Putting an economic value on environmental costs, viable?

In the previous post, we talked about how development could be natural. However, not everything that occurs naturally are good. Things seem to go wrong when economic values are attached to the resources. For instance, rubber trees used to be of little economic value before people knew how to collect latex. Thereafter, capitalists start destroying natural forested areas to make way for rubber tree plantations. Introducing and using biofuels as a major energy source will only increase value of certain crops (first and second generation mainly), exacerbating artificial selection. In the past, humans may not have realised the possible environmental nor social consequences of human activities thus values of a product only comprise of commercial marketable value. Today, externalities such as social and environmental costs can be calculated and included in official financial accounts via costs of ecosystem services as people increasingly see the importance of sustainable development. Including socio-environmental costs into the capitalist system is a great idea since it has always been missing in the capitalist equation. Hence, the increasing attention given to biofuels can be attributed to this new holistic accounting method. However, there are a few problems associated with it. How do we know if the environmental values are ‘correct’? Are we able to accurately to translate socio-environmental values such as ‘lesser carbon footprint’ into economic values that can be included in the calculation of traditional economic accounts? Putting aside the technical problems, let us take a look at the practical problems. Is it actually viable to capitalise on the social and environmental aspect of anything? In the capitalist world, there has to be revenue, costs and self-interested capitalists who strive to maximise profits. Social and environmental costs can be calculated but private firms are not interested as the benefits (revenue) are non-excludable. In other words, firms will be incurring higher costs which benefit the society as a whole and not oneself. There is no incentive for a capitalist, whose primary aim is to maximise profits, to include such costs. In other words, traditional economic and capitalist ideas are still deeply ingrained in the international market. Then why are biofuels gaining so much attention from the LDCs such as Malaysia and Indonesia who wants to become major biofuels powers?Even though biofuels are often marketed as environmentally friendly fuels, capitalists are intrigued by other characteristics of biofuels – renewability and low costs of production. Being renewable means that it will never run out unlike coal or fossil fuels, so producers worry less about volatile prices of biofuels. On top of that, unlike other renewable resources, biofuels can be assimilated into the current energy supply chain with minimal technical adjustment hence have much lower costs comparted to renewable energy such as hydroelectric, wind or nuclear energy where power plants and infrastructure has to be built from scratch. In other words, socio-environmental accounting has little significance in affecting the biofuels market, which essentially still is driven by traditional economic factors. 

Is capitalism the answer to ENV problems?

Why are people so alienated from nature today? We attain food from food kiosks instead of plucking berries from bushes; we attain potable water from taps instead of rivers; our roads are tarred instead of grassy greens or mud. Today, nature and the society we live in seems to be mutually exclusive.

Majority of us city dwellers forget the fact that everything we have in our lives today is a result of a forced sacrifice by nature. For instance, printing an article. Where did the paper come from? How much electricity is consumed to print it? How is electricity generated? What are the components of the printer? What materials were used to make them? How were the materials obtained? My point is, people are not unaware that we are stripping earth’s natural resources to support our daily activities.

In the past, when humans were still one with the nature, mankind depended on nature for basic survival. Today we depend on nature not for basic survival, but for greater comforts which un-coincidentally shares a positive relationship with economic development. We overconsume finite resources like fossil fuels and metals which had no economic value in the prehistoric age, in turn resulting in adverse effects on the environment which never was an issue before the age of humans.

We know the problems, yet we still continue with our lives the way it is as we have a more pressing need for profits than saving the earth. Due to capitalism, people (hence the government) are more obsessed with making money and profits gained precedence over other aspects of life, including the environment. “The point is that environmental pollution is driven by economic necessity under capitalism. Within the existing political-economic context, drastically decreasing pollution can only be brought about by economic recession.”[1]

Is capitalism really such a horrendous system?
Are capitalistic methods such as carbon credits be a solution from a problem that stems from capitalism? 

Being capitalistic involves being self-interested, hence we tend to prioritise, even our values and principles against societal ones. Even though I am not pro-capitalist, I have to admit this system is rather effective. The competitive nature of this system is what brought about the Anthropocene, where many innovative technological advancements surfaced and mankind have achieved many milestones. The environment may have been neglected, or even alienated as a result of our greed. Nevertheless, firms down the supply chain will still have to address environmental issues eventually as we are never really alienated from the nature as resources for human activity stems from nature. Or simply because as people get richer they demand for a clean (and probably green) environment. Since capitalism manipulates the idea of self-interest, there will always be a place for the environment in capitalism as a person’s environment is always part of their self-interest. It may seem otherwise today as the environmental problems are either not close to us, or are still tolerable. In time to come, these problems would be impossible to ignore and capitalism would work its magic. However, will it be too late? And, will the poor be saved from the pending catastrophe?

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[1] Adapted from Global Political Ecology by Richard Peet, Paul Robbins and Michael Watts

Private sector and community working hand in hand?

I have to make it known that some of my posts, including this post are adopted from my free response writing essays for another module, Green Capitalism.

This post is a response to this article: Renewing the Penobscot

Summary of the Article:
There are many damns built along the river in Penobscot, which resulted in a series of social and environmental problems, upsetting different parties including the locals and environmentalists. Then come along this guy named Scott who managed to bridge the gap between the hydroelectric company and the community.

Scott's story in Penobscot was a beautiful one. It shows that people with different interests can actually come together to help resolve socio-environmental issues proving positive changes possible - as long as the people are determined to make it work. In this case, asking a hydroelectric company to shut down her dam seems like an impossible idea. Yet the team managed to come to a consensus that the dam is to be removed, and the firm was agreeable as there were series of modest energy enhancements to sustain the firm’s generating capacity. It was a beautiful story with a great outcome in which all stakeholders benefitted eventually.

Yet the undeniable truth is that these are anomalies.

As technology advances, mankind are less and less dependent on the natural environment for sustenance. For instance, fossil fuels are finite and decreasing at an appalling rate. Governments are looking for alternatives to provide for energy but are spoilt for choices as there are so many different means of energy generation today. The worry that our future generations will not have sufficient resources can be easily resolved with technological innovation. The bigger issue is, will everyone be able to get access to the technology, or will some be left behind?

The problem lies in the fact that these producers choose to turn a blind eye to the environmental and social consequences and risks associated with these economic activities, which stems from outsourcing. Most developed countries have stringent environmental laws in place, policies to protect the well-being of the people hence it is very troublesome and expensive for production of certain goods in their home countries. This resulted in a shift of pollutive industries to cheaper alternatives with lesser red tape, generating more pollution than before.

The simple underlying problem is that the pollutants are not directly affecting the people running these firms. If the stakeholders of a chemical plant were to live in the vicinity of the plant, the plant is sure to produce minimal polluted air, process its waste properly and ensure that the plant would not blow up. The truth is, these stakeholders are probably across the globe in the comforts of their home, wondering how to further reduce cost of production, especially if outsourced to places with lenient rules and regulations in place. Firms generally are purposefully oblivious to these issues.

Hence I was greatly moved by Penobscot’s success in making things work. Not many firms would be willing to take this step, knowing that there could be economic losses but still invested time and money to hear the community out, and even benefitted from it eventually. Even though it was a small step towards saving the environment, it is a significant one which marks the start of Penobscot’s journey to saving their environment.