None of the world’s top industries would be profitable if environmental costs were fully integrated

by David Roberts, Grist, April 17, 2013

The notion of “externalities” has become familiar in environmental circles. It refers to costs imposed by businesses that are not paid for by those businesses. For instance, industrial processes can put pollutants in the air that increase public health costs, but the public, not the polluting businesses, picks up the tab. In this way, businesses privatize profits and publicize costs.
While the notion is incredibly useful, especially in folding ecological concerns into economics, I’ve always had my reservations about it. Environmentalists these days love speaking in the language of economics — it makes them sound Serious — but I worry that wrapping this notion in a bloodless technical term tends to have a narcotizing effect. It brings to mind incrementalism: boost a few taxes here, tighten a regulation there, and the industrial juggernaut can keep right on chugging. However, if we take the idea seriously, not just as an accounting phenomenon but as a deep description of current human practices, its implications are positively revolutionary.
To see what I mean, check out a recent report [PDF] done by environmental consultancy Trucost on behalf of The Economics of Ecosystems and Biodiversity (TEEB) program sponsored by United Nations Environmental Program. TEEB asked Trucost to tally up the total “unpriced natural capital” consumed by the world’s top industrial sectors. (“Natural capital” refers to ecological materials and services like, say, clean water or a stable atmosphere; “unpriced” means that businesses don’t pay to consume them.)
It’s a huge task; obviously, doing it required a specific methodology that built in a series of assumptions. (Plenty of details in the report.) But it serves as an important signpost pointing the way to the truth about externalities.
Here’s how those costs break down:
The majority of unpriced natural capital costs are from greenhouse gas emissions (38%), followed by water use (25%), land use (24%), air pollution (7%), land and water pollution (5%), and waste (1%).
So how much is that costing us?  Trucost’s headline results are fairly stunning.
First, the total unpriced natural capital consumed by the more than 1,000 “global primary production and primary processing region-sectors” amounts to $7.3 trillion a year — 13 percent of 2009 global GDP.
(A “region-sector” is a particular industry in a particular region — say, wheat farming in East Asia.)
Second, surprising no one, coal is the enemy of the human race. Trucost compiled rankings, both of the top environmental impacts and of the top industrial culprits.
Here are the top five biggest environmental impacts and the region-sectors responsible for them:
It’s coal again! This time North American coal is up at number three.
Trucost’s third big finding is the coup de grace. Of the top 20 region-sectors ranked by environmental impacts, none would be profitable if environmental costs were fully integrated. Ponder that for a moment: None of the world’s top industrial sectors would be profitable if they were paying their full freight. Zero.
That amounts to an global industrial system built on sleight of hand. As Paul Hawken likes to put it, we are stealing the future, selling it in the present, and calling it GDP.
This gets back to what I was saying at the top. The notion of “externalities” is so technical, such an economist’s term. Got a few unfortunate side effects, so just move some numbers from Column A to Column B, right?
But the UNEP report makes clear that what’s going on today is more than a few accounting oversights here and there. The distance between today’s industrial systems and truly sustainable industrial systems — systems that do not spend down stored natural capital but instead integrate into current energy and material flows — is not one of degree, but one of kind. What’s needed is not just better accounting but a new global industrial system, a new way of providing for human wellbeing, and fast. That means a revolution.


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Jul 20, 2016 7:31 PM

If the focus is kept exclusively in ‘externalities’ then trouble at home (ie: inner conflict, denial and denial of such denial) can continue without exposure. The use of external patsies, proxies and scapegoats all operate as the projection of evil intent masked in relative innocence or blind self-righteousness. The out-sourcing of blame, guilt, debt, fear and pain are the inverse inner narrative to the appearance of a positively acquired ‘power’ – as a sort of negative version of ‘pass the parcel’. The personhood that operates as is the currency of blame being equated with responsibility – rather than choice. Therefore we indenture ourselves to mind-traps of blame-defined and therefore false ‘choices’. The corpse of persona – that results from using it as a manipulating leverage is a golem that can be engineered and operated by the corporate ‘person’ – which is the god of mind-management and indeed to ownership and… Read more »

Tim Groves
Tim Groves
Jul 20, 2016 3:58 AM

The majority of unpriced natural capital costs are from greenhouse gas emissions (38%)
This is only “true” if we assume that greenhouse gas emissions cost anything at all and that they bring no benefits.
It is arguable that greenhouse gas emissions actually cost nothing because emitting them makes no significant difference to the climate. Also, it’s possible that they have a negative cost because what little warming they may be responsible for may be beneficial on balance, and because in the case of CO2, its well-documented value as a plant nutrient boosting yields and enabling more growth at lower temperatures and under drier conditions is a huge net plus for agriculture and the biosphere.

Jul 20, 2016 11:46 AM
Reply to  Tim Groves

Everyone is entitled to their own opinions, but they are not entitled to their own facts.
Unfortunately despite be theoretically able to argue a point you still need evidence to back up the argument. Greenhouse gas emissions are definitely a problem. This can be demonstrated in a lab, it’s established science. Or are you anti-science?
Similarly emissions of sulphur dioxide were and are a problem, which was tackled by international agreement resulting in the reversal of the acid rain problems in Europe. Also see the CFC issue and the ozone hole.
But no, apparently global warming is a neoliberal conspiracy, so there’s nothing we can do about it.
This attitude is why we’re all fucked.

Jul 19, 2016 11:50 PM

Reblogged this on TheFlippinTruth.

Xi Wangmu (@HsiWanMu)
Xi Wangmu (@HsiWanMu)
Jul 19, 2016 9:47 PM

Everything old is new again. If only we could actually implement Bucky’s vision… http://www.nature.com/nature/journal/v531/n7595/full/531443a.html

Jul 19, 2016 9:44 PM

Thanks for posting this article that explains the concept of externalities (i.e. the effect of a transaction upon others). First time I heard of the word and concept of ‘externality’ is in an essay from Chomsky (everytime I do not understand a word or concept or a political situation, I Google: ‘Chomsky and word/concept/political situation’ or go directly to his webpage and search there for the word/concept/political situation’; doing so makes you learn a lot about very interesting stuff in a relatively short time [infinetely faster as compared with learning from newspaper articles]. Anyway, you can find the essay here: https://chomsky.info/20100930/). First, Chomsky explains to the reader why the human race is likely to be the only intelligent species in the Universe. Next, he explains why the human race is destined to exterminate itself, all thanks to externalities. Finally (and thankfully), he explains how the human race can proof him… Read more »

Jul 19, 2016 9:34 PM

Great. In the future, everything what generates profit should be restricted, pimps of capitalism will say goodbye and head to retirement. Or everything will grow very expensive. Of course not for people who know how to burden those “defenceless” .
A rhetorical question: what is more likely?

Jul 20, 2016 11:32 AM
Reply to  Nerevar

Ha, nice positive outlook there. Here’s one for you – when oil eventually runs out, there will be mass starvation on the planet. We need oil derived fertiliser to intensively farm as we currently do. Consequently there will not be enough people to buy from these global corporations and they will go extinct.

Jul 19, 2016 9:21 PM

The link to the report doesn’t seem to be working . . .

Jul 19, 2016 11:42 PM
Reply to  Runner77

Thanks for alerting us to the problem. I’ve just tracked down the Trucost site with the original report itself and have replaced the URL for that link. You should be able to access the report now.