On Earth Day, sorting the numbers
By Policy Director Jim DiPeso
AN HISTORICAL DOCUMENT: The following op-ed was published on April 22, 2002, in the Philadelphia Inquirer, Milwaukee Journal-Sentinel, Birmingham News, Albuquerque Journal. An except was published in the Charlotte Observer.
When Enron cooked its books by hiding huge liabilities in elaborate shell games, the house of cards tumbled, investors were left cheated, and employees were left broke. Likewise, we’re in danger of overspending what we’ve been given by the environment, creating the possibility of widespread suffering and loss.
Consider the environment in financial terms, as a stock of “natural capital” that pays “dividends.” The environment pays many dividends in the form of essential life-support services – oxygen production, water purification, water storage, topsoil formation, waste recycling, and climate stability.
Natural capital is made up of ecological communities – plants, animals and microbes working together in forests, grasslands, coral reefs and other natural areas to deliver environmental services reliably, like a quarterly dividend check from a blue-chip company.
The world’s stock of natural capital and the value of the annual dividend are enormous. A rough calculation by University of Maryland ecological economist Robert Costanza puts the value of environmental services at $36 trillion per year, equal to about 82 percent of annual gross world product. The estimate is an incomplete approximation, however, since many environmental services could not be replaced with any known engineered substitutes, at any price.
Next, imagine we’re managing the world’s natural capital like a shell game, spending down the principal and reporting fabulous profits, while hiding liabilities with tricky bookkeeping. It’s not hard to see that disastrous consequences would be inevitable. Once the capital is frittered away, the dividends will disappear.
The Enron scenario is disturbingly close to the way the world’s natural capital is treated today. The principal is being liquidated but the proceeds are tallied as income. Liabilities, such as rampant pollution, loss of biodiversity and ecosystem destruction – to the extent they’re recognized at all – are kept off the books.
This state of affairs is not the product of diabolical minds. Instead, it is the consequence of conventional economic models, which are rooted in cultural notions that ignore or even deny the reality of humanity’s interconnection with nature.
As a result, conventional economic measures don’t say much about the depletion of natural capital resulting from overpopulation, inefficient consumption, and ever more powerful industrial technologies. Yet the depletion is no less real.
Consider the following:
Seventy percent of world fish stocks are fully exploited or overfished. Meanwhile, half the coral reefs, mangroves and sea grasses that serve as nurseries for marine life are in danger of degradation from destructive fishing practices and climate change.
Water resources are imperiled by pollution, draining of wetlands and overexploitation. By 2025, nearly half the world’s population will face water scarcity.
Wild forests are being cleared for mining, logging, grazing and development. More than 60,000 square miles of wild tropical forests are lost every year.
Greenhouse gas emissions are upsetting atmospheric processes that have produced a stable climate and enabled civilizations to flourish. A changing climate will exacerbate the pressure on water supplies, forests and farmland.
The first step toward reversing the tide is truthful accounting. Accurate reporting of environmental assets, liabilities, income, and costs will help us begin grasping the value of natural capital, understanding the consequences of depletion, and devising effective measures to protect what’s left. To help our leaders make better informed decisions, environmental indexes should be as widely reported and broadly accepted as the gross domestic product.
Honest environmental accounting is more than a new system of bookkeeping. It’s a way of rediscovering our connections to nature and ensuring a high quality of life. Keeping our natural capital healthy is the smart investment choice for ourselves. As Dwight Eisenhower said in his farewell address,
“As we peer into society’s future, we – you and I, and our government – must avoid the impulse to live only for today, plundering for our own ease and convenience, the precious resources of tomorrow.”