GDP measures economic activity, but not the worth of that activity. Putting environmental factors into top level judgments of national economies is a big step towards sustainability
? Valuing ecosystem services: From 'reversing entropy' to the price of voles
The influential OECD is to incorporate green factors, including biodiversity, into its general economic assessments.
That was the bombshell from this morning's session at the Smith School world forum on enterprise and the environment, revealed by the OECD's Simon Upton. "We will mainstream this in economic surveys of member countries" starting from 2012, he said.
Why is that important? Because all economies are currently judged on GDP. That is a good measure of activity but, for example, values equally rebuilding cities after flooding and building defences to prevent that flooding. Incorporating measures reflecting the health of the environment completely changes this, as laid out on the UN's report on the economics of ecosystems and biodiversity last year. That report, for example, concluded that companies were causing $2.2 trillion a year of damage to the environment.
The more nations are judged on how well they conserve nature and the services it provides, the harder it will be for companies to dump their waste into the environment for free. The OECD move is the first I have heard from any major group to put green indicators into mainstream economic indicators.
(Note: Speaking to Upton after his talk he made clear that it will start with commentary on how well countries are managing their natural capital. Getting agreement on numerical indicators will take time, he says, but he thinks carbon intensity of production is good for energy and nitrogen flux for food.)
Upton also highlighted the scandal of fossil fuel subsidies: $300bn globally in 2009, many times the money spent on renewable energy.
Update 1.30pm: PepsiCo are represented here by Derek Yach, senior vice president for global health and agricultural policy. He acknowledged that the presence of the manufacturer of fizzy, sugary drinks might strike some as odd at an ecosystems forum, but told an interesting story.
He said his CEO, Indra Nooyi, had over the last year or two asked the company's top lawyer to investigate what legal responsibilities PepsiCo had in environmental protection, in addition to reputational or social responsibility duties. He told her that legal responsibilities are getting stronger and stronger, though Yach didn't give examples.
Pavan Sukdhev, who led the UN's huge report on the economics of ecosystems and biodiversity. We reported a lot on that last year, but the highlights he raised are well worth revisiting.
Sukdhev said that "externalities", the damage caused by companies that they do not pay to clean up, amount to $2.25 trillion a year, or 33% of all their profit. That led to the toughest problem in stopping the damage: the lack of recognition in private sector of their impact on the environment. Another big challenge was in getting governments to use public money for public good, by investing in ecosystem protection, which can have huge internal rates of return, e.g. 75% for grasslands.
James Griffiths, from WBCSD, which represents 200 global companies, noted there was $1.35 trillion of natural capital loss per year - about the same as the GDP of of the UK.
Update 4.30pm: It's been a mind-expanding day, so here's just a few more thoughts from the forum.
? International agreements: The OECD's Simon Upton noted that there have been at least 145 international agreements made on environmental issues over history, stretching back to fishing rights in middle ages in the Baltic sea. "But one thing has not changed," he said. "Implementation remains entirely in hands of nation states." The current UN convention on biological diversity "preserves absolutely the right to exploit national resources", he said. "But we now live in world in which commerce runs globally."
? Economic growth and population: Upton also pointed out just how big the challenge posed by economic growth is. Global GDP in 2010 was $70 trillion: by 2050 it's predicted to be $300 trillion. "The current path of development will continue drive biodiversity loss. We have huge efficiencies to achieve if we are to achieve that growth on a planet that remains liveable."
Trista Patterson, an adviser to the US Forestry service and TEDx speaker, pointed out an inconsistency in economic conventional thinking. "In order to be more willing to pay to protect ecosystem services you need to earn more money and so you need to [according to conventional thinking] to use more natural resources."
That's the vicious circle that underpins the idea that protecting the environment is a luxury only affordable in good times, I think. Once you understand that prosperity in a globalised world with seven billion (and rising) people depends on a healthy planet, the stupidity of that thinking leaps out.
Patterson also raised the new UN population estimates for 2100 ? up from a peak of nine billion to 10 billion - as a serious issue. "That extra 1bn is massive. It's a major error that we are not devoting our full resources to that issue."
She had another line I liked: "We used to talk about planetary life support systems, like banks, being too big to fail. They are not."
? Green versus black in China: My colleague Jonathan Watts has admirably charted the race between the enormous low-carbon efforts in China, which run alongside that nation's vast and rising emissions. Professor Ouyang Zhiyun, of the Chinese academy of sciences, neatly illustrated the same tension.
He noted that 45 billion tonnes of soil ? upon which human life depends - is lost each year. And a few minutes later, told us that the state had set up ecological finance systems to pay local county authorities for conservation: a cool $4bn a year.
Finally, there are video interviews of Pavan Sukdhev and other forum speakers, if you want more.
Keep tuned for more from this summit on Thursday, here on my blog and on twitter @dpcarrington and #SSWFEE.
Source: http://www.guardian.co.uk/environment/damian-carrington-blog/2011/jun/29/green-economy-biodiversity
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