Green accounting to tackle "greenwashing"

Although many undergraduate economics students go on to become accountants it is not an area of interest to many academic economists. However, when it comes to "greenwashing" the following post is of interest.

Software to Hold “Greenwashers” Accountable [Software advice]

Greenwash (verb, \ˈgrēn-wȯsh\) – to market a product or service by promoting a deceptive or misleading perception of environmental responsibility.

It’s no secret that “going green” has become the next big thing in the corporate world. Riding the wave of consumers’ growing interest in environmental sustainability, companies are launching major ad campaigns to tout their green credentials. But many of their claims are misleading or downright false. The ads are compelling, but how are we to know who’s telling the truth? “Greenwashing” is eroding the credibility of well-intentioned green businesses and turning would-be green consumers into skeptics.

It’s reminiscent of the challenge to hold corporations accountable for their financial reporting. While the recent financial crisis highlighted the shortcomings of our markets and reporting structures, the United States business community is still a leader in financial accounting, reporting and ethics. Our system is sophisticated, consisting of a combination of generally accepted accounting principles (GAAP), fairly rigorous government oversight, a massive industry of accounting professionals and mature accounting software technologies that keep track of every last dollar.

We must develop the same infrastructure for environmental accounting. The development of Enterprise Carbon Accounting (ECA) software is well underway, with roughly 60 vendors bringing solutions to market. ECA software enables companies to track their carbon footprint and the footprint of their suppliers as well as the impact of customer use of their products. It’s a promising innovation that can help us manage corporate America’s environmental footprint, but it’s still at the early stages of adoption. We need a number of things to happen for the ECA market to mature and develop environmental accounting to the same level as financial accounting.

So what will it take to develop the ECA software market and have the infrastructure necessary to hold greenwashers accountable? We think there are five key requirements to get us there:

* Clear government action on regulations;
* Adoption of carbon accounting principles;
* Expansion of “Scope 3” emissions accounting;
* Better business incentives to go green; and
* Demanding, informed consumers.

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WTO-Related Matters in Trade and Environment:

This 2004 paper covers an issue of increasing importance in my mind. The failure of Copenhagen and the failure (so far) of the Doha round may in fact be partially explained by the need to bring negotiations on the environment and trade to the same table.

There are a complex set of interactions here and this paper sets the scene.

WTO-Related Matters in Trade and Environment: Relationship Between WTO Rules and MEAs [PDF]

Date: 2010
By: Aparna Sawhney
URL: http://d.repec.org/n?u=RePEc:ess:wpaper:id:2984&r=env

Environmental issues began to be systematically addressed in the WTO following the Decision on Trade and Environment taken towards the end of the Uruguay Round at Marrakesh in 1994. The Committee on Trade and Environment was established in the same year, with the explicit mandate to resolve environmental issues in the trading system. [WTO Research Series No. 5]

Keywords: Environmental, systematically. Trade, Environment,

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"Weather throws the punches but climate trains the boxer"

In a recent grant application those of us contributing had a long debate over the appropriate use of "weather" and "climate".

In the end it was clear we were talking about "weather" although it sounds far less "current" and interesting than using "climate".

We were talking about the economic impact of severe weather events (not climate events).

The quote "weather throws the punches but climate trains the boxer" now makes it all clear to me and would have saved a number of long email debates on the distinction between the two.

This quote came up when reading a review of a new book.



In a review in the TES the reviewer continues the boxer theme and suggests that some of climate change's heavyweight contenders have not even entered the ring yet. Rising sea levels are one such heavy weight.

This book is suitably doom-laden so should appeal to economists everywhere.

"At the end of the last Ice Age, for instance, oceans rose over 420ft over a few millennia, including one period when the process topped 15ft per century".

If the same speed of change occurred today it would be far harder for humans to adapt. Back them you would quite literally just "up sticks" and move inland.

Those economists who argue that even if man made climate change is real it does not matter because we can adapt would do well to read this book. There are practical limits to adaption under extreme scenarios.

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"Economists, time to team up with the ecologists!"

A very fine title for a paper and this one is newly published in Ecological Economics.

The abstract seems to be blaming economists for a lack of interdisciplinary work. Economists get accused of this from virtually every discipline from what I can make out.

I am all for such joint work. Apparently ... "the easiest candidates for interdisciplinary teamwork in bioeconomics are therefore researchers who acknowledge ethical relativism."

I am not sure if I qualify or not but it sounds like I should acknowledge it.

For those less familiar with what ethical relativism actually is Answers.com and dictionary.com write as follows:

Ethical Relativism is operating in a system of situational ethics. Thou shalt not steal, unless you get a chance to steal from a big corporation, the government or someone you don't like. You are faithful to your wife, except on business trips, when everybody cheats, right? Basically, it means being comfortable with shifting your ethics to meet the situation. I try to maintain my ethics in all situations, however though I believe in thou shalt not kill, ants, flies and roaches die if I find them in my house and if you break into my home and come up the stairs, you are a direct threat to my family's safety and I will blow you away with little to no warning. But since I know these are my ethics, family before thief, I do not consider that a case of situational ethics.
Also see "moral relativism".

or

In ethics, the belief that nothing is objectively right or wrong and that the definition of right or wrong depends on the prevailing view of a particular individual, culture, or historical period.

Do economists as a general rule reject ethical relativism? My guess is that we would be all for it. Sounds good to me.


Economists, time to team up with the ecologists!

Hilde Karine Wam

Department of Ecology and Natural Resource Management, Norwegian University of Life Sciences, Box 5003, 1432 Ås, Norway

Abstract

Bioeconomic modeling is an increasingly relevant meeting arena for economists and ecologists. A majority of the growing literature, however, is written by economists alone and not with ecologists in true interdisciplinary teamwork. Physical distance between research institutions is no longer a reasonable justification, and I argue that, in practice, neither do the more fundamental philosophical oppositions present any real hindrance to teamwork. I summarize these oppositions in order of increasing magnitude as: 1) the axiom, held by many ecologists, of ‘irreducible complexity of ecosystem functioning’, which is avoided simply because the ecological ‘whole’ (as opposed to its ‘parts’) is not an element of most realistic modeling scenarios; 2) the axiom, also held by many ecologists, of ‘the precautionary principle’, which mainly surfaces at the applied end of natural resource management, and thereby should not prevent economists and ecologists from jointly building the models necessary for the final decision making; and 3) the economists' axiom of ‘the tradability principle’, which is harder to overcome as it demands value-based practical compromises from both parties. Even this may be solved, however, provided the economists accept non-marketable components in the model (e.g. by using restriction terms based on ecology), and the ecologists accept a final model output measured in terms of monetary value. The easiest candidates for interdisciplinary teamwork in bioeconomics are therefore researchers who acknowledge ethical relativism. As bioeconomics presently functions mainly as an arena for economists, I say the responsibility for initiating interdisciplinary teamwork rests most heavily on their shoulders.

Keywords: Ecological economics; Intrinsic; Nature; Management; Philosophy; Wildlife

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"Aquifer economics" - deep waters drying up

An economist article allows me to use the term "aquifer economics". I am always on the look out for new varieties of "economics" and this could be a big one.

From a teaching perspective this is yet another good "tragedy of the commons" story especially when aquifers cross national boundaries.

Deep waters, slowly drying up [Economist]

CLEMENT weather and plentiful water mean that Punjab produces an eighth of India’s total food grains. But the water table has dropped by ten metres since 1973 and the rate of decline is accelerating on both the Indian and the Pakistani sides of the region. It is a similar story for the north-western Sahara aquifer system (NWSAS), shared by Algeria, Tunisia and Libya. Withdrawals increased ninefold between 1950 and 2008. Springs are drying up and soil salinity has increased.

Such depletion of aquifers is a classic tragedy of the commons. Farmers pump, oblivious of others’ actions or the impact of their own. Scarcity stokes this rather than braking it. Worse, much abstracted water is used in inefficient irrigation; compounding that, underpricing means it is often used for watering low-value crops. Powerful farming lobbies have little interest in changing the status quo.

Aquifers, like fish stocks, are most at risk when they cross national borders, making property rights weaker. Groundwater provides about a fifth of the planet’s water needs and half its drinking water. In arid countries such as Libya or Saudi Arabia, that figure is close to 100%. Almost 96% of the planet’s freshwater resources are stored as groundwater, half of which straddles borders. UNESCO, a United Nations body, estimates that 273 aquifers are shared by two or more countries.

The signing this summer of a treaty between Brazil, Argentina, Uruguay and Paraguay to protect the Guarani aquifer, after a six-year study of the region’s underwater resources, has thus come as a nice surprise. It may even be a trend. Mali, Niger and Nigeria are due to sign a provisional deal early next year to set up a body to run the Iullemeden aquifer, where withdrawals have exceeded recharge ever since 1995, endangering the Niger river in the dry season.

The two deals follow a UN resolution in 2008 on creating a legal regime for aquifers (it may become a full convention next year). Lifting sanctions on Libya has had an effect, too. The Libyans say they may stop growing wheat using water from the NWSAS and the Nubian sandstone aquifer system, the world’s largest fossil aquifer, which they share with Egypt, Chad and Sudan. An agreement in 1992 set up a body to run this but it has stayed largely dormant. Now sampling and monitoring have resumed, under the aegis of the International Atomic Energy Agency (which has a sideline in environmental monitoring).

Such scientific work is crucial because aquifers are still poorly understood. Until a UNESCO inventory in 2008, nobody knew even how many transboundary aquifers existed. Experts are still refining the count: the American-Mexico border may include 8, 10, 18 or 20 aquifers, depending on how you measure them. Defining sustainability vexes hydrologists too, particularly with ancient fossil aquifers that will inevitably run dry eventually. Estimates for the life of the Nubian sandstone aquifer range from a century to a millennium.

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Is the US really a "mythic pig preening itself"?

As the insults fly over climate change the Chinese hit well below the belt with the insult to the US likening the US criticisms of China to "a mythic pig preening itself."

It is hard to believe that the Chinese would have to resort to such aggressive language.

Just in case there are any readers are still a little perplexed or indeed would like to know more about the mythical pig please read on.

Zhu Bajie

Su likened the U.S. criticism to Zhubajie, a pig in a classic Chinese novel, which in a traditional saying preens itself in a mirror.

"It has no measures or actions to show for itself, and instead it criticizes China, which is actively taking measures and actions," Su said of the United States.

UK readers of a certain age may well remember the always excellent TV programme "Monkey" where the mythical pig appears regularly.

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"Reality used to be a friend of mine"

I have often thought that the relationship between academic economics and reality can appear tenuous not least when I am in sitting through another hard core theoretical economics seminar and the 23rd slide of complicated looking equations appears on the screen.

On a more trivial level I have always wanted to use "reality used to be a friend of mine" as a blog post title although I forget where this quote comes from now.

Harald Uhlig (Chicago) takes a look at this relationship in a non-technical way (phew). He looks at important issues not least whether economics is a "science" or an "art".

Economics and Reality

Harald Uhlig
University of Chicago - Department of Economics

September 2010

NBER Working Paper No. w16416

Abstract:
This paper is a non-technical and somewhat philosophical essay, that seeks to investigate the relationship between economics and reality. More precisely, it asks how reality in the form empirical evidence does or does not influence economic thinking and theory. In particular, which role do calibration, statistical inference, and structural change play? What is the current state of affairs, what are the successes and failures, what are the challenges? I shall tackle these questions moving from general to specific. For the general perspective, I examine the following four points of view. First, economics is a science. Second, economics is an art. Third, economics is a competition. Forth, economics politics. I then examine four specific cases for illustration and debate. First, is there a Phillips curve? Second, are prices sticky? Third, does contractionary monetary policy lead to a contraction in output? Forth, what causes business cycles? The general points as well as the specific cases each have their own implication for the central question at hand. Armed with this list of implications, I shall then attempt to draw a summary conclusion and provide an overall answer.

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