Green accounting II

No sooner does one "green accounting" story come along then it is followed by another.
This time the world bank is putting in its twopeneth.

I have been covering green accounting in Econ101 for years but I expect this is a "deeper" integration.

"Embeding nature in the national accounts" sounds good to me although it certainly is not a "silver bullet". These are all small steps in the right direction.

World Bank Launches Scheme To Green Government Accounts

The World Bank on Thursday launched a program to help nations put a value on nature just like GDP in a bid to stop the destruction of forests, wetlands and reefs that underpin businesses and economies.

The five-year pilot project backed by India, Mexico and other nations aims to embed nature into national accounts to draw in the full benefits of services such as coastal protection from mangroves or watersheds for rivers that feed cities and crops.

"We're here today to create something that no one has tried before: a global partnership that can fundamentally change the way governments value their ecosystems," World Bank President Robert Zoellick told reporters in the Japanese city of Nagoya.

More than 100 ministers are in Nagoya for a U.N. meeting that aims to seal a historic deal to set new 2020 targets to combat the rapid loss of plant and animal species from deforestation, pollution, over-hunting and climate change.

One of the targets before the ministers is to agree to include the values of biological diversity into national development plans, or possibly national accounts.

"For economic ministries in particular, it's important to have an accounting measure that they can use to evaluate not only the economic value but the natural wealth of nations," Zoellick told Reuters in an interview.

"It's not a silver bullet. It's a way of trying to help people understand better in economic terms the value of natural wealth."

While economists try to get a handle on the value of nature, scientists are struggling to get a full picture of the variety of wildlife species around the globe as climate change, exploitation and pollution threaten "mass extinctions," a series of studies published on Wednesday showed.

BENEFITS

Envoys at the Japan meeting, the product of years of negotiations, are trying to win agreement on a 20-point plan that aims to protect fish stocks, fight the loss and degradation of natural habitats and conserve larger land and marine areas.

Greater financing from rich nations, possibly through redirecting subsidies from the fossil fuel, fishing and other industries is key.

Envoys are also aiming to clinch by Friday a new pact that sets laws for the sharing of genetic resources between governments and companies, such as drug and agri-resources firms.

Poorer nations want greater controls to protect their environment and to potentially earn billions of dollars in extra revenue from the benefits of trees to fungi, insects to frogs.

Delegates and greens say the talks are making progress ahead of Friday's deadline but were still deadlocked on some issues and negotiations were expected to continue deep into the night.

"There is definitely a positive atmosphere," Norwegian Environment Minister Erik Solheim told Reuters. "Everyone wants to reach a consensus here."

The World Bank program will give developing countries tools to help them measure the value and benefits of their ecosystems. India's Environment Secretary Vijai Sharma said at the launch the tools would make impact assessments more objective when looking at bids by miners or steelmakers to set up operations in India.

India recently scrapped London-listed Vedanta Resources' plans to mine bauxite and expand its alumina refinery in Orissa over environmental concerns, worrying investors.

The government has also expressed concerns over a $12 billion steel mill planned by South Korean firm Posco.

The Bank and other groups also launched a "save our species" initiative in Nagoya aimed at getting businesses to contribute to new conservation fund.

"It's nice that you may have a tiger as a logo but what does it do for your logo if the tiger goes extinct?" Zoellick told Reuters.

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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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