Economic Value to Environment_a Challenge

8/11/2019 Economic Value to Environment_a Challenge

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ATTRIBUTING ECONOMIC VALUE

TO THE

NATURAL ENVIRONMENT:

Challenges & Possibilities

Key Words: Economy, natural environment, sustainability, growth, human life

Abstract: A sustainable world depends on what human beings do with their

freedom to behave and mingle with nature. To produce results ideas have to be

implemented. Humans are born with responsibilities not only towards other

fellows but also towards the environment and development of community and

society.

This present paper expresses the views of the author on the same lines about

challenges and possibilities of attributing economic value to natural

environment. The possibilities and existing practices are expressed in this paper

major being the steps towards sustainability reporting, new methods oforganizational governance, energy efficiency, green initiatives by governments.

The present paper is divided into 3 major parts;

1- Problems and current scenario of environment,

2- Cost analysis

3- Possibilities of attributing economic value to natural environment. This part

consists of setting of metrics for measurement & reporting initiativesundertaken internationally.

Water used in food and drink production, timber for packaging, furniture and paper,productive land for fruit and vegetables, and fibres for clothes, are amongst just some of the


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biodiversity and ecosystem services whose economic value is subject to the availability andits cost estimation is mostly unprized, and largely unaccounted for in business life, the flowand use of natural resources is embedded in the global economy every day.

Biodiversity underpins ecosystem services. Bees cant pollinate, nor can trees store carbon,if they have all died. Diverse systems are better at capturing carbon, storing water andpreserving fisheries. Just how diverse an ecosystem has to be in order to supply the goods andservices needed by man is a matter of debate - a debate made harder by the fact that manyspecies may have uses that man has not yet found.1

. Using the implied social cost of carbon from the Stern report ($85 per tonne CO2), the longrun economic cost of 2008 net greenhouse gas emissions could be in the region of$1.7trillion*. For the same year, the economic cost of biodiversity loss and ecosystemdegradation was estimated to be between US$2 and US$4.5 trillion (3.37.5% of globalGDP). While these numbers are not directly comparable, the fact that they are in the same

order of magnitude should give pause for thought.

To date discussions on biodiversity loss have focused on specifics such as coral reefdegradation, deforestation or declining fish stocks. All of these are of concern to particularindustries or regions. Recently, the broad systemic implications of biodiversity loss andecosystem degradation linking to resource management, climate change and populationgrowth have been more explicitly articulated. This briefing paper will explore both specificand broader systemic effects and the associated business risks. 2

Economic policy and social policy have been largely separate agendas involving differentparticipants. Many see the two as conflicting agendas because of the flaws in the capitalist

system. However, there is no inherent conflict between capitalism and social needs. Aproductive and growing economy requires rising skill levels, a proliferation of newcompanies, safe working conditions, healthy workers who live in decent housing in safeneighborhoods, and a sense of opportunity. Social and economic policy must be integrated inaddressing societys ills and ensuring true progress.3

Pressures on biodiversity and the existing defects


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The world is today facing unique and daunting environmental challenges. These includeclimate change; an emerging global crisis in water availability and water pollution; recordloss of biodiversity and long-term damage to ecosystems; pollution of the atmosphere; waste

production and disposal; impacts of chemicals use and toxic substance disposal; damagedaquatic ecosystems; and deforestation and land degradation.

A process of ecosystem degradation, driven largely by population growth, and theindustrialisation and intensification of agriculture, beginning with land conversion, andfollowed by overgrazing or soil degradation, has been a key driver of desertification,resulting in the widespread loss of once productive land. Increasing water scarcity, itself

partly a result of deforestation or removal of vegetation, is compounding the problem inmany regions.The economic cost of soil erosion in Europe is estimated at 53 per hectare per year12. Annual economic losses caused by introduced agricultural pests in the US, UK, Australia,South Africa, India and Brazil exceed US$100 billion 4

Factors resulting in environmental degradation

Economic growthThe development-centric vision that prevails in most countries andinternational institutions advocates a headlong rush towards more development, whereby thedevelopment of increasingly advanced technologies and more efficiently scaled economieswould help to protect the environment against the damage caused by the very samedevelopment. Environmental economists, on the other hand, point to a close correlation

between economic growth and environmental degradation, arguing for qualitativedevelopment as an alternative to growth. There are those, particularly within the alternativeglobalization movement, who maintain that it is feasible to change to a degrowth phasewithout losing social efficiency or lowering the quality of life.

ConsumptionThe growth of consumption and the cult of consumption, or consumeristideology, is the major cause of economic growth. Overdevelopment, seen as the onlyalternative to poverty, has become an end in itself. The means for curbing this growth are notequal to the task, since the phenomenon is not confined to a growing middle class indeveloping countries, but also concerns the development of irresponsible lifestyles,

particularly in northern countries, such as the increase in the size and number of homes andcars per person.

Destruction of biodiversityThe complexity of the planets ecosystems means that the lossof any species has unexpected consequences. The stronger the impact on biodiversity, thestronger the likelihood of a chain reaction with unpredictable negative effects. Despite all thedamage inflicted, a number of ecosystems have proved to be hugely resilient.Environmentalists are endorsing a precautionary principle whereby all potentially damagingactivities would have to be analyzed for their environmental impact.

PopulationForecasts predict 8.9 billion people on the planet in 2050, representing anincrease of 41% from current numbers. This is a subject which primarily affects developingcountries, but also concerns northern countries; although their demographic growth is lower,the environmental impact per person is far higher in these countries. Demographic growthneeds to be countered by developing education and family planning programmes and

generally improving womens status.


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Challenges

It may be relatively straightforward to demonstrate values in monetary terms and capturethem in markets. This applies most obviously to commodity values such as the number oflivestock or cubic meters of timber, but can equally be applied to amount of carbon storage or

the supply of clean water. On the other hand, in more complex situations involving multipleecosystems and services, and/or plurality of ethical or cultural convictions, monetaryvaluations may be less reliable or unsuitable. In such cases, simple recognition of value may

be more appropriate.

The crisis caused by the impact of human activities on nature calls for responses byinternational institutions, governments and citizens. Governance intends to meet this crisis by

pooling the experience and knowledge of each of the agents and institutions concerned.

Environmental problems of climate change, biodiversity loss and degradation of ecosystemthreaten to block solutions and already restrict economic development in many countries and

regions. Environmental protection measures remain insufficient. The necessary reformsrequire time, energy, money and diplomatic negotiations. The situation has not generated aunanimous response. Persistent divisions slow progress towards global environmentalgovernance.

The global nature of the crisis limits the effects of national or sectoral measures. Cooperationis necessary between actors and institutions in international trade, sustainable developmentand peace.

The effort to curb global warming is as stuck as ever, but that, whether we like it or not,were all in this together.

The obstacles remain significant. Countless summit conferences since the Kyoto Protocol onclimate change was adopted more than 15 years ago have failed to budge the fundamentalroadblocks standing in the way of collective action: How should the costs be divided? Whodid what to whom? Globalizationwhich in the process of exporting production and jobsfrom rich to poor countries also exported the carbon dioxide emitted to make the products

consumed by the rich countriesadds another complex twist to allocating responsibility forthe carbon in the air. The disquieting question is this: Are emissions the responsibility of thecountries that made them or of the countries for whom the products were made? Two yearsago, some of the greenest constituencies in the country asked Elizabeth Stanton and

colleagues at the Stockholm Environment Institute-U.S. Center to perform a set ofcalculations on their carbon emissions. Rather than tally the carbon they produced, theywanted an inventory of the emissions generated in making, transporting, using and disposingof what they consumed. They were in for a surprise. San Francisco, for example, generatedonly eight million metric tons of carbon dioxide equivalent in 2008. The citys consumption,

by contrast, added nearly 22 million tons of carbon to the air. Using consumption-basedmeasurements, Oregons emissionsin 2005 jumped to 78 million tons from 53 million.

Understanding its impact on climate change is a necessary first step for families, andmunicipalities, to take concrete action to mitigate carbon emissions. This sort ofrecalculation, however, could have an unforeseen effect on the international politics of

climate change by shifting responsibility on a global scale. With the concentration of carbondioxide in the air zooming last spring to its highest level since mastodons roamed the earth


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some three million years ago, the United Nations, against all odds, hopes 2014 will finallydeliver the breakthroughs needed for the big carbon-spewing nations to agree on a plan by2015.The diplomacy of climate change appears as stuck as ever. Poor carbon-spewers likeChina justify their opposition to tight carbon limits on the grounds that, on a per-person basis,their emissions are still very low. Moreover, most of the carbon in the atmosphere now, they

argue, was put there by Americans and other wealthy carbon-spewers, who burned a lot offossil fuels on the way to getting rich. Forbidding the Chinese from doing the same would betantamount to condemning them to stagnation. Policy makers in Washington retort that whileall this may be true, a deal that only required rich countries to limit emissions would be

pointless: their carbon savings would be negated by growing emissions elsewhere. Heavyemitters of greenhouse gaseslike the agriculture and chemical industrywould decampfrom rich nations to the less carbon-restricted shores of the developing world. 5

1- Economist 2008

3-http://www.isc.hbs.edu/Creating_Shared_Value.htm

2,4 - A briefing paper for participants engaged in biodiversity related discussions at the

World Economic Forum Davos-Klosters Annual Meeting: Prepared by

PricewaterhouseCoopers for the World Economic Forum.

5-http://www.nytimes.com/2013/12/25/business/economy/what-if-consumers-not-

producers-paid-for-emissions.html?_r=0


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Benefits of protecting tropical forest ecosystems often outweigh the costs. While forestconservation may be a good deal for society, the question remains how to make it a good dealfor the people who actually live there.

Costs of Biodiversity Loss

The total annual economic cost of biodiversity loss and ecosystem degradationis estimated to be between US$2 and US$4.5 trillion, or 3.3 - 7.5% of globalGDP, according to a PricewaterhouseCoopers analysis 4

The UN study The Economics of Ecosystems and Biodiversity (TEEB) indicates that scrutinyof big business and its impacts on the worlds natural capital is likely to intensify as betterevaluations and assessments come to the fore. Already, TEEB estimates the global economicimpact annually of biodiversity loss at between $2-4.5 trillion, and is to be felt in product

pricing, availability of products and financing, impact on climate and supply chaindisruptions for consumers, business and government. 5

The values of nature vary according to local biophysical and ecological circumstances andthe social, economic and cultural context. Intangible values, which may be reflected insocietys willingness to payto conserve particular species or landscapes, or to

protect common resources, must be considered alongside more tangible values like food ortimber to provide a complete economic picture.Valuation is seen not as a panacea, but rather as a tool to help recalibrate the faulty economiccompass that has led us to decisions that are prejudicial to both current well-being and that offuture generations. The invisibility of biodiversity values has often encouragedinefficient use or even destruction of the natural capital that is the foundation of our

economies. 6

Conserving forests avoids greenhouse gas emissions worth US$ 3.7 trillion

Halving deforestation rates by 2030 would reduce global greenhouse gas emissions by 1.5 to2.7 GT CO2 per year, thereby avoiding damages from climate change estimated at more thanUS$ 3.7 trillion in NPV terms. This figure does not include the many co-benefits of forestecosystems 7

With more than a million people in China dying prematurely each year from breathing itsdirty air, and with warming temperatures portending rising sea levels and disruptions to food

production, the centrally planned Communist country is experimenting with a capitalistapproach to address the problem: it is creating incentives so that the marketand not thegovernmentwill force reductions in emissions.

Carbon cap-and-trade programs align environmental goals with market incentives.Conventional regulatory approaches cannot ensure achievement of emissions targets, create

problematic unintended consequences, and are very costly for what they achieve, saystheeconomistRobert N. Stavins,director of the Harvard Environmental Economics Program.

So how did America detour away from emissions markets, which are the preferred approachof many economists, climate and consumer advocates, and many electric utility companies

that own and operate power plants?
http://www.hks.harvard.edu/fs/rstavins/http://www.hks.harvard.edu/fs/rstavins/


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It all comes down to politics. Before the last recession, political support was building for acarbon market, with various Republicans, including Senator John McCain, his partys 2008

presidential nominee, supporting a market-based approach. After House Democrats approveda cap-and-trade bill in 2009 that put a price on fossil-fuel emissions, the issue became a targetof the Tea Party. In the midst of the worst economy in 75 years, the Senate declined to take

up the measure, and cap and trade became a dirty term on Capitol Hill.

Even so, several states already have turned to this approach. Californias effort began in

January. Nine mid-Atlantic and Northeast states use it under the Regional Greenhouse GasInitiative.

In Washington, faint whispers of a carbon tax are still occasionally heard as a solution forbudget and environmental problems in a single policy. But even if that were to happen, thetax would probably be small and would not guarantee the reduction in emissions needed.Like a tax, carbon markets can also generate revenue that can be rebated to consumers orused to lower other taxes. 8

4,5 - News Release : Date: 14 September 2010 : Pricewater Cooperhouse.

6,7 - TEEB (2010) The Economics of Ecosystems and Biodiversity: Mainstreaming theEconomics of Nature: A synthesis of the approach, conclusions and recommendations ofTEEB.Pavan Sukhdev and TEEB Team, Preface.

8-http://www.nytimes.com/2013/08/10/opinion/pollution-economics.html?src=rechp&_r=1&- Author:Dirk Forrister is president and chief executiveofficer of the International Emissions Trading Association.Paul Bledsoe is a senior fellow in

the energy and climate program at the German Marshall Fund of the United States

Metrics of sustainability in Legal framework

Sustainability"Meeting the needs of the present without compromising future needs
http://energy.nationaljournal.com/contributors/dirk-forrister.phphttp://energy.nationaljournal.com/contributors/dirk-forrister.phphttp://www.gmfus.org/expert/experts_dirc/paul-bledsoe/http://www.gmfus.org/expert/experts_dirc/paul-bledsoe/http://energy.nationaljournal.com/contributors/dirk-forrister.php


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Most effective on environmental issues where improvements can yield immediate economic

benefits In other areas, intangible long term consequences provide a weak justification for short termcosts.

The importance of businesses in improving the quality of life is well recognized. However,there is growing awareness that in an increasingly complex world, businesses also havesignificant and long-lasting impacts on people, our planet and our ability to sustain the levelsof holistic development that we all aspire to. This realization has also brought an increasingconcern amongst all stakeholders, who are demanding that businesses of all types and sizesneed to function with fairness and responsibility. Specifically, this calls for businesses beingthoroughly aware and conscious of their social, environmental and economic responsibilities,and balance these different considerations in an ethical manner.

In India the National Voluntary Guidelines on Socio-Economic and EnvironmentalResponsibilities of Business brought out by the Ministry of Corporate Affairs will help the

Corporate sector in their efforts towards inclusive development. Businesses now have to takeresponsibility for the ways their operations impact society and the natural environment. TheCorporate Sector must now focus its attention on achieving the 'triple bottom line'- people,

planet andprofit. Urged by the Prime Minister's Ten Point Charter, the Corporate Sector isnow trying to ensure that economic growth is socially and environmentallysustainable. 9

When it comes to philanthropy, executives increasingly see themselves as caught betweencritics demanding ever higher levels of "corporate social responsibility" and investorsapplying pressure to maximize short-term profits. Increasingly, philanthropy is used as a formof public relations or advertising, promoting a company's image through high-profilesponsorships. But there is a more truly strategic way to think about philanthropy.Corporations can use their charitable efforts to improve their competitive context--the qualityof the business environment in the locations where they operate. Using philanthropy toenhance competitive context aligns social and economic goals and improves a company'slong-term business prospects. Addressing context enables a company not only to give money

but also leverage its capabilities and relationships in support of charitable causes. Taking thisnew direction requires fundamental changes in the way companies approach theircontribution programs. Adopting a context-focused approach requires a far more disciplinedapproach than is prevalent today. But it can make a company's philanthropic activities far

more effective.

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9Page 2: Foreword: R.P.N. Singh, Minister of State, Corporate Affairs ,Ministry ofCorporate Affairs : National Voluntary Guidelines on Social, Environmental andEconomical Responsibilities of Business being brought out by the Ministry of CorporateAffairs.10- http://www.isc.hbs.edu/soci-corporate_philanthropy.htm

Green Initiative in Corporate Governance in IndiaIn order to promote the Green Initiative in Corporate Governance, the Ministry of

Corporate Affairs (MCA) vide its circular No.17/2011

dated 21 April 2011 has allowed paperless compliances by the Companies pursuant to theprovisions of the Information Technology Act, 2000.
http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=R0212Dhttp://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=R0212Dhttp://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=R0212D


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Advantages of Green Initiative1. Reduction in paper consumption2. Contribution towards a greener environment3. Ensure prompt receipt of communication4. Avoid loss in postal transit

5. Savings in paper and postage costs

With the passage of time certain metrics have come up to standardize the and legalize themovement of environment protection some of them are ; ISO 50001, Global ReportingInitiative, ISO 140001, National Green Tribunal.

Economic Value to Environment_a Challenge

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