(This is Part 4 of a series. Go back to Part 3.)
A third type of hurricane lying in wait is the ecological one. Though at this time the ecological hurricane seems to be farther offshore than the others, it has the potential to be the most powerful storm of all.
Though I've talked about them elsewhere, a brief catalog of signs can be recounted here. Each of these phenomena is a canary in the mineshaft, so to speak, signaling us that something is off. Taken together, they are warning of an impending catastrophe:
–The planet getting warmer.
–Weather becoming more violent.
–Glaciers melting.
–Mountain icecaps receding.
–Forests and jungles disappearing.
–Species becoming endangered/extinct.
–Fisheries becoming depleted.
–Increasing toxins in air and water.
–Rising rates of cancer and mutations.
–Increasing water shortages.
...and so on. Though many laudable efforts have been
and are being made to counter the causes of ecological decline, a true sense of global urgency will be needed to achieve a sustainable planet.
It may seem ironic to many, but probably the single most helpful step that can be taken to assist and restore nature is, in George Musser's words, "to hang a price tag on her."
Some people maintain that it is demeaning to nature to attach a price tag to her benefits. But perhaps it actually honors nature, for it may be the very thing that could save her (and thus ourselves as well). How? When nature's benefits have price tags, those benefits can enter into business and economic calculations for the first time.
As things stand now, nature is mostly invisible in market calculations. Economic statistics do not take account of the many benefits provided by nature, and as a result the economic statistics are distorted.
For instance, if we clearcut a forest and sell the lumber, GDP will rise. Yet we've actually lost an invaluable asset that could provide benefits for generations to come. In other words, a loss has been incurred that, in economic statistics, shows up as a gain.
That's distortion. This gross distortion of the price of lumber, as an example, prevents the price mechanism from working its wonders to provide incentives towards an ecologically sustainable lumber industry.
The price mechanism is a very powerful force, since it automatically tends to allocate resources in the most efficient ways. However, like electricity or fire or other powerful forces, it can help us or hurt us depending on how wisely it is used.
For example, activities such as mining, farming and driving all have a heavy impact on the environment,
yet their ecological costs remain largely absent from economic calculations. Because the full cost of these activities is not accounted for, there is little economic incentive to conserve nature in performing them.
So the question naturally arises: How to best incorporate the immense power of free markets in order to benefit and preserve nature? How can we make nature part of the "price" of various business and economic activities?
A really good way to do this is to use a process known as cap-and-trade. An example always helps in clarifying:
Let's say you want to cut sulpher emissions from power plants. First the government sets the goal: this many tons of emission will be allowed in total. Then from that total the government (or some authorization agency) creates
standardized permits.
Each permit allows a standardized unit of sulpher to be emitted, let's say one ton of sulpher. If you're a power plant, you must have one of these one-ton permits for each ton of sulpher you emit.
Then the relevant agency simply auctions off the available permits to the highest bidders. Those power plants that are least efficient and emitting the most sulpher will need the most permits and will wind up paying the most money to obtain them.
However, this creates a powerful incentive for inefficient power plants to invest in more efficient processes that will emit less sulpher and need fewer permits.
From there you let the free market operate. Each power plant will face a trade-off between buying permits to allow pollution and investing in equipment to become less polluting. The point is that each power plant will make their own decision, depending upon their own particular situation, yet the overall pollution cap is achieved.
And then, every few years or whenever, the government or the regulatory body lowers the overall cap of emitted sulpher—but again allows the free market to determine how that cap is to be achieved.
The genius of this system is that it combines the best features of government and the free market. Government sets the overall goal, but then creates a market in sulpher permits (or whatever) that allows the price-mechanism of the free market to determine, in the most efficient way, how that goal will be reached.
In fact, this is exactly what was done in 1990 when the United States set up the first cap-and-trade system. But the principle applies everywhere. For instance:
Cap-and-trade is being used to set limits on overfishing in the U.S. and New Zealand. Fishermen bid for permits that allow them to "harvest" a certain amount of fish. This is beneficial to all, including fishermen, because it allows fisheries to operate at a sustainable level.
The European Union has set up the first market in carbon dioxide. Costa Rica and Mexico have set up markets in units of forest preserved. The U.S. has set up a market in acres of wetland preserved or restored. And so on.
Further, those countries that lead the world in sustainable technologies such as renewable energy, efficient cars and buildings and ecological restoration will gain enormous economic advantages as these technologies become huge businesses and are exported to the rest of the world.
Properly conceived, business and the environment are not at odds. On the contrary, when nature is accounted for economically, profitable business and a sustainable environment are seen to be two wings of the same bird.
(This is the end of Part 4. Go to Part 5.)
—jim sloman, 9.9.05
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