A growing body of writing, loosely known as “ecological economics,” is emerging in academic and business circles around the world. Ecological economics is an integrated philosophy that recognizes that our material lives are intimately bound up with the natural world. The focus, furthermore, is on the whole spectrum of human needs, including health, social justice, and community well-being, and not primarily, as in traditional economics, on production, consumption and the acquisition of wealth.
Both “ecology” and “economics” are rooted in the same Greek word “oikos,” meaning a home or dwelling. Ecology is the study of the home, economics is the management of the home. The ecological studies have been done; how we now manage our only home, Mother Earth, will determine whether we survive as a species.
Ecological economics encompasses the notion of the “steady state” economy promoted by contemporary theorists like Herman Daly and Robert Costanza. The central feature of this type of economy is that economic growth has prescribed limits established by nature. The overarching aim of a steady state economy is balance and stability: not only ecological and economic, but social stability as well. The concept of the “stationary state” economy with growth limits was first proposed by John Stuart Mill in 1848.
The no-growth paradigm is aptly illustrated by the prominent Quaker economist, Kenneth Boulding’s analogy of a spaceship. In a lecture entitled Earth as Space Ship delivered in 1965, Boulding argued that, like a space ship, we live in a finite ecological system and that our survival depends on maintaining a delicate symbiotic relationship with the natural world.
Financial risk assessment procedures in our economy are based largely on cost-benefit analysis. Cost-benefit analysis reduces, not just economic, but all variables, such as health, safety, and the environment, to statistical and monetary terms. How harm can be minimized in the short run is the underlying question that determines business decisions – concern for the long term impact is minimal. Profits, stock prices, and dividends all drive the financial system to focus on the short term and not on the long term future.
A new world order shaped by the impact of pollution and global warming on public health, rapidly increasing social inequality and emerging ecological economic principles will refocus risk management on the precautionary principle. The burden of proof will shift to the proponents of policy initiatives to demonstrate unequivocally that no harm will ensue from any decisions, both in the present or in the future. What is the potential for harm will become the underlying question for business decisions.
Sir Nicholas Stern, former Chief Economist of the World Bank, makes a cogent case for introducing precautionary measures now to stave off future disasters. He suggests that the cost of immediate action to reduce the risks associated with climate change will be much less than the long term costs if we do nothing. Essentially, he is arguing that precautionary prevention to mitigate global warming today will be a lot less painful than the social, economic, and ecological fallout from climate chaos in the future.
Is any price too high to protect the health of the planet is the question asked by ecological economists. Trade-offs that jeopardize the future are unacceptable and in all our long term economic decisions, we have a moral obligation to err on the side of caution. The precautionary approach is the ethical basis of ecological economics.
A central feature of ecological economics is green and renewable energy. Driven by shortages, increasing prices, and global warming, renewable energy will initiate a new industrial revolution and gradually replace our traditional finite energy sources.
Oil and natural gas production has peaked and declining output will soon push prices up again. Coal is dirty and “clean coal” is still a fantasy fuel. Manufacturing hydrogen is dependent on vast supplies of electricity while nuclear energy is ruinously expensive and the waste is toxic for millennia.
Solar, wind, geothermal, biomass, water and tidal power all offer exciting opportunities to green the energy grid. Countries like Japan (hybrid cars), Denmark (wind), Germany and Spain (wind and solar) have a formidable lead in renewable energy technology. However, promising catch-up initiatives are at last underway in California and Ontario and other parts of the continent.
Technological initiatives constitute a major thrust of ecological economics. But these are the micro-technologies based on the philosophy of Fritz Schumacher’s classic book, Small is Beautiful. They are not the mega, unproven technofixes, such as carbon capture and storage.
Micro-generating units for solar, wind and hydro are less environmentally destructive than the huge centralized coal and nuclear plants. If Canada can design and build advanced nuclear reactors, why can our scientists not create micro-generators for renewable energy? Feed-in tariffs, based on the German model, allow residents and business to sell their power directly into the grid. Similar programs are being introduced all over North America, including Ontario.
Micro units not only localize economic activity, they also eliminate the network of expensive and unsightly transmission lines that criss-cross the countryside. In addition, electro-magnetic radiation emanating from these lines is a major heath concern. The massive lines and towers have disadvantages other than aesthetic, health and cost: they are subject to ice and wind storms and they lose power in transmission, especially in hot summer weather.
Although micro-technology is important in improving energy efficiency and extending the life of resources as well as reducing pollution, our initial efforts must be focused on eliminating energy waste. Conservation is at the heart of ecological economics.
Before resorting to technological improvements, we must first modify our own behaviour, such as our consumption levels and lifestyles. Technology must follow individual restraint. Amory Lovins, founder of the Rocky Mountain Institute, uses the concept of a “negawatt” (a megawatt not used) to illustrate that it is far less expensive to conserve a unit of electricity than to build an additional unit of supply.
Normally, if customers reduce their electricity consumption by conserving energy, the utility loses money because sales and revenue drop. Through tax incentives, California allows the utilities to retain some of the savings as profit, thereby “decoupling” their revenues from sales. The utilities save even more money because with reduced demand, there is less need for costly expansion of their supply generation. California has led the way in promoting energy efficiency for decades, so successfully that per capita consumption has remained flat for the past 25 years.
Decoupling and demand reduction is an example of the “negawatt” principle at work. Not rewarding consumption is also a revolutionary break with orthodox economics and its obsession on multiplying the market and expanding production. These are some of the developments that exemplify the spirit of an emerging alternative economic order to the traditional market capitalist model.
Business and neo-classical economists often refer contemptuously to attempts to change our consumption behaviour as “social engineering.” At the same time they promote “geo-engineering” – expensive, unproven methods, such as carbon capture – to mitigate global warming. The choice is ours. The future will have no choice.
The meltdown in the North American automobile industry is a warning for all energy-intensive and polluting manufacturing. Future employment growth will be concentrated in the “green” sectors, such as public transportation, waste recycling, renewable energy generation and smaller, energy efficient automobiles.
Recycling industries will offer increased employment as we exhaust our supply of natural resources. Just as tailings dumps are being remined by gold companies because of scarcity and surging gold prices, so will we soon be mining garbage dumps for metals and plastics. One of the advantages of resource depletion will be the end of our wasteful, throw-away habits.
The downsizing of the world trading system as a result of declining oil reserves will also change the nature of employment. Supply lines for food and manufactured goods will become unsustainable and we will become increasingly dependent on local production. Communities will be revitalized; they will once again become the centre of work, energy generation, and cultural activities.
Food production will also become increasingly local because of rising transportation costs. Lengthy supply lines will curtail the operation of mega factory farms, feedlots and centralized meat plants. The advantages of economies of scale, a cherished principle of modern business practice, will be neutralized by rising transportation costs. One benefit of smaller local abattoirs for meat processing will be a reduced incidence of salmonella, listeria and swine and avian flu.
Food policy is a contentious issue among ecological economists. Although rising fuel costs will shorten supply lines, the impact of “food miles” (the distance food is conveyed) on global warming may have been exaggerated. Transportation probably only accounts for 10 percent of the total greenhouse gas emissions generated by our food system. Over half the greenhouse gas emissions of the food system are actually created on the farm.
The environmental impact of food is determined largely by the production process, such as petro-chemical dependent monoculture and by the type of farming, such as beef, for example. Animal agriculture is the real climate curse. It is estimated by the UN Food and Agriculture Organization that at least 20 percent of total global greenhouse gases are generated by livestock farming.
Although many ecological economists are not vegans, we should all consider eating far less meat and dairy products, more plants and grains, and seasonal, organic and local produce when possible. By our preferences and our purchases, we can build an eco-agricultural system that is healthier for us and for the planet.
Economic growth is not a measure of progress or prosperity. We have devised accounting systems, such as the Gross Domestic Product (GDP), that do not accurately reflect the negative effects of unrestrained growth on both our social and ecosystems. GDP only measures activities - everything from jobs and sales to auto accidents and oil spills - that contribute in dollar figures to the economy. In Paul Hawken’s words: We are stealing the future, selling it to the present, and calling it gross domestic product.
We have to redefine progress and prosperity as something other than material and monetary wealth. Ecological economists are promoting alternative indexes, such as the Canadian Index of Wellbeing and the Genuine Wealth Index to reflect more accurately the impact of economic activity on society and on nature. Broader assessment criteria for these indexes include happiness, job satisfaction, volunteer work and sustainability, as well as accounting for negative factors, such as clear-cut forests, crime, and social inequality.
The alternative indexes are an attempt to slow the metabolic rate of consumer turbo-capitalism by designing accounting systems that measure both the costs and benefits of economic growth. Only by synchronizing the balance sheets of nature and the economy on the basis of true costs, can we establish a sustainable bottom line for the planet.
A close corollary to ecological accounting systems is true-cost pricing. Frequently, prices do not reflect the full costs of production. For example, some companies use the atmosphere as a free dumping ground for their carbon dioxide emissions. Delinquent companies also release mine tailings into lakes and oil residues into ponds that in turn leech toxins into rivers – all at no financial cost to the corporate bottom line.
We are not costing these “externalities” of business activity – nor their impact, such as global warming and diseases, like asthma – in our national accounts, and nor are we including them in the price of the final product. More seriously, by concealing all the negative externalities, we are free-loading on the environment at the expense of future generations.
True-cost pricing is a major tenet of ecological economics, whether it is accounting for externalities in the production process or government subsidies for agriculture or tax write-offs for the oil industry. The pricing process under our present business model is distorted: it favours corporations at the expense of nature and it encourages consumption at the expense of conservation.
North American governments subsidize a range of economic activities from petroleum products to nuclear energy to agriculture. Subsidies are one area where governments can remove themselves from the economic process – and free themselves from the iron grip of lobbyists – with relative ease. A commitment by politicians to true-cost pricing would be a responsible environmental and economic initiative.
Perhaps the most perverse subsidy of all, after the tar sands and nuclear energy, is for corn-based ethanol. It is a subsidy that has created serious social problems, such as food shortages, and environmental disasters, like the dead zone in the Gulf of Mexico caused largely by fertilizer run-off from the corn belt. It now appears that corn ethanol generates more emissions than the gasoline it replaces. Eliminating agricultural subsidies would level the growing field for all farmers.
Death and taxes may be the only certainties in life but there is another sinister twist to the old adage. Because of the immense size of the average North American’s ecological footprint, the nature of the taxation policies of our governments could shape the long term health of the planet. But it is the preferences of the electorate that actually shapes taxation policies: our demands for ever lower income, sales, property and corporate taxes simply fuels environmentally destructive consumption.
An ecological taxation policy will revise current policies and priorities. Tax rates on resource depletion, garbage, atmospheric emissions, and overconsumption have to be increased to protect nature. Cutting the GST by 2 percentage points has cost Canada billions of dollars of revenue that could have been devoted to environmental reconstruction instead of stimulating more wasteful spending. Under a green tax shift, less destructive factors, such as renewables, labour, and personal savings would receive lighter treatment. Taxation policies in future must be based on the “polluter pays” principle.
There is general consensus among ecological economists that the most effective way of curbing greenhouse gas emissions is to impose a carbon tax on all fossil fuels. It is a simple and transparent tax and the revenue can be redistributed so that the poor are not adversely affected by higher energy prices. Carbon taxes have worked successfully in Sweden for a number of years.
An alternative mechanism, known as “cap and trade,” is more popular with business and governments, largely because it is not as politically loaded a term as “carbon tax” and it is “market-based.” Cap and trade is a carbon emission trading system and it is basically an international market in pollution credits. It does not have the same immediate impact on reducing emissions as a carbon tax does and it is also more difficult to implement.
Ecological economics is a philosophy based on the notion of interconnection, balance, and sustainability. If we can balance our lifestyle demands with the biocapacity of the planet and recognize the importance of biodiversity, nature will regenerate and replenish its resources indefinitely. Nature, after all, is the base that anchors and sustains all economic activity.
Both “ecology” and “economics” are rooted in the same Greek word “oikos,” meaning a home or dwelling. Ecology is the study of the home, economics is the management of the home. The ecological studies have been done; how we now manage our only home, Mother Earth, will determine whether we survive as a species.
Ecological economics encompasses the notion of the “steady state” economy promoted by contemporary theorists like Herman Daly and Robert Costanza. The central feature of this type of economy is that economic growth has prescribed limits established by nature. The overarching aim of a steady state economy is balance and stability: not only ecological and economic, but social stability as well. The concept of the “stationary state” economy with growth limits was first proposed by John Stuart Mill in 1848.
The no-growth paradigm is aptly illustrated by the prominent Quaker economist, Kenneth Boulding’s analogy of a spaceship. In a lecture entitled Earth as Space Ship delivered in 1965, Boulding argued that, like a space ship, we live in a finite ecological system and that our survival depends on maintaining a delicate symbiotic relationship with the natural world.
Financial risk assessment procedures in our economy are based largely on cost-benefit analysis. Cost-benefit analysis reduces, not just economic, but all variables, such as health, safety, and the environment, to statistical and monetary terms. How harm can be minimized in the short run is the underlying question that determines business decisions – concern for the long term impact is minimal. Profits, stock prices, and dividends all drive the financial system to focus on the short term and not on the long term future.
A new world order shaped by the impact of pollution and global warming on public health, rapidly increasing social inequality and emerging ecological economic principles will refocus risk management on the precautionary principle. The burden of proof will shift to the proponents of policy initiatives to demonstrate unequivocally that no harm will ensue from any decisions, both in the present or in the future. What is the potential for harm will become the underlying question for business decisions.
Sir Nicholas Stern, former Chief Economist of the World Bank, makes a cogent case for introducing precautionary measures now to stave off future disasters. He suggests that the cost of immediate action to reduce the risks associated with climate change will be much less than the long term costs if we do nothing. Essentially, he is arguing that precautionary prevention to mitigate global warming today will be a lot less painful than the social, economic, and ecological fallout from climate chaos in the future.
Is any price too high to protect the health of the planet is the question asked by ecological economists. Trade-offs that jeopardize the future are unacceptable and in all our long term economic decisions, we have a moral obligation to err on the side of caution. The precautionary approach is the ethical basis of ecological economics.
A central feature of ecological economics is green and renewable energy. Driven by shortages, increasing prices, and global warming, renewable energy will initiate a new industrial revolution and gradually replace our traditional finite energy sources.
Oil and natural gas production has peaked and declining output will soon push prices up again. Coal is dirty and “clean coal” is still a fantasy fuel. Manufacturing hydrogen is dependent on vast supplies of electricity while nuclear energy is ruinously expensive and the waste is toxic for millennia.
Solar, wind, geothermal, biomass, water and tidal power all offer exciting opportunities to green the energy grid. Countries like Japan (hybrid cars), Denmark (wind), Germany and Spain (wind and solar) have a formidable lead in renewable energy technology. However, promising catch-up initiatives are at last underway in California and Ontario and other parts of the continent.
Technological initiatives constitute a major thrust of ecological economics. But these are the micro-technologies based on the philosophy of Fritz Schumacher’s classic book, Small is Beautiful. They are not the mega, unproven technofixes, such as carbon capture and storage.
Micro-generating units for solar, wind and hydro are less environmentally destructive than the huge centralized coal and nuclear plants. If Canada can design and build advanced nuclear reactors, why can our scientists not create micro-generators for renewable energy? Feed-in tariffs, based on the German model, allow residents and business to sell their power directly into the grid. Similar programs are being introduced all over North America, including Ontario.
Micro units not only localize economic activity, they also eliminate the network of expensive and unsightly transmission lines that criss-cross the countryside. In addition, electro-magnetic radiation emanating from these lines is a major heath concern. The massive lines and towers have disadvantages other than aesthetic, health and cost: they are subject to ice and wind storms and they lose power in transmission, especially in hot summer weather.
Although micro-technology is important in improving energy efficiency and extending the life of resources as well as reducing pollution, our initial efforts must be focused on eliminating energy waste. Conservation is at the heart of ecological economics.
Before resorting to technological improvements, we must first modify our own behaviour, such as our consumption levels and lifestyles. Technology must follow individual restraint. Amory Lovins, founder of the Rocky Mountain Institute, uses the concept of a “negawatt” (a megawatt not used) to illustrate that it is far less expensive to conserve a unit of electricity than to build an additional unit of supply.
Normally, if customers reduce their electricity consumption by conserving energy, the utility loses money because sales and revenue drop. Through tax incentives, California allows the utilities to retain some of the savings as profit, thereby “decoupling” their revenues from sales. The utilities save even more money because with reduced demand, there is less need for costly expansion of their supply generation. California has led the way in promoting energy efficiency for decades, so successfully that per capita consumption has remained flat for the past 25 years.
Decoupling and demand reduction is an example of the “negawatt” principle at work. Not rewarding consumption is also a revolutionary break with orthodox economics and its obsession on multiplying the market and expanding production. These are some of the developments that exemplify the spirit of an emerging alternative economic order to the traditional market capitalist model.
Business and neo-classical economists often refer contemptuously to attempts to change our consumption behaviour as “social engineering.” At the same time they promote “geo-engineering” – expensive, unproven methods, such as carbon capture – to mitigate global warming. The choice is ours. The future will have no choice.
The meltdown in the North American automobile industry is a warning for all energy-intensive and polluting manufacturing. Future employment growth will be concentrated in the “green” sectors, such as public transportation, waste recycling, renewable energy generation and smaller, energy efficient automobiles.
Recycling industries will offer increased employment as we exhaust our supply of natural resources. Just as tailings dumps are being remined by gold companies because of scarcity and surging gold prices, so will we soon be mining garbage dumps for metals and plastics. One of the advantages of resource depletion will be the end of our wasteful, throw-away habits.
The downsizing of the world trading system as a result of declining oil reserves will also change the nature of employment. Supply lines for food and manufactured goods will become unsustainable and we will become increasingly dependent on local production. Communities will be revitalized; they will once again become the centre of work, energy generation, and cultural activities.
Food production will also become increasingly local because of rising transportation costs. Lengthy supply lines will curtail the operation of mega factory farms, feedlots and centralized meat plants. The advantages of economies of scale, a cherished principle of modern business practice, will be neutralized by rising transportation costs. One benefit of smaller local abattoirs for meat processing will be a reduced incidence of salmonella, listeria and swine and avian flu.
Food policy is a contentious issue among ecological economists. Although rising fuel costs will shorten supply lines, the impact of “food miles” (the distance food is conveyed) on global warming may have been exaggerated. Transportation probably only accounts for 10 percent of the total greenhouse gas emissions generated by our food system. Over half the greenhouse gas emissions of the food system are actually created on the farm.
The environmental impact of food is determined largely by the production process, such as petro-chemical dependent monoculture and by the type of farming, such as beef, for example. Animal agriculture is the real climate curse. It is estimated by the UN Food and Agriculture Organization that at least 20 percent of total global greenhouse gases are generated by livestock farming.
Although many ecological economists are not vegans, we should all consider eating far less meat and dairy products, more plants and grains, and seasonal, organic and local produce when possible. By our preferences and our purchases, we can build an eco-agricultural system that is healthier for us and for the planet.
Economic growth is not a measure of progress or prosperity. We have devised accounting systems, such as the Gross Domestic Product (GDP), that do not accurately reflect the negative effects of unrestrained growth on both our social and ecosystems. GDP only measures activities - everything from jobs and sales to auto accidents and oil spills - that contribute in dollar figures to the economy. In Paul Hawken’s words: We are stealing the future, selling it to the present, and calling it gross domestic product.
We have to redefine progress and prosperity as something other than material and monetary wealth. Ecological economists are promoting alternative indexes, such as the Canadian Index of Wellbeing and the Genuine Wealth Index to reflect more accurately the impact of economic activity on society and on nature. Broader assessment criteria for these indexes include happiness, job satisfaction, volunteer work and sustainability, as well as accounting for negative factors, such as clear-cut forests, crime, and social inequality.
The alternative indexes are an attempt to slow the metabolic rate of consumer turbo-capitalism by designing accounting systems that measure both the costs and benefits of economic growth. Only by synchronizing the balance sheets of nature and the economy on the basis of true costs, can we establish a sustainable bottom line for the planet.
A close corollary to ecological accounting systems is true-cost pricing. Frequently, prices do not reflect the full costs of production. For example, some companies use the atmosphere as a free dumping ground for their carbon dioxide emissions. Delinquent companies also release mine tailings into lakes and oil residues into ponds that in turn leech toxins into rivers – all at no financial cost to the corporate bottom line.
We are not costing these “externalities” of business activity – nor their impact, such as global warming and diseases, like asthma – in our national accounts, and nor are we including them in the price of the final product. More seriously, by concealing all the negative externalities, we are free-loading on the environment at the expense of future generations.
True-cost pricing is a major tenet of ecological economics, whether it is accounting for externalities in the production process or government subsidies for agriculture or tax write-offs for the oil industry. The pricing process under our present business model is distorted: it favours corporations at the expense of nature and it encourages consumption at the expense of conservation.
North American governments subsidize a range of economic activities from petroleum products to nuclear energy to agriculture. Subsidies are one area where governments can remove themselves from the economic process – and free themselves from the iron grip of lobbyists – with relative ease. A commitment by politicians to true-cost pricing would be a responsible environmental and economic initiative.
Perhaps the most perverse subsidy of all, after the tar sands and nuclear energy, is for corn-based ethanol. It is a subsidy that has created serious social problems, such as food shortages, and environmental disasters, like the dead zone in the Gulf of Mexico caused largely by fertilizer run-off from the corn belt. It now appears that corn ethanol generates more emissions than the gasoline it replaces. Eliminating agricultural subsidies would level the growing field for all farmers.
Death and taxes may be the only certainties in life but there is another sinister twist to the old adage. Because of the immense size of the average North American’s ecological footprint, the nature of the taxation policies of our governments could shape the long term health of the planet. But it is the preferences of the electorate that actually shapes taxation policies: our demands for ever lower income, sales, property and corporate taxes simply fuels environmentally destructive consumption.
An ecological taxation policy will revise current policies and priorities. Tax rates on resource depletion, garbage, atmospheric emissions, and overconsumption have to be increased to protect nature. Cutting the GST by 2 percentage points has cost Canada billions of dollars of revenue that could have been devoted to environmental reconstruction instead of stimulating more wasteful spending. Under a green tax shift, less destructive factors, such as renewables, labour, and personal savings would receive lighter treatment. Taxation policies in future must be based on the “polluter pays” principle.
There is general consensus among ecological economists that the most effective way of curbing greenhouse gas emissions is to impose a carbon tax on all fossil fuels. It is a simple and transparent tax and the revenue can be redistributed so that the poor are not adversely affected by higher energy prices. Carbon taxes have worked successfully in Sweden for a number of years.
An alternative mechanism, known as “cap and trade,” is more popular with business and governments, largely because it is not as politically loaded a term as “carbon tax” and it is “market-based.” Cap and trade is a carbon emission trading system and it is basically an international market in pollution credits. It does not have the same immediate impact on reducing emissions as a carbon tax does and it is also more difficult to implement.
Ecological economics is a philosophy based on the notion of interconnection, balance, and sustainability. If we can balance our lifestyle demands with the biocapacity of the planet and recognize the importance of biodiversity, nature will regenerate and replenish its resources indefinitely. Nature, after all, is the base that anchors and sustains all economic activity.
