Putting a monetary value on protecting the planet means people will pay a real price for what they consume
Posted on – Thursday 30 March 23 at 12:30pm
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Renault Focat
Hyderabad: About 30 years ago, many developed countries began the process of absolutely decoupling their CO2 emissions and energy use from economic growth. That means keeping emissions steady, or better yet, reducing emissions while the economy grows.
As a result, the UK, France, Germany and the US now have much higher GDP than 1990 levels, but lower CO2 emissions. And it’s not just because of the deindustrialization of the West: even if we include imports from countries like China, emissions are reduced.
This trend may come too little too late to avoid the worst consequences of climate change and the destruction of wildlife. But this is evidence of perhaps the biggest misunderstanding of economics: that growth is a measure of how much an economy produces, not an imperfect description of the value of that production.
Emissions vs. GDP
Tackling climate change requires a radical transformation of the economy to use less energy and resources. This means it can boost economic growth by making us consume “better” rather than more. Putting a monetary value on protecting the planet means that people will pay a real price for what they consume.
The things we buy often become more valuable if the perceived quality of the product improves. Research shows that consumers are willing to pay more if they perceive a brand to be more valuable, for example because it is more ethical or environmentally friendly. This is the case for low-carbon energy, fair trade chocolate, organic and local produce – and even more so for those who care about how they are perceived by others.
The same goes for the services people pay for. In fact, as the economy becomes increasingly reliant on services rather than products, this part of our consumption places more emphasis on being “green.”
That’s because today’s economic growth is largely independent of measuring the value of the things we buy. Two-thirds of the world’s GDP is made up of services, and as we work remotely, these services are increasingly provided in our own homes. Environmental costs consist almost entirely of the energy needed to make the internet work — and there’s a way to make it greener.
Science fiction writers and futurists of the 1960s correctly predicted that we would live in a world of wireless communications, flat-screen TVs and sophisticated kitchen appliances, while few foresaw younger generations celebrating the return of European sleeper trains. They might also be surprised by how many people use online dating services to find love through their phones. The fact that Match.com is worth more than Mitsubishi and Mazda Motors combined shows that our economy is shifting toward consumption of services rather than traditional goods.
government intervention
This does not mean that free markets and technology alone will save the world from climate change. Government intervention is also required. In fact, one of the oldest and most accepted ideas in economics is that consumers should not only pay for the production costs of the products they buy, but also for the costs incurred by society. That means taxing pollution, the destruction of wildlife, unhealthy food, traffic congestion and the depletion of natural resources, rather than raising the same amount by taxing revenue.
It could also be a source of economic growth. Research shows that taxing pollution produces a “double dividend”: It restores fair competition between polluting and non-polluting products, and the resulting tax revenue is invested to benefit all. If the high cost of pollution and limited natural resources force us to innovate, we can actually create value rather than destroy it.
In such a world, sustained growth over the next century would mean phasing out fossil fuels and improving energy efficiency, and largely replacing meat production with plant-based and lab-based alternatives. But more value can also be created through services, addressing well-being issues and creating cleaner air and water, healthier food and safer cities.
In fact, the 15-minute city is less a socialist utopia than an economist’s dream. Charging the true cost of car use through heavy taxes on noise and air pollution is textbook introductory economics. Redistributing public land to humans and public transit saves time for everyone. On the other hand, adding roads just creates more congestion, and public transport becomes more efficient as more people use it. Less time spent in the car means more time for work and leisure.
real challenge
And when it comes to artificial intelligence, like machines and robots in the past, it will not kill jobs, but will give us more time and money to spend. This is economic growth.
The real challenge of growth is not to defy the laws of physics with technologies that magically let us produce more with the same or fewer resources. It is our society’s ability to tax polluting activities and regulate the use of land and natural resources, while still being able to redistribute wealth. This is the ability to do more with less.
We also need to figure out how to properly interpret everything we value. Over time, what is calculated in GDP data has begun to change to include things that traditional markets cannot directly measure.
Making a case for protecting nature means being able to put a number on it: taxing the social cost while recording the use value of our parks, forests and mountains. If those who care about protecting the environment don’t fight to give nature as many numbers as possible because they find the idea of valuing nature in monetary terms distasteful, then people who don’t care will.
www.theconversation.com
