a> in May, alongside <a href="https://www.nature.com/articles/d41586-023-01563-3">others</a> who also questioned its logic and purpose. Further correspondence in June also described calls to govern water on a global scale as “<a href="https://www.nature.com/articles/d41586-023-01924-y">unrealistic</a>” and distracting from sustainable and equitable access. </p>
<p>It’s unclear how a global social cost of water would work in practice. Writing as economists who have studied local water markets for decades, we see many problems with the concept, such as: </p>
<ul>
<li><p>how water moisture volumes would be estimated reliably and regularly</p></li>
<li><p>how a dollar value could be reliably associated with water moisture flows across borders</p></li>
<li><p>how payments would be enforced between countries, and by what institutions</p></li>
<li><p>whether the money paid between countries would actually improve water security</p></li>
<li><p>what would happen when moisture flows across borders lead to floods with loss of human lives – would the downwind country receive compensation for water disasters as well as droughts? </p></li>
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<p>Australia has the most sophisticated water markets in the world, in the Murray-Darling Basin. But even here there are <a href="https://academic.oup.com/oxrep/article-abstract/36/1/132/5696682">considerable differences in how markets work</a>. Water values and costs are also very different.</p>
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Read more:
<a href="https://theconversation.com/what-is-the-social-cost-of-carbon-2-energy-experts-explain-176255">What is the ‘social cost of carbon’? 2 energy experts explain</a>
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<img alt="A man looks out of the second-storey window of his flooded shack at Scott’s Creek, Morgan." src="https://images.theconversation.com/files/534965/original/file-20230630-23-ziw4ih.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/534965/original/file-20230630-23-ziw4ih.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/534965/original/file-20230630-23-ziw4ih.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/534965/original/file-20230630-23-ziw4ih.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/534965/original/file-20230630-23-ziw4ih.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/534965/original/file-20230630-23-ziw4ih.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/534965/original/file-20230630-23-ziw4ih.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">In December, 2022, the swollen Murray River flooded homes in South Australia. The floodwater reached the second floor of Darren Davey’s shack at Scott’s Creek, Morgan.</span>
<span class="attribution"><a class="source" href="https://photos.aap.com.au/search/murray%20flood?q=%7B%22pageSize%22:25,%22pageNumber%22:2%7D">MATT TURNER, AAP</a></span>
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<h2>Australia’s Murray-Darling Basin: a case in point</h2>
<p>The value of water in the Basin consists of benefits and costs. Some benefits include:</p>
<ul>
<li><p>direct use of water to grow crops or irrigate pasture</p></li>
<li><p>recreational use such as boating and water sports</p></li>
<li><p>indirect use including the benefits to health and wellbeing from living alongside a natural water body</p></li>
<li><p>future use values, knowing there is sufficient water to sustain healthy ecosystems and rivers in years to come</p></li>
<li><p>future generational, existence and cultural values such as non-use values associated with the ancient <a href="https://www.theguardian.com/australia-news/2015/jul/10/fish-traps-brewarrina-extraordinary-ancient-structures-protection">Brewarrina fish traps</a>. </p></li>
</ul>
<p>Costs include harm to mental health associated with a lack of water during drought. At the other extreme, there’s the cost of too much water causing floods, property damage and loss of life, or salinity harming viticulture in the Riverland. </p>
<p>This shows the social value of water is incredibly difficult to measure even within one area such as the Basin, let alone trying to enforce a global water market.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/water-buybacks-are-back-on-the-table-in-the-murray-darling-basin-heres-a-refresher-on-how-they-work-200529">Water buybacks are back on the table in the Murray-Darling Basin. Here's a refresher on how they work</a>
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<h2>What should instead happen next?</h2>
<p><a href="https://www.nature.com/articles/d41586-023-01564-2">We think the best way</a> to address the water crisis is to focus on local management and institutions, plan carefully and implement a wide range of policies. These include: </p>
<ul>
<li><p>using economic methods and tools to assess and implement local water policies where feasible</p></li>
<li><p>removing subsidies that incentivise water exploitation</p></li>
<li><p>establishing sustainable extraction limits</p></li>
<li><p>strengthening water institutions to allow measurement, monitoring and enforcement of water use</p></li>
<li><p><a href="https://reliefweb.int/report/world/what-why-and-how-world-water-crisis-global-commission-economics-water-phase-1-review-and-findings">promoting water justice and sharing</a>. </p></li>
</ul>
<p>This is a big task. Misdirection down blind alleys is a distraction that the world cannot afford.</p>
<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/42TLwJwAxQ8uE0bYuZNufh?utm_source=generator" width="100%" height="152" frameborder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe><img src="https://counter.theconversation.com/content/205571/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sarah Ann Wheeler has received funding from the Australian Research Council; GRDC; Wine Australia; MDBA; CRC Food Waste; CSIRO; Goyder Institute; SA Department of Environment and Water; ACCC; NT Department of Environment, Parks and Water Security; NSW Health; Commonwealth Department of Agriculture and Water; Meat and Livestock Australia; ACIAR; RIRDC; UNECE; NCCARF; National Water Commission; and the Government of Netherlands.</span></em></p><p class="fine-print"><em><span>The International Food Policy Research Institute, where Claudia Ringler works, receives funding from a considerable number of donors; none of which is linked to this piece. Claudia Ringler is a member of the International Advisory Committee (IAC) of UNU-INWEH.</span></em></p>After almost half a century, the United Nations has waded back into the murky world of water policy. But one of the ideas following this year’s international meeting has been shot down.Sarah Ann Wheeler, Professor in Water Economics, University of AdelaideClaudia Ringler, Deputy Director, Environment and Production Technology Division, International Food Policy Research Institute (IFPRI) Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1973822023-02-13T13:23:45Z2023-02-13T13:23:45ZA new strategy for western states to adapt to long-term drought: Customized water pricing<figure><img src="https://images.theconversation.com/files/509212/original/file-20230209-28-cecwzt.jpg?ixlib=rb-1.1.0&rect=6%2C6%2C4486%2C2984&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Prompts like this sign in Coalinga, California, may get people to use less water – but paying them could be more effective. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/sign-informs-residents-to-conserve-water-on-saturday-august-news-photo/1243860618">Matt McClain/The Washington Post via Getty Images</a></span></figcaption></figure><p>Even after <a href="https://www.npr.org/2023/01/22/1150197343/why-heavy-winter-rain-and-snow-wont-be-enough-to-pull-the-west-out-of-a-megadrou">heavy snow and rainfall in January</a>, western states still face an ongoing drought risk that is <a href="https://doi.org/10.1073/pnas.2006323117">likely to grow worse</a> thanks to climate change. A whopping snowpack is good news, but it doesn’t reduce the need for long-term planning.</p>
<p>Confronted with a shrinking supply of water for agriculture, industry and residential uses, water agencies have pursued different strategies to encourage water conservation. They have <a href="https://environment-review.yale.edu/water-conservation-gentle-nudge-can-go-long-way-0">nudged customers</a> to reduce water use, <a href="https://www.ladwpnews.com/phase-3-water-restrictions-frequently-asked-questions/">limited outdoor watering</a> and offered incentives to <a href="https://www.ladwpnews.com/rebate-increase-gives-ladwp-customers-5-per-square-foot-to-replace-lawns-with-sustainable-landscaping/">rip out lawns</a>. On the supply side, there are innovative ideas about <a href="https://theconversation.com/how-california-could-save-up-its-rain-to-ease-future-droughts-instead-of-watching-epic-atmospheric-river-rainfall-drain-into-the-pacific-197168">using heavy rains to recharge groundwater</a>.</p>
<p>Basic economics teaches us that a higher price for water would encourage conservation. Up until now, however, <a href="https://www.latimes.com/california/story/2022-10-24/millions-of-californians-are-struggling-to-pay-for-water">concerns about harming low-income households</a> have limited discussions about raising water prices to reduce demand. </p>
<p>We know that it’s hard to pay more for essential goods such as food, energy and water, especially for lower-income households. Rather than raising everyone’s water prices, we propose a customized approach that lets individual consumers decide whether to pay higher prices. </p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/cp1ST9MxDcY?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">In August 2022, the federal government declared an unprecedented drought emergency on the Colorado River and ordered Arizona, Nevada and Mexico to sharply reduce their water usage.</span></figcaption>
</figure>
<h2>Who is most able and willing to conserve?</h2>
<p>One of the most common challenges involved in making markets work well is what economists call <a href="https://www.investopedia.com/terms/a/asymmetricinformation.asp">asymmetric information</a> – when one party has more access to relevant information than the other party. Think about buying or selling a car before online tools like <a href="https://www.carfax.com/value/">Carfax</a> were available. Owners and dealers knew more about what each car was really worth, so they had greater bargaining power than buyers. </p>
<p>The West has millions of water users with a broad range of incomes who consume water at widely varying levels. These consumers, including urban households, businesses and farmers, know more than water agencies do about how readily they can conserve water. </p>
<p>For example, a person who owns a home with a large green lawn and who is conservation-minded may need only a small incentive to switch to <a href="https://spectrumnews1.com/ca/la-west/environment/2022/03/21/socal-water-districts-urge-water-conservation">native, low-water plants</a>. Some farmers may need only a small incentive to replace <a href="https://www.uidaho.edu/-/media/UIdaho-Responsive/Files/cals/centers/Kimberly/forage/Alfalfa-Irrigation-Facts-2013.pdf">water-intensive alfalfa production</a> with a less water-intensive crop.</p>
<p>Water agencies could elicit this private information by making a “take it or leave it” offer to water consumers. Some of California’s electric utilities have already <a href="https://www.nber.org/papers/w23553">experimented with this opt-in approach</a> to encourage energy conservation. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/509214/original/file-20230209-166-3o38ks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A large house with a pool, bordered by brown dirt" src="https://images.theconversation.com/files/509214/original/file-20230209-166-3o38ks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/509214/original/file-20230209-166-3o38ks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/509214/original/file-20230209-166-3o38ks.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/509214/original/file-20230209-166-3o38ks.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/509214/original/file-20230209-166-3o38ks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/509214/original/file-20230209-166-3o38ks.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/509214/original/file-20230209-166-3o38ks.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Water officials in the Las Vegas area want to cap the size of new swimming pools like this one at a home abutting desert land in Henderson, Nev.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/ColoradoRiverUsersWesternDrought/752a24416a174bcd8bb8fcbaed0a2b9b/photo">AP Photo/John Locher</a></span>
</figcaption>
</figure>
<h2>Target the big users</h2>
<p>Every western water district has access to customer-level big data on monthly and even daily water consumption. Agencies could use this information to identify the top 10% of water consumers in their territories, based on volume used – like the household in the Bel Air neighborhood of Los Angeles that used <a href="https://la.curbed.com/2015/10/1/9915330/california-biggest-water-user">11.8 million gallons of water</a> in 2014.</p>
<p>Water agencies could randomly select customers among the largest water users in their service areas to participate in a small pilot study. Each invitee would receive an opt-in contract offering to pay them an annual fee for enrolling for three years in a water conservation program. In return, the price the consumer paid for each gallon of water would triple. This approach would give the consumer a guaranteed payment for participating and a clear incentive to use less water.</p>
<p>Data scientists would collect information on who accepted the offer and could survey invitees to learn how they decided whether or not to participate. Combining these two data sets would make it possible to test hypotheses about which factors determined willingness to accept the opt-in offer. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1623035161368530965"}"></div></p>
<p>Using customer-level water consumption data over time, water agencies could track usage and compare customers who participated in the price increase program with others who turned down the offer. This would make it possible to estimate the water conservation benefits of introducing customized water prices.</p>
<p>There are many different ways in which water users could cut back, including swapping out <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/j.0741-6261.2008.00026.x?casa_token=SVO72Cz4sloAAAAA%3AlmARK8MIBvgi-S_fk4Vx9JuRPiH0IunV7iQ82_H4x7WI3OZBpOXZbyyqL1Ma69IioXgcVA4cGTF1ef5C3w">old appliances</a> or watering their gardens less often. Farmers could <a href="https://theconversation.com/a-water-strategy-for-the-parched-west-have-cities-pay-farmers-to-install-more-efficient-irrigation-systems-185820">install more efficient irrigation systems</a>. Customers who <a href="https://doi.org/10.1016/j.wre.2020.100169">chose the payment in return for higher prices</a> would decide which conservation strategies worked best for them. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/509217/original/file-20230209-18-5griet.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Children use an open-air shower at a public beach." src="https://images.theconversation.com/files/509217/original/file-20230209-18-5griet.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/509217/original/file-20230209-18-5griet.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=407&fit=crop&dpr=1 600w, https://images.theconversation.com/files/509217/original/file-20230209-18-5griet.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=407&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/509217/original/file-20230209-18-5griet.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=407&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/509217/original/file-20230209-18-5griet.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/509217/original/file-20230209-18-5griet.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/509217/original/file-20230209-18-5griet.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">In 2015, California temporarily shut off showers at state beaches to conserve water, a strategy that mainly affected less affluent households.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/ryanh-morales-from-left-and-his-brother-dereck-use-the-news-photo/480116758">Genaro Molina/Los Angeles Times via Getty Images</a></span>
</figcaption>
</figure>
<h2>Big potential insights</h2>
<p>Conducting a pilot study using a randomly chosen sample of high-usage customers is a low-stakes strategy. If it fails to promote water conservation at a low cost, then a valuable lesson has been learned. If it succeeds, the same opt-in offer could be made to more high-usage customers. </p>
<p>Water agencies would need funds to support the pilot study, possibly from state or federal sources. Since pumping, treating and heating water uses energy, and thus <a href="http://dx.doi.org/10.1088/1748-9326/10/11/114002">creates greenhouse gas emissions</a>, funds from the <a href="https://www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook/#:%7E:text=The%20Inflation%20Reduction%20Act%20is,technology%2C%20manufacturing%2C%20and%20innovation.">Inflation Reduction Act</a> might be an option. Successful water conservation would <a href="https://19january2017snapshot.epa.gov/climatechange/what-you-can-do-home_.html">help to slow climate change</a>.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/8RuVzvHVop0?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">A farmer in California’s Central Valley explains how he started directing floodwaters onto his fields in wet years to recharge groundwater and buffer his lands against dry years.</span></figcaption>
</figure>
<p>Today, most water agencies don’t know how responsive individual customers would be to higher prices. By conducting the type of pilot study that we have described, agencies could answer that question without raising prices for vulnerable households. If such initiatives succeeded, they could be replicated in other drought-prone areas of the West. Since farms <a href="https://www.climatecentral.org/climate-matters/water-in-the-west">consume the largest share of water</a> in western states, it is especially important to learn more about farmers’ willingness to conserve. </p>
<p>Water is essential for life, but westerners have different abilities and willingness to conserve it. We recommend a strategy that rewards those who are most able to reduce their usage without punishing those who are least able.</p><img src="https://counter.theconversation.com/content/197382/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Even after January’s storms, California faces a water-scarce future. An economist and an engineer propose a way to test higher water prices as a conservation strategy without hurting low-income users.Matthew E. Kahn, Provost Professor of Economics and Spatial Sciences, USC Dornsife College of Letters, Arts and SciencesBhaskar Krishnamachari, Ming Hsieh Faculty Fellow and Professor of Electrical and Computer Engineering, University of Southern CaliforniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1938482022-11-10T13:42:09Z2022-11-10T13:42:09ZThe inconvenient truth of Herman Daly: There is no economy without environment<figure><img src="https://images.theconversation.com/files/493961/original/file-20221107-15-jn1xap.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C6000%2C3988&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The economy depends on the environment. Economics can seem to forget that point.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/victoria-harbour-victoria-bay-hong-kong-china-royalty-free-image/542366448">Ines Lee Photos/Moment via Getty Images</a></span></figcaption></figure><p>Herman Daly had a flair for stating the obvious. When an economy creates more costs than benefits, he called it “<a href="https://youtu.be/qBXBk4fduW8">uneconomic growth</a>.” But you won’t find that conclusion in economics textbooks. Even suggesting that economic growth could cost more than it’s worth can be seen as <a href="https://grist.org/article/bank/">economic heresy</a>.</p>
<p>The renegade economist, known as the father of ecological economics and a leading architect of sustainable development, <a href="https://www.washingtonpost.com/obituaries/2022/11/04/herman-daly-ecological-economist-dead/">died on Oct. 28, 2022, at the age of 84</a>. He spent his career questioning an economics disconnected from an environmental footing and moral compass. </p>
<p>In an age of climate chaos and economic crisis, his ideas that inspired a movement to live within our means are increasingly essential.</p>
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<h2>The seeds of an ecological economist</h2>
<p><a href="https://www.routledge.com/Herman-Dalys-Economics-for-a-Full-World-His-Life-and-Ideas/Victor/p/book/9780367556952">Herman Daly grew up in Beaumont, Texas</a>, ground zero of the early 20th century oil boom. He witnessed the unprecedented growth and prosperity of the “gusher age” set against the poverty and deprivation that lingered after the Great Depression. </p>
<p>To Daly, as many young men then and since believed, economic growth was the solution to the world’s problems, especially in developing countries. To study economics in college and export the northern model to the global south was seen as a righteous path.</p>
<figure class="align-center ">
<img alt="Headshot photo of Daly as an older man, with glasses and thinning hair," src="https://images.theconversation.com/files/493896/original/file-20221107-12049-ekeb85.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/493896/original/file-20221107-12049-ekeb85.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/493896/original/file-20221107-12049-ekeb85.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/493896/original/file-20221107-12049-ekeb85.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/493896/original/file-20221107-12049-ekeb85.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/493896/original/file-20221107-12049-ekeb85.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/493896/original/file-20221107-12049-ekeb85.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Economist Herman Daly (1938-2022)</span>
<span class="attribution"><span class="source">Courtesy of Island Press</span></span>
</figcaption>
</figure>
<p>But Daly was a voracious reader, a side effect of having polio as a boy and missing out on the Texas football craze. Outside the confines of assigned textbooks, he found a history of economic thought steeped in rich philosophical debates on the function and purpose of the economy.</p>
<p>Unlike the precision of a market equilibrium sketched on the classroom blackboard, the real-world economy was messy and political, designed by those in power to choose winners and losers. He believed that economists should at least ask: <a href="https://www.scientificamerican.com/article/economics-in-a-full-world/">Growth for whom, for what purpose and for how long</a>?</p>
<p>Daly’s <a href="https://www.routledge.com/Herman-Dalys-Economics-for-a-Full-World-His-Life-and-Ideas/Victor/p/book/9780367556952">biggest realization</a> came through reading marine biologist Rachel Carson’s 1962 book “<a href="http://www.rachelcarson.org/SilentSpring.aspx">Silent Spring</a>,” and seeing her call to “come to terms with nature … to prove our maturity and our mastery, not of nature but of ourselves.” By then, he was working on a Ph.D. in Latin American development at Vanderbilt University and was already quite skeptical of the hyperindividualism baked into economic models. In Carson’s writing, the conflict between a growing economy and a fragile environment was blindingly clear.</p>
<p>After a fateful class with <a href="https://www.jstor.org/stable/2957794">Nicholas Georgescu-Roegen</a>, Daly’s conversion was complete. Georgescu-Roegen, a Romanian-born economist, dismissed the free market fairy tale of a pendulum swinging back and forth, effortlessly seeking a natural state of equilibrium. He argued that the economy was more like an hourglass, a one-way process converting valuable resources into useless waste.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/qBXBk4fduW8?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Herman Daly explains ‘uneconomic growth.’</span></figcaption>
</figure>
<p>Daly became convinced that economics should no longer prioritize the efficiency of this one-way process but instead focus on the “optimal” scale of an economy that the Earth can sustain. Just shy of his 30th birthday in 1968, while working as a visiting professor in the poverty-stricken Ceará region of northeastern Brazil, Daly published “<a href="https://doi.org/10.1086/259412">On Economics as a Life Science</a>.”</p>
<p>His sketches and tables of the economy as a metabolic process, entirely dependent on the biosphere as source for sustenance and sink for waste, were the road map for a revolution in economics.</p>
<h2>Economics of a full world</h2>
<p>Daly spent the rest of his career drawing boxes in circles. In what he called the “pre-analytical vision,” the economy – the box – was viewed as the “wholly owned subsidiary” of the environment, the circle.</p>
<p>When the economy is small relative to the containing environment, a focus on the efficiency of a growing system has merit. But Daly argued that in a “full world,” with an economy that outgrows its sustaining environment, the system is in danger of collapse. </p>
<figure class="align-center ">
<img alt="Illustrations of a square (economy) inside a circle (ecosystem). Energy and matter go into and out of the economy square, and some is recycled. Meanwhile solar energy enters the ecosystem circle and some heat escapes. In one, the square is too large." src="https://images.theconversation.com/files/494020/original/file-20221108-20-lup7ja.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494020/original/file-20221108-20-lup7ja.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=328&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494020/original/file-20221108-20-lup7ja.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=328&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494020/original/file-20221108-20-lup7ja.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=328&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494020/original/file-20221108-20-lup7ja.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=413&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494020/original/file-20221108-20-lup7ja.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=413&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494020/original/file-20221108-20-lup7ja.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=413&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Herman Daly’s conception of the economy as a subsystem of the environment. In a ‘full world,’ more growth can become uneconomic.</span>
<span class="attribution"><span class="source">Adapted from 'Beyond Growth.' Used with permission from Beacon Press.</span></span>
</figcaption>
</figure>
<p>While a professor at Louisiana State University in the 1970s, at the height of the U.S. environmental movement, Daly brought the box-in-circle framing to its logical conclusion in “<a href="https://islandpress.org/books/steady-state-economics">Steady-State Economics</a>.” Daly reasoned that growth and exploitation are prioritized in the competitive, pioneer stage of a young ecosystem. But with age comes a new focus on durability and cooperation. His steady-state model shifted the goal away from blind expansion of the economy and toward purposeful improvement of the human condition.</p>
<p>The international development community took notice. Following the United Nations’ 1987 publication of “<a href="https://sustainabledevelopment.un.org/content/documents/5987our-common-future.pdf">Our Common Future</a>,” which framed the goals of a “sustainable” development, Daly saw a window for development policy reform. He left the safety of tenure at LSU to join a rogue group of environmental scientists at the World Bank.</p>
<p>For the better part of six years, they worked to upend the reigning economic logic that treated “the Earth <a href="https://islandpress.org/books/steady-state-economics">as if it were a business in liquidation</a>.” He often butted heads with senior leadership, <a href="http://pratclif.com/sustainability/beyond%20growth.htm">most famously with Larry Summers</a>, the bank’s chief economist at the time, who publicly waved off Daly’s question of whether the size of a growing economy relative to a fixed ecosystem was of any importance. The future U.S. treasury secretary’s reply was short and dismissive: “That’s not the right way to look at it.” </p>
<p>But by the end of his tenure there, Daly and colleagues had successfully incorporated new environmental impact standards into all development loans and projects. And the international sustainability agenda they helped shape is now baked into the <a href="https://sdgs.un.org/2030agenda">U.N. Sustainable Development Goals</a> of 193 countries, “a plan of action for people, planet and prosperity.”</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/khgIHOmEGxs?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Herman Daly and Kate Raworth, creator of Doughnut Economics, discuss pandemic-resistant economies.</span></figcaption>
</figure>
<p>In 1994, Daly returned to academia at the University of Maryland, and his life’s work was recognized the world over in the years to follow, including by <a href="https://rightlivelihood.org/the-change-makers/find-a-laureate/herman-daly/">Sweden’s Right Livelihood Award</a>, <a href="https://www.heinekenprizes.org/portfolio-items/herman-e-daly/">the Netherlands’ Heineken Prize for Environmental Science</a>, <a href="http://www.sofieprisen.no/Prize_Winners/1999/index.html">Norway’s Sophie Prize</a>, Italy’s Medal of the Presidency, <a href="https://www.af-info.or.jp/en/blueplanet/list-2014.html">Japan’s Blue Planet Prize</a> and even <a href="https://earthbound.report/2008/12/29/herman-daly-adbusters-person-of-the-year/">Adbuster’s person of the year</a>. </p>
<p>Today, the imprint of his career can be found far and wide, including measures of the <a href="https://theconversation.com/beyond-gdp-are-there-better-ways-to-measure-well-being-33414">Genuine Progress Indicator</a> of an economy, new <a href="https://www.kateraworth.com/doughnut/">Doughnut Economics</a> framing of social floors within environmental ceilings, worldwide <a href="https://www.isecoeco.org/resources/graduate-programs-in-ecological-economics/">degree programs in ecological economics</a> and a vibrant <a href="https://degrowth.info/en">degrowth movement</a> focused on a just transition to a right-sized economy. </p>
<p>I knew Herman Daly for two decades as a co-author, mentor and teacher. He always made time for me and my students, most recently writing the foreword to my upcoming book, “<a href="https://islandpress.org/books/progress-illusion">The Progress Illusion: Reclaiming Our Future from the Fairytale of Economics</a>.” I will be forever grateful for his inspiration and courage to, as he put it, “ask the naive, honest questions” and then not be “satisfied until I get the answers.”</p><img src="https://counter.theconversation.com/content/193848/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Herman Daly wrote the forward to my new book "The Progress Illusion" (Island Press, 2022). We also co-authored a workbook in ecological economics, also published by Island Press.</span></em></p>With a square and a circle, the father of ecological economics and a founding architect of sustainable development redrew our understanding of the economy. It was revolutionary.Jon D. Erickson, Professor of Sustainability Science and Policy, University of VermontLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1708202021-12-13T14:19:16Z2021-12-13T14:19:16ZGDP ignores the environment: why it’s time for a more sustainable growth metric<figure><img src="https://images.theconversation.com/files/436964/original/file-20211210-149721-10wthgw.jpg?ixlib=rb-1.1.0&rect=0%2C17%2C5975%2C3950&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Researchers have estimated the gross ecosystem product (GEP) of Qinghai province in China.</span> <span class="attribution"><span class="source">Jiaye Liu / shutterstock</span></span></figcaption></figure><p>For more than 70 years, Gross Domestic Product, or GDP, has been the key yardstick by which nations have measured economic progress. But GDP is designed to exclusively account for the monetary benefits accrued from economic activity. It is blind to the degradation of the natural environment, finite resources and human wellbeing. It’s time we came up with something better.</p>
<p>Without ever having to acknowledge how nature has contributed to economic growth, GDP has promoted unsustainable practices that have contributed to the climate and biodiversity emergencies. To put it another way, GDP is like a ledger that will not accept red ink. Like an accounting trick, it has allowed us to vent greenhouse gasses into the atmosphere, destroy habitats and neglect human wellbeing without ever having to worry about the consequences.</p>
<p>Of course, the current environmental disaster was something that the economist Simon Kuznets did not have to consider when he <a href="https://foreignpolicy.com/2011/01/03/gdp-a-brief-history/">developed the concept</a> in the aftermath of the Great Depression in the 1930s. But notwithstanding its limitations, something Kuznets was himself aware of, GDP has become the main economic indicator in use today. This puts policy makers who are trying to limit global warming in somewhat of a bind.</p>
<h2>Gross Ecosystem Product</h2>
<p>As such, we need to start looking at alternative metrics such as Gross Ecosystem Product (GEP) so that we can account for nature’s contribution to economic activity and human wellbeing.</p>
<p>Although research into <a href="https://www.pnas.org/content/117/25/14593">calculating GEP</a> is only in its infancy, it attempts to place a monetary value on things like clean water, soil quality, food security, healthcare and the culturally-significant landscapes that contribute to our happiness. In other words, GEP assigns a dollar value to the work of bees who act as nature’s pollinators, bogs that sequester carbon, and the stimulating effect nature has on our mental health.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/437216/original/file-20211213-13-3f7s4e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="two bees and a yellow flower" src="https://images.theconversation.com/files/437216/original/file-20211213-13-3f7s4e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/437216/original/file-20211213-13-3f7s4e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=325&fit=crop&dpr=1 600w, https://images.theconversation.com/files/437216/original/file-20211213-13-3f7s4e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=325&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/437216/original/file-20211213-13-3f7s4e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=325&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/437216/original/file-20211213-13-3f7s4e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=409&fit=crop&dpr=1 754w, https://images.theconversation.com/files/437216/original/file-20211213-13-3f7s4e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=409&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/437216/original/file-20211213-13-3f7s4e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=409&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Bees: good for GEP.</span>
<span class="attribution"><span class="source">RUKSUTAKARN studio / shutterstock</span></span>
</figcaption>
</figure>
<p>While GDP looks exclusively at the value of production – or outputs – GEP instead places a value on nature’s input and incentivises policy makers to invest in nature. It would be naive to simply add both measures together and come up with an overall figure, since both metrics overlap in numerous areas. But the two measures can still provide decision makers with complementary information that could help allow for sustainable economic growth into the future.</p>
<h2>Exporting ecosystem services – and boosting GEP</h2>
<p>For example, the Chinese government has been experimenting with the implementation of GEP in Qinghai province – a remote region of the Tibetan plateau that contains the source of the Mekong, Yangtze and Yellow Rivers.</p>
<p>There, researchers found that GEP was far greater than GDP in the year 2000, 81.5 vs. 26 billion Yuan. At that point, there was considerably more useful ecosystem activity than human economic activity. </p>
<p>However by 2015 GEP had shrunk to three quarters the size of GDP, <a href="https://www.pnas.org/content/117/25/14593">185.4 vs. 242 billion Yuan</a>. This suggests greater investment had been made in traditional economic growth at the expense of the environment. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/437218/original/file-20211213-13-4xfcmu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="River winds through large valley" src="https://images.theconversation.com/files/437218/original/file-20211213-13-4xfcmu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/437218/original/file-20211213-13-4xfcmu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/437218/original/file-20211213-13-4xfcmu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/437218/original/file-20211213-13-4xfcmu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/437218/original/file-20211213-13-4xfcmu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/437218/original/file-20211213-13-4xfcmu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/437218/original/file-20211213-13-4xfcmu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Several huge rivers begin on the high plateaus of Qinghai province.</span>
<span class="attribution"><span class="source">DMHJ / shutterstock</span></span>
</figcaption>
</figure>
<p>Intriguingly, as Qinghai is the source of three major rivers, the study also found that the province “exports” ecosystem services like drinking water and fertilising nutrients, which show up in the GEP accumulated by other Chinese provinces and neighbouring countries. </p>
<p>The ability to measure the value of Qinghai’s ecosystem “export” could set in train a process whereby financial compensation is paid to the province by neighbouring regions. Such a programme could create the economic incentive for communities to conserve and grow ecosystem assets. To put this in a global perspective, imagine if Brazilian farmers were paid by European countries to manage the rainforest based on the amount of carbon it sequesters.</p>
<p>Similarly, in Ireland where I live, GEP would allow bogs and woodlands to contribute to the economy. In such a scenario, Irish cities could be compelled to pay rural regions to store some of the carbon they produce or to maintain culturally significant landscapes that enhance mental health and wellbeing.</p>
<p>By placing a value on the benefits that we derive from our natural environment, GEP would also encourage us to think differently about how we manage, maintain and grow those regions that have been neglected in favour of centralised growth strategies.</p>
<p>However, for now at least, it would be impractical to implement a system like GEP or the UN’s <a href="https://seea.un.org/">System of Environmental-Economic Accounting</a>. Apart from being hugely complex and largely unproven, adopting it would require a global economic consensus on a scale not seen since the international financial order was devised <a href="https://theconversation.com/uk/topics/bretton-woods-11536">after the second world war</a>.</p>
<p>Nevertheless, if we are to manage the complex trade-offs needed to mitigate the climate crisis, then radical new thinking is required.</p><img src="https://counter.theconversation.com/content/170820/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Onakuse does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Radical new thinking is required to fight climate change, and ‘gross ecosystem product’ might help.Stephen Onakuse, Senior Lecturer, Department of Food Business and Development, and Deputy Director of the Centre for Sustainable Livelihoods, University College CorkLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1617932021-06-01T20:12:07Z2021-06-01T20:12:07ZAbout 500,000 Australian species are undiscovered – and scientists are on a 25-year mission to finish the job<figure><img src="https://images.theconversation.com/files/403711/original/file-20210601-19-1tnmg7t.jpg?ixlib=rb-1.1.0&rect=3%2C6%2C1695%2C1296&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Wikimedia</span></span></figcaption></figure><p>Here are two quiz questions for you. How many species of animals, plants, fungi, fish, insects and other organisms live in Australia? And how many of these have been discovered and named?</p>
<p>To the first, the answer is we don’t really know. But the best guess of taxonomists – the scientists who discover, name, classify and document species – is that Australia’s lands, rivers, coasts and oceans probably house <a href="https://www.environment.gov.au/land/nrs/about-nrs/protecting-biodiversity">more than 700,000 distinct species</a>.</p>
<p>On the second, taxonomists estimate <a href="https://www.environment.gov.au/science/abrs/online-resources">almost 200,000 species have been scientifically named</a> since Europeans first began exploring, collecting and classifying Australia’s remarkable fauna and flora. </p>
<p>Together, these estimates are disturbing. After <a href="https://www.anbg.gov.au/biography/vlamingh-willem.html">more than 300 years</a> of effort, scientists have documented <a href="https://www.abc.net.au/news/2014-09-07/75-per-cent-of-species-unknown-fact-check/5649858?nw=0">fewer than one-third</a> of Australia’s species. The remaining 70% are unknown, and essentially invisible, to science. </p>
<p>Taxonomists in Australia name an average <a href="https://www.taxonomyaustralia.org.au/new-species-2019">1,000 new species</a> each year. At that rate, it will take at least 400 years to complete even a first-pass stocktake of Australia’s biodiversity.</p>
<p>This poor knowledge is a serious threat to Australia’s environment. And a first-of-its kind report <a href="http://science.org.au/taxonomyplan">released today</a> shows it’s also a huge missed economic opportunity. That’s why today, Australia’s taxonomists are calling on governments, industry and the community to support an important mission: discovering and documenting all Australian species within 25 years.</p>
<h2>Australia: a biodiversity hotspot</h2>
<p>Biologically, Australia is one of the richest and most diverse nations on Earth – between 7% and 10% of all species on Earth <a href="https://www.cbd.int/countries/profile/?country=au">occur here</a>. It also has among the world’s <a href="https://stateoftheworldsplants.org/2016/">highest rates of species discovery</a>. But our understanding of biodiversity is still very, very incomplete.</p>
<p>Of course, First Nations peoples discovered, named and classified many species within their knowledge systems long before Europeans arrived. But we have no ready way yet to compare their knowledge with Western taxonomy.</p>
<p>Finding new species in Australia is not hard - there are almost certainly unnamed species of insects, spiders, mites and fungi in your backyard. Any time you take a bush holiday you’ll drive past hundreds of undiscovered species. The problem is recognising the species as new and finding the time and resources to deal with them all.</p>
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<p>Taxonomists describe and name new species only after very careful due diligence. Every specimen must be compared with all known named species and with close relatives to ensure it is truly a new species. This often involves detailed microscopic studies and gene sequencing. </p>
<p>More fieldwork is often needed to collect specimens and study other species. Specimens in museums and herbaria all over the world sometimes need to be checked. After a great deal of work, new species are described in scientific papers for others to assess and review.</p>
<p>So why do so many species remain undiscovered? One reason is a shortage of taxonomists trained to the level needed. Another is that technologies to substantially speed up the task have only been developed in the past decade or so. And both these, of course, need appropriate levels of funding.</p>
<p>Of course, some groups of organisms are better known than others. In general, noticeable species – mammals, birds, plants, butterflies and the like – are fairly well documented. Most less noticeable groups - many insects, fungi, mites, spiders and marine invertebrates - remain poorly known. But even inconspicuous species are important.</p>
<p>Fungi, for example, are essential for maintaining our natural ecosystems and agriculture. They fertilise soils, control pests, break down litter and recycle nutrients. Without fungi, the world would literally grind to a halt. Yet, <a href="https://www.environment.gov.au/science/abrs/publications/other/numbers-living-species/executive-summary#fungi">more than 90% of Australian fungi</a> are believed to be unknown. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-we-discovered-a-hidden-world-of-fungi-inside-the-worlds-biggest-seed-bank-156051">How we discovered a hidden world of fungi inside the world’s biggest seed bank</a>
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<figure class="align-center ">
<img alt="fungi on log" src="https://images.theconversation.com/files/403713/original/file-20210601-23-i6ddjf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/403713/original/file-20210601-23-i6ddjf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=429&fit=crop&dpr=1 600w, https://images.theconversation.com/files/403713/original/file-20210601-23-i6ddjf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=429&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/403713/original/file-20210601-23-i6ddjf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=429&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/403713/original/file-20210601-23-i6ddjf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=539&fit=crop&dpr=1 754w, https://images.theconversation.com/files/403713/original/file-20210601-23-i6ddjf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=539&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/403713/original/file-20210601-23-i6ddjf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=539&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Fungi plays an essential ecosystem role.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Mind the knowledge gap</h2>
<p>So why does all this matter? </p>
<p>First, Australia’s biodiversity is under severe and increasing threat. To manage and conserve our living organisms, we must first <a href="https://theconversation.com/hundreds-of-australian-lizard-species-are-barely-known-to-science-many-may-face-extinction-161572">discover and name them</a>.</p>
<p>At present, it’s likely many undocumented species are becoming extinct, invisibly, before we know they exist. Or, perhaps worse, they will be discovered and named from dead specimens in our museums long after they have gone extinct in nature.</p>
<p>Second, many undiscovered species are crucial in maintaining a sustainable environment for us all. Others may emerge as pests and threats in future; most species are rarely noticed until something goes wrong. Knowing so little about them is a huge risk.</p>
<p>Third, enormous benefits are to be gained from these invisible species, once they are known and documented. A report <a href="http://science.org.au/taxonomyplan">released today</a>
by Deloitte Access Economics, commissioned by Taxonomy Australia, estimates a benefit to the national economy of between A$3.7 billion and A$28.9 billion if all remaining Australian species are documented. </p>
<p>Benefits will be greatest in biosecurity, medicine, conservation and agriculture. The report found every $1 invested in discovering all remaining Australian species will bring up to $35 of economic benefits. Such a cost-benefit analysis has never before been conducted in Australia. </p>
<p>The investment would cover, among other things, research infrastructure, an expanded grants program, a national effort to collect specimens of all species and new facilities for gene sequencing.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/a-few-months-ago-science-gave-this-rare-lizard-a-name-and-it-may-already-be-headed-for-extinction-140356">A few months ago, science gave this rare lizard a name – and it may already be headed for extinction</a>
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<figure class="align-center ">
<img alt="Two scientists walk through wetlands holding boxes" src="https://images.theconversation.com/files/403715/original/file-20210601-25-1yf3pk4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/403715/original/file-20210601-25-1yf3pk4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/403715/original/file-20210601-25-1yf3pk4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/403715/original/file-20210601-25-1yf3pk4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/403715/original/file-20210601-25-1yf3pk4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/403715/original/file-20210601-25-1yf3pk4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/403715/original/file-20210601-25-1yf3pk4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Discovering new species often involves lots of field work.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<h2>Mission possible</h2>
<p>Australian taxonomists – in museums, herbaria, universities, at the CSIRO and in
government departments – have spent the last few years planning an ambitious mission to discover and document all remaining Australian species within a generation.</p>
<p>So, is this ambitious goal achievable, or even imaginable? Fortunately, yes. </p>
<p>It will involve deploying new and emerging technologies, including <a href="https://research.csiro.au/environomics/team-research-projects/high-throughput-collection-genomics-of-highly-variable-dna-samples/">high-throughput robotic DNA sequencing</a>, <a href="https://research.csiro.au/icv/critterpedia-an-ai-powered-app-to-identify-insect-and-snake-species/#:%7E:text=Critterpedia%3A%20an%20AI%2Dpowered%20app%20to%20identify%20insect%20and%20snake%20species,-July%2015th%2C%202020&text=Critterpedia%20is%20an%20AI%2Dpowered,or%20snake%20submitted%20by%20users.">artificial intelligence</a> and <a href="https://www.scientificamerican.com/article/supercomputer-scours-fossil-record-for-earths-hidden-extinctions/">supercomputing</a>. This will vastly speed up the process from collecting specimens to naming new species, while ensuring rigour and care in the science.</p>
<p>A national meeting of Australian taxonomists, including the young early career researchers needed to carry the mission through, was held last year. The meeting confirmed that with the right technologies and more keen and bright minds trained for the task, the rate of species discovery in Australia could be sped up by the necessary 16-fold – reducing 400 years of effort to 25 years. </p>
<p>With the right people, technologies and investment, we could discover all Australian species. By 2050 Australia could be the world’s first biologically mega-rich nation to have documented all our species, for the direct benefit of this and future generations.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/hundreds-of-australian-lizard-species-are-barely-known-to-science-many-may-face-extinction-161572">Hundreds of Australian lizard species are barely known to science. Many may face extinction</a>
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<img src="https://counter.theconversation.com/content/161793/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kevin Thiele has received funding from The Ian Potter Foundation and from relevant sector organisations for the work that led to this article.</span></em></p><p class="fine-print"><em><span>Jane Melville does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>After more than 300 years of effort, scientists have documented fewer than one-third of Australia’s species. The remaining 70% are unknown, and essentially invisible, to science.Kevin Thiele, Adjunct Assoc. Professor, The University of Western AustraliaJane Melville, Senior Curator, Terrestrial Vertebrates, Museums Victoria Research InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1547042021-02-05T17:10:56Z2021-02-05T17:10:56ZNature: how do you put a price on something that has infinite worth?<figure><img src="https://images.theconversation.com/files/382744/original/file-20210205-17-ni9mev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The priceless view over Loch Lomond, Scotland.</span> <span class="attribution"><span class="source">Gary_Ellis_Photography / shutterstock</span></span></figcaption></figure><p>There’s a new nature conservation strategy in town – and it means business. During the 1970s, 80s and 90s the main tactic to protect wildlife was to highlight the plight of charismatic “flagship” species (remember the WWF Save the Panda campaign?). Since the millennium, however, a new strategy backed by major conservation organisations such as The Nature Conservancy is to price the benefits that nature provides.</p>
<p>Not all conservationists agree, as borne out by <a href="https://www.nature.com/articles/d41586-018-05984-3">fierce debates</a> in a major international initiative assessing global biodiversity. Yet the idea is now mainstream, as evidenced by the high profile <a href="https://www.gov.uk/government/publications/final-report-the-economics-of-biodiversity-the-dasgupta-review">Economics of Biodiversity: Dasgupta Review</a> commissioned by the UK government and lead by the economist Partha Dasgupta. </p>
<p>Proponents of the economic approach argue that if we don’t give nature a price then we essentially treat it as having zero value. In contrast, if we articulate value in monetary terms then this can be factored into government and business decisions. Harmful costs to the natural world are no longer “externalised”, to use the economic jargon, and instead the value of “natural capital” is incorporated into balance sheets.</p>
<p>There is certainly some merit to this approach, as shown in <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/578005/pes-pilot-review-key-findings-2016.pdf">pilot projects</a> where land owners are paid to improve water quality or reduce flooding. Although it’s worth noting that decisions can go the other way too, as occurred when a <a href="https://tradezone.dubetradeport.co.za/Pages/Home">major airport and trade zone</a> in Durban, South Africa, <a href="https://www.gov.za/s-ndebele-welcomes-dube-trade-port-environmental-impact-assessment-eia-approval">got the go-ahead</a> when forecasted <a href="https://www.dubetradeport.co.za/SiteFiles/424/finalreport-globalinsight.pdf">jobs and economic growth</a> were deemed to outweigh the <a href="https://www.pik-potsdam.de/en/news/public-events/archiv/alter-net/programme/11.9.2011/schroeter-schlaack/presentation_schroeter-schlaack_2011.pdf">economic value of the environment</a> that would be destroyed. </p>
<p>Obviously, not all aspects of nature’s value can be captured in economic terms. Nature is also valued in ways that are spiritual, for example. This is fully recognised by advocates of the approach, who suggest their estimates simply convey minimum values.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/382760/original/file-20210205-13-1p9tavf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Red green and yellow parrot on a branch." src="https://images.theconversation.com/files/382760/original/file-20210205-13-1p9tavf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/382760/original/file-20210205-13-1p9tavf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/382760/original/file-20210205-13-1p9tavf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/382760/original/file-20210205-13-1p9tavf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/382760/original/file-20210205-13-1p9tavf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/382760/original/file-20210205-13-1p9tavf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/382760/original/file-20210205-13-1p9tavf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The large city of Durban is found in an official ‘biodiversity hotspot’.</span>
<span class="attribution"><span class="source">Slow Walker / shutterstock</span></span>
</figcaption>
</figure>
<p>On the other side of the debate, concerns about monetary valuation relate to how it might undermine other aspects of nature protection. </p>
<p>To give an example, consider the <a href="https://ec.europa.eu/easme/en/section/life/life-environment-sub-programme">EU-funded</a> <a href="https://zoo-naturetrade.zoo.ox.ac.uk/">NatureTrade</a> project, in which computer algorithms are used to quantify benefits from nature (such as carbon storage, pollination, recreation) derived on someone’s land. Landowners are then helped to draw up a contract so they can be paid for these, in an auction the researchers behind the project describe as an “eBay for ecosystem services”. This may seem a great idea, but <a href="https://www.sciencedirect.com/science/article/pii/S0921800914003668">studies</a> have found that many landowners already protect nature simply because it’s the “right” thing to do, and paying them “crowds out” these social norms.</p>
<h2>A hierarchy of needs</h2>
<p>Despite the debate, both viewpoints can in fact be complementary. </p>
<p>As an analogy, take psychologist Abraham Maslow’s idea of the <a href="https://journals.aom.org/doi/10.5465/amle.2017.0351">hierarchy of needs</a> for human development. These are often illustrated as a pyramid, with quantifiable physiological needs and security at the bottom, and the less tangible values of belonging, esteem, and transcendence at the top. A <a href="https://scottbarrykaufman.com/books/transcend/">recent book</a> reveals that Maslow intended improvement of all these aspects simultaneously (after all, what use is security and safety if we do not have hope and meaning?). </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/382746/original/file-20210205-14-1fc9if5.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The hierarchy of needs pyramid" src="https://images.theconversation.com/files/382746/original/file-20210205-14-1fc9if5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/382746/original/file-20210205-14-1fc9if5.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=469&fit=crop&dpr=1 600w, https://images.theconversation.com/files/382746/original/file-20210205-14-1fc9if5.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=469&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/382746/original/file-20210205-14-1fc9if5.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=469&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/382746/original/file-20210205-14-1fc9if5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=589&fit=crop&dpr=1 754w, https://images.theconversation.com/files/382746/original/file-20210205-14-1fc9if5.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=589&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/382746/original/file-20210205-14-1fc9if5.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=589&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">There is some debate over whether Maslow himself ever represented his theory as a pyramid.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Maslows-Hierarchy-of-Needs-1.png">nmilligan / wiki</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>If we were to draw up a similar pyramid representing a healthy environment, at the bottom would be the bare essentials provided by nature, such as having clean air and water, and insects to pollinate crops. Higher up in the pyramid would be the benefits of nature for mental health, and the transcendental aspects which give purpose and spiritual meaning. Different types of people and academic disciplines focus on different layers of the pyramid, but we need them all.</p>
<p>Sometimes the language used by economists doesn’t help. The Dasgupta Review provocatively states: “Nature is an asset.” Yet the boundaries between our self and the natural world are more fuzzy than they may first seem, as I evidence in my book <a href="https://research.reading.ac.uk/social-and-applied-ecology/the-self-delusion/">The Self Delusion</a>. As Sigmund Freud realised <a href="https://books.google.co.uk/books?id=jCnYDwAAQBAJ">in 1930</a>, when we feel kinship with – or to use the non-scientific term “love” – something, then we don’t objectify it. Instead, boundaries disappear and it merges with our sense of identity. It is antithetical to many people to refer to a dancing swift, an elegant swan or friendly-looking robin as an “asset”. </p>
<p>Words matter, and there is also danger that such <a href="https://www.routledge.com/Language-and-Neoliberalism/Holborow/p/book/9780415744560">language of commodification</a> can encourage <a href="https://www.emerald.com/insight/content/doi/10.1108/SAMPJ-07-2018-0178/full/html">psychological distancing</a>. People who feel less connected to nature <a href="https://conbio.onlinelibrary.wiley.com/doi/full/10.1111/cobi.13381">do less to protect it</a>. This is why there is a growing movement involving organisations such as the <a href="https://www.rspb.org.uk/our-work/conservation/projects/connection-to-nature/">RSPB</a> (the UK’s largest bird charity), to restore a sense of connection to nature, especially in children.</p>
<p>Given the worry that commodification of nature will pollute our worldviews, the big question is whether we can restrict such parlance to domains of policy and business accounting (where it can arguably do some good). I think we can. Consider how human life is valued: in monetary terms by insurance companies and for medicine procurement by health services, yet still in terms of infinite worth to most of us. Just because monetary valuation is used in some sectors doesn’t mean it will flood across to all.</p>
<p>A diversity of viewpoints and approaches is essential to protecting nature effectively. The “economics of nature” are likely here to stay, but that does not replace the tireless efforts of those who have worked for decades to convey the awe-inspiring and transcendental value of nature. As the naturalist <a href="http://www.literaturepage.com/read.php?titleid=walden&abspage=243&bookmark=1">Henry David Thoreau</a> put it: “If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them.”</p><img src="https://counter.theconversation.com/content/154704/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Oliver has received research funding from BBSRC, NERC and Natural England for quantifying biodiversity change and impacts on humans. He is affiliated with Defra as a senior scientific fellow on their Systems Research Programme and is author of a book about human interconnectedness and global environmental change ('THE SELF DELUSION') published by Weidenfeld and Nicholson. </span></em></p>People both for and against pricing biodiversity need to work together to protect the natural world.Tom Oliver, Professor of Applied Ecology, University of ReadingLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1216852019-09-10T11:56:28Z2019-09-10T11:56:28ZMarket-based policies work to fight climate change, from India to Jamaica<p>The <a href="https://www.press.uchicago.edu/ucp/books/book/chicago/C/bo18146821.html">economic foundation</a> at the heart of conservative political philosophy is that markets are the best way to allocate the bulk of society’s resources.</p>
<p>That faith in markets explains the Republican Party’s preference for, say, <a href="https://www.economist.com/the-economist-explains/2016/12/11/why-republicans-hate-obamacare">private medical insurance</a> over a government-run American health system. And it informs their push to <a href="https://www.forbes.com/sites/mayrarodriguezvalladares/2018/08/22/why-do-republicans-want-to-gut-bank-regulations-even-more/">loosen regulations that have governed big banks</a> since the 2009 financial crisis.</p>
<p>This emphasis on markets is also on display in many policies that conservative parties across the globe are enacting to address climate change. Climate change may be a <a href="https://theconversation.com/caribbean-residents-see-climate-change-as-a-severe-threat-but-most-in-us-dont-heres-why-91049">partisan issue in the United States</a>, but numerous <a href="https://www.pewresearch.org/fact-tank/2019/04/18/a-look-at-how-people-around-the-world-view-climate-change/">surveys of other countries</a> reveal that tackling climate change is <a href="https://www.ipsos.com/en/global-warming-issue-unites-world-opinion">not incompatible with conservative principles</a>.</p>
<h2>Conservative governments with a strong climate record</h2>
<p>Across Europe, Conservatives have gotten behind <a href="https://theconversation.com/taxes-and-caps-on-carbon-work-differently-but-calibrating-them-poses-the-same-challenge-104898">cap and trade</a>, a market-based system for reducing carbon emissions. </p>
<p>The <a href="https://ec.europa.eu/clima/policies/ets_en">European Emission Trading</a> system, passed by the European Commission in 2005 with support across the ideological spectrum, sets limits on the continent’s annual carbon emissions. Companies that pollute more may purchase carbon rights from those who find innovative ways to reduce their own emissions, capping total pollution while giving individual firms the freedom to buy and sell their share. </p>
<p>The cap-and-trade strategy was first put into practice in the United States in 1990, under President George Bush, <a href="https://www.smithsonianmag.com/science-nature/the-political-history-of-cap-and-trade-34711212/">to combat acid rain</a>. </p>
<p>In Germany, an industrial powerhouse, <a href="https://www.cleanenergywire.org/factsheets/making-climate-chancellor-angela-merkel">Chancellor Angela Merkel</a> of the center-right Christian Democratic party, has <a href="https://www.climatechangenews.com/2019/06/19/merkel-fallen-climate-chancellor-chance-save-legacy/">strongly supported</a> a comprehensive climate law that would combine cap and trade, tax incentives for renewable energy and major investments in energy efficiency.</p>
<p>To be fair, the political spectrum in Europe skews left. But conservatives in more right-leaning countries are fighting climate change, too.</p>
<p>India’s hard-right Prime Minister Narendra Modi – leader of the world’s largest democracy – is a strong proponent of renewable energy. While his administration maintains support for the coal industry, solar production is set to <a href="https://www.news18.com/news/politics/promise-of-renewable-and-clean-energy-what-changed-in-bjps-five-years-2093747.html">increase five-fold in India by 2022</a>. </p>
<p>And Chilean President Sebastian Piñera, who holds <a href="https://www.nytimes.com/2017/12/17/world/americas/chile-presidential-election.html">strong conservative views</a> on many social issues, has nonetheless embraced some of the <a href="https://climateactiontracker.org/countries/chile/">most stringent climate goals</a> in Latin America. </p>
<p>According to the Climate Action Tracker, which monitors countries’ progress toward reducing carbon emissions, Chile will generate 65% of its electricity from renewable energy by 2035, and has imposed strict new energy efficiency standards on manufacturing, mining and transportation.</p>
<p>In Jamaica, the Labour Party – the island’s conservative party – has endorsed a new “<a href="https://theconversation.com/jamaica-leads-in-richard-branson-backed-plan-for-a-caribbean-climate-revolution-105478">climate accelerator</a>.” Backed by billionaire Richard Branson and the <a href="https://www.iadb.org/en/news/idb-join-new-caribbean-climate-smart-accelerator-facilitate-1bn-investments">Inter-American Development Bank</a>, the initiative aims to make this vulnerable region more resilient by <a href="https://www.worldbank.org/en/news/press-release/2018/08/09/caribbean-aims-become-world-first-climate-smart-zone">attracting financing</a> to scale up renewable energy, build low-carbon infrastructure and increase investments in green technology.</p>
<p><iframe id="nz8QR" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/nz8QR/3/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Climate change is a market failure</h2>
<p>I am an <a href="https://www.middlebury.edu/institute/people/jason-scorse">environmental economist</a>, but it doesn’t require advanced training in economics to recognize the basic principles underlying all these conservative-backed environmental policies.</p>
<p>The first is conservative faith that financial markets can adapt and innovate to address today’s climate challenge. </p>
<p>There’s evidence for this belief. Renewable power – which was economically unviable just a decade ago – <a href="https://www.forbes.com/sites/dominicdudley/2018/01/13/renewable-energy-cost-effective-fossil-fuels-2020/#55616b3e4ff2">is so affordable now</a> because governments and companies around the world have <a href="https://ourworldindata.org/renewable-energy">invested immensely in solar and wind</a>. What is expensive today can be made cheap tomorrow if governments put the right incentives in place. </p>
<p>The second basis for the climate policies conservatives worldwide support is an understanding that, under <a href="https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1017&context=econ_workingpaper">certain circumstances</a>, markets can and do fail. </p>
<p>Markets function properly only under certain conditions. </p>
<p>First, the harmful impacts of producing a given good – which economists call “<a href="https://pressbooks.bccampus.ca/uvicecon103/chapter/5-1-externalities/">negative externalities</a>” – cannot hurt anyone other than the producers and consumers of that good. There must also be clear and enforceable property rights over every good in the marketplace. </p>
<p>When these bedrock principles are violated, market breakdown ensues. </p>
<p>Take air pollution, for example. When a chemical factory that produces a cleaning product releases toxic fumes, the cost of that pollution – the negative externality – is not borne exclusively by the buyer or seller of that product. Everyone who inhales the fumes suffers. </p>
<p>Yet because no one owns the “property rights” to the atmosphere, no one can hold the chemical factory or its clients legally responsible for contaminated air. </p>
<p>This is market failure. And in the environmental realm, it is the norm. </p>
<p>Every coal plant or natural gas field that emits the <a href="https://www.nationalgeographic.com/environment/global-warming/greenhouse-gases/">greenhouse gases that drives climate change</a> free of charge is violating the fundamental principle of well-functioning markets. </p>
<p>Policies like Europe’s cap and trade system or Britain’s <a href="https://uk.reuters.com/article/uk-eu-britain-carbontrading/british-carbon-tax-to-start-november-4-in-the-event-of-no-deal-brexit-government-idUKKCN1U70NG">carbon tax</a>, which will soon require companies <a href="https://www.c2es.org/content/carbon-tax-basics/">pay a fee</a> for every unit of pollution they emit, are designed to fix this problem.</p>
<h2>Global outliers</h2>
<p>Not all conservatives embrace market-based environmental policies, of course.</p>
<p>Republicans in the U.S. voted overwhelmingly <a href="https://insideclimatenews.org/news/19072018/anti-carbon-tax-resolution-house-vote-climate-solutions-caucus-curbelo-scalise-koch-influence-congress">against a proposed carbon tax in 2016</a>. Then-House Majority Whip Steve Scalise <a href="https://www.atr.org/overwhelming-majority-house-votes-oppose-carbon-tax">said</a> it would be “detrimental to American families and businesses.” </p>
<p>Australia’s conservative party, which won a <a href="https://theconversation.com/labors-election-loss-was-not-a-surprise-if-you-take-historical-trends-into-account-117399">surprise victory</a> in May’s national election, is <a href="https://www.forbes.com/sites/jamesellsmoor/2019/06/01/climate-change-australias-election-has-far-reaching-consequences/#7c4136b71e75">propelling the country backwards on climate</a>. A few years ago, they repealed a <a href="https://www.vox.com/world/2019/5/17/18628180/australia-election-2019-labor-liberal-party-morrison">2010 carbon tax</a>. Now the country’s new prime minister, Scott Morrison, is reducing the emission-reduction target Australia signed onto in the Paris climate accords and renewing <a href="https://www.theguardian.com/australia-news/live/2017/feb/09/bill-shorten-malcolm-turnbull-union-liberal-labor-politics-live">his government’s commitment to the coal industry</a>.</p>
<p>Brazil’s far-right President Jair Bolsonaro, too, has <a href="https://theconversation.com/amazon-fires-jair-bolsonaro-faces-mounting-political-backlash-in-brazil-even-from-his-allies-122512">rolled back his country’s strict environmental regulations</a>. That’s left the Amazon rainforest open to <a href="https://theconversation.com/amazon-fires-deforestation-has-a-devastating-heating-impact-on-the-local-climate-new-study-122914">deforestation</a> and <a href="https://theconversation.com/the-amazon-is-burning-4-essential-reads-on-brazils-vanishing-rainforest-122288">fire</a>.</p>
<p>The current governments of the United States, Australia and Brazil are global outliers who defy overwhelming basic economics and <a href="https://climate.nasa.gov/evidence/">overwhelming scientific evidence</a> that climate change is one of the <a href="https://www.nytimes.com/2018/03/29/climate/united-nations-climate-change.html">gravest risks facing humanity</a>. </p>
<p>From Jamaica to India, rightist leaders have shown confidence that with the right incentives companies can and will innovate to transform the economy in a more sustainable direction.</p>
<p>[ <em>Deep knowledge, daily.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=deepknowledge">Sign up for The Conversation’s newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/121685/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>In the past Jason Scorse has received funding from various environmental NGOs, including Natural Resources Defense Council, EarthJustice, and the Sierra Club for consulting work. </span></em></p>Conservatives worldwide favor carbon pricing, cap-and-trade systems and other innovative environmental plans – just not in the United States.Jason Scorse, Associate Professor, Chair, Director, MiddleburyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1200652019-07-24T11:07:49Z2019-07-24T11:07:49ZResource depletion is a serious problem, but ‘footprint’ estimates don’t tell us much about it<figure><img src="https://images.theconversation.com/files/285413/original/file-20190723-110195-1gcmce8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Government negligence, rampant development and illegal land clearing spark wildfires in Indonesia that annually ravage thousands of acres of forest.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/AP10ThingsToSee-Indonesia-Wildfires/1cf055c1810b40ce92e05d28c680e4f7/7/0">AP Photo</a></span></figcaption></figure><p>Experts widely agree that human activities are harming the global environment. Since the Industrial Revolution, the world economy has grown dramatically. Overall this is a success story, since rising incomes have lifted millions of people out of poverty. But it has been fueled by population growth and increasing consumption of natural resources. </p>
<p>Rising demand to meet the needs of <a href="https://www.prb.org/2018-world-population-data-sheet-with-focus-on-changing-age-structures/">more than 7.6 billion people</a> has transformed land use and generated unprecedented levels of pollution, affecting biodiversity, forests, wetlands, water bodies, soils and air quality.</p>
<p>It’s pretty certain that humans are consuming more resources than the Earth can regenerate. An updated estimate of how fast that consumption is happening suggests it’s more rapid this year than in the past 50, according to the California-based <a href="https://www.footprintnetwork.org/">Global Footprint Network</a>. This environmental nonprofit calculates the annual arrival of <a href="https://www.overshootday.org/">Earth Overshoot Day</a> – the date when humanity’s demands on nature exceed what the network’s analysts estimate the Earth can regenerate over the entire year. This year they peg the date as July 29 – the earliest date since ecological overshoot began in the early 1970s. </p>
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<span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<p>As an ecological economist and <a href="https://scholar.google.com/citations?user=fCsfSRkAAAAJ&hl=en">scholar of sustainability</a>, I am particularly interested in metrics and indicators that can help us understand human uses of Earth’s ecosystems. Better measurements of the impacts of human activities can help identify ways to sustain both human well-being and natural resources. </p>
<p>Earth Overshoot Day is a compelling concept and has raised awareness of the growing impact of human activities on the planet. Unfortunately, the methodology used to calculate it and the ecological footprint on which it is based is conceptually flawed and practically unusable in any science or policy context. In my view, the ecological footprint ultimately does not measure overuse of natural resources – and it may very well underestimate it.</p>
<h2>Rising demands, finite resources</h2>
<p>The Global Footprint Network estimates when Earth Overshoot Day will arrive based on its <a href="https://www.footprintnetwork.org/resources/data/">National Footprint Accounts</a>. These include extensive data sets that the organization uses to calculate two overarching indicators: </p>
<ul>
<li><p>The ecological footprint, perhaps the most commonly used metric of the environmental impacts of human resource use. Each country’s ecological footprint is an estimate of the biological resources required to meet its population’s consumption demands and absorb its carbon emissions. </p></li>
<li><p>National biocapacity, which is an estimate of how well each country’s ecosystems can produce the natural resources consumed by humans and absorb the waste and pollution that humans generate. </p></li>
</ul>
<p>Both of these measures are expressed in global hectares. One hectare is equal to 10,000 square meters, or about 2.47 acres. </p>
<h2>Going into overshoot</h2>
<p>To estimate when Earth Overshoot Day will arrive, the Global Footprint Network calculates the number of days in a given year for which Earth has enough biocapacity to provide for humans’ total ecological footprint. </p>
<p>When the footprint of consumption worldwide exceeds biocapacity, the authors assert that humans are overshooting, or exceeding the regenerative capacity of Earth’s ecosystems. This year, they estimate that humans are using natural resources 1.75 times faster than ecosystems can regenerate – or, put another way, consuming 1.75 Earths.</p>
<p>As an example, the ecological footprint for the United Kingdom is 4.4 global hectares per person, and global biocapacity is 1.63 hectares per person. Therefore, it would take (4.4 /1.63) 2.7 Earths if everyone lived like the British.</p>
<p>The U.K.’s Overshoot Day would be estimated as 365 x (1.63 /4.4) = 135, or the 135th day of the year, which is May 17 based on <a href="http://data.footprintnetwork.org/#/compareCountries">2016 data</a>. The United States reached overshoot even earlier, on March 15.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"930416274928295937"}"></div></p>
<h2>What to count?</h2>
<p>However, there are some fundamental and misleading shortcomings in these calculations. In a <a href="https://doi.org/10.1371/journal.pbio.1001700">2013 paper</a>, six authors from academia, <a href="https://www.nature.org/">The Nature Conservancy</a> and the California-based <a href="https://thebreakthrough.org/about">Breakthrough Institute</a> analyzed how the Ecological Footprint falls short. In their view, it primarily measures humans’ carbon footprint but does not fully address other key impacts.</p>
<p>To calculate ecological footprints, the Global Footprint Network estimates the supply and demand of renewable biological resources across six land use types: forests, fishing grounds, croplands, grazing lands, developed lands and the area of forest required to offset human carbon emissions – that is, the carbon footprint. According to the network’s own analysis, each of these land use types is nearly in balance or in surplus, except for the carbon footprint.</p>
<p>The two key categories for producing food – cropland and grazing land – are defined in such a way that they can never be in deficit. And the analysis does not reflect environmental consequences of human use of these lands, such as soil erosion, nutrient runoff or overuse of water. It measures only land area.</p>
<p>For example, the ecological footprint for Indonesia is 1.7 global hectares per person, which is among the lowest 30% of all countries. But according to a 2014 study, Indonesia has the <a href="https://doi.org/10.1038/nclimate2277">highest deforestation rate in the world</a>.</p>
<p>Furthermore, the footprint calculation does not consider whether stocks of natural resources are decreasing or increasing as a result of human consumption. This question is critical for understanding ecological impacts. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/5HOijUtExiM?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Is shopping online better for the environment than driving to the store? Yes, but only if you don’t choose express delivery.</span></figcaption>
</figure>
<p>These national ecological footprint calculations also conflate sustainability with self-sufficiency. They assume that every nation should produce all of the resources it consumes, even though it might be less expensive for countries to import some goods than to produce them at home. </p>
<p>As an example, the network lists Canada as an <a href="http://data.footprintnetwork.org/#/">“ecological creditor”</a> whose biocapacity exceeds its population’s ecological footprint. However, Canada is <a href="https://www.eia.gov/beta/international/">among the top 5 oil-producing countries in the world</a>, and exports much of that oil for foreign consumption. Most of it goes to the United States, an “ecological debtor” that consumes more resources than it produces. </p>
<p>Thinking purely in terms of generic “resources,” everyone is better off when debtor countries can import resources from nations with supplies to spare. There are real and important environmental impacts associated with producing and consuming oil, but the network’s calculations do not address them. Nor do they reflect the decline in natural capital from extracting a nonrenewable resource.</p>
<h2>Measuring sustainability</h2>
<p>The Global Footprint Network asserts that “You can’t manage what you can’t measure,” but it may be impossible to create a single metric that can capture all human impacts on the environment. Earth Overshoot Day highlights unsustainable uses of natural resources, but we need scientifically robust ecological indicators to inform environmental policy, and a broader understanding of ecological risks.</p>
<p>Better measurements of sustainability should reflect changes in our supplies of natural capital, include estimates of uncertainty and incorporate multiple pathways to reduce carbon footprints. The best tool for measuring human impacts on the planet may be a dashboard of environmental indicators, not a footprint.</p><img src="https://counter.theconversation.com/content/120065/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert B. Richardson is affiliated with the International Society for Ecological Economics, and is currently President of the U.S. Society for Ecological Economics. </span></em></p>July 29, 2019 is ‘Earth Overshoot Day,’ a date coined by the nonprofit Global Footprint Network to publicize overuse of Earth’s resources. But their estimates may actually understate the problem.Robert B. Richardson, Professor of Sustainable Development, Michigan State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1080112018-12-03T11:33:57Z2018-12-03T11:33:57ZGeorge H.W. Bush understood that markets and the environment weren’t enemies<figure><img src="https://images.theconversation.com/files/248306/original/file-20181202-194925-b20gxr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President George H.W. Bush (right) fishing on the Kennebunk River in Maine, Aug. 27, 1990. </span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Watchf-AP-A-MAINE-USA-APHS161255-George-H-W-Bu-/6299fa3b7de24d779e4cac246fd358a6/74/0">AP Photo/Doug Mills</a></span></figcaption></figure><p>Former President George H.W. Bush, who died on Nov. 30, was admirable for many reasons, from his skillful <a href="https://theconversation.com/why-well-miss-george-h-w-bush-americas-last-foreign-policy-president-95560">leadership through the end of the Cold War</a> to his personal warmth and courtesy. As an <a href="https://scholar.google.com/citations?user=lfkXE9kAAAAJ&hl=en">environmental economist</a>, I believe his approach to conservation also deserves attention.</p>
<p>Bush <a href="https://news.yale.edu/2018/12/01/lifetime-public-service-remembrance-george-hw-bush-48-ba">majored in economics at Yale</a> and was a skilled politician. He believed that market-based solutions could protect the environment at lower cost than the command-and-control strategy that was more typical in the 1970s and 1980s. </p>
<p>Under that approach, regulators ordered each polluter to install the same equipment to reduce emissions. This could be cost-effective <a href="http://faculty.haas.berkeley.edu/wolfram/papers/fkw_100326.pdf">if all polluters used the same technology</a>, but in modern economies, firms rarely have similar management or the same operating equipment. Bush was willing to test the idea that setting pollution reduction targets and letting regulated firms decide how best to achieve them could lead to better outcomes.</p>
<h2>Markets for clean air</h2>
<p>In June 1989, Bush proposed what would become his most important environmental achievement: the <a href="https://www.epa.gov/clean-air-act-overview/1990-clean-air-act-amendment-summary">Clean Air Act Amendments of 1990</a>. This sweeping legislation used a market-based approach to halve sulfur dioxide emissions from coal-fired power plants, which reacted in the air to produce harmful <a href="https://www.epa.gov/acidrain/what-acid-rain">acid rain</a>. </p>
<p>This pollution was generated mainly by coal-fired electric utilities in the Midwest, but winds carried it into New England and mid-Atlantic states, where it <a href="https://www.smithsonianmag.com/science-nature/acid-rain-and-our-ecosystem-20824120/">damaged forests, rivers and lakes</a>. States where the pollution was produced had little incentive to regulate it because the costs were borne by others far away. In a 2011 study, Nobel Laureate William Nordhaus and others estimated that coal-fired power plants generated social costs – including acid rain – that could <a href="http://dx.doi.org/10.1257/aer.101.5.1649">equal or exceed the value of the electricity they produced</a>. </p>
<p>President Bush followed the advice of economists who recommended introducing a national market where utilities could <a href="http://www.robertstavinsblog.org/2010/07/27/beware-of-scorched-earth-strategies-in-climate-debates/">buy and sell the right to pollute</a>. This approach made sense for mitigating acid rain because utilities differed with respect to their cost of reducing emissions. Utilities in states such as Ohio had much higher emissions, and a greater scope of emissions reductions possibilities if they were required to cut them.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/248303/original/file-20181202-194938-100udjy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/248303/original/file-20181202-194938-100udjy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/248303/original/file-20181202-194938-100udjy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=912&fit=crop&dpr=1 600w, https://images.theconversation.com/files/248303/original/file-20181202-194938-100udjy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=912&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/248303/original/file-20181202-194938-100udjy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=912&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/248303/original/file-20181202-194938-100udjy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1146&fit=crop&dpr=1 754w, https://images.theconversation.com/files/248303/original/file-20181202-194938-100udjy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1146&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/248303/original/file-20181202-194938-100udjy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1146&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">President George Bush presents a pen he used to sign the Clean Air Act Amendments to EPA Administrator William Reilly, left, Nov. 16, 1990 as Energy Secretary James Watkins looks on.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Watchf-Associated-Press-Domestic-News-Dist-of-/4bbbba2cebdb4a41b43526cd427ecb2d/22/0">AP Photo/Charles Tasnadi</a></span>
</figcaption>
</figure>
<p>Under the legislation, each utility would receive an allotment of permits, proportional to its past emissions, that allowed it to release a fixed amount of pollution. The total number of permits was set at a level that would <a href="http://dx.doi.org/10.1086/467384">reduce national emissions by 10 million tons relative to the 1980 level</a>, phasing down over time. Each company could use its permits to cover its emissions, or sell any permits it did not use <a href="https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.1.103">at the market price</a>. If a utility could reduce its emissions for less than the going market price for a permit, it could make those reductions by whatever means it chose, then sell the permit and keep the difference.</p>
<p>This approach encouraged utilities to hire environmental engineers to update their production processes and find cleaner strategies, such as <a href="https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.1.103">switching to lower-sulfur coal</a>. It <a href="http://dx.doi.org/10.1257/jep.12.3.69">created dynamic innovation investment</a> to discover new strategies for producing power while creating fewer emissions. </p>
<p>The legislation <a href="https://www.eenews.net/stories/1059994544">passed the Senate 89 to 10 and the House 401 to 25.</a> Such bipartisan support for environmental regulation is rarely seen today. “Every city in America should have clean air,” President Bush <a href="https://www.nytimes.com/1990/11/16/us/bush-signs-major-revision-of-anti-pollution-law.html">said as he signed it</a>. “With this legislation I firmly believe we will.” And studies show that he was right: The program successfully <a href="http://dx.doi.org/10.1257/jep.12.3.69">reduced sulfur dioxide emissions at a lower cost</a> than the command-and-control method.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/248304/original/file-20181202-194938-uxfrgw.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/248304/original/file-20181202-194938-uxfrgw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/248304/original/file-20181202-194938-uxfrgw.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=229&fit=crop&dpr=1 600w, https://images.theconversation.com/files/248304/original/file-20181202-194938-uxfrgw.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=229&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/248304/original/file-20181202-194938-uxfrgw.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=229&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/248304/original/file-20181202-194938-uxfrgw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=288&fit=crop&dpr=1 754w, https://images.theconversation.com/files/248304/original/file-20181202-194938-uxfrgw.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=288&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/248304/original/file-20181202-194938-uxfrgw.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=288&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Wet sulfate deposition fell by 66 percent across the eastern U.S. from 1989–1991 to 2014–2016, thanks to reduced sulfate emissions.</span>
<span class="attribution"><a class="source" href="https://www3.epa.gov/airmarkets/progress/reports/acid_deposition_figures.html#figure1">EPA</a></span>
</figcaption>
</figure>
<h2>Can emissions trading save Earth’s climate?</h2>
<p>Today climate change is the world’s biggest environmental challenge. Bush took this problem seriously enough to issue an order in 1989 that led to creation of the <a href="https://www.globalchange.gov/">U.S. Global Change Research Program</a>, which produces expert reports on <a href="https://nca2018.globalchange.gov/">how climate change is affecting the United States</a>. In 1992 he signed the <a href="https://unfccc.int/">United Nations Framework Convention on Climate Change</a>, which created a process for countries to work together to understand and respond to climate change. </p>
<p>It’s hard to know whether Bush would have taken steps to curb climate change if he had been reelected in 1992. Some members of his administration <a href="https://archive.epa.gov/epa/aboutepa/william-k-reilly-oral-history-interview.html">supported such a course</a>, but others were <a href="https://www.nytimes.com/interactive/2018/08/01/magazine/climate-change-losing-earth.html">less convinced of the need to act</a>. And <a href="https://www.nytimes.com/1992/07/04/us/the-1992-campaign-bush-on-the-environment-a-record-of-contradictions.html">critics found fault</a> with positions Bush took on other environmental issues, especially in the second half of his term.</p>
<p>Nonetheless, Bush succeeded in building a political coalition to reduce pollution, and I believe there are <a href="https://ideas.repec.org/p/nbr/nberwo/14963.html">valuable political economy lessons</a> to be learned from his record as debate continues over future U.S. climate mitigation policy. </p>
<p>As our nation’s population and per-capita income continue to grow, making progress toward sustainability will require reducing the emissions our economy generates per dollar of income. The acid rain program showed that markets for pollution lower the cost to society of achieving this goal. By rewarding economic actors who can reduce pollution at the lowest cost, they give businesses an incentive to become even better at this task. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/c9QodGK-FJA?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">President Bush speaks on U.S. climate change policy at Georgetown University, Feb. 6, 1990.</span></figcaption>
</figure>
<p>As concerns grow over <a href="https://theconversation.com/being-born-in-the-wrong-zip-code-can-shorten-your-life-104037">inequality in America</a>, U.S. officials also must pay close attention to who bears the costs of new regulations. If carbon mitigation policies raise electricity and gasoline prices, then middle-class purchasing power could decline. </p>
<p>But this income effect can be offset by simultaneously imposing a carbon fee and then <a href="https://www.brookings.edu/wp-content/uploads/2016/06/05222014_exec_summary_carbon_tax_broader_us_fiscal_reform.pdf">giving households a lump-sum rebate</a>. This approach would adhere to President Bush’s core goals of harnessing market forces to accelerate environmental progress while protecting the pocketbook of the middle class. Prominent liberal and conservative economic experts who have served under every U.S. president since Nixon <a href="https://www.clcouncil.org/founding-members/">support this approach</a>.</p>
<p>President Trump plans to <a href="https://theconversation.com/why-trumps-decision-to-leave-paris-accord-hurts-the-us-and-the-world-78707">withdraw the United States from the Paris Climate Accord</a>, the latest stage of international efforts to curb climate change, and has repeatedly <a href="https://www.cnn.com/2018/11/26/politics/donald-trump-climate-change/index.html">questioned whether climate change is real</a>. In contrast, President Bush spoke of it as a challenge to be faced. Just after signing the Framework Convention on Climate Change, Bush stated in a <a href="https://www.nytimes.com/1992/06/13/world/the-earth-summit-excerpts-from-speech-by-bush-on-action-plan.html">speech to the 1992 Earth Summit in Rio de Janeiro</a>:</p>
<blockquote>
<p>“We must leave this earth in better condition than we found it, and today this old truth must be applied to new threats facing the resources which sustain us all, the atmosphere and the ocean, the stratosphere and the biosphere. Our village is truly global.”</p>
</blockquote><img src="https://counter.theconversation.com/content/108011/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matthew E. Kahn does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>George H.W. Bush, who pledged to be ‘the environmental president,’ took a market-based approach to pollution control that helped clear the air. Now some experts think it could work on climate change.Matthew E. Kahn, Professor of Economics, USC Dornsife College of Letters, Arts and SciencesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1007052018-07-30T15:51:42Z2018-07-30T15:51:42ZYes, humans are depleting Earth’s resources, but ‘footprint’ estimates don’t tell the full story<figure><img src="https://images.theconversation.com/files/229654/original/file-20180727-106524-17wl00g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Purse seiner fishing in the Indian Ocean. Footprint estimates do not assess how sustainably resources such as fisheries are managed.</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:GP04JLI.jpg">Jiri Rezac</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Experts widely agree that human activities are harming the global environment. Since the Industrial Revolution, the world economy has grown dramatically. Overall this is a success story, since rising incomes have lifted millions of people out of poverty. But it has been fueled by population growth and increasing consumption of natural resources. </p>
<p>Rising demand to meet the needs of <a href="https://theconversation.com/7-5-billion-and-counting-how-many-humans-can-the-earth-support-98797">more than 7 billion people</a> has transformed land use and generated unprecedented levels of pollution, affecting biodiversity, forests, wetlands, water bodies, soils and air quality.</p>
<p>On Aug. 1, humans will have consumed more natural resources in 2018 than the Earth can regenerate this year, according to the California-based <a href="https://www.footprintnetwork.org/">Global Footprint Network</a>. This environmental nonprofit calculates the annual arrival of <a href="https://www.overshootday.org/">Earth Overshoot Day</a> – the date when humanity’s demands on nature exceed what the network’s analysts estimate the Earth can regenerate over the entire year. Aug. 1 is the earliest date since ecological overshoot began in the early 1970s. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/229645/original/file-20180727-106527-11vhdj2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/229645/original/file-20180727-106527-11vhdj2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/229645/original/file-20180727-106527-11vhdj2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=376&fit=crop&dpr=1 600w, https://images.theconversation.com/files/229645/original/file-20180727-106527-11vhdj2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=376&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/229645/original/file-20180727-106527-11vhdj2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=376&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/229645/original/file-20180727-106527-11vhdj2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=473&fit=crop&dpr=1 754w, https://images.theconversation.com/files/229645/original/file-20180727-106527-11vhdj2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=473&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/229645/original/file-20180727-106527-11vhdj2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=473&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Aug. 1 is the earliest arrival of Earth Overshoot Day since humans started overusing the planet’s resources in the 1970s.</span>
<span class="attribution"><a class="source" href="https://www.overshootday.org/">Global Footprint Network</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>As an ecological economist and <a href="https://scholar.google.com/citations?user=fCsfSRkAAAAJ&hl=en">scholar</a> of sustainability, I am particularly interested in metrics and indicators that can help us understand human uses of Earth’s ecosystems. Better measurements of the impacts of human activities can help identify ways to sustain both human well-being and natural resources. </p>
<p>Earth Overshoot Day is a compelling concept and has raised awareness of the growing impact of human activities on the planet. Unfortunately, the methodology used to calculate it and the ecological footprint on which it is based is conceptually flawed and practically unusable in any science or policy context. In my view, the ecological footprint ultimately does not measure overuse of natural resources – and it may very well underestimate it.</p>
<h2>Rising demands, finite resources</h2>
<p>The Global Footprint Network estimates when Earth Overshoot Day will arrive based on its <a href="https://www.footprintnetwork.org/resources/data/">National Footprint Accounts</a>. These include extensive data sets that the organization uses to calculate two overarching indicators: </p>
<ul>
<li><p>The ecological footprint, perhaps the most commonly used metric of the environmental impacts of human resource use. Each country’s ecological footprint is an estimate of the biological resources required to meet its population’s consumption demands and absorb its carbon emissions. </p></li>
<li><p>National biocapacity, which is an estimate of how well each country’s ecosystems can produce the natural resources consumed by humans and absorb the waste and pollution that humans generate. </p></li>
</ul>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/_T5M3MiPfW4?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">The Global Footprint Network’s National Footprint Accounts compare countries’ annual demand for goods and services to the resources they produce.</span></figcaption>
</figure>
<p>Both of these measures are expressed in global hectares. One hectare is equal to 10,000 square meters, or about 2.47 acres. </p>
<h2>Going into overshoot</h2>
<p>To estimate when Earth Overshoot Day will arrive, the Global Footprint Network calculates the number of days in a given year for which Earth has enough biocapacity to provide for humans’ total ecological footprint. The rest of the year represents “global overshoot.” </p>
<p>When the footprint of consumption worldwide exceeds biocapacity, the authors assert that humans are exceeding the regenerative capacity of Earth’s ecosystems. This year, they estimate that humans are using natural resources 1.7 times faster than ecosystems can regenerate – or, put another way, consuming 1.7 Earths.</p>
<p>As an example, the ecological footprint for France is 4.7 global hectares per person, and global biocapacity is 1.7 hectares per person. Therefore, it would take (4.7/ 1.7 =) 2.8 Earths if everyone lived like the French.</p>
<p>France’s Overshoot Day would be estimated as (365 x (1.7/ 4.7)) = 130, or the 130th day of the year, which is May 5 based on <a href="http://data.footprintnetwork.org/#/compareCountries">2014 data</a>. The United States reached overshoot even earlier, on March 15.</p>
<h2>What to count?</h2>
<p>However, there are some fundamental and misleading shortcomings in these calculations. In a 2013 <a href="https://doi.org/10.1371/journal.pbio.1001700">paper</a>, six authors from academia, <a href="https://www.nature.org/">The Nature Conservancy</a> and the California-based <a href="https://thebreakthrough.org/about">Breakthrough Institute</a> analyzed how the Ecological Footprint falls short. In their view, it primarily measures humans’ carbon footprint but does not address other key impacts.</p>
<p>To calculate ecological footprints, the Global Footprint Network estimates the supply and demand of renewable biological resources across six land use types: forests, fishing grounds, croplands, grazing lands, developed lands and the area of forest required to offset human carbon emissions – that is, the carbon footprint. According to the network’s own analysis, each of these land use types is nearly in balance or in surplus, except for the carbon footprint. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/229650/original/file-20180727-106527-110bkma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/229650/original/file-20180727-106527-110bkma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/229650/original/file-20180727-106527-110bkma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/229650/original/file-20180727-106527-110bkma.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/229650/original/file-20180727-106527-110bkma.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/229650/original/file-20180727-106527-110bkma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/229650/original/file-20180727-106527-110bkma.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/229650/original/file-20180727-106527-110bkma.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Conventional tillage leaves fields in South Dakota vulnerable to erosion. Impacts like this are not captured in footprint calculations that focus on quantifying resources.</span>
<span class="attribution"><a class="source" href="https://flic.kr/p/oaBaKH">USDA NRCS South Dakota</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>The two key categories for producing food – cropland and grazing land – are defined in such a way that they can never be in deficit. And the analysis does not reflect environmental consequences of human use of these lands, such as soil erosion, nutrient runoff or overuse of water. It measures only land area.</p>
<p>For example, the ecological footprint for Indonesia is 1.61 global hectares per person, which is among the lowest 30 percent of all countries. But according to a 2014 <a href="https://doi.org/10.1038/nclimate2277">study</a>, Indonesia has the highest deforestation rate in the world.</p>
<p>Furthermore, the footprint calculation does not consider whether stocks of natural resources are decreasing or increasing as a result of human consumption. This question is critical for understanding ecological impacts. </p>
<p>These national ecological footprint calculations also conflate sustainability with self-sufficiency. They assume that every nation should produce all of the resources it consumes, even though it might be less expensive for countries to import some goods than to produce them at home. </p>
<p>As an example, the network lists Canada as an <a href="http://data.footprintnetwork.org/#/">“ecological creditor”</a> whose biocapacity exceeds its population’s ecological footprint. However, Canada is <a href="https://www.eia.gov/beta/international/">among the top 10 oil-producing countries in the world</a>, and exports much of that oil for foreign consumption. Most of it goes to the United States, an “ecological debtor” that consumes more resources than it produces. </p>
<p>Thinking purely in terms of generic “resources,” everyone is better off when debtor countries can import resources from nations with supplies to spare. There are real and important environmental impacts associated with producing and consuming oil, but the network’s calculations do not address them. Nor do they reflect the decline in natural capital from extracting a nonrenewable resource.</p>
<h2>Measuring sustainability</h2>
<p>The Global Footprint Network asserts that “You can’t manage what you can’t measure,” but it may be impossible to create a single metric that can capture all human impacts on the environment. Earth Overshoot Day highlights unsustainable uses of natural resources, but we need scientifically robust ecological indicators to inform environmental policy, and a broader understanding of ecological risks.</p>
<p>Better measurements of sustainability should reflect changes in our supplies of natural capital, include estimates of uncertainty and incorporate multiple pathways to reducing carbon footprints. The best tool for measuring human impacts on the planet may be a dashboard of environmental indicators, not a footprint.</p><img src="https://counter.theconversation.com/content/100705/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert B. Richardson does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>August 1, 2018 is ‘Earth Overshoot Day,’ a date coined by the nonprofit Global Footprint Network to publicize overuse of Earth’s resources. But their estimates actually understate the problem.Robert B. Richardson, Associate Professor of Sustainable Development, Michigan State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/948052018-07-24T10:28:05Z2018-07-24T10:28:05ZWhat’s the value of a clean beach? Here’s how economists do the numbers<figure><img src="https://images.theconversation.com/files/228616/original/file-20180720-142438-1k3g67t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">How much would you pay to make this disappear?</span> <span class="attribution"><a class="source" href="https://flic.kr/p/bwNakJ">Emilian Robert Vicol</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Millions of Americans head outdoors in the summer, whether for a day at a nearby lake or a monthlong road trip. For <a href="https://doi.org/10.1093/reep/rew019">environmental economists like me</a>, decisions by vacationers and outdoor recreators offer clues to a challenging puzzle: estimating what environmental resources are worth.</p>
<p>In 1981 President Ronald Reagan issued an <a href="https://www.archives.gov/federal-register/codification/executive-order/12291.html">executive order</a> that required federal agencies to weigh the costs and benefits of proposed major new regulations, and in most cases to adopt them only if the benefits to society outweighed the costs. Reagan’s order was intended to promote environmental improvements without overburdening economic growth.</p>
<p>Cost-benefit analysis has been so successful as a tool for policy analysis that <a href="https://theconversation.com/what-trump-misses-about-regulations-they-produce-benefits-as-well-as-costs-72470">every administration since Reagan has endorsed using it</a>. However, it requires measuring benefits that are not “priced” in typical markets. Fortunately, putting a price on non-market environmental outcomes, such as safer drinking water and fewer deaths from exposure to dirty air, has proved to be possible, and highly valuable. These estimates help to make the case for actions such as cleaning up beaches and protecting scenic areas.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/228618/original/file-20180720-142423-bcx24m.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/228618/original/file-20180720-142423-bcx24m.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/228618/original/file-20180720-142423-bcx24m.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=190&fit=crop&dpr=1 600w, https://images.theconversation.com/files/228618/original/file-20180720-142423-bcx24m.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=190&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/228618/original/file-20180720-142423-bcx24m.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=190&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/228618/original/file-20180720-142423-bcx24m.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=239&fit=crop&dpr=1 754w, https://images.theconversation.com/files/228618/original/file-20180720-142423-bcx24m.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=239&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/228618/original/file-20180720-142423-bcx24m.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=239&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Studies by the EPA have calculated that the benefits of avoided deaths and illnesses resulting from the Clean Act far outweigh the costs to society of complying with the law.</span>
<span class="attribution"><a class="source" href="https://www.epa.gov/transportation-air-pollution-and-climate-change/accomplishments-and-success-air-pollution-transportation">EPA</a></span>
</figcaption>
</figure>
<h2>What’s it worth to you?</h2>
<p>According to a preliminary estimate from the U.S. Bureau of Economic Analysis, outdoor recreation <a href="https://www.bea.gov/outdoor-recreation/">adds US$373 billion to the U.S. economy yearly</a>. That’s 2% of our annual gross domestic product – more than agriculture, mining or utilities, and approaching the <a href="https://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=51&isuri=1&5114=a&5102=1">economic contribution of national defense</a>.</p>
<p>Most policymakers and local communities measure the economic value of outdoor recreation through estimates like this, which calculate how much money it adds to local economies through direct expenditures. For example, vacationers rent hotel rooms, and their spending pays employee salaries and funds local investments through hotel taxes. Visitors to national parks pay entrance fees for park upkeep, and augment local economies through employee wages and other expenditures on food and services around the park. </p>
<p>But recreation decisions also reveal the value that people place on the environment itself. Outdoor destinations provide services, such as opportunities to swim or hike in unspoiled settings. If high levels of <a href="https://ohiowatersheds.osu.edu/node/1530">harmful bacteria</a> close a beach I was planning to visit, I may choose to drive a longer distance to a beach with clean water. By quantifying such increases in time and out-of-pocket expenditures, economists can measure people’s willingness to pay for changes in environmental quality.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/228649/original/file-20180720-142423-178939m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/228649/original/file-20180720-142423-178939m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/228649/original/file-20180720-142423-178939m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/228649/original/file-20180720-142423-178939m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/228649/original/file-20180720-142423-178939m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/228649/original/file-20180720-142423-178939m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/228649/original/file-20180720-142423-178939m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/228649/original/file-20180720-142423-178939m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Travelers’ willingness to spend time and money visiting remote attractions like Yellowstone National Park in Wyoming help economists estimate how the public values those places.</span>
<span class="attribution"><a class="source" href="https://flic.kr/p/Ye6Bi5">NPS/Jacob W. Frank</a></span>
</figcaption>
</figure>
<h2>Funding beach cleanups</h2>
<p>In one recent study, I worked with other researchers to estimate increased travel and time expenditures that people incurred to avoid <a href="https://doi.org/10.1086/697152">trash and debris on 31 Southern California beaches</a>. No one wants to go to a beach littered with hypodermic needles, plastic bottles and discarded fishing nets. But cleaning up marine debris is expensive, and it is hard for communities to recover the costs, particularly for public beaches with open access. Understanding the value of cleaner beaches can help build support for funding trash collection.</p>
<p>To measure the amount of debris, we hired workers to walk the beaches tallying quantities of trash. Then we surveyed Southern California residents about how often and where they went to the beach, which enabled us to correlate numbers of visitors at each beach with quantities of debris. Finally, using travel time and expenses for each visitor to visit each beach, we modeled the relationship between where they chose to go to the beach, how much they spent to get there, and the cleanliness of the beach.</p>
<p>Using this model, we found that visitors to these beaches would be willing to incur $12.91 in additional costs per trip if each of the beaches had 25 percent less debris. This translated into a total willingness to pay $29.5 million for action to reduce marine debris by 25 percent on these beaches.</p>
<h2>Reducing harmful algal blooms in Lake Erie</h2>
<p>Trash on beaches is mainly an aesthetic nuisance, but some resource problems are more severe. For example, warm weather often triggers <a href="https://theconversation.com/nutrient-pollution-voluntary-steps-are-failing-to-shrink-algae-blooms-and-dead-zones-81249">harmful algal blooms in Lake Erie’s western basin</a>. These outbreaks, which are caused by agricultural and urban phosphorous pollution, contain freshwater toxins that are dangerous to humans and animals. They can trigger beach closures, and sometimes even drinking water bans. </p>
<p>Using similar techniques to the California study, I worked with another group of economists to estimate the <a href="http://ageconsearch.umn.edu/record/274026">economic value of reducing outbreaks of harmful algal blooms in Lake Erie</a>. To model the relationship between recreation and water quality, we combined satellite data on harmful algal outbreaks in the lake in the summer of 2016 with visit patterns from a survey of Lake Erie visitors. Once again, we used travel time to each visited site and out-of-pocket expenditures to get there to represent the price of a trip. Then we correlated the price of a trip with the location of the visit and the presence of harmful algal blooms. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/228648/original/file-20180720-142423-1gblq0a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/228648/original/file-20180720-142423-1gblq0a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/228648/original/file-20180720-142423-1gblq0a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/228648/original/file-20180720-142423-1gblq0a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/228648/original/file-20180720-142423-1gblq0a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/228648/original/file-20180720-142423-1gblq0a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/228648/original/file-20180720-142423-1gblq0a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/228648/original/file-20180720-142423-1gblq0a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Algal toxin warning sign on an empty Maumee Bay State Park public beach on Lake Erie in Oregon, Ohio, Sept. 15, 2017.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Awash-In-Algae/6c035746838c4d028d19c0bbf12e0915/9/0">AP Photo/Paul Sancya</a></span>
</figcaption>
</figure>
<p>Our results showed that reducing these outbreaks through a 40 percent reduction in phosphorous runoff to the Lake Erie Basin would save swimmers, boaters and fishermen $800,000 to $970,000 per year by reducing the need for them to travel extra distance to avoid algal blooms. </p>
<p>In spring 2018, Ohio <a href="https://www.cbsnews.com/news/toxic-algae-leads-ohio-to-designate-western-lake-erie-as-impaired/">declared the western Lake Erie watershed to be “impaired”</a> by algal blooms, meaning it does not meet federal water quality standards. Our study provides one measurement of Ohio residents’ willingness to pay for a cleaner lake.</p>
<h2>Avoiding a major oil spill</h2>
<p>People can choose different destinations to avoid dirty beaches or algae outbreaks. But in the case of large-scale environmental disasters, such as the BP Deepwater Horizon oil spill in the Gulf of Mexico in 2010, vacationers are more likely to cancel their trips altogether. </p>
<p>In a study using survey data on canceled vacation trips to Northwest Florida in the year following the BP oil spill, I worked with other economists to estimate the <a href="https://doi.org/10.1086/697560">decrease in economic value to Northwest Florida coastal towns</a>. We found that the spill caused a 9 percent drop in trips to Northwest Florida beaches, causing total economic losses of $252 million to $332 million across the Florida panhandle. Those losses represent decisions to spend vacation time and money in places where there was less risk of encountering polluted beaches.</p>
<p>The Gulf coast stretches from western Florida to Texas and has numerous beaches and fishing towns, so this sum is probably just a small fraction of economic harm caused by the spill due to canceled travel. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/KywA97PeEWs?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Jacksonville, Florida, on the Atlantic coast benefited after the BP spill as travelers avoided the Gulf coast.</span></figcaption>
</figure>
<h2>The value of pricing nature</h2>
<p>Contrary to some environmentalists’ fears, putting a price on natural resources has encouraged decision-makers to recognize that natural capital is finite. Before, it was easy to assume that they were free to exploit. Now economic valuation research can help decision makers answer questions such as <a href="http://dx.doi.org/10.1126/science.aam8124">how much damage the BP spill did to natural resources</a>, and <a href="http://www.nber.org/papers/w21383">whether the benefits of the EPA’s Acid Rain Program exceeded the costs</a>. Assigning dollar values to natural resources makes it possible to use the power of markets to design policies and regulations that benefit all.</p><img src="https://counter.theconversation.com/content/94805/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Timothy Haab receives funding from the National Oceanic and Atmospheric Administration, and the University of Florida. </span></em></p>What would you pay to keep trash off your favorite beach, or pollution away from a national park? Economists can tease these values out of our travel choices and use the numbers to help make policy.Timothy Haab, Professor of Environmental Economics, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/967572018-05-21T10:46:09Z2018-05-21T10:46:09ZWhy California’s new rooftop mandate isn’t good enough for some solar power enthusiasts<figure><img src="https://images.theconversation.com/files/219506/original/file-20180517-26263-etqx3i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Solar panels being installed in new housing under construction in Sacramento, Calif. </span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/California-Solar-Panels/7cfad931249a4daaa808f0b103a2ff1a/1/0">AP Photo/Rich Pedroncelli</a></span></figcaption></figure><p>More <a href="http://www.sacbee.com/latest-news/article210793889.html">California rooftops will soon sport solar panels</a>, partly due to a new state mandate requiring them for all new houses and low-rise residential buildings by 2020.</p>
<p>This rule immediately sparked <a href="https://www.bloomberg.com/view/articles/2018-05-14/california-s-mandate-puts-solar-up-for-grabs">lively debates</a>. Even experts who generally advocate for solar energy expressed <a href="https://www.bloomberg.com/news/articles/2018-05-09/think-solar-is-upending-california-s-power-grid-now-just-wait">skepticism</a> that it was actually a good idea. </p>
<p>As an <a href="https://scholar.google.com/citations?user=TxYfplkAAAAJ&hl=en">environmental economist</a> who studies the design of environmental policies, I believe that doing something about climate change is important, but I don’t consider this new solar mandate to be the best way to achieve that goal. I’m also concerned that it could exacerbate problems with California’s housing market.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"996463514205261825"}"></div></p>
<h2>More than two sides</h2>
<p>You might expect the debate over this policy, which became official when the California Energy Commission <a href="http://www.energy.ca.gov/releases/2018_releases/2018-05-09_building_standards_adopted_nr.html">unanimously voted</a> in favor of it on May 8, to pit two well-defined camps against each other.</p>
<p>Environmentalists who prize fighting climate change might love it due to a presumption that increasing the <a href="https://qz.com/1224296/california-is-taking-a-cooling-off-period-after-generating-too-much-energy-from-the-sun/">share of power California derives</a> from <a href="https://theconversation.com/the-state-of-the-us-solar-industry-5-questions-answered-90578">solar panels</a> will <a href="https://www.carbonbrief.org/solar-wind-nuclear-amazingly-low-carbon-footprints">reduce greenhouse gas emissions</a> by cutting demand for natural gas and coal.</p>
<p>On the other hand, those who <a href="https://www.mercurynews.com/2017/07/16/cap-and-trade-opponent-climate-change-gives-democrats-an-excuse-to-raise-taxes/">question whether the costs of addressing climate change are worth it</a> might hate the solar mandate, since they either see no benefits or think the benefits aren’t worth the costs.</p>
<p>But there are more than two sides.</p>
<h2>Environmental economics 101</h2>
<p>Many renewable energy experts, including economists like me, want governments to do something to address climate change but question the mandate.</p>
<p>University of California, Berkeley economist <a href="http://faculty.haas.berkeley.edu/borenste/">Severin Borenstein</a> summed up this take in his <a href="https://twitter.com/BorensteinS/status/994242782100271104">open letter</a> to the California Energy Commission opposing the rule. University of California, Davis economist <a href="http://www.sacbee.com/opinion/op-ed/soapbox/article210886434.html">James Bushnell</a> also <a href="https://energyathaas.wordpress.com/2018/05/14/lessons-in-regulatory-hubris/">opposes the mandate</a> for similar reasons. </p>
<p>Above all, what we economists call “<a href="https://link.springer.com/chapter/10.1007/978-3-642-24514-5_9">command-and-control policies</a>” like this mandate – inflexible requirements that apply to everyone – often don’t make sense. For example, going solar is less economical in some cases. Even in sunny California, builders can construct housing in shady areas, and not all homeowners use enough electricity for the investment to pay off before they move away. </p>
<p>The mandate does have <a href="https://www.cnbc.com/2018/05/09/california-approves-plan-to-mandate-solar-panels-on-new-homes.html">some exemptions</a> tied to shade and available roof space, but there could property owners subjected to the requirement to <a href="https://www.greentechmedia.com/articles/read/solar-mandate-all-new-california-homes#gs.Ob8roHI">own or lease solar panels</a> who might consider it unreasonable.</p>
<p>We tend to think that “<a href="https://www.epa.gov/environmental-economics/economic-incentives">market-based policies</a>” would work better. By relying on incentives instead of requirements, people get to decide for themselves what to do.</p>
<p>Good examples of these policies include a tax on pollution, like <a href="https://www2.gov.bc.ca/gov/content/environment/climate-change/planning-and-action/carbon-tax">British Columbia’s carbon tax</a>, or a cap-and-trade market, like the European Union’s <a href="https://ec.europa.eu/clima/policies/ets_en">Emissions Trading System</a>. Instead of restricting the right to pollute, these approaches make people and businesses pay to pollute, either through taxation or by buying mandatory permits.</p>
<p>The flexibility of market-based policies can make meeting pollution reduction goals cost-effective. When people – or businesses – have to factor the costs of pollution into their decision-making, they have a financial incentive to pollute less and will find ways to do so. By reducing pollution as cheaply as possible, more money is left over to spend on other pressing needs like housing, health care and education.</p>
<p>This advantage is not merely theoretical. By many accounts, market-based policies have successfully worked according to theory, including the U.S. <a href="https://voxeu.org/article/lessons-climate-policy-us-sulphur-dioxide-cap-and-trade-programme">sulfur</a> <a href="https://www.sciencedirect.com/science/article/pii/S0301479705002124">dioxide</a> trading program and the EU’s <a href="https://www.edf.org/blog/2015/06/30/europes-emissions-trading-system-turns-10-success-worthy-reflection">carbon trading</a> program. </p>
<p><a href="http://www.latimes.com/business/hiltzik/la-fi-hiltzik-captrade-20180111-story.html">California itself has a cap-and-trade market</a>. I believe that expanding and improving it would cut carbon emissions more cost-effectively than the solar mandate would. </p>
<p>Many economists also fear that the mandate will worsen <a href="https://www.npr.org/2018/04/16/601970552/californias-housing-crisis-working-but-on-the-brink-of-homelessness">California’s housing unaffordability</a>. This crisis has many causes, such as <a href="https://www.aeaweb.org/articles?id=10.1257/jep.32.1.59">restrictive zoning regulations that curtail construction</a>. But the solar-panel requirement, which could increase the cost of a new home by <a href="https://www.sfchronicle.com/business/article/Solar-panels-on-homes-soon-could-be-required-in-12894398.php">more than $10,000</a>, probably won’t help, even though supporters of the policy argue that the solar panels will <a href="http://www.bbc.com/news/world-us-canada-44059865">pay for themselves</a> in terms of lower monthly electricity costs.</p>
<p><iframe id="UZieL" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/UZieL/3/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>The solar mandate’s fans</h2>
<p>The solar mandate’s defenders, including Gov. Jerry Brown and Sierra Club leader <a href="https://www.sltrib.com/news/nation-world/2018/05/10/california-becomes-first-state-to-mandate-solar-on-new-homes/">Rachel Golden</a>, make <a href="https://www.vox.com/energy-and-environment/2018/5/15/17351236/california-rooftop-solar-pv-panels-mandate-energy-experts">several arguments</a> – two of which I find credible.</p>
<p>The first is what I’d call the “<a href="https://www.youtube.com/watch?v=TlIUXvAdpcw">Panglossian</a>” argument, after the character in “Candide,” Voltaire’s 18th-century classic satire. In what Voltaire would call “the best of all possible worlds,” <a href="http://channel.nationalgeographic.com/before-the-flood/articles/whats-a-carbon-tax-and-how-does-it-reduce-emissions/">taxing carbon</a> would make perfect sense.</p>
<p>But this is a world riddled with <a href="https://www.sciencedirect.com/science/article/pii/S0301421514000901">political obstacles</a> that make enacting almost any climate policy next to impossible. If a big American state can enact an imperfect law like this mandate that might do some good, <a href="https://twitter.com/CostaSamaras/status/994596578252984320">then it should go for it</a>.</p>
<p>The other argument I find reasonable is that by drumming up more demand, the solar mandate will expand the solar panel market – thereby driving solar costs down, perhaps more quickly than a carbon tax would. <a href="https://link.springer.com/article/10.1023/A:1015519401088">There’s some</a> <a href="https://scholar.harvard.edu/files/gerarden/files/gerarden_jmp.pdf">evidence</a> supporting the theory that these mandates can spur innovation in renewable electricity technologies.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"996494145987358720"}"></div></p>
<p>If the mandate works out, it might address <a href="https://www.sciencedirect.com/science/article/pii/S0921800905000303">two issues</a> at once: shrinking California’s carbon footprint and bolstering technological progress in the solar industry.</p>
<p>To be sure, the cost of residential solar panels has plummeted in recent years, although generating solar energy through rooftop panels remains <a href="https://theconversation.com/when-will-rooftop-solar-be-cheaper-than-the-grid-heres-a-map-54789">less cost-effective</a> than power from utility-scale solar farms.</p>
<h2>A practical policy</h2>
<p>After mulling all the various arguments made by these different camps, I don’t think that whether California’s rooftop solar mandate is the perfect policy for the climate or the state’s homebuyers is the question.</p>
<p>The answer to that question is a resounding no – but that is beside the point because no policy is perfect. The key question is whether this policy – given its imperfections and given the difficulty in passing more cost-effective policies – is a winner overall. That question is harder to answer.</p>
<p>Ultimately, I believe the mandate will yield some environmental benefits, though they could be more cost-effectively achieved through other means.</p><img src="https://counter.theconversation.com/content/96757/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Garth Heutel receives funding from the Alliance for Market Solutions. </span></em></p>Environmentalists and climate hawks are cheering, but many experts aren’t excited about the state making rooftop solar panels mandatory on most new homes beginning in 2020.Garth Heutel, Associate Professor of Economics, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/800612017-06-29T01:13:09Z2017-06-29T01:13:09ZWhat’s the economic value of the Great Barrier Reef? It’s priceless<p>Deloitte Access Economics <a href="https://www2.deloitte.com/au/en/pages/economics/articles/great-barrier-reef.html">has valued</a> the Great Barrier Reef at A$56 billion, with an economic contribution of A$6.4 billion per year. Yet this figure grossly underestimates the value of the reef, as it mainly focuses on tourism and the reef’s role as an Australian icon. </p>
<p>When you include aspects of the reef that the report excludes, such as the ecosystem services provided by coral reefs, you find that the reef is priceless.</p>
<p>Putting a price on the Great Barrier Reef buys into the notion that a cost-benefit analysis is the right way to make decisions on policies and projects that may affect the reef. For example, the environmental cost of the extension to the <a href="http://www.abc.net.au/news/2015-12-22/massive-abbot-point-coal-port-expansion-gets-federal-approval/7047380">Abbot Point coal terminal</a> can be compared to any economic benefits.</p>
<p>But as the reef is both priceless and irreplaceable, this is the wrong approach. Instead, the <a href="http://unesdoc.unesco.org/images/0013/001395/139578e.pdf">precautionary principle</a> should be used to make decisions regarding the reef. Policies and projects that may damage the reef cannot go ahead. </p>
<h2>How do you value the Great Barrier Reef?</h2>
<p>The Deloitte report uses what’s known as a “contingent valuation” approach. This is a survey-based methodology, and is commonly used to measure the value of non-market environmental assets such as <a href="http://www.appstate.edu/%7Ewhiteheadjc/eco3620/projects/mocktrial/pdf/loomisandwhite-ee-1996.pdf">endangered species</a> and <a href="http://www.jstor.org/stable/pdf/2663496.pdf">national parks</a> – as well as to calculate the impact of events such as <a href="http://econweb.ucsd.edu/%7Ercarson/papers/AlaskaReport.pdf">oil spills</a>. </p>
<p>In valuing the reef, surveys were used to elicit people’s willingness to pay for it, such as through a tax or levy. This was found to be A$67.60 per person per year. The report also uses the travel-cost method, which estimates willingness to pay for the Great Barrier Reef, based on the time and money that people spend to visit it. Again, this is commonly used in environmental economics to value national parks and the recreational value of local lakes.</p>
<p>Of course, all methods of valuing environmental assets have limitations. For example, it is difficult to make sure that respondents are stating realistic amounts in their willingness to pay. Respondents may act strategically if they think they really will be slugged with a Great Barrier Reef levy. They may conflate this environmental issue with all environmental issues. </p>
<p>But more importantly, the methodology in the report leaves out the most important non-market value that the reef provides, which are called <a href="http://www.environment.gov.au/biodiversity/publications/ecosystem-services-key-concepts-and-applications">ecosystem services</a>. For example, coral reefs provide storm protection and erosion protection, and they are the nurseries for 25% of all marine animals which themselves have commercial and existence value. </p>
<p>The Deloitte report even cites (but does not reference) a <a href="http://www.sciencedirect.com/science/article/pii/S0959378014000685">2014 study</a> that values the ecosystem services provided by coral reefs at US$352,249 per hectare per year. The Great Barrier Reef Marine Park <a href="https://www.npsr.qld.gov.au/world-heritage-areas/great_barrier_reef.html">covers 35 million hectares</a> with 2,900 individual reefs of varying sizes. This means the ecosystem services it provides are worth trillions of dollars per year. </p>
<p>That is, it is essentially priceless. </p>
<h2>The problem with putting a value on the Reef</h2>
<p>Valuing the environment at all is <a href="https://www.theguardian.com/environment/georgemonbiot/2014/jul/24/price-nature-neoliberal-capital-road-ruin">contentious</a> in <a href="http://www.sciencedirect.com/science/article/pii/S0095069684710084">economics</a>. Valuation is performed so that all impacts from, say, a new development, can be expressed in a common metric – in this case dollars. This allows a cost-benefit analysis to be performed. </p>
<p>But putting a price on the Great Barrier Reef hides the fact that it is irreplaceable, and as such its value is not <a href="http://le.uwpress.org/content/82/2/141.short">commensurate</a> with the values of other assets. For instance, using Deloitte’s figure, The Australian newspaper <a href="http://www.theaustralian.com.au/national-affairs/great-barrier-reef-valued-at-more-than-12-opera-houses-study/news-story/33e7f7420e2b41bf9efd6a4aa6e3351b">compared the reef</a> to the value of 12 Sydney Opera Houses. But while they are both icons, the Opera House can be rebuilt. The Great Barrier Reef cannot. Any loss is irreversible. </p>
<p>When environmental assets are irreplaceable and their loss irreversible, a more appropriate decision-making framework is the <a href="http://unesdoc.unesco.org/images/0013/001395/139578e.pdf">Precautionary Principle</a>. </p>
<p>The Precautionary Principle suggests that when there is uncertainty regarding the impacts of a new development on an environmental asset, decision makers should be cautious and minimise the maximum loss. For example, if it is even remotely possible that the extension to the Abbot Point coal terminal could lead to <a href="http://www.abc.net.au/news/2015-12-22/massive-abbot-point-coal-port-expansion-gets-federal-approval/7047380">massive destruction</a> of the reef, then precaution suggests that it shouldn’t go ahead. </p>
<p>Assigning a value to the reef might still be appropriate under the Precautionary Principle, to estimate the maximum loss. But it would require the pricing of all values and especially ecosystem services. </p>
<p>While the Precautionary Principle has been <a href="http://www.public.iastate.edu/%7Ejwcwolf/Papers/Gardiner%20on%20Precautionary%20Principle.pdf">much maligned</a> due to its perceived bias against development, it is a key element of the definition of Ecologically Sustainable Development in Australia’s <a href="https://www.legislation.gov.au/Details/C2012C00801">Environment Protection and Biodiversity Conservation Act 1999</a>.</p>
<p>For a priceless asset like the Great Barrier Reef, it is perhaps better to leave it as “priceless” and to act accordingly. After all, if the Precautionary Principle is ever going to be used when assessing Ecologically Sustainable Development, in contrast with cost-benefit analysis and valuations, it is surely for our main environmental icon. </p>
<p>Ultimately, the protection and prioritisation of the Great Barrier Reef is a political issue that requires political will, and not one that can be solved by pricing and economics.</p><img src="https://counter.theconversation.com/content/80061/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Neil Perry does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A full valuation of the Great Barrier Reef leads to a number so high it is essentially not worth considering in economic terms.Neil Perry, Research Lecturer, Western Sydney UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/708822017-03-13T00:42:19Z2017-03-13T00:42:19ZCurbing climate change has a dollar value — here’s how and why we measure it<figure><img src="https://images.theconversation.com/files/160050/original/image-20170308-24179-ppfhn4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Coal train in Missouri. Assigning a social cost to carbon emissions puts a price on activities that generate them, such as burning fossil fuels.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/rsgranne/179321532/in/photolist-gR53y-f8Ypyj-pVYvmE-4up59H-qQDayK-bRHmsF-byF4Bm-nsMDPS-bHMN9X-gR5bD-bHMMVc-8K5CT-8iRwGq-ekH6Uj-aYY96T-w6VEB-fiZreP-8BZktF-n6k9mM-7ytT3e-dL1Q3v-fQykZw-RE3m4p-6u68ov-r9xyN8-nPieke-9eGaG6-97iG8w-eiGUvW-eXbVPD-9Cdamr-i6GRir-AgMGq-7yydPs-6MFmGv-7YqFTT-PFHiL-eXcsnB-9quDVF-bomDqN-2y36HA-dL1WEv-6p2ko8-bt8h6R-492zzn-5UCpT8-RFezrY-kQA2vR-SfW9fa-bC5Tq7">Scott Granneman/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>President Trump is expected to issue an executive order soon to reverse Obama-era rules to cut carbon pollution, including a moratorium on leasing public lands for coal mining and a plan to reduce carbon emissions from power plants.</p>
<p>Trump and his appointees argue that these steps will bring coal miners’ jobs back (although coal industry job losses reflect <a href="https://theconversation.com/king-coal-is-dethroned-in-the-us-and-thats-good-news-for-the-environment-63910">competition from cheap natural gas</a>, not regulations that have yet to take effect). But they ignore the fact that mitigating climate change will produce large economic gains. </p>
<p>While burning fossil fuels produces benefits, such as powering the electric grid and fueling cars, it also generates widespread costs to society – including damages from climate change that affect people around the world now and in the future. Public policies that reduce carbon pollution deliver benefits by avoiding these damages. </p>
<p>Since the Reagan administration, federal agencies have been <a href="https://www.archives.gov/federal-register/codification/executive-order/12291.html">required</a> to enact only regulations whose potential benefits to society justify or outweigh their potential costs. To quantify benefits from acting to curb climate change, the U.S. government developed a formal measure in 2009 of the value of reducing carbon pollution, which is referred to as the social cost of carbon, or SCC. Currently, federal agencies use an SCC figure of about US$40 per ton in today’s dollars. </p>
<p>Now the <a href="https://qz.com/901053/the-social-cost-of-carbon-the-most-important-number-youve-not-heard-of-could-soon-be-under-attack-by-climate-change-deniers-in-donald-trumps-administration/">Trump administration</a> and critics in <a href="https://www.washingtonpost.com/news/energy-environment/wp/2017/02/28/members-of-congress-met-to-discuss-the-costs-of-climate-change-they-ended-up-debating-its-existence/?utm_term=.780a03495de6">Congress</a> may reduce this figure or even stop using it. EPA Administrator Scott Pruitt’s recent comment that carbon dioxide is not “a primary contributor” to climate change suggests that Pruitt <a href="https://www.nytimes.com/2017/03/09/us/politics/epa-scott-pruitt-global-warming.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news&_r=0">may challenge the agency’s 2009 finding</a> that carbon emissions are pollutants and threaten human health.</p>
<p>As an economist for the White House, I was a member of the working group that developed the first government-wide <a href="https://obamawhitehouse.archives.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf">SCC estimate</a>. We can always improve our processes for estimating and using the SCC, but getting rid of it would be a mistake. A well-functioning democracy needs transparency about the economic benefits of investments driven by public policy – as well as the benefits we give up when we walk away from making these investments. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/160054/original/image-20170308-24177-pw85xk.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/160054/original/image-20170308-24177-pw85xk.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=457&fit=crop&dpr=1 600w, https://images.theconversation.com/files/160054/original/image-20170308-24177-pw85xk.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=457&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/160054/original/image-20170308-24177-pw85xk.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=457&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/160054/original/image-20170308-24177-pw85xk.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=574&fit=crop&dpr=1 754w, https://images.theconversation.com/files/160054/original/image-20170308-24177-pw85xk.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=574&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/160054/original/image-20170308-24177-pw85xk.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=574&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">As a result of human activities since the Industrial Revolution, carbon dioxide levels have increased to 400 parts per million, higher than any time in at least the last one million years.</span>
<span class="attribution"><a class="source" href="http://www.globalchange.gov/browse/multimedia/atmospheric-carbon-dioxide-levels">US Global Change Research Program</a></span>
</figcaption>
</figure>
<h2>The value of avoiding hurricanes and wildfires</h2>
<p>Scientists widely agree that carbon dioxide emissions, primarily from burning fossil fuels, <a href="https://www.epa.gov/sites/production/files/2016-08/documents/federal_register-epa-hq-oar-2009-0171-dec.15-09.pdf">pose significant risks to Earth’s climate</a>. Intuitively, it makes sense that reducing carbon emissions benefits society by reducing risks of flooding, wildfires, storms and other impacts associated with severe climate change. </p>
<p>We can estimate the benefits of many goods and services, from pop music to recreation, from the prices people pay for them in markets. But valuing environmental benefits is not so simple. Americans can’t go to the store and buy a stable climate. </p>
<p>Carbon pollution drives global warming that causes many different impacts on the natural and built environment and human health. Because carbon emissions have such broad and diverse impacts, scholars have developed models to characterize the economic benefits (or costs) of reducing them. </p>
<p>Current U.S. government practice draws from <a href="https://academic.oup.com/reep/article/7/1/23/1577964/Developing-a-Social-Cost-of-Carbon-for-US">three peer-reviewed integrated assessment models</a>. An integrated assessment model represents a chain of events, starting with economic activities that involve fossil fuel combustion. This generates carbon emissions, which contribute to climate change. </p>
<p>And climate change causes outcomes that can be measured in monetary terms. For example, rising carbon pollution will increase the likelihood of <a href="http://nca2014.globalchange.gov/report/sectors/agriculture">lower agricultural yields</a>, threaten public health through <a href="http://nca2014.globalchange.gov/highlights/report-findings/extreme-weather">heat stress</a> and damage infrastructure through <a href="http://nca2014.globalchange.gov/highlights/report-findings/extreme-weather">floods and intense storms</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/160052/original/image-20170308-24192-vexk8x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/160052/original/image-20170308-24192-vexk8x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/160052/original/image-20170308-24192-vexk8x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/160052/original/image-20170308-24192-vexk8x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/160052/original/image-20170308-24192-vexk8x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/160052/original/image-20170308-24192-vexk8x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/160052/original/image-20170308-24192-vexk8x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Flooding in Hoboken, New Jersey after Superstorm Sandy in 2012. Climate change is predicted to increase the frequency and severity of coastal storms.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/accarrino/8179663210">acarrino/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<h2>Thousands of scenarios</h2>
<p>The social cost of carbon represents the damages of one ton of carbon dioxide emitted into the air. To estimate it, economists run models that forecast varying levels of carbon dioxide emissions. They can then model and compare two forecasts – one with slightly higher emissions than the other. The difference in total climate change damages represents the social cost of carbon. </p>
<p>Carbon pollution can remain in the atmosphere for <a href="https://www.ipcc.ch/ipccreports/tar/wg1/016.htm">up to 200 years</a>, so these models are run over a century or more in order to account for long-term damages that carbon emissions impose on society. </p>
<p>SCC estimates are based on chains of events that include many uncertainties – for example, how many tons of carbon will be emitted in a given year, the amount of warming that will result, and how severely this warming will exacerbate risks like floods and heat waves. Since we cannot predict any single scenario with certainty, the U.S. government has modeled hundreds of thousands of different scenarios to produce its SCC estimates. </p>
<p>Some model scenarios, based on admittedly extreme assumptions, produce negative SCC estimates – that is, they find that carbon pollution is good for the planet. But the vast majority of scenarios show that carbon pollution is bad for the planet, and that on average, every ton of carbon dioxide emitted into the atmosphere imposes damages equal to about $40 in today’s dollars. </p>
<h2>Balancing costs and benefits of regulations</h2>
<p>The federal government began calculating a social cost of carbon after the U.S. Court of Appeals for the Ninth Circuit <a href="http://caselaw.findlaw.com/us-9th-circuit/1024716.html">ruled</a> in 2007 that the Department of Transportation had to account for climate benefits from its regulations to improve automobile fuel economy. Environmental groups and a dozen states challenged the regulations, in part because the Bush administration had valued the benefits of cutting carbon dioxide emissions at zero.</p>
<p>In response, the Obama administration created a working group in 2009 with officials from 12 agencies to develop the federal government’s first official SCC estimate. Our initial figure of $25 for <a href="https://obamawhitehouse.archives.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf">2010</a> was updated in <a href="https://obamawhitehouse.archives.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf">2013</a>, <a href="https://obamawhitehouse.archives.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf">2015</a> and <a href="https://obamawhitehouse.archives.gov/sites/default/files/omb/inforeg/scc_tsd_final_clean_8_26_16.pdf">2016</a>, reflecting updates in the underlying models. </p>
<p>Agencies have used these estimates in benefit-cost analyses for scores of federal regulations, including the Environmental Protection Agency’s <a href="https://www.epa.gov/sites/production/files/2015-08/documents/cpp-final-rule-ria.pdf">Clean Power Plan</a>, the Department of Transportation’s <a href="https://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/Phase-2-HD-Fuel-Efficiency-GHG-Final-RIA.pdf">medium and heavy-duty vehicle fuel economy standards</a>, and the Department of Energy’s <a href="https://www.regulations.gov/document?D=EERE-2008-BT-STD-0012-0133">minimum efficiency standard for refrigerators and freezers</a>. Some of these studies were required only by <a href="https://www.gpo.gov/fdsys/pkg/FR-2011-01-21/pdf/2011-1385.pdf">executive order</a>, but others were required by law. Unless the authorizing statutes are amended, the Trump administration will have to produce analyses accounting for carbon pollution reduction benefits if it wants to issue new regulations that can withstand legal challenges. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/160051/original/image-20170308-24204-1y5gvp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/160051/original/image-20170308-24204-1y5gvp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=386&fit=crop&dpr=1 600w, https://images.theconversation.com/files/160051/original/image-20170308-24204-1y5gvp3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=386&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/160051/original/image-20170308-24204-1y5gvp3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=386&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/160051/original/image-20170308-24204-1y5gvp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=485&fit=crop&dpr=1 754w, https://images.theconversation.com/files/160051/original/image-20170308-24204-1y5gvp3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=485&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/160051/original/image-20170308-24204-1y5gvp3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=485&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Fuel economy label for gasoline-powered vehicle. Federal agencies have have factored the social cost of carbon into regulations governing vehicle fuel economy and other issues.</span>
<span class="attribution"><a class="source" href="https://www.fueleconomy.gov/feg/Find.do?action=bt1">www.fueleconomy.gov</a></span>
</figcaption>
</figure>
<p>The Trump administration could continue to use SCC estimates in regulatory evaluations, but water them down. For example, some <a href="http://dx.doi.org/10.1126/science.351.6273.569-b">scholars</a> have called for focusing only on domestic benefits – as opposed to total global benefits – of reducing carbon pollution in the United States. Emitting a ton of carbon imposes damages in the United States and around the world, just as a ton emitted in Beijing imposes damages on the United States and other countries around the world. Considering only the domestic impacts of carbon pollution could lower the SCC by three-quarters. </p>
<p>But if the United States ignores the benefits of reducing carbon pollution that other countries enjoy, then those other countries may follow suit and consider only how cutting emissions will benefit them internally. This approach ignores the <a href="http://dx.doi.org/10.1126/science.1259774">strategic value</a> that serves as the primary motivation for <a href="http://www.belfercenter.org/sites/default/files/legacy/files/2016-10_paris-agreement-beyond_v4.pdf">countries to work together to combat climate change.</a> The world would achieve much greater emissions reductions and greater net economic benefits if countries implement policies based on the <a href="http://www.nber.org/papers/w22246">global social cost of carbon</a> instead of a domestic-only SCC.</p>
<p>As climate change science and economics continue to evolve, our tools for estimating benefits from reducing carbon pollution will need to <a href="http://dx.doi.org/http://science.sciencemag.org/content/346/6214/1189">evolve and improve</a>. In January the National Academies of Sciences published a <a href="https://www.nap.edu/catalog/24651/valuing-climate-damages-updating-estimation-of-the-social-cost-of">report</a> that lays out an extensive research agenda for improving the estimation and use of the social cost of carbon. </p>
<p>The federal government has used used benefit-cost analysis to calculate society’s bottom line from regulations for decades. So far, the Trump administration appears to be focused solely on costs – an approach that <a href="https://theconversation.com/what-trump-misses-about-regulations-they-produce-benefits-as-well-as-costs-72470">maximizes the corporate bottom line</a>, but leaves the public out of the equation.</p><img src="https://counter.theconversation.com/content/70882/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joseph Aldy is affiliated with Resources for the Future, the National Bureau of Economic Research, and the Center for Strategic and International Studies. </span></em></p>To weigh the economic impact of climate change policies, we need to estimate the social cost of carbon. An economist explains how it’s done and why the Trump administration shouldn’t end the practice.Joseph Aldy, Associate Professor of Public Policy, Harvard Kennedy SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/621042016-08-22T04:36:31Z2016-08-22T04:36:31ZNew Zealand is letting economics rule its environmental policies<figure><img src="https://images.theconversation.com/files/134894/original/image-20160822-30363-1a1dm3g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">New water policies could cause even more harm to the already damaged Tukituki River.</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File%3ATukituki_River_and_Te_Mata_Peak%2C_Hawkes_Bay%2C_New_Zealand%2C_12_May_2006_(145007872).jpg">Phillip Capper/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Balancing the environment with development is tricky. One way for policymakers to include the value of ecosystems in development is to set limits for pollution and other environmental impacts, known as environmental bottom lines (EBLs). These can be a helpful way of embedding into an economy the value of ecosystems. They also help protect <a href="http://www.stats.govt.nz/browse_for_stats/environment/environmental-economic-accounts.aspx">natural assets</a> in order to maintain a sustainable cash flow. </p>
<p>Unfortunately, bottom lines also risk developments meeting limits without actually helping the environment. Bottom lines form a significant part of environmental policy in New Zealand, in particular in the areas of freshwater and greenhouse gas emissions. </p>
<p>Bottom lines should not have as much influence in New Zealand policy as they do. So how can we make better policy that actually helps the environment? </p>
<h2>Setting a low bar</h2>
<p>The New Zealand government is <a href="http://www.mfe.govt.nz/publications/fresh-water/next-steps-fresh-water-consultation-document">reviewing</a> its <a href="http://www.mfe.govt.nz/fresh-water/freshwater-management-nps">National Policy Statement for Freshwater Management</a> and is emphasising the need to maximise an economic return on fresh water as a commodity. </p>
<p>In addition, the statement identifies various bottom lines for local councils (such as maximum acceptable concentrations of pollutants and/or minimum water quality attributes), as well as mechanisms to protect minimum flows. </p>
<p>The combination of listing bottom lines while looking for the best economic return can lead to perverse outcomes. For example, the proposed Hawke’s Bay <a href="http://www.hbrc.govt.nz/hawkes-bay/projects/ruataniwha-water-storage-scheme/">Ruataniwha Water Storage Scheme</a> would protect water supply for intensifying farming, but increases the risk of worsening the already ecologically crippled Tukituki River. </p>
<p>The bottom-line philosophy is so entrenched that environmental groups recently <a href="http://www.nzherald.co.nz/hawkes-bay-today/news/article.cfm?c_id=1503462&objectid=11283722">celebrated a ruling</a> that developers could not pollute a river so badly that it would kill off organisms. A bare minimum standard must be met, but it is not something we should aspire to celebrate.</p>
<p>On the other hand, <a href="https://www.horizons.govt.nz/publications-feedback/one-plan">many regional councils are trying to do better than this</a> by specifying goals for improving water quality in certain areas. The Rotorua Lakes and Lake Taupo are examples of central and local government working together to improve conditions.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/134910/original/image-20160822-18711-1sgq0wc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/134910/original/image-20160822-18711-1sgq0wc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/134910/original/image-20160822-18711-1sgq0wc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=448&fit=crop&dpr=1 600w, https://images.theconversation.com/files/134910/original/image-20160822-18711-1sgq0wc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=448&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/134910/original/image-20160822-18711-1sgq0wc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=448&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/134910/original/image-20160822-18711-1sgq0wc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=563&fit=crop&dpr=1 754w, https://images.theconversation.com/files/134910/original/image-20160822-18711-1sgq0wc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=563&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/134910/original/image-20160822-18711-1sgq0wc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=563&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Lake Taupo.</span>
<span class="attribution"><span class="source">Sids1/Wikimedia Commons</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>But without clear central government support, those councils that want to go beyond the bottom line and make more significant environmental improvements may end up <a href="http://www.stuff.co.nz/manawatu-standard/opinion/9220591/One-Plan-for-all">facing legal action</a> brought by those suffering real or imagined erosion of their property rights.</p>
<p>The same is true of greenhouse gases, particularly those related to transport development. The current <a href="http://www.tandfonline.com/doi/full/10.1080/14693062.2015.1052957">benefit-cost approach</a> to investment in roads is not assessed against national emission reduction targets. This leads (as one example) to <a href="https://www.nzta.govt.nz/roads-and-rail/state-highway-projects/roads-of-national-significance-rons/">nationally signficant road projects</a> being approved <a href="http://www.radionz.co.nz/news/national/305849/no-thought-given-to-pollution-in-new-road-plans-greens">without accounting for transport emissions increases</a>. </p>
<p>While better roads increase fuel efficiency and so lower emissions per vehicle, they also generate more car use, meaning a net increase in emissions. Road transport emissions have increased 72% <a href="http://www.mfe.govt.nz/climate-change/reporting-greenhouse-gas-emissions/nzs-greenhouse-gas-inventory">between 1990 and 2014</a>.</p>
<p>True, the government has <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealands-climate-change-target-our-contribution-new-international">voiced support</a> for electric cars and use of biofuels and also funded more public transport, walking and cycling, which will help reduce emissions. But overall the lack of joined-up thinking and a bottom-line approach – we will pollute, but only this much – protects economic growth rather than the environment.</p>
<p>While water quality and greenhouse emissions are less bad than they might have been with no policies at all, the bottom-line concept implies that ecosystems can be maintained at some measurable minimum acceptable standard, with the option of improvement when conditions allow. </p>
<p>Unless matched with clear timelines and goals to improve ecological health, the result is a continued trading down of ecosystem assets in order to boost economic ones.</p>
<h2>Positive developments</h2>
<p>An alternative to the bottom-line mindset would be to implement environmental policies that call for net positive ecological outcomes – so-called “<a href="http://www.tandfonline.com/doi/full/10.1080/13574809.2015.1129891">positive development</a>”. </p>
<p>This integrates ecological decline and improvement into economic decision-making. The <a href="http://www.ecologyandsociety.org/vol14/iss1/art12/">human and ecological history</a> of a place would be accounted for. You would look not only at whether the materials for, say, a building came from sustainable sources, but whether you were contributing to improving ecosystems.</p>
<p>For example, protecting and enhancing biodiversity is done in Australia and New Zealand to offset development impacts. The preference is not just to minimise harm, but to <a href="http://bbop.forest-trends.org/">improve things</a>. </p>
<p>In the same way that economic investments need to demonstrate a positive financial outcome, so positive development will require a demonstration of how human activity will contribute to improving ecological health – water quality, biodiversity, local and global air quality, and so on. </p>
<p>Attached to resource consents, it could mean failure to demonstrate net ecological benefit means no permit. This shifts things from, say, just rehabilitating a mine site to requiring demonstrated improvement in its post-mining ecological value, or contributing to improving ecological values elsewhere. </p>
<p>As explained by Janis Birkeland in her 2008 book <a href="https://books.google.co.nz/books/about/Positive_Development.html?id=3X5ZW21uY7cC&redir_esc=y">Positive Development</a>, this approach goes beyond reducing use of materials, carbon and energy (the kind of outcomes attached to such initiatives as green buildings), to requiring improvements in total ecological health over the life cycle of a proposed development. </p>
<p>Applied to water quality, it would require developers to show how they would improve water quality and associated ecological values, rather than merely meeting minimum defined standards. And in terms of climate change, it would require proof that transport funding would result in a decline in emissions, rather than simply limiting the rate of increase.</p>
<p>What is needed is a government that is willing to go beyond requiring that development minimises harm to requiring that it does actual good.</p><img src="https://counter.theconversation.com/content/62104/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Knight-Lenihan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>New Zealand’s economically driven approach to ecological decline risks entrenching environmental problems rather than solving them.Stephen Knight-Lenihan, Lecturer in environmental planning, University of Auckland, Waipapa Taumata RauLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/565342016-04-08T09:33:37Z2016-04-08T09:33:37ZOffshore drilling: why it makes economic sense to wait<figure><img src="https://images.theconversation.com/files/117356/original/image-20160404-18157-fscs45.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Activists surround Shell Oil rig in Seattle's Elliot Bay to protest Arctic drilling plans</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/backbone_campaign/17332349103">Daniella Beccaria/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>From chants of “Drill, Baby, Drill” to outrage over the BP oil spill, offshore drilling has been highly controversial in recent years. Some view it as a vastly underused revenue source, while others see it as a grave environmental threat. In parts of the Gulf of Mexico, drilling continues on a regular basis. In most other regions it is the subject of fierce political debate. </p>
<p>The Obama administration recently reversed its plan to allow drilling off of the mid-Atlantic coast, which it <a href="http://www.nytimes.com/2010/03/31/science/earth/31energy.html?_r=0">proposed in 2010</a>, <a href="http://science.time.com/2010/07/12/obama-issues-new-offshore-drilling-moratorium/">suspended after the Deepwater Horizon spill</a>, then <a href="https://www.washingtonpost.com/news/energy-environment/wp/2015/01/27/obama-administration-opens-up-southern-atlantic-coast-to-offshore-drilling-but-restricts-it-in-alaska/">floated again in 2015</a>. Critics have <a href="http://ppec.asme.org/latest-news/obama-scraps-atlantic-offshore-drilling-plans-in-major-reversal/">attacked</a> the Atlantic decision, arguing that the government is turning its back on much-needed revenue and resources. </p>
<p>But this line of thinking rests on a flawed economic rationale that ignores our ability to revisit decisions in the future. This “now-or-never” fallacy has driven U.S. offshore leasing policy for years. Convincing the Department of the Interior to finally adopt an economically rational approach that values delaying risky decisions required a lengthy advocacy campaign and a federal lawsuit. Offshore leasing decisions can be incredibly complex, and should be informed by balanced economic analysis. </p>
<h2>The economic value of patience</h2>
<p>The basic economic principle at stake is known as option value. It recognizes that it can be smart to wait before making irreversible decisions with uncertain outcomes. </p>
<p>When we preserve the option to act at a later time, we can benefit from new information and technological innovation. Financial analysts and economists have recognized this concept for decades. U.S. economists Robert C. Merton and Myron S. Scholes won a <a href="http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1997/press.html">Nobel Prize</a> in 1997 for developing sophisticated tools to place a price tag on this value. </p>
<p>Economists have applied the idea of option value to such diverse actions such as <a href="http://www.ecologyandsociety.org/vol13/iss1/art27/ES-2007-2296.pdf">forest management</a> and <a href="http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2935598/">spraying pesticides</a>. In the offshore leasing context, option value puts a price on the benefits of waiting for potential improvements in drilling and spill remediation practices and new information about fossil fuel availability and environmental risks. </p>
<p>Leases for offshore oil and gas development are awarded under five-year plans issued by the Interior Department. Shortly after President Obama took office in 2009, the Interior Department began updating its offshore leasing plan for 2007-2012. Consistent with prior practice, the agency did not properly consider the value of waiting in its analysis of the costs and benefits of opening new areas for oil drilling.</p>
<p>The <a href="http://policyintegrity.org/">Institute for Policy Integrity</a>, a nonpartisan think tank at New York University that analyzes law, economics and regulatory policy to improve government decision-making, filed <a href="http://policyintegrity.org/documents/MMScomments.pdf">public comments</a> on the decision. (I was the institute’s director at this time.) We argued that Interior’s approach “systematically overstates the value of immediate resource extraction” and could “cost the American public hundreds of billions of dollars” by ignore the potential for future extraction when prices might be higher and the risk of costly environmental damages might be lower. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/117365/original/image-20160404-27157-o3t25w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/117365/original/image-20160404-27157-o3t25w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/117365/original/image-20160404-27157-o3t25w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/117365/original/image-20160404-27157-o3t25w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/117365/original/image-20160404-27157-o3t25w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/117365/original/image-20160404-27157-o3t25w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/117365/original/image-20160404-27157-o3t25w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Oil rigs on the coast of Scotland idled in 2015 due to low oil prices.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/mike_elleray/17918967973/in/photolist-tiroTF-BAzN5e-zmM3xj-BTtToc-zB4QZ9-ymPyhy-oAatHu-zmS7JM-oiGtP9-oiHgVV-oiGNmN-BYsyMb-oAaua1-wepne9-B4fG9A-ozZfqu-ozVDkT-BRaQ8o-wMxHRE-rsFuV8-oAavqN-oiHqor-yUhFUA-ozZjXf-ozVzPp-oiGywW-oyayJh-oAcpqv-oBX13n-oyanU1-ozZAWE-oiHj5K-oBX7iZ-oAcoh8-ozVz58-ozZmkq-yWBica-oiGB1o-oiHkbH-oiHnja-ozVBGc-oiGsod-oAcwuk-oAaCd5-ozVzxx-oBXamH-vSZQFe-oyazas-oiHkRF-nhX7ZS">Michael Elleray/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>When the agency refused to modify its strategy, we filed a <a href="http://policyintegrity.org/documents/Petition_to_BOEMRE_on_Option_Value.pdf">formal petition</a> to the Interior Department asking the agency to account for option value in all leasing plans and relevant economic analyses. Interior <a href="http://policyintegrity.org/documents/BOEMRE%20response.pdf">denied</a> the petition but claimed that it was studying whether option value might be included in future leasing decisions.</p>
<p>From our perspective, Interior’s approach was doubly flawed. First, it ignored a substantial economics literature on the importance of option value. Second, it violated a statutory requirement to consider “economic, social, and environmental vlaues” when planning offshore leasing. As I argued in a subsequent <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2137806">law review article</a>, failing to account for option value thus led not only to bad decision making, but also exposed the agency to litigation risk. </p>
<p>Other advocates supported this view. In 2012 the <a href="http://sustainable-economy.org/">Center for Sustainable Economy (CSE)</a>, an environmental advocacy group that focuses on natural resource use, challenged the 2012-2017 leasing plan in court, claiming that Interior’s flawed and incomplete economic analysis violated the <a href="http://www.boem.gov/Outer-Continental-Shelf-Lands-Act/">Outer Continental Shelf Lands Act</a> by failing to account for option value. The Institute for Policy Integrity helped represent CSE, and I argued the case in my new role as a law professor at the University of Virginia. The three-judge panel included Chief Judge Merrick Garland, now a nominee to the Supreme Court.</p>
<p>The decision in that case, <a href="https://scholar.google.com/scholar_case?case=8933061532267658295&q=Center+for+Sustainable+Economy+v.+Jewell&hl=en&as_sdt=40000006&as_vis=1">Center for Sustainable Economy v. Jewell</a>, issued in March 2015, rejected the now-or-never fallacy, although it did not strike down Interior’s leasing plan. Writing for herself and Judge Garland, Judge Nina Pillard found that the costs of delay could be offset as technology improves, “drilling becomes cheaper, safer, and less environmentally damaging,” and “more becomes known about the damaging effects” of drilling. At the very least, the panel ruled, Interior should perform a qualitative assessment of those benefits. (This point allowed Interior to move forward based on updated qualitative analysis in its final plan. The third judge on the panel, Judge David Sentelle, dissented on unrelated grounds.) </p>
<p>As this case wound through the courts, Interior was already developing its 2017–2022 leasing plan. In the draft version, released in January 2015, the agency announced that it would offer drilling leases covering more than 100 million acres off the Atlantic coast between Georgia and Virginia – the first oil and gas exploration in this area in decades. This proposal triggered a new wave of controversy. Some state leaders <a href="http://ocsgovernors.org/governor-mccrory-applauds-step-toward-offshore-energy-exploration/">embraced</a> offshore leasing, which they saw as a major new revenue source, but <a href="http://usa.oceana.org/seismic-airgun-testing/grassroots-opposition-atlantic-drillinghttp://example.com/">coastal communities</a> and <a href="http://www.environmentnorthcarolina.org/programs/nce/protect-our-coast">environmental groups</a> voiced outrage over the risks.</p>
<p>While the new Atlantic leases drew most of the attention, the draft leasing plan also included some welcome changes. With the CSE v. Jewell litigation hanging over its head, Interior moved to incorporate a much more nuanced and detailed analysis of option value. For the first time, the agency seriously rejected the now-or-never fallacy. Even as it was exploring new leasing areas, Interior began to provide an extensive discussion of the environmental and social benefits of delay. </p>
<p>Interior’s announcement last month that it would not authorize drilling in the Atlantic is the final act of this protracted drama. After conducting an even more detailed assessment of option value, Interior abandoned its plans to open the Atlantic for drilling in the final 2017–2022 plan. It also committed to performing even more analysis of option value during the lease sale process for all offshore areas. </p>
<p>This last move is especially important because, although Atlantic drilling has been put on ice (for now), Interior has not completely abandoned proposals for leasing in risky areas, including the Arctic. The revised 2017-2022 plan includes both the Beaufort and Chukchi Seas off the coast of Alaska. Those leases are not terribly attractive today: <a href="https://www.washingtonpost.com/news/energy-environment/wp/2015/11/17/following-in-shells-footsteps-oil-major-statoil-will-also-exit-the-alaskan-arctic/">several large oil companies have canceled plans</a> to drill in the region in response to technical challenges and low oil prices. </p>
<p>But if oil prices rebound, we can expect industry interest to follow. In that case, given the massive uncertainties associated with drilling in these treacherous and environmentally sensitive waters, placing the proper economic value on patience will be vital. Interior has taken some important steps to incorporate option value in its thinking, but the real test may lie in the future.</p><img src="https://counter.theconversation.com/content/56534/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael A. Livermore is an associate professor of law at the University of Virgina and a senior adviser for the Institute for Policy Integrity at New York University School of Law. </span></em></p>Offshore drilling debates boil down to “Drill, baby, drill” versus “spill, baby, spill.” But economists say the right question is when we know enough to drill safely – and often that means waiting.Michael A. Livermore, Associate Professor of Law, University of VirginiaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/470392015-09-21T04:04:24Z2015-09-21T04:04:24ZTwo visions of the ‘new economy’ collide where people and technology intersect<figure><img src="https://images.theconversation.com/files/95310/original/image-20150918-12343-1emeet8.jpg?ixlib=rb-1.1.0&rect=250%2C12%2C3787%2C2561&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">WikiHouse is one example of the technology-driven new economy, which focuses on people rather than profits.</span> <span class="attribution"><span class="source">WikiHouse</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>In Sydney in September, <a href="http://www.naomiklein.org/main">Naomi Klein</a> spoke passionately about how climate change opens up opportunities to <a href="http://fodi.sydneyoperahouse.com/program/capitalism-and-the-climate/">change our economic system</a> in a fundamental way, focusing it more on “people and planet” than on economic growth. </p>
<p>Her view is similar to that of the <a href="http://www.neweconomics.org/pages/what-we-do">New Economics Foundation</a> in the UK and to the <a href="http://neweconomy.net/about/necs-mission-and-vision">New Economy Coalition</a> in the US. These link systemic economic change to democratic empowerment, grass-roots struggle and the pursuit of environmental and social justice. </p>
<p>This is one emerging vision of a “new economy”. </p>
<p>Another vision is <a href="http://www.theguardian.com/books/2015/jul/17/postcapitalism-end-of-capitalism-begun">technology-led</a>, increasingly centred on digital disruptors, such as peer-to-peer services like <a href="https://theconversation.com/au/topics/airbnb">AirBnB</a> and <a href="https://theconversation.com/au/topics/uber">Uber</a>. </p>
<p>The technology-led vision is linked to the increasing dominance of a service-based economy, as well as technological shifts to manufacturing processes that intensify competitive dynamics and global mobility. </p>
<p>Both visions have long histories, but there are fascinating possibilities emerging at their intersection, drawing on elements of both visions, designing social and ecological values into the heart of technological platforms. </p>
<p>Some of the best examples of this lie in the domain of web-enabled peer-to-peer services. These services use technology to eliminate many of the intermediaries and “middlemen” that have typified service provision in industrialised economies, particularly in food, transport and energy. </p>
<h2>Helping people access food and housing</h2>
<p>Two interesting examples of smaller-scale experiments that blur the boundaries between the two versions of the new economy are the Open Food Network and Wikihouse. </p>
<p><a href="http://openfoodnetwork.org/">Open Food Network</a> (to whose crowdfunding campaign I have contributed) uses open source software to link producers and consumers of local ethical food. Based in Melbourne, it describes itself as:</p>
<blockquote>
<p>An emerging networked e-commerce system for activating online food marketplaces and collaborative distribution … [enabling] farmers, eaters and independent food enterprises to connect, trade, manage Food Hubs and coordinate logistics.</p>
</blockquote>
<p><a href="http://wikihouse.cc">Wikihouse</a> uses free and open source hardware designs to enable rapid build of eco-housing. Founded in the UK by architect and designer Alastair Parvin, it describes itself as:</p>
<blockquote>
<p>A small non-profit with a huge mission: to create the world’s simplest, most sustainable building systems, which are shared in commons – owned by and for everyone.</p>
</blockquote>
<p>These are systems Wikihouse claims make it possible for a team of amateurs to assemble the chassis of a mid-sized house in one to three days. Wikihouse is already being deployed to good effect in <a href="http://www.stuff.co.nz/business/small-business/67617829/WikiHouse-project-a-social-enterprise">Christchurch</a> in the wake of the 2011 earthquake. </p>
<p>In many ways, both Open Food Network and Wikihouse could stand as an example of either version of the new economy. Both provide a web-based platform that cuts out or curtails the power of the middleman. Both stress the desire to create positive social change of a systemic kind, one that will disrupt the existing dominance of large-scale commercial provision of food or housing. These features echo the technology-led perspective on the new economy.</p>
<p>But “people and planet” are also designed into both projects. This is visible in their strong commitment to open-source and the way this supports small community groups anywhere in the world in setting up local initiatives easily and at low cost. </p>
<p>Similarly, both stress the inbuilt sociality and affordability of the practices they enable as the key to allowing broad take-up and scaling by replication (rather than scaling up). They seek to go beyond simply providing a software platform as a commercial service, aiming to connect like-minded groups around the world in a collaborative community. </p>
<h2>Debating the details</h2>
<p>Are these nascent multinational chains-in-waiting? Many less obvious and visible dimensions of the projects suggest not, such as not-for-profit legal structures as the umbrella entity for the projects, open-source intellectual property, an <a href="http://www.wikihouse.cc/support/">explicit avoidance</a> of venture capital investment. All these combine to create a <a href="http://p2pfoundation.net/Sustainable_Food,_Sharing_Economies_and_the_Ethos_of_Legal_Infrastructure">distinctive ethos</a> that resists being categorised as either/or of the two visions of a new economy. </p>
<p>The New Zealand chapter of Wikihouse, initially called Think Radical, tells its <a href="http://www.stuff.co.nz/business/small-business/67617829/WikiHouse-project-a-social-enterprise">own story</a> in slightly wry terms as one where it was “advised to formalise a company structure in the interests of credibility and trust”, at which point “it was suggested that Think Radical would be, well, too radical”. They named themselves Space Craft Systems instead. This move epitomises the sometimes uncomfortable straddling act that these projects embody. </p>
<p>The key point here is not to suggest that these projects are win-win solutions. On the contrary, it is more to insist that the political and ethical challenges that are put front and centre by social commentators such as Naomi Klein are equally integral to any technology-led vision of a new economy. </p>
<p>Debating not only the details that make these initiatives work in practice, but also their political and ethical implications, can help us to understand better the possibilities of the new economy. It will also remind us of the multiple ways in which peer-to-peer and sharing economies might transform the economic landscape ahead.</p><img src="https://counter.theconversation.com/content/47039/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bronwen Morgan receives funding from the Australian Research Council. She has contributed to the crowdfunding campaign of Open Food Network. </span></em></p>Two visions of the ‘new economy’, one based on environmental and social justice values, the other on disruptive technologies, are coming together to challenge the status quo.Bronwen Morgan, Professor of Law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/392202015-04-22T10:04:10Z2015-04-22T10:04:10ZConsumed: why more stuff does not mean more happiness<figure><img src="https://images.theconversation.com/files/78642/original/image-20150420-25715-1jrb7hw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Not the aisle for happiness.</span> <span class="attribution"><span class="source">consumer via www shutterstock com</span></span></figcaption></figure><p>Consumption. By a strange shift of meaning, this 19th-century word describing a serious and often fatal <a href="http://pubs.acs.org/subscribe/archive/mdd/v05/i02/html/02timeline.html">disease</a> is the same word used now for a way of life focused on material goods. Is it time to bring back its negative, and often deadly, associations into our public discourse? </p>
<p>Consumption as reality and metaphor operates on many levels – personal, communal and economic. Most importantly, it causes profound consequences for the planet and its resources. </p>
<p>The anniversary of Earth Day provides a fitting occasion to think more broadly and deeply about what these patterns of consumption mean for us, our communities, and for planet Earth.</p>
<h2>Diminishing returns</h2>
<p>We all want stuff, but in our overdeveloped, fast-paced culture we seldom challenge ourselves to ask ourselves the one important question: how much is enough? </p>
<p>Of course, important distinctions have to be made between fundamental needs – water, food, clothing, shelter along with the financial security to achieve them – from those things that are not essential to our survival. These non-essentials may include owning large passenger vehicles, taking luxury vacations, or dining at four-star restaurants. Although many people desire these, do they foster human happiness?</p>
<p>Many studies indicate that such non-essentials rarely appear at the top of the list of what actually fosters human fulfillment or happiness. Research indicates that income levels above <a href="http://www.pnas.org/content/107/38/16489.full">US$75,000 a year</a> rarely result in remarkably increased levels of happiness. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/78646/original/image-20150420-25683-11l5bt3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/78646/original/image-20150420-25683-11l5bt3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/78646/original/image-20150420-25683-11l5bt3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=428&fit=crop&dpr=1 600w, https://images.theconversation.com/files/78646/original/image-20150420-25683-11l5bt3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=428&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/78646/original/image-20150420-25683-11l5bt3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=428&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/78646/original/image-20150420-25683-11l5bt3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=538&fit=crop&dpr=1 754w, https://images.theconversation.com/files/78646/original/image-20150420-25683-11l5bt3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=538&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/78646/original/image-20150420-25683-11l5bt3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=538&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Wealth: a way to keep up with the Joneses but how much is enough?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/chrisjunker/6324444957/in/photolist-aCSr9r-8P7C5T-cmMLrS-dWs9Mz-8ZFwiw-gp7e9-4f8Pvo-923oqo-gp6wK-9GR3ei-5sVWrc-2fJ6SV-5wkebx-dGouHc-9wFRW2-q8LYm8-9aMCmM-9RsjFk-jCJuHn-asWZQu-oG4veq-6Qb5CH-ayYS5f-7TFdVn-2fJ5YV-gsGDRZ-gz2V8E-gsGE8k-feNRa8-dvPbG5-jAbKF5-cpszRN-e9VnmW-98fprj-dcvjiF-eAYzp-9PPd1r-5FsyCg-8usD9K-8UJbM8-ka1ufB-avkW1k-6W2G5t-gz2khw-si7MT-bnUuph-gz3nMZ-gsGEni-q5RR6-8VgRyM">Christian Junker - AHKGAP/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>In <a href="http://www.newscientist.com/article/mg21528752.300-inequality-the-more-money-the-merrier.html">The more money, the merrier?</a>, Harvard Business School professor <a href="http://www.hbs.edu/faculty/Pages/profile.aspx?facId=326229&facInfo=fea">Michael Norton</a> shows that the ultra rich report high levels of happiness when they give some of their money away to others. In contrast, those with very little money do report increased happiness with improved income and wealth but there is a point of diminishing returns in the happiness quotient.</p>
<p>If having a great deal of money along with the ability to buy stuff is not a major component of happiness, why are we so consumed with consumption? Have we been duped by the pressures of advertising that creates “needs” and manipulates our desires? </p>
<p>Some of the motivation for this pursuit of stuff is comparative and is rooted in the desire to appear as well off as friends and neighbors. And we do this even though many of us know that a good family life, meaningful work, and fulfilling social relationships contribute much more to our well-being than what is in our paychecks or our stock portfolios.</p>
<p>Other than the tiny percentage of counter-cultural messages that appear in publications or platforms such as Adbusters, we are inundated by messages and advertising from every media vying for our time, attention, and money. </p>
<p>It takes enormous focus and discipline to screen out the onslaught of these ubiquitous messages and use our mental energies for more worthwhile tasks that lead to human fulfillment.</p>
<h2>Copenhagen Theory of Change</h2>
<p>At the global level, researchers know that we are well beyond the carrying capacity of the Earth’s resources given the current human population and the projected increases expected to occur this century. </p>
<p>The <a href="http://unsdsn.org/wp-content/uploads/2014/02/WorldHappinessReport2013_online.pdf">World Happiness Report</a> from the Earth Institute at Columbia University shows that while happier countries are those with greater wealth, other factors contributing to human happiness are more important than wealth, including strong social support, the absence of corruption, personal freedom, good family life and community engagement. </p>
<p>If aggressive consumption is not what makes people happy, how can we begin to reframe our thinking and, more importantly, alter our behavior in the marketplace to be in harmony with the pursuit of genuine happiness? </p>
<p>As it turns out, reducing rates of consumption not only is better for the planet, it also benefits our well-being. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/78648/original/image-20150420-25701-pw7hl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/78648/original/image-20150420-25701-pw7hl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/78648/original/image-20150420-25701-pw7hl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=752&fit=crop&dpr=1 600w, https://images.theconversation.com/files/78648/original/image-20150420-25701-pw7hl8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=752&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/78648/original/image-20150420-25701-pw7hl8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=752&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/78648/original/image-20150420-25701-pw7hl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=944&fit=crop&dpr=1 754w, https://images.theconversation.com/files/78648/original/image-20150420-25701-pw7hl8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=944&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/78648/original/image-20150420-25701-pw7hl8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=944&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Copenhagen residents have improved well-being while reducing emissions.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/16nine/3202607008/in/photolist-5T1cud-2jAojw-4dHJpZ-74V8Ls-7ozLvj-4LqLkj-jhyFgq-6wEe6o-2NdUB2-ajKFPj-juoKFf-6cbLdn-2vt3uY-eENLBD-9cLDZa-2JhkUf-8mZ9UU-9DDXoS-kNzkQa-6MN28n-6dW1iz-7E4F5s-d85RXY-4fv3GA-8Z6jvv-peuaKq-8jbRx5-6kFbJn-eEPGTL-pew6gz-aGHJ1n-89qrba-ncfazg-eEFSMv-4TjL3r-edHj14-ktkWff-62FVyN-f5Vrz3-a8hUdc-a8hTUV-6wbixy-7VeUaj-556U2N-5bqoJ4-bZtFo1-gw6aHy-9wsJQ2-9CT1VZ-jJpb1K">Colville-Andersen/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span>
</figcaption>
</figure>
<p>One book released in 2015 may help us to think this through by looking at ways to reduce externalities like emissions to which we all contribute but feel little obligation to redress.<a href="http://press.princeton.edu/titles/10414.html"> In Climate Shock: The Economic Consequences of a Hotter Planet</a>, authors Gernot Wagner and Martin Weitzman challenge the behavioral economic view that small personal changes are negligible and irrelevant to social change. They argue that the initiatives of a few people with strong moral commitments can effect social changes. </p>
<p>They call their finding the “Copenhagen Theory of Change”: how small individual choices can lead half the inhabitants of a city of 1.2 million people to use bikes for commuting (yes, even in winter at the 55th parallel). </p>
<p>Moreover, the city of Copenhagen is on track to achieve carbon neutrality by the year 2025. No doubt the reduction in the use of private passenger vehicles is a large part of this effort for Copenhagen to become carbon-neutral.</p>
<h2>Equity and environment</h2>
<p>Reduction in rates of consumption for those of us in the over-developed world can have very positive effects on individual happiness, can lead to more engaged communities working for social and economic changes, and can help reduce human use of natural resources. </p>
<p>In this effort, principles of distributive justice come into play and should lead to vigorous public debates about more equitable ways to distribute goods and services on the regional, national and global levels. If these deep social and economic changes are technically possible, then we need the intellectual honesty, moral insight and courage to take them up as the most serious and complex issues of our time. </p>
<p>What better way to celebrate Earth Day than to increase human happiness and give the gift of our self-restraint and reduced consumption to the source of all our sustenance – the Earth and its precious resources.</p>
<p><em>This is an updated version of an article originally published April 22, 2015.</em></p><img src="https://counter.theconversation.com/content/39220/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Judith Stark does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A lifestyle based on aggressive consumption stresses the Earth’s resources and, beyond a certain point of comfort, does not actually foster human fulfillment or happiness.Judith Stark, Professor of Philosophy, Seton Hall UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/383842015-03-05T23:04:44Z2015-03-05T23:04:44ZIf dollars rule the world, why don’t the bees get a bailout?<figure><img src="https://images.theconversation.com/files/73782/original/image-20150304-15287-xstrmf.jpg?ixlib=rb-1.1.0&rect=8%2C2%2C1873%2C1281&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">We bailed out the banks – our food is worth even more, but working out exactly how much more is tricky.</span> <span class="attribution"><a class="source" href="http://commons.wikimedia.org/wiki/File%3APollinationn.jpg">Louise Docker/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Attempts to put a dollar value on the natural world – so-called “natural capital” or “ecosystem services” – have produced some frankly staggering numbers. A <a href="http://www.nature.com/nature/journal/v387/n6630/abs/387253a0.html">seminal 1997 paper</a> valued the world’s ecosystem services at US$33 trillion (A$42 trillion) a year. This estimate was controversial, given that it dwarfed the entire global market economy, which at the time stood at roughly US$18 trillion a year. </p>
<p>An <a href="http://www.sciencedirect.com/science/article/pii/S0959378014000685">updated estimate published last year</a> suggested that a better annual global estimate of the value of ecosystem services would have been even higher – a massive US$145 trillion in 1997. Disappointingly, the paper also valued today’s natural world at less than this – roughly US$125 trillion a year, because of damage to Earth’s ecosystems in the interim.</p>
<p>Still, whichever way you slice it, nature is worth a lot. Ecosystem services are still estimated to be worth something like twice as much as the world’s US$75 trillion gross domestic product. Put another way, the estimated US$20 trillion decline in annual ecosystem services between 1997 and 2014 is equivalent to wiping out a quarter of today’s global annual economic activity. </p>
<p>These are disturbing and significant losses if one acknowledges the legitimacy of these kinds of studies, although not everyone does. Some economists have <a href="http://www.nature.com/nature/journal/v443/n7107/full/443027a.html">criticized these estimates</a> while some <a href="http://philosophy.gmu.edu/people/msagoff">philosophers</a> have critiqued these assessments because some ecosystem services are literally invaluable. Water has infinite value to any living human, but none of us pays an infinite amount of money (or even all of our income) for the water we use. </p>
<p>So it’s easy to see why people have difficulty wrapping their head around how to put dollar values on the environment. The numbers are too big to make economic sense, and yet too small to describe the absolute essentials of life. </p>
<p>Perhaps we can make some headway by working through one of the most oft-quoted examples of ecosystem services: the bees that help us grow our food.</p>
<h2>Hard workers</h2>
<p>Insect pollination is a classic ecosystem service. Insects pollinate our crops for free, and if they were to go extinct we would probably have to try and do it ourselves. We can therefore <a href="http://www.elgaronline.com/view/9781781955154.00018.xml">estimate the value of the bees’ work</a> by calculating the cost of paying armies of people to wander from plant to plant with small pollen-covered paintbrushes. <a href="http://www.sciencedaily.com/releases/2008/09/080915122725.htm">One estimate</a> put this figure at US$217 billion a year. </p>
<p>If such methods sound a bit rough and ready to you, consider the valuation of share market assets during the <a href="https://theconversation.com/au/topics/global-financial-crisis">global financial crisis</a>. In 2008 the people of the United States <a href="http://thinkprogress.org/economy/2013/07/31/2387161/cost-of-financial-crisis/">lost more than 20% of their wealth</a> as measured in stocks, bonds, real estate, and other marketed financial assets. The Dow Jones Industrial Average <a href="http://en.wikipedia.org/wiki/United_States_bear_market_of_2007%E2%80%9309">went down by more than a third of its total value</a>. How “real” were those values before or after the crash?</p>
<p>Putting a value on ecosystem services is not the same as commodification or privatization. Many ecosystem services are best considered as public goods or common resources, but we still need a way to put a value on them, so that people will see that they have value. </p>
<p>Why? Because otherwise (and without wishing to sound facetious) we wouldn’t be able to argue with anyone who claims there’s a sound economic case for deliberately killing all the bees.</p>
<h2>Bye bye, bees</h2>
<p>Let’s go back to our hypothetical workforce of human crop pollinators. If bees were to go extinct and be replaced with paid workers, it would be a “win-win-win” scenario from a strictly economic perspective: boosting economic productivity while creating jobs and generating tax revenue. </p>
<p>I would hope even the most logical economist wouldn’t really want to live in a world with no bees. But what this thought experiment shows is that we need to develop worldviews that are broader than the dominant economic one we are currently trapped in. </p>
<p>One possibility is a <a href="http://www.ecosystemmarketplace.com">global market for ecosystem services</a>, although this idea is complicated by the fact that ecosystems are public goods and thus cannot really be owned or traded. The question of using free-market solutions to protect the environment is just as fraught, if not more so, than it is for delivering public schools, prisons or military defence. On the other hand, there are those who would argue there’s a case for privatising organisations like fish and wildlife services, or coast guards.</p>
<h2>Where is the environment’s bailout?</h2>
<p>Perhaps, given the huge value of ecosystem services, what we really need is to put environmental advocates in similar positions of authority to those enjoyed by powerful economists in the US government. People like <a href="http://www.treasury.gov/about/history/Pages/hmpaulson.aspx">Henry Paulson</a>, <a href="http://www.treasury.gov/about/history/Pages/tgeithner.aspx">Timothy Geithner</a>, and <a href="https://theconversation.com/au/topics/ben-bernanke">Ben Bernanke</a>, who were given the political power to print trillions of dollars to “save the economy”. </p>
<p>No country in the world has ministers or leaders with anything like that sort of power to “save the environment”. Yet the environment we depend on for our survival is clearly more valuable than any market economy. </p>
<p>Economics is sometimes described as the art of <a href="http://en.wikipedia.org/wiki/Scarcity">allocating scarce resources</a>. The problem is that ecosystem services were not considered a scarce resource for the first two centuries of modern economics. Fixing this oversight will involve identifying and classifying these services, and assessing their economic value. The current economic model of unending growth cannot be tweaked to make room for this. </p>
<p>The serious threat to environmental resources such as biodiversity, a stable climate, wetlands, coral reefs, and insect pollination suggests that humanity is facing perhaps its greatest challenge for survival. If we do not give “saving the environment” just as much priority (if not more) as “saving the economy”, we will continue down the environmentally destructive road that we have been on for the past two hundred years. Ironically, if we continue down this road the economy may continue to grow while overall human well-being declines. </p>
<p>The bees have been doing a good job, and they never ask for a raise. Let’s not terminate their contract.</p><img src="https://counter.theconversation.com/content/38384/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Sutton does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Is it worth trying to put a price on the natural world, when things like water and food are priceless? Yes, says Paul Sutton - without knowing the value of the environment, we might not value it at all.Paul Sutton, Professor of Environmental Science, University of South AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/367932015-02-02T12:00:36Z2015-02-02T12:00:36ZBeyond GDP: the Ebola shock should push us to pursue quality of growth<figure><img src="https://images.theconversation.com/files/70637/original/image-20150130-25924-1acd5qa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The price of growth? Ebola management in Guinea</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/69583224@N05/14775227551/in/photolist-oxFbgp-ovHMjj-ovCUoB-oxEVMp-qRVP3a-qRLBKK-qRRo9s-qRVQGn-qtaXf7-qPihW2-oVcLjw-mZyb4f-mZyaVE-ozymNw-pNKp1N-qF5mJZ-pM2Zb8-pce1Yd-pNKpHu-pNYnAB-oer9yg-qEVrx5-oN5DuU-qXmfTg-qEiRkj-q1HpF6-qXqqaL-oeqAuZ-oWL6Hf-qEVq9U-oMiQF5-p4L2Cb-ohnx9M-ovDEdF-ovCYmM-oepVj5-oQyC1y-qKJnAg-qtiP1c-oYBL13-oYByTx-qKyPi4-ojG7wv-oYCu9t-qw6MSu-orW9vP-qwHFrG-p7FpXe-odUR1J-qLZcQj">European Commission DG ECHO</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>If ever we wanted a reminder of how global capitalism has got things wrong, the <a href="https://theconversation.com/uk/topics/ebola">Ebola outbreak in West Africa</a> serves the purpose well. Our assumption that economic growth is essential is not only a feature of markets and politics, it also feeds into our thinking on development goals such as poverty reduction. The hope somehow remains that the relentless pursuit of production and consumption will trickle down to deliver more substantial benefits. </p>
<p>The devastating crisis is starkly revealing about the dangers of non-inclusive growth. Rapid increases in GDP fuelled by <a href="http://www.africaminingvision.org/amv_resources/ISGbulletin1.pdf">enclave mining</a>, neglecting health systems and agricultural and urban employment can create the structural conditions for extreme vulnerability to shocks, as disenfranchised populations shun poor health facilities and resist early outbreak control efforts. The Ebola shock, in turn, has badly set back the rapid economic growth recently seen in Sierra Leone, Liberia and Guinea.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/70629/original/image-20150130-25930-1yeulyx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/70629/original/image-20150130-25930-1yeulyx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/70629/original/image-20150130-25930-1yeulyx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=268&fit=crop&dpr=1 600w, https://images.theconversation.com/files/70629/original/image-20150130-25930-1yeulyx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=268&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/70629/original/image-20150130-25930-1yeulyx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=268&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/70629/original/image-20150130-25930-1yeulyx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=337&fit=crop&dpr=1 754w, https://images.theconversation.com/files/70629/original/image-20150130-25930-1yeulyx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=337&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/70629/original/image-20150130-25930-1yeulyx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=337&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_cd&idim=country:LBR&hl=en&dl=en#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_mktp_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:LBR:GIN:SLE&ifdim=region&tstart=633657600000&tend=1359504000000&hl=en_US&dl=en&ind=false">World Bank/Google</a></span>
</figcaption>
</figure>
<h2>Counting costs</h2>
<p>Is is timely that new <a href="https://sustainabledevelopment.un.org/topics/sustainabledevelopmentgoals">Sustainable Development Goals</a> are fundamentally questioning the equation of development with economic growth.</p>
<p>Environmental sustainability, human well-being, health and nutrition, gender equality, safe cities and access to justice cannot be achieved through GDP alone. In as much as economic growth is highlighted, it is with the important qualifiers that it should be “<a href="https://sustainabledevelopment.un.org/topics/sustainabledevelopmentgoals">sustained, inclusive and sustainable</a>.”</p>
<p>The Institute of Development Studies (IDS) has <a href="http://www.ids.ac.uk/news/growth-is-dead-long-live-growth-why-we-need-to-pay-urgent-attention-to-the-quality-of-economic-growth">published a book</a> in which development economists question some of the discipline’s received wisdoms. They draw together evidence that pursuing business-as-usual, old-style growth is no longer an option. Inequalities are rising in many places, undermining people’s well-being. Environmental threats are increasing and are already manifest in droughts, floods, depleted resources and devastated livelihoods. Crises – from finance to food, energy to disease – are unravelling progress.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/70627/original/image-20150130-25939-1w4qine.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/70627/original/image-20150130-25939-1w4qine.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/70627/original/image-20150130-25939-1w4qine.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/70627/original/image-20150130-25939-1w4qine.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/70627/original/image-20150130-25939-1w4qine.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/70627/original/image-20150130-25939-1w4qine.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/70627/original/image-20150130-25939-1w4qine.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/70627/original/image-20150130-25939-1w4qine.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Does the pursuit of GDP give the green light to crises?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/95072945@N05/12072296685/in/photolist-joMFdi-6f2jAL-j5cev-j5cdv-j5cfh-ahdXbm-8i9qYB-4VrgBT-84ue3-4A8ySJ-dp5zGj-drrusQ-5ogang-aBchPi-5DeXwG-tEsAP-2nabba-8MneV3-XhqL3-3hhRDX-3UN759-8MBDdG-5CgbFz-8fLT-9t93Cf-2SqSg7-cV4pnE-7d7KWU-5yQvNk-61C1ps-c2SRy-6gccHi-9edwYy-csjm5d-bYQT3f-9DH55f-6g8Bma-9JArrL-dazbJ5-dqgUyn-8kqWBn-8kqUgt-8kqT5X-8kqUMp-8ku5Rw-9TKYq1-8ku7vo-adFTjf-LPpBT-asBSo">Kelly Sikkema</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>The central idea is that 21st-century development needs us to address the quality of economic growth in at least three dimensions:</p>
<ol>
<li><p>Growth must incorporate environmental costs, especially of climate change.</p></li>
<li><p>It must be inclusive, especially generating employment for growing populations.</p></li>
<li><p>It must be resilient to shocks, such as the financial, food and health crises that have rocked the world in recent years.</p></li>
</ol>
<h2>Interdependencies</h2>
<p>Taking a global view of development, we have chosen to focus more of our work on three related themes – <a href="http://www.ids.ac.uk/opinion/this-year-and-next-refreshing-ids-for-transforming-times">accelerating sustainability, reducing inequalities and building inclusive and secure societies</a>.</p>
<p>Recent world events highlight the interactions between these themes. Ebola is just one, shattering example. As <a href="http://www.ids.ac.uk/team/green-transformations">our work in China and India is showing, low carbon growth</a> needs to generate jobs if it is to avoid undermining well-being and enhance inequality. The relationship between green growth and social justice therefore needs attention.</p>
<p>Sustainability, inclusivity, and resilience are important not just in themselves, but because each influences the other. And economic growth pursued to the neglect of its human and environmental foundations will ultimately prove unsustainable, kicking back to undermine itself through conflict, disaster and stagnation.</p>
<h2>Questioning growth</h2>
<p>Economists have long questioned the idea of “growth at all costs”. Dissenting voices have been heard from illustrious figures such as <a href="http://www.bbc.co.uk/history/historic_figures/keynes_john_maynard.shtml">John Maynard Keynes</a> and IDS founding director <a href="http://www.ids.ac.uk/publication/a-short-history-of-ids-a-personal-reflection">Dudley Seers</a> to modern-day exponents <a href="http://www.josephstiglitz.com/">Joseph Stiglitz</a> and <a href="http://www.ted.com/talks/thomas_piketty_new_thoughts_on_capital_in_the_twenty_first_century?language=en">Thomas Piketty</a>. They, and others in between, have argued that unregulated capitalist growth enhances inequalities and is unsustainable in its own terms.</p>
<p>A slightly shorter lineage of neoclassical environmental economists, for example <a href="http://www.amazon.com/Blueprint-For-Green-Economy-Series/dp/1853830666">the pioneering work</a> of David Pearce and Ed Barbier in the 1980s, has long argued for addressing environmental “market failures” through mechanisms such as carbon and resource taxes and the “polluter pays” principle. <a href="http://www.oecd.org/greengrowth/">Recent debates</a> highlight prosperity, low carbon and green growth.</p>
<p>Meanwhile, resilience studies – dominated by ecologists, but with social scientists including economists among them – have <a href="http://era-mx.org/biblio/resilience-sd.pdf">questioned linear growth models</a>. They call instead for approaches centred on system adaptation and transformation to respond to, and bounce back from, stresses and shocks, whether environmental or economic.</p>
<h2>Pulling it together</h2>
<p>You might ask what is new here? But by adding up and integrating across these often separate areas of analysis, a new vision of growth emerges – not simply as a single quantity in which more is better, but as a set of vectors.</p>
<p>Put <a href="http://steps-centre.org/anewmanifesto/">another way</a>, growth and the innovation that supports it can go in different directions. Which directions are pursued has consequences for distribution – who gains and who loses. And a diversity of pathways is important in order to respond to different contexts, and to build resilience by avoiding putting all the eggs in one basket.</p>
<p>Because ultimately this is about choices to support particular directions or qualities over others. These choices are essentially political. We cannot escape the role of states in setting directions, for instance through regulation and taxation. But social movements and citizen action also have key roles to play. Politics must extend both up and down from what national governments can do, to encompass action both locally and globally.</p>
<p>Enhancing the quality of growth to promote sustainability, equity and inclusivity, will require economists to connect their skills and perspectives with those of others. They must combine forces with political, institutional and social analysts and also, crucially, with the people in public, private and civil sectors who are positioned to make real change happen. Genuine progress here, and applied in the right areas, would help transform thinking and create alliances which might just in the future be able to head off the kind of health crisis which so marked 2014.</p><img src="https://counter.theconversation.com/content/36793/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Melissa Leach does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>If ever we wanted a reminder of how global capitalism has got things wrong, the Ebola outbreak in West Africa serves the purpose well. Our assumption that economic growth is essential is not only a feature…Melissa Leach, Director, Institute of Development StudiesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/280142014-07-04T04:57:24Z2014-07-04T04:57:24ZTour de Yorkshire will boost economy but what about the environment?<figure><img src="https://images.theconversation.com/files/52222/original/ms9md9ww-1403692475.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Blurred lines. Costs and benefits of the TDF are hard to define</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/oneshotimages/10035794085/in/photolist-ghQ4Wv-aoXgFw-aA1fcP-nmZM4n-dMAEJ1-5nZf6c-dbkkL1-mzSN1-doMVyE-g1j6Gk-doMVtS-doMKRR-aoYRUM-mLeHf-g1je5r-g1jjiy-g1juEc-doML1z-doMND8-doMMn6-g4BePQ-doMLuv-g1jgcx-5kQXHD-g1jff3-db1SXS-doMUL1-mLehe-nvoeGj-5kAYek-doMUUC-ap7iWt-5jW6x9-g1j8sp-38hXcr-38nAFS-9NAsCc-mLunb-g1j9ue-agvnR4-aoi7tk-5khHXN-38CTfu-35Fwx2-8ADbXg-mzSzy-35BMpR-35BKC2-35BNRx-aoYLJk">oneshotimages</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>When the world’s greatest cycling race starts in Yorkshire, England on July 5, some 2-3m visitors are expected to turn out to watch a spectacle which will cost <a href="http://www.bbc.co.uk/news/uk-england-21050740">an estimated £10m to host</a>. If the organisers want to make their investment pay, their focus must be far beyond the “Grand Depart” and the carnival long weekend of lycra and lung-bursting sprints.</p>
<p>This will be the fourth time that the Tour de France has visited Britain. Plymouth hosted one stage in 1974; there were two from Dover to Brighton and around Portsmouth in 1994; and London and Canterbury hosted the start in 2007. <a href="http://www.letour.com/le-tour/2014/us/overall-route.html">This year the UK will host three stages</a>: Stages 1 and 2 in Yorkshire, and Stage 3 from Cambridge to London.</p>
<p>Yorkshire’s bid to host the first two stages of Le Tour is estimated to cost in the region of £6.5m – a £4m “staging fee” to the race organisers ASO (Amaury Sport Organisation), and an additional £2.5m by local authorities to cover day-to-day hosting costs.</p>
<p>But there are other costs we need to consider. In 2007, the Grand Depart had a similar number of spectators line the route from London and Kent. <a href="http://www.cardiff.ac.uk/cplan/sites/default/files/Tour-de-France.pdf">A study by our team of researchers</a> found that as well as having economic benefits, the event also had significant negative environmental impacts. </p>
<p>That environmental impact of the event was estimated by calculating its <a href="http://www.myfootprint.org/">“ecological footprint”</a>. This is the area of land required to support the resource demands and consumption patterns of spectators, and is measured in terms of global hectares. The total footprint was estimated to be 57,900 global hectares – equivalent to 143 times the area of London’s Olympic Park. And the ecological footprint of the average spectator at the Grand Depart was found to be almost 2.2 times greater than if they had not attended the event and gone about their everyday activities at home.</p>
<p>The main contributor to this was travel. The average spectator travelled 734 kilometres (456 miles) to watch the event. Almost 59% of the total distance travelled was by air (largely international air travel), which added significantly to the overall footprint. Other key contributors were rail (25%), coach (11%) and car (11%) travel.</p>
<h2>Impact v legacy</h2>
<p>In return for hosting Le Tour, Yorkshire is hoping for a significant financial return on its investment – <a href="http://www.theguardian.com/uk-news/2013/dec/26/grand-depart-tour-de-france-yorkshire">a boost in excess of £100m for its local economy</a> while promoting further tourism in the region, attracting inward investment, and increasing participation in cycling.</p>
<p>This raises several important questions, not least of which is whether the economic benefits to be gained from hosting a major sport event such as Le Tour outweigh any negative environmental impacts that it might generate. It is perhaps an issue that highlights how priorities change when an economy looks more fragile and non-financial factors get pushed to the periphery.</p>
<p>And while economic benefits are often used by organisers to galvanise support in the bidding for a sporting event, perhaps potential hosts should be required to estimate the environmental impacts too, in order that we might better understand the overall picture. Then the public might be more motivated to make sure officials are accountable for implementing effective strategies to reduce any negative impacts.</p>
<p>That last point is certainly more challenging as the characteristics of a host location will vary, and influence the scale and type of impacts in different ways. But it is certainly not clear what Yorkshire or the Tour organisers are doing to reduce the negative environmental impacts that will arise from Le Tour this year, in particular spectator travel.</p>
<h2>Uphill task</h2>
<p>On the positive side <a href="http://cycle.yorkshire.com/the-legacy">Cycle Yorkshire</a> and its partners should be applauded for producing a strategy designed to promote cycling as a healthy and enjoyable physical activity, and a low polluting mode of transport. In order to offset those environmental costs, it will be crucial to generate positive legacies from hosting the 2014 Grand Depart and the hope is that Le Tour will inspire local residents to get on their bikes and maximise the many benefits of cycling. But, does the strategy go far enough? </p>
<p>Perhaps there is a valid trade-off between hosting the Le Tour and having 2-3m spectators create a large ecological footprint, and creating a positive environmental legacy – getting more locals on their bikes, improving their health and reducing motorised travel in Yorkshire in the long term. </p>
<p>But to embed those benefits and encourage a significant number of individuals to change the way in which they travel to work, shop or school will be an uphill challenge. Cycle Yorkshire itself acknowledges that there are “wide discrepancies in cycling infrastructure, participation and opportunities across the region”. </p>
<p>As with the rest of the country, the car is often the preferred choice of travel, and to have any real hope of achieving a more permanent behaviour change will require a continuous programme of investment in cycling infrastructure and networks in the region over many years – and not just the feelgood effects of a one-off event.</p><img src="https://counter.theconversation.com/content/28014/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrea Collins has received funding from the ESRC and RCUK.</span></em></p>When the world’s greatest cycling race starts in Yorkshire, England on July 5, some 2-3m visitors are expected to turn out to watch a spectacle which will cost an estimated £10m to host. If the organisers…Andrea Collins, Lecturer, Cardiff UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/273042014-05-30T12:22:06Z2014-05-30T12:22:06ZWithout transparency, Europe’s carbon market reform will fail<figure><img src="https://images.theconversation.com/files/49807/original/4k5d37sn-1401384488.jpg?ixlib=rb-1.1.0&rect=0%2C264%2C1110%2C726&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A reform silver lining lurking behind the clouds?</span> <span class="attribution"><a class="source" href="http://commons.wikimedia.org/wiki/File:Coal_power_plant_Datteln_2_Crop1.png">Arnold Paul</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>In 2008, the European carbon market crashed. Carbon emission allowances in the EU Emissions Trading System (<a href="http://ec.europa.eu/clima/policies/ets/index_en.htm">ETS</a>) plunged from €30 per tonne of C0<sub>2</sub> in June 2008 to €7 at the beginning of 2009. Prices have fluctuated around €5 ever since.</p>
<p>There is broad consensus on why the price remains low. Partly, it is due to the recession: lower industrial output means less demand for allowances. At the same time, other environmental policies (such as renewable energy and energy efficiency) have been promoted, and this has confused the market. Overarching these factors are the short-term approach to decision making taken by most businesses, which makes it difficult to promote the long-term benefits of environmental investment, and general uncertainty about EU and international emission targets.</p>
<p>But is the low price a problem? The answer depends on how you view the objectives of the scheme.</p>
<p>Some see the emissions trading as a mechanism established purely to reduce greenhouse gas emissions over time at the lowest possible cost. From this perspective, the current low price is due to the interplay of supply and demand, and there is no need for intervention.</p>
<p>Others think the scheme should also provide a clear price signal to support technological innovation. In other words, the carbon price must be high enough to discourage large investments that lock in companies to highly polluting, high-carbon technologies for decades to come. Instead, companies would be encouraged to invest early in low carbon technologies. From this point of view, the current low price is a problem that must be fixed.</p>
<h2>Spanners in the works</h2>
<p>The debate around emissions trading reform has become polarised and political. The real issue is lack of responsiveness to changing current events in a system designed with decade-long timescales in mind.</p>
<p>Unforeseen events, such as a change in economic conditions or new technological developments, can trigger dramatic changes in demand. To function properly, an emissions trading scheme needs to be able to respond to these changes.</p>
<p>A <a href="http://www.lwec.org.uk/sites/default/files/attachments_biblio/PP-System-responsiveness-and-EU-Emission-Trading-System.pdf">responsiveness mechanism</a> may be the answer. The scheme could be adapted to include an override that would lessen the impact of excessive undersupply or oversupply of allowances.</p>
<p>Ideally, such a mechanism would be clear and transparent. Clear, so that every buyer and seller in the market is able to understand how it operates. And transparent, with the system data readily available to ensure the mechanism could not be gamed or subject to political lobbying.</p>
<p>What are the options? Some stakeholders support the creation of a “price collar” – a price floor to prevent the price falling so low as to discourage innovation, and a price ceiling to cap costs for industries covered by the scheme.</p>
<p>This sounds straightforward but it is difficult to set appropriate price thresholds. The price ceiling, in particular, might well be set to protect against only <em>politically</em> unacceptable high prices.</p>
<p>Others, including the European Commission, support the creation of a <a href="http://theenergycollective.com/edimantchev/330621/commission-proposes-market-stability-reserve-europe-s-carbon-market">market stability reserve</a>. Here, the commission would automatically add and withhold allowances from the market based on a set of rules agreed in advance. Triggers could be based on various indicators, such as the overall number of allowances in circulation.</p>
<p>Depending on the design of the rules, a market stability reserve could be relatively clear and simple to understand. However, for it to be transparent the quantitative data used to determine the triggers should be available to market participants.</p>
<p>Price data is readily and continuously observable from the market, but the commission has historically been slow to release quantitative data on allowance usage, and the data has been subject to restrictions.</p>
<p>In this context, it is troubling that the European Commission has recently decided <a href="http://www.euractiv.com/sections/energy/eu-figures-show-carbon-credit-glut-persists-offset-data-withheld-302197">to stop releasing information</a> on the extent to which firms use <a href="http://www.theguardian.com/environment/2012/nov/20/europe-emissions-trading">international carbon offsets</a>, where polluting companies buy credits from others who are making emissions reductions in lieu of making their own. While this is part of the system’s normal functioning, the quality of international offset credits purchased from outside the EU ETS – in terms of representing genuine, effective carbon emissions reductions – lacks transparency, and can be dubious or exposed to fraud.</p>
<p>The market reserve mechanism will only operate correctly if firms can respond promptly and appropriately to the triggers – and this will require greater system transparency than the commission is providing.</p><img src="https://counter.theconversation.com/content/27304/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Luca Taschini receives funding from the Centre for Climate Change Economics and Policy, which is funded by the UK Economic and Social Research Council (ESRC).</span></em></p><p class="fine-print"><em><span>Josh Gregory does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In 2008, the European carbon market crashed. Carbon emission allowances in the EU Emissions Trading System (ETS) plunged from €30 per tonne of C02 in June 2008 to €7 at the beginning of 2009. Prices have…Luca Taschini, Research Fellow, London School of Economics and Political ScienceJosh Gregory, MSc student, Environmental Economics and Policy, Imperial College LondonLicensed as Creative Commons – attribution, no derivatives.