G CRUNCHING THE NUMBERS

A PRICE ON

NATUREEconomists and environmentalists have traditionally clashed heads.

But what if we can get the two to work together?We take a back-to-basics look at green economics.

WORDS BY SUE WHITE

AS ENVIRONMENTALISTS PUSH FOR THE PRESERVATION OF NATURAL RESOURCES, THERE ISCONTINUED RESISTANCE FROM THOSE WHO VIEW THIS AS ECONOMIC SUICIDE, IF WE'RE TOBATTLE CLIMATE CHANGE EFFECTIVELY AND INTRODUCE ANY KIND OF TURNAROUND FOR OURFUTURE, ENVIRONMENTALISTS WILL NEED TO ENGAGE WITH ECONOMISTS AND BUSINESS LEADERS.

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Green economics is a reality thatyoung environmentalists are startingto tune in to. Katerina Kimmorley,23, is an alumni of the Centre forSustainability Leadership. "I was anidealistic environmentalist, then I realisedno one will take on these great ideasunless the project also demonstrates anunderstanding of the economic systemin which they are going to be placed,"she says. "Economics - looking at therate of growth of the economy inflation,distribution of finite wealth and budgetdeficits - is what the people with powerknow and understand, and pushing abarrow when you don't understand thekey metrics of decision-makers is futile."

With an honours degree in economicsmajoring in energy markets guiding her,Kimmorley points to three key economicfactors she believes are currentlyhampering environmental progress."Perpetual growth, not valuing naturalresources and discounting the futureare all keys to why our economy is notworking for the environment," she says.

What is a green economy?

The distinguishing feature between traditional free marketeconomics and green economics is that the latter directlyvalues nature's resources and services as having economicvalue. This approach results in improved social equity andhuman wellbeing, while taking into consideration the Earth'slimited natural resources and risks to the environment.

According to Pavan Sukhdev, project leader of the UnitedNation Environment Programme's Green Economy initiative,we live in a society that depends largely on market prices toindicate value, yet we don't measure environmental valuein these terms. "The [environment's] economic invisibility isfundamentally the reason we let things get destroyed, andthat's not good for anyone," he says. "Bees and insectsare pollinators, but you don't get invoices from bees."

Economics is whatthe people with

power know andunderstand.

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G CRUNCHING THE NUMBERS

Jennifer Westacott, KPMG's partner incharge, sustainability, climate change andwater says a green economy is emerging,but slower than some might like.

"The concern KPMG has is that it's nothappening fast enough. Ultimately wecan't go on preserving the environment incompetition with the economy, we haveto find a way of growing the economy thatpreserves the environment," she says.

The growth of industries focussedon delivering green products andservices, renewable energies, low-carbontransport, energy-efficient buildings,clean technologies, turning waste into aresource, sustainable agriculture, forestrymanagement and sustainable fisheries areexamples we're seeing as a shift toward agreener economy.

Such developments are a new enginefor growth, employment and alleviatingpoverty, according to Sukhdev.

How do we create a green economy?

Westacott says we all need to start understanding the economicrealities of the cost of resources in our supply chain. "We haven'tbeen pricing water and energy properly in terms of their long-term renewability Businesses may see some of these resources asan infinite supply, and not factor the full cost or potential scarcityof them into their long-term business planning."

There are also less tangible factors - such as the loss ofbiodiversity, or ecosystem degradation - that are not reflected inthe price of goods. These are considered 'externalities'.

"When we buy a plastic bottle the transaction is between usand the retailer, but there are a range of externalities occurringthat aren't costed in," says Ben Eltham, fellow with progressiveAustralian think tank, the Centre for Policy Development. "Forexample, the waste that is created by that transaction, or thecost of the bottle being cleaned up by council and sent to landfill,"he explains.

We aren't saying there's no spirirtualand societal value to nature, but just thatit also has economic value.

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Humans love an incentive

"The reason why we are unable to find a global solution tothe problems of environmental sustainability is that manygovernments and people in them don't have strong enoughincentives to worry about it. So, they take actions which are notconsistent with long-term environmental sustainability," warnsFabrizio Carmignani, formerly an economist with the UN, now asenior lecturer at the University of Queensland.

"In Cameroon [Africa] they have fantastic rainforests thatare being depleted at quite a fast rate. Local people cut downthe trees because they have absolutely no other economicalternative. We can't go to them and explain the long-term

importance of the forests; they wouldn'tcare because that's the only way theycan make a living. So we have to makethe protection of forests in their owninterests," Carmignani says.

Closer to home, Eltham points to SouthAustralia's waste policies as a successfuluse of incentives in encouragingsustainable consumer behaviour. "For along time they had compulsory deposit/return schemes, and now you get paid forreturning empty bottles," he says.

As Sukhdev continues to lobby globallyfor a price on nature, he believes botheconomists and environmentalists needto change their thinking.

"We aren't saying there's no spiritualand societal value to nature, but justthat it also has economic value. So whyaren't we reflecting that in the accountsof society? It's not either/or: it's both. Whynot account for it?"

THE MINING TAX