Market approach to the environment

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Earth provides us with many goods and services, such as water and clear air, for "free". Can the destruction of the environment be stopped by putting a price on "free" ecosystem services or is it a false solution, creating more problems than it solves?

The « empty forest » syndrome and other bad ideas

Author

Lyse Mauvais

03/03/2015 - 00:00

The philosophy of the “market approach” to environmental issues is one that has become increasingly popular in recent years. Sadly, this idea has led to the emergence of a new “freedom to pollute” culture. Now may be the time to accept that when it comes to the environment, conciliating economic priorities with ethical and sustainability concerns is not the way to go.

The market approach to environmental preservation stems from a fairly simple idea; in order to give people, firms and nations incentives to preserve our environment and the various species and ecosystems it shelters, we ought to translate the abstract and yet undeniable value of environmental “products” for our welfare, economy and future, into concrete economic terms.

The “empty forest” syndrome

The increased marketization of the environment has led to a widespread phenomenon; the « empty forest » syndrome. In an effort to diminish deforestation and as a mean to incite firms and governments to take greater care of their forests, several economic incentives have been brought forth to encourage reforestation. This seems at first like an excellent idea; by “paying” companies to reforest, or making them pay when they don’t we encourage firms to be an active part of environmental efforts? Firms are willing to help replant the indigenous, native, ancient and biodiversity-rich forests that their activities may damage or uproot. But one cannot plant an indigenous forest, and the cheapest way to quickly fulfill “tree surface” quotas is to plant relatively abundant, often exogenous, always fast-growing sets of species. Firms do reforest efficiently; but the forests we end up with are deserted, emptied of their animal, entomological and floral diversity.

The “free to pollute” culture

The example described above is but one in many. More generally, the marketization of the environment has led to the emergence of a new and tragic “free-to-pollute” culture. Should certain firms exceed their allocated “pollution quotas”, they could be asked to pay extra fees…or to buy other firms’ quotas in order to make up for their overpollution. In other terms, firms can today claim to foster environmental efforts and preservations even as they help destroy ecosystems, because economic investment has been popularly accepted as a replacement token for environmental worth.
This is a significant problem because by creating a global market for environmental damage, we have created the illusion that such a market truly existed at the environmental level. The environment has become a good like any other – one we can dispose of. This ignores, however, the truth; destruction caused in one part of the globe cannot be made up for through economic “investment” on another continent.

Putting a price on the environment

This question, indeed, lies at the heart of everything that has been discussed above.
Some environmentalists, scientists, cautious politicians and concerned citizens argue that narrowing biological and landscape diversity into economic categories is unfeasible and absurd. The environment is an intertwined web of species, systems, areas. No animal, no ecosystem has a truly direct impact on welfare and GDP. A species' contribution to our world is only understandable if one takes into account the biological webs and food chains linking all species.
A more radical perspective has also emerged; the one that claims that the economy and the environment must be forever disconnected. In other terms, it is time for men to mature up and to drive their eyes off economic charts. We need to save the environment because it matters to our lives and our children’s futures, and it is up to governments to face greed and self-interest and to seize environmental matters- as our public heritage. This approach, however, has been criticized as idealistic and unrealistic.

Imperfect alternatives

There’s no denying that the marketization of the environment has led to perverse side effects, yet throwing this approach away altogether does not seem to bring us anywhere closer to a solution.
What this article tries to suggest is that economic indicators are misfitted to a good understanding of the way the environment works, and the way we wish to see it preserved. The solution, then, while waiting for a better one, lies in increasing the qualitative efficiency of the market approach. Some suggest to put the creation of labels, indexes and quotas in the hands of real experts, scientists and environmentalists rather than economists. Others insist on the role that environmental panels must play in controlling the way the government markets its environmental heritage, as a way to limit damages and increase the pressure on polluting agents. No solution seems perfect, but we do need to look for a better approach to managing our environment - and that starts with pointing out the flaws and vices of the current market approach.

This article deliberately presents only one of the many existing points of views of this contorversial subject. Its content is not necessarily representative of its author's personal opinion. Please have a look at Duel Amical's philosophy.

This article convinced me.

The tragedy of the commons and other disasters of our times

Author

Radek Jan

03/19/2015 - 00:00

Mankind is also advanced enough to understand the importance of nature in our lives as well as in our economy and to take appropriate measures. For that to happen, the right kind of economic incentives has to be put in place first.

The expression « Anthropocene » refers to the times we live in, times when human activity has already become the major geophysical force on the Earth. Human technology has evolved so far that we are now able to pollute the world, alter the climate and cause the massive loss of biodiversity. But mankind is also advanced enough to understand the importance of nature in our lives as well as in our economy and to take appropriate measures.

Approach the environment from an economic perspective

The quality of our lives depends directly on the quality of the environment we live in and only very few, if any, doubt this dependence. Yet the link between the environmental quality and the productivity of an economy remains much more subtle and hidden from the public debate. If we want to keep and further improve our welfare and quality of life, then the preservation of our environment is a vital, not a moral obligation. We are destroying natural resources and irreparably damaging entire ecosystems without taking into account their importance for our economy.

Planet Earth provides many important services for free, which leads people to take them for granted. But those "ecosystem services" are granted for free only as long as they last, in other words, before we damage or destroy them. So the degradation of the environment implies heavy opportunity costs in loss of ecosystem services. This is where environmental economy comes into play: by calculating the market price of services provided for free by the Earth, we can express their value. In our world, a thing with a value is much more likely to be protected then something taken for granted. As cynical as this may sound it can also be highly efficient!

Value of ecosystem services in an interdependent world

Once we fully realise the value of services given to us for free by the environment, we will naturally want to keep benefiting from those services for free. This logical reasoning will increase our incentives to keep the environment from harm. But how to motivate people, corporations and even governments to pay for the preservation of the environment ? This big question leaves space for long and technical discussions about how to put in place system of payment for ecosystem services and other incentives for the preservation of natural resources. This issue can not be addressed separately at the local and State level, since there are no boundaries in nature and the environment is interconnected across the world. In other words, borders are just subjective lines on the paper, the Earth is “one and indivisible” and the issue of mitigation of climate change impacts surpasses the domain of State sovereignty. Consequently, widely accepted and generally implemented solutions to environmental problems have to be found on the international level.

Economic cooperation and help to the poorest countries as a response to environmental threats

“Poverty is the biggest polluter” Ghandi used to say. The Kuznets environmental curve backs this statement: as countries develop, they tend to decrease their carbon footprint and their negative impact upon the environment decreases. Yet those developed countries, let’s call them “the global North”, were also responsible during their industrialisation phase for the majority of pollution that caused our present environmental problems. Nowadays, while the global North takes initiatives to mitigate climate change, the pollution emitted by “the global South” keeps increasing from day to day. Most importantly, the global South often lacks both financial and technological means as well as the scientific understanding necessary to take efficient climate action. This is where the reduction of economic and social inequalities around the world meets the question for the protection of the environment. As politically explosive as it is, the development aid and technological transfer from the North to the South seems to be a pressing issue that requires widely agreed-upon solutions on the global level.

A sustainable future to look forward to

In conclusion, the right kind of economic incentives can turn market forces from destruction to the preservation of the environment. The mitigation of the environmental impact of our society also requires the reduction of inequalities around the world as well as a rational and widely backed global environmental policy. If all the issues related to the climate change have to be addresses with success, then we need the international community to agree upon deeper economic cooperation and technology transfers. In this quest, approaching the environment from the economic perspective seems as the most promising way to think about the importance of Earth.