SpruceRoots Magazine - September/October 2000


The Outer Limits

by Ian Lordon

Ecological Economics At first glance it may strike some as a contradiction in terms, an incongruous conjunction, two concepts that simply don't belong together. Like industrial park, unbiased reporting, or rap singer.

But there are a growing number of people - scientists, researchers, writers, and even a few otherwise ordinary economists - who are beginning to understand that ecology and economy are inseparable. That stable, diverse, sustainable and vibrant economies can't exist for long without the support of equally vigorous ecological systems.

The irony is that popular and accepted economic doctrine ignores the role of ecosystems in modern western economies, and actually rewards the destruction of the ecosystems these economies depend upon.

Recently, Canada's economy reached the one-trillion dollar mark, a milestone which produced splashy headlines and prompted politicians to pat each other on the back. But the increasingly uninhibited growth of our economy isn't putting everyone in a celebratory mood, least of all Tom Green.

Green, an ecological economist from Nelson BC, doesn't place much stock in the traditional measurements and values taught by economics professors in most universities, or used by policy-makers the world over. In fact, he'd prefer to see people and institutions abandon traditional means of judging economic performance in favour of a perspective which includes and accounts for ecological values.

"Politicians rate their success on an economic scale based largely on whether they get the economy to grow or not, and the way conventional economists measure growth fails to take into account whether you've depleted resources or not," he says. "Ecological economists start from the fundamental premise that we have to understand how ecosystems work and we have to live within their limits."

Acknowledging ecological limits is the last thing on the minds of most economists who would rather believe the economy is only held back by things like interest rates, labour, costs, and government regulation. The moment a ceiling is built over the economy, solving problems like social disparity and poverty through unlimited economic growth becomes impossible.

"Mainstream economists believe the key to solving problems of inequity is to make the pie grow so that each person, no matter how small their share, is eventually going to get more." But if the pie can only get as big as the earth is capable of making it - "your pie can't grow anymore and suddenly you're looking at why does one person have two thirds of the pie and a hundred otherpeople are sharing the rest. In other words, it's not an economy where you're going to have tons of Bill Gates out there."

Because ecological costs aren't considered when measurements such as the Gross Domestic Product (GDP) are calculated, numbers like one-trillion dollars become very misleading. Resources and materials aren't pulled out of thin air, they are drawn from the earth's limited capacity to produce them. GDP only considers them once they become commodities, and that means it's missing one half of the ledger.

"Alberta right now is a case in point. They're celebrating tremendous economic growth and if you look at it, a lot of it is fuelled by sucking up oil from the ground faster and faster, but that oil isn't being replaced."

What is the cost to the farmer who can't graze cattle on a field perforated with oil wells? What about the costs if the incidence of hurricanes, flooding, or pollution rises in part due to emissions from burning Alberta oil? What about health costs and reduced quality of life for human beings? Will these losses be calculated and deducted from the provincial GDP? At the moment the answer is no.

"When you drive your car you pay 60 or 70 cents a litre for gas depending where you are. You pay that and people think: 'Wow, that's really expensive!' I think there's a good argument that gas really costs around five dollars a litre - if you add in the health costs, the costs on people where it was extracted, subsidies to the highway industry, costs to the environment, and all these costs. We're not paying what we should be paying, and that's encouraging people to use cars more than they should."

The conventional approach to economics today compels people, businesses, and governments to ignore the limits of ecosystems and consume them until they are destroyed.

"We have an economic system that shows the economy is getting worse if we do many of the key things we have to do for sustainability," he says.
"A consumerist economy, some people call it an addictive economy, is all about creating consumer addiction. In a way, the best thing that can happen to the economy these days is people decide to replace their cars one year earlier. Then we'd produce all sorts of new cars and have more car shops and these things The worst thing that could happen would be if everybody decided to walk or bike one day a week. That would have a real economic impact."

But how can we consider these costs? Can you put a price on an intact rainforest? An untapped oil reserve? And if you do, what then? Who's going to buy an intact rainforest if it can't be exploited? Green says these notions are simply incompatible with contemporary methods of doing business.

"A while ago some economists, and some ecological economists among them, tried to put a price on the environmental services provided by the earth and they came up with a number like 33-trillion dollars a year. They thought people didn't appreciate how much the environment does for us and if we put a price on it, we'll recognize that, take it more seriously, and try to protect it. But if they came up with a number like one-trillion, or 66-trillion, or 33-trillion, how did they think policy-makers are going to act differently? If they came up with a number like 12 dollars I can see politicians going 'oh, we don't need to worry about it then.'"

"I think it's much easier to start with the fundamental argument that if you're dependent on certain things then you have to protect those things and keep them viable to satisfy your needs."

Green says a classic example of applied ecological economic principles is ecosystem-based forestry because it begins by identifying environmental limits and then plans economic activity within those limits.

"You start with an ecosystem-based plan and say 'okay, what do we need to maintain in the forest in order to have long-term ecosystem functioning?' Then, within that plan you set those areas aside or you specify careful management requirements. Within the stand you also set limits on those things you need to retain like wildlife patches and course woody debris so there's structure left behind to make soil in the next rotation and so on. Once you've done those things you've defined ecological limits and then you can look at having economic activity within those limits."

But even if foresters unanimously adopted ecosystem-based practices overnight, it would only impact a small sector of the economy. If ecological principles are ever going to be broadly accepted and applied, Green believes people's values are going to have to change significantly.

"To make that shift is a big challenge," he says. "The idea or ideas of neo-classical economics have worked their way into mainstream thought and even our cultural values over a long period of time. Kids learn very early about things like you'll get as much money as your work is worth, that the more money you make the more things you can buy, and that having more things is desirable. I guess I'm a bit weird because when I look around at people and I see a household where there are large amounts of environmentally-damaging consumption I think people are earning too much. That's a very radical proposition."

Green's answer is to tax lower income earners less and higher income earners more which would limit the ability of people to over-consume.

"We tax people for earning very low amounts of money. It would make much more sense to be easier on people for the first thirty thousand dollars they earned. Then we have to start looking at taxing people more when they're over a certain amount - for instance marginal tax rates in the United States used to be above 90 percent once you were above $500,000."

Naturally, this idea isn't particularly popular among right-wingers or the legions of aspiring millionaires around the world.

"It's really hard to sell, which is interesting. What percentage of the North American population earns over $500,000 a year? And yet 90 percent of people, who don't earn anywhere near that amount, would say that would be bad for the economy."

Taxing high income earners more, compliments the idea that because the environmental pie is only so big, people should be entitled to a certain small share and then penalized accordingly when they start consuming larger and larger amounts.

Another way of using taxes to encourage people to act more responsibly would be to raise levies on goods and services which have a major impact on the environment. Green points to oil and gas as a good example and suggests raising the price of fuel closer to its true environmental cost. The additional revenue would compensate governments for going easier on low-income earners, and force people to think carefully about decisions which strain the environment.

"The net result is fuel becomes more expensive and people have to consider it when they buy a car, drive to work, or plan a trip to town. I wouldn't move it up from 70 cents to five dollars overnight, it's something you do gradually so people have time to change. You let people know this is how we're going to do it - over the next five years the price of gas is going to double and the next five years after that it's going to double again. People know it's coming and they can start to think about it when they renovate their house, or when they buy a vehicle, or plan a subdivision."

Because the economy adapts to prices and scarcity, a relatively simple scheme like raising fuel prices could result in huge and unimaginable shifts in our economic structure. Some of the foreseeable developments could include improved mass-transit systems, and widespread use of energy efficient homes and vehicles. Ultimately, these shifts would benefit the environment, and Green predicts they are inevitable anyway.

"We can plan for this change or we can let both nature and resource prices take us by surprise. After the first oil crisis a lot of people were worried about the cost of driving and so they bought smaller cars. Recently, everyone bought sport utility vehicles because in real terms the price of gas has been very low, then it comes up again and people start complaining about it."

"There have been some predictions about global oil and gas reserves which suggest that in 2010 production of oil will peak and then start to slowly fall down. At the same time consumption has continued to go up. The moment production peaks and starts to go down while consumption is still going up will have a very interesting effect on prices, and our economy is not going to be ready for it. Europe is going to be much better off because they've had higher gas prices for a long time."

Despite these dire predictions governments aren't hiring ecological economists in droves to help develop policies and legislation which will prepare people and our economy for the coming shortages. Green says although the field is rapidly acquiring converts and credibility, ecological economists aren't in a position to alter the course of the economy in any major way.

"I don't think many ecological economists have much influence. Ecological economics is growing largely because a lot of people - environmental scientists, ecologists and whatnot - are feeling frustrated because they can put forward scientific information but nothing happens because it all comes down to the bottom line."

Scientists are tired of introducing articles and papers on greenhouse gasses, the ozone layer, water quality, extinction, and marine webs only to be dismissed by politicians and legislators who are worried about jobs in the home riding or busy looking for the next campaign donation from industry.

"The scientific community is becoming very interested in ecological economics and that's generating credibility. The membership of the Society of Ecological Economists is growing very fast and their journal is one of the more influential journals in economics. That's a big change. Also I think a lot of economists are beginning to recognize the flaws, the limits, and the narrowness of the neo-classical paradigm. But there's still a long way to go."

The problem is that as long as the economy continues along its present course, the environment suffers and the opportunities for the future continue to diminish. It took nearly a hundred years for modern economic thought and principles to develop and be understood and applied by governments around the world. There isn't enough time to wait for ecological economics to do the same.

"I don't think we have a century to do that, that's one of the real dilemmas. We talked about the nineties being the turnaround decade for the environment and it wasn't. It was the 'let's go backwards faster' decade in terms of how gasoline emissions have increased, how governments have rolled back environmental regulations, and how through public relations campaigns the whole environmental ethic has been under attack."

And it isn't as though environmentalism is a new invention. After thirty years one would imagine society as a whole might have made more progress, but Green attributes the recent backlash to ill-conceived environmental legislation and to industrial elements protecting their own interests more effectively.

"Part of what happened is when the environment was discovered in the late sixties and seventies politicians felt they had to act. People were clamoring for action. So they implemented a whole bunch of laws, some of them not so well thought-out in terms of perhaps being costly considering what they achieved. Industry was taken by surprise, didn't realize how strong this was going to come on, and eventually got itself organized."

"I think they've argued that all these regulations aren't so effective, that what we need is a more self-monitoring approach. Then we end up with things like Walkerton, which a lot of people are linking to cutbacks to the environment industry and the provincial capacity to test for water quality."

To Green, and most ecological economists, the answer to environmental concerns doesn't necessarily lie in cumbersome regulation but in responsible use. The challenge is identifying where to draw the line, how much the earth can provide us, and then confining consumption within those limits. Ideally, this approach will result in healthy ecosystems and a healthy economy.

"Ecotrust Canada came up with a book that talks about the Clayoquot Sound area returning to an economy of abundance. I think that's a neat idea because they point out that in the Clayoquot region it used to be that there was abundance everywhere. If you looked on the hillsides, there was tons of trees. If you went to the ocean, all the things you could possibly imagine wanting to harvest were there abundantly. And as long as you took from it modestly that abundance continued."

"We tend to think of modern economies as economies of abundance. It's true they provide us with abundant stuff, but they also leave us with poverty. Poverty in terms of what's left on the land, and what's left in the sea. We have to get back to this idea of restoring nature to abundance and living within that abundance."

SpruceRoots Magazine - September/October 2000