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Commentary: Greenwash! Now in New Improved Formula [Economic Valuation & Payment for Environmental Services]

The Heinrich Böll Foundation

December 3, 2015

by Clive Spash

 

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Comment on Jutta Kill’s “Economic Valuation and Payment for Environmental Services

This report is an excellent overview of the pitiful state of environmentalism and its neoliberalisation.  The issues raised are important and should be taken seriously.  However, I would like to suggest a few areas in which the argument could benefit from some further reflection.

In opening the paper the introduction emphasises the idea of a “paradigmatic change” (p.2) in terms of what is happening with economic valuation of the environment.  There is no further definition of this concept or its relevance, and I think this suggestion of substantive novelty is in fact misleading.  The ongoing push for incorporating aspects of the social and environmental world into an financial and economic one has been ongoing for at least 200 years.  Some seventy years ago, Karl Polanyi (1944), who is mentioned (p.16), identified the creation of the fictitious commodity as being a necessary part of the industrialisation starting in the early 1800s.  He also recognised the extension of this from labour and land to the environment.  The more recent push of the economics profession, for extensive valuation allied to financial regulatory instruments, goes back to the 1960s.  The role of economic valuation in its modern form had already been successful promoted politically under the Reagan administration, which in 1981 institutionalised the use of cost-benefit analysis for evaluating proposed environmental legislation (Presidential Executive Order 12291).  What is new is only the extent to which economic valuation of the environment, and fictitious commodity creation, have since been pushed, and the readiness of various actors to keep pushing ever further.

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For the financiers, bankers and corporate capitalists the drive is the necessity of finding new means of exploitation to capture surplus value, as the old ones become exhausted and/or regulated (hence the need to also roll back regulation as Jutta Kill rightly notes as part of the valuation/market instrument game).  However, what about the environmentalists?  Why do the big environmental non-governmental organisations, such as the Nature Conservancy, back this?  Why do so many ecologists back Natural capital, ecosystems services valuation and biodiversity offsets?  Some notably examples are the likes of Gretchen Daily, systems ecologist Bob Costanza (who many now think is an economist!), and the Nature Conservancy’s chief scientist Peter Kareiva.  What about ecological economist Herman Daly who advocates Natural Capital and tradable permits markets, another financial instrument of exploitation?  (For a critique of emissions trading see Spash, 2010.)  One answer is that all the aforementioned are from the USA and all apparently support the existing corporate model of market capitalism, including prices as efficient means of resource allocation.  Of course they demand some side constraints on the existing systems, but they do not advocate any systemic change or conduct any analysis of the political economy.  Their politics appears to be classic American liberal and, despite the contradictions, their economics maintains core tenets of orthodox belief (e.g. prices allocate resources and do so efficiently).

Yet, there is, in addition to this American camp, another group, of what I term new environmental pragmatists (Spash, 2013), that is more broadly based and geographically widespread.  These are the ones Jutta Kill rightly recognises as advocating instrumental valuation of species, such as bees.  They are often also ecologists, but not necessarily in favour of the American way of life or its inherent political liberalism.  Their concern is to be pragmatic because the desire for material wealth and financial affluence now seems to dominate all systems of political economy, and so they believe the expression of value must be as instrumental to those ends.  Their training in an instrumental natural science may be in part to blame, but their political and economic naivety also plays a key role in their belief that they can win the numbers game in a battle with bankers, financiers and big corporations.  Still, once again, I would emphasise that core aspects of this monetary valuation game, for ‘saving’ the environment, are quite old in content.  In the period from 1880 to 1920 over 1000 studies calculated the monetary value of services provided by birds as a means to show their value and aid their conservation, but the new insecticides made the birds’ services (and the valuation exercises) redundant.  The positive “externalities” of birds had evaporated due to technological innovation.

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In the report, the term “externalities” is used repeatedly and highlighted as a key aspect of the economic approach.  This is a highly problematic concept (as the report notes), but also one that is totally misleading as to the issues involved.  There is nothing about pushing costs on to others that is external to the modern economic system of capital accumulation (whether based in Europe, USA, China, Russia, India, Brazil, Australia or anywhere else).  Indeed this is an essential aspect of how the modern economy operates and maximises the surplus that accrues to the minority.  The powerless, women, poor and the environment are there to be exploited as an internal operation of the political and economic system.  There are no errors or need for systems correction.  This is why Karl W. Kapp (1950) called such activities cost shifting exercises, not externalities.  In our critiques, improving the accuracy and meaningfulness of terminology and conceptualisation would help.  So let’s stop using the neoclassical economists’ term “externalities” for something that is internal to the capital accumulating economic system.

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Indeed in other places this accuracy of conceptualisation is exactly what is argued for, e.g. with respect to the need to stop calling Nature “capital” and ecosystems functions “goods and services”.  Jutta Kill correctly identifies the capture of the environmental movement by corporate interests and how this has been matched by the conversion of language and concepts in key areas of the natural sciences informing that movement.  Thus ecology and conservation biology have lost their own scientific terminology (Spash and Aslaksen, 2015).

Along the way I would like to note the importance of the point about the impossibility of ever “internalising externalities”.  As the Laws of Thermodynamics make clear, the materials and energy that we put into our economic systems will come out the other side as waste in equal amounts (but different form).  In short all our production and consumption of energy and materials creates problems for the model of perfect resource pricing so beloved by economic textbooks and neoliberal politics.  If we take the economists at their word, then they must admit that all the prices in the economy are wrong and need to be changed, i.e., price ‘correction’ to account for “externalities” would result in full scale technocratic economic intervention, or what used to be called a planned economy.

The links between offsetting pollution and biodiversity loss through markets, or market like mechanisms, also needs to be linked to the model of development that is now prevalent.  That is a model of resource extractivism come hell or high water.  The backing for the extractivist regime, that maintains the resource supply chains for the consumerist society, is the military.  Fear is a key tool of control now widely deployed in our supposed democracies of the West.  Ours is a world of military intervention and domination in which violent destruction of the ‘other’ is totally legitimised daily in the news, media and entertainment.  Nature is no different, if it gets in the way, just wipe it out and explain to those who benefit the necessity of this for maintaining the political and economic system.  As long as the imperial mode of living (Brand and Wissen, 2013) is enjoyed by enough key people, in the right power structure and sections of the segmented society, nothing needs to change.

After having made these provisos, I would like to note that the report hits many nails squarely on the head.  Not least of these is the fallacious concept of Green Growth and its associated Green Economy.  In the end, selling monetary valuation as saving the planet goes along with the current advocacy of economic growth as the solution to human induced climate change (Spash, 2014).  Both are clearly just, a new improved formulae of that good old favourite corporate product, Greenwash.

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References Cited
Brand, U., Wissen, M., 2013. Crisis and continuity of capitalist society-nature relationships: The imperial mode of living and the limits to environmental governance. Review of International Political Economy 20, 687-711.
Kapp, K.W., 1950. The Social Costs of Private Enterprise. Shocken, New York.
Polanyi, K., 1944. The Great Transformation, 1st edition ed. Rinehart & Company Inc., New York/Toronto.
Spash, C.L., 2010. The brave new world of carbon trading. New Political Economy 15, 169-195.
Spash, C.L., 2013. The shallow or the deep ecological economics movement? Ecological Economics 93, 351-362.
Spash, C.L., 2014. Better Growth, Helping the Paris COP-out?: Fallacies and Omissions of the New Climate Economy Report. Institute for Environment and Regional Development, Vienna.
Spash, C.L., Aslaksen, I., 2015. Re-establishing an ecological discourse in the policy debate over how to value ecosystems and biodiversity. Journal of Environmental Management 159, 245-253.

 

[Professor Clive L. Spash holds the Chair of Public Policy & Governance at WU in Vienna and is Editor-in-Chief of Environmental Values. He has conducted research on climate change economics and policy for over 25 years and his work in the area includes the book Greenhouse economics: Value and ethics as well as numerous articles. His critique of carbon trading was the subject of attempted censorship while he was a senior civil servant at the CSIRO in Australia. More information can be found at www.clivespash.org.]

This Changes Nothing: The Paris Agreement to Ignore Reality

Globalizations, 2016
Vol. 13, No. 6, 928–933,

 

The following is an excerpt from the paper This Changes Nothing: The Paris Agreement to Ignore Reality authored by Clive L. Spash, WU Vienna University of Economics and Business, Vienna, Austria

 

“The Paris Agreement signifies commitment to sustained industrial growth, risk management over disaster prevention, and future inventions and technology as saviour. The primary commitment of the international community is to maintain the current social and economic system. The result is denial that tackling GHG emissions is incompatible with sustained economic growth. The reality is that Nation States and international corporations are engaged in an unremitting and ongoing expansion of fossil fuel energy exploration, extraction and combustion, and the construction of related infrastructure for production and consumption. The targets and promises of the Paris Agreement bear no relationship to biophysical or social and economic reality.”

 

The Paris Agreement follows suit and claims that: ‘Accelerating, encouraging and enabling innovation is critical for an effective, long-term global response to climate change and promoting change does not require new technology which, even when successful, takes decades to move from invention to innovation to implementation. That time frame is a luxury that has already been squandered by decades of inaction and fossil fuel expansion. The reduction of GHGs is necessary immediately using existing appropriate (not high) technology, changing infrastructure, systemic transformation and control of demand.

Therein lies the problem with the Paris Agreement; it is a fantasy which lacks any actual plan of how to achieve the targets for emissions reductions. There are no mentions of GHG sources, not a single comment on fossil fuel use, nothing about how to stop the expansion of fracking, shale oil or explorations for oil and gas in the Arctic and Antarctic. Similarly, there are no means for enforcement. Article 15 on implementation and compliance establishes an expert committee that will be ‘non-adversarial and non-punitive’, which means that it has no teeth and can do nothing about non-compliance. Then, there is Article 28, which offers the withdrawal option without any sanctions. Everyone seems to have already conveniently forgotten how Canada backed out of the Kyoto Protocol in order to frack on a massive and environmentally catastrophic industrial scale.

What is the point of trusting the governments who sign up to this agreement with one hand while investing ever more in fossil fuel extraction, combustion and consumption with the other? These are the same governments who know the world already has proven fossil fuel reserves that exceed the amount that can be combusted by at least three times,[3] for an even chance of achieving 2C, but continue exploring for more. They are the same governments promoting 7 per cent growth rates and the proliferation of industrialisation and modern energy infrastructure including advanced fossil fuel technology (UN Resolution A/RES/70/1). So, they give us promises of 1.5C while constructing infrastructure and supporting production processes requiring massive fossil fuel expansion in an economic system built on mass conspicuous consumption and a throwaway fashion culture.

The divorce of economic and energy policy from the targets of Article 2 can only be seen as either total cynicism or total delusion on the part of the negotiators applauding in Paris. Perhaps they are all highly trained in the Orwellian art of doublethink. In any case, the aspirational targets bear no relationship at all to the reality of what governments, and their business partners, are actually doing today,[4] or the other treaties the same governments are simultaneously signing. The economic system is already committed to continue exploiting resources as fast as possible in the race for ever-increasing material and energy throughput. Just look at the European Community’s Horizon 20:20 goals and their promotion of growth and competition and the ongoing push for the Transatlantic Trade and Investment Partnership. Apparently, economic growth is the priority to be protected and promoted above all else.

The contradiction at the heart of the Paris Agreement is actually unsurprising because the powerful lobbying for growth as the solution to climate change has for some time been orchestrated by corporate business and financiers using the rhetoric of a green economy. As I have noted elsewhere (Spash, 2014), this has involved the combination of arguments for growth alleviating poverty with the necessity of environmental risk management, and ‘green’ technology promoted through trillions of dollars being directed towards ‘entrepreneurs’ (i.e. multinational corporations), to create a ‘new economy’. Technology and innovation are key to this position with its neo-Austrian economics and ‘free market’ rhetoric. Climate change policy must be crafted accordingly to serve the capital accumulating growth economy, and so the latter becomes the solution to (not the cause of) the former.

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Unfortunately, many environmental non-governmental organisations have bought into this illogical reasoning and justify their support as being pragmatic. Neoliberal language is rife across their reports and policy recommendations and their adoption of natural capital, ecosystems services, offsetting and market trading. These new environmental pragmatists believe, without justification, that the financialisation of Nature will help prevent its destruction. Thus, environmentalists promote carbon emissions trading but pay little attention to its dangers and failures (Spash, 2010). For example, Nat Keohane of the Environmental Defence Fund has noted on their website how they pushed in the corridors of Paris for ‘an opening for markets’. The right-wing government of New Zealand, leading an 18-country lobby, also had its negotiators pushing for the same international carbon markets. However, you will not find emissions trading, markets, cap and trade or offsets, mentioned in the doublespeak of the Agreement, but rather the term ‘internationally transferred mitigation outcomes’ (clause 108 and Article 6), something Keohane applauds.

Doublespeak and wording that is strategically ambiguous is the high point of international diplomacy in the Paris Agreement. This is what made the Agreement possible and why it is so meaningless. Do not look for the words oil, natural gas, coal or fracking because they do not merit even one single mention. Nor indeed is there anything about addressing the sources of human GHG emissions, or the structures that promote them. Consider something as fundamental as energy use. The one sentence that mentions energy appears in the preamble and merely acknowledges the need to promote ‘sustainable energy in developing countries, in particular in Africa’.

What the Paris Agreement tells is a bizarrely unreal story. Apparently, the cause of climate change is not fossil fuel combustion or energy sources but inadequate technology and the solution is sustainable development (i.e. economic growth and industrialisation) and poverty alleviation. As far as the current production and consumption systems are concerned, little needs to change. There are no elites consuming the vast majority of the world’s resources, no multinational corporations or fossil fuel industry needing to be controlled, no capital accumulating competitive systems promoting trade and fighting over resources and emitting vast amounts of GHGs through military expenditure and wars, and no governments expanding fossil fuel use and dependency.

The unreality of this document is only matched by the unreality of the praise given to it by the media and others. This is a sign of how much strategic ambiguity and doublespeak have now become an accepted way for international politics to be conducted and reported. People can even applaud stating that the whole UNFCCC has failed for over 20 years and the planet is headed well beyond 2C. The rhetorical flourish of successful agreement is meant to hide a total lack of substance. The Paris Agreement is at heart a document that consists of independent unilateral unenforceable targets but is being sold as a multi-lateral consensus with firm commitments.

In the final analysis, a simple test of the effectiveness of the Paris Agreement would have been a dramatic drop in the share price of the fossil fuel industry, which is loaded with toxic assets.

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That is, a serious agreement would have written-off all the fossil fuel reserves that cannot be burnt without heading way beyond the already exceed 2C target. This would have revealed the financial balance sheets that are bankrupt. Nothing happened to the stock market because the Paris Agreement is perceived by the fossil fuel industry, and financial markets, as no threat to business as usual, and possibly it is even a great opportunity for new financial instruments and ongoing economic exploitation of the planet, with trillions to come to the energy industry in subsidies for innovation and technology development.

In reality, the Paris Agreement is a compilation of nationally determined intended contradictions. The UNFCCC Secretariat advanced no plan of action and its latest Agreement is totally divorced from the operations of the current economic and political systems. Human-induced climate change can now conveniently slip off the political and media agenda until the time comes for the next major cop-out due in 2023 when a ‘stock-taking’ exercise is scheduled. By then few, if any, of the politicians responsible for this farce are likely to be in office, and neither they nor the bureaucrats and negotiators who have celebrated this great success will ever be held accountable. An acceleration of climate change impacts seems to be the only thing that will now alter the complacency of the global community.

 

Download the full paper: http://www.tandfonline.com/doi/full/10.1080/14747731.2016.1161119

 

[3] The excess of three times is based upon large conservative estimates of the available remaining budget, namely 1400 Gt of CO2, under a 50% chance of achieving 28C (Raupach et al., 2014, p. 874). IPCC (2013) calculations are much lower, but even these have been criticised as neither up-to-date (referencing 2011) nor adequately taking into account non-energy emissions which reduce the amount left for fossil fuels. Doing so leads Anderson (2015) to estimate the remaining budget for energy emissions over the period 2015–2100, at about 650 Gt of CO2 for a ‘likely’ (66%) chance of staying below 28C. On this basis, the excess of reserves is over 6 times the available budget. Going down to 1.58C and/or increasing the chance of achieving the target increase(s) the excess even further.
[4] The commitments already made to exploiting new fossil fuel sources by 2012 were estimated as leading to the release of 300 Gt CO2 equivalent between 2012 and 2050 (Meindertsma & Blok, 2012). This is being added to the existing excess of unburnable stocks for the 28C target (McGlade & Ekins, 2015); see also previous note.

 

[Professor Clive L. Spash holds the Chair of Public Policy & Governance at WU in Vienna and is Editor-in-Chief of Environmental Values. He has conducted research on climate change economics and policy for over 25 years and his work in the area includes the book Greenhouse economics: Value and ethics as well as numerous articles. His critique of carbon trading was the subject of attempted censorship while he was a senior civil servant at the CSIRO in Australia. More information can be found at www.clivespash.org.]