Over the past two decades far-sighted government and corporate decisions makers have been coming to grips with the growing threat to economic growth caused by environmental abuse. In response they have increased their efforts to account for economic effects on ecosystem health as part of the overall system for rational economic decision making. As these new systems now approach maturity, we have arrived at the advent of what might be described as ecosystem economies – namely, economic decision making systems in which the ecosystem is considered as a vital source of goods and services, whose stocks and flows ultimately constrain and drive economic growth.
The portrayal of carbon pricing by Australia’s newly elected Liberal-National government as a fear creating tax represents a disappointing step backwards in Australia’s progress towards becoming an ecosystem economy. In taking this backward step, Australia appears to be falling even further behind far-sighted nations and corporations that are now embracing the concepts of natural capital and ecosystem services as essential aspects of mainstream economic decision making. For example, Andrew Liveris, the Chairman & CEO of multinational giant The Dow Chemical Company[1] recently observed: “Companies that value and integrate biodiversity and ecosystem services into their strategic plans are best positioned for the future”.
As a tool to help make rational decisions about goal setting and resource allocation 20th century economics made a huge contribution to the growth of national wealth, as measured in terms of growth in our capacity to consume. But by adopting a system that effectively ignored the negative impacts of pollution and over exploitation on our long-term capacity to derive economic value from the natural environment, 20th century decision makers ignored the need to meet the true costs of acting in ways that destroy the natural capital upon which long term growth and profitability ultimately depends. In the long run, it just doesn’t make economic sense to keep making this same mistake.
For example, if we accept the link between excessive carbon emissions, global warming, and decline in the long-term productive capacity of natural ecosystems, then it is economically irrational not to place a price on excessive carbon emissions. Only by doing so can we create the economic conditions in which those producers who invest in low-emission alternatives will ultimately be advantaged, so that the whole economic system adjusts to a pattern of growth based on more sustainable carbon emission levels.
In the emerging ecosystem economies of the 21st century, governments are accepting responsibility for extending regulatory frameworks to take account of the complex, yet increasingly demonstrable relationships between stocks and flows of natural capital (the natural resources from which we draw ecosystem services in order to sustain life and experience enjoyment of life) and our collective social and corporate capacity to grow and prosper. This long overdue acceptance has largely depended on our scientific and technological capacity to understand and model those interactions, which is now becoming well established.
It is now becoming widely accepted that the economically rational way for global society to manage natural capital in pursuit of widespread growth and prosperity is to charge for economic actions that draw down on the stock of natural capital and pay for those which increase it, at the same time as educating people about the underlying reasons why this makes good economic sense in the long run.
The good news is that tools and technologies now exist for governments and corporations to rationally apply the principles of ecosystem economics. For example, Australia will be amongst the world’s first nations to publish a set of national environmental accounts, based on the globally accepted System of Environmental-Economic Accounting (SEEA), which has been developed over the past two decades under the auspices of the United Nations. And in Victoria at least we are already capable of assessing the impact of commercial land use on the stocks and flows of natural capital and ecosystem services within local catchment areas, with the real prospect of realising substantial gains in overall productivity through the development of more rational land use on an ecosystem scale.
On the micro-economic corporate scale, the economic incentive boils down to long-term productivity. Accounting for ecosystem services is the economically rational way to maximise long-term returns on the exploitation of natural capital. In an ecosystem economy, this translates into adopting more efficient use of natural resources like water or reconfiguring land-use in order to increase sustainable yields of both consumable and natural goods and services. The net result in the long run is that the landholder will become economically better off. Armed with better information and understanding of their landscape it should be possible to ensure that, if there is any loss of production of traditional market goods through this reallocation of land use, it will be more than offset by payments for their contribution to increasing the value of their natural capital.
So whether as voters, employees, shareholders or social networkers, I would urge all Australians to support and encourage the emergence of our own ecosystem economy as a good – or indeed as an urgently overdue – political development. Don’t be conned by backward looking, short-term focussed politicians and corporations into believing that we should continue to avoid paying to maintain the health and productive capacity of our natural capital. It’s everybody’s ecosystem, upon which everybody depends on our long term capacity for economic growth. So it’s up to us all to insist that we embrace ecosystem economics as soon as possible, to secure a positive economic future for ourselves, and for generations to come.