Archive for October, 2008


On Tulips, Bubbles, and Slow Money

Saturday, October 25th, 2008

I’ll be the first to admit, I’m kind of a dummy when it comes to economics (But then, I’m not running for President). That’s why I’m so grateful to have Jonathan Teller-Elsberg around to throw me a line when I’m flailing.

But I do understand basic principles. The Ponzi scheme of subprime mortgage speculation was wrong-headed, reckless, and unrealistic. Real money needs to be backed by real goods. Bubbles burst.

The editorial blog of Ode Magazine illustrates another interesting point: sometimes bubbles aren’t all bad. Sometimes they promote growth and innovation. The problem is, the housing bubble was not one of these “good” bubbles. As Jurriaan Kamp put it, when the housing market tanked, “the party [was] simply over.”

We tend to think that bubbles are wrong. But they serve an important objective. They finance new creativity, new opportunities, and new economic growth. The tulip mania in the Dutch Golden Age brought many extraordinary beautiful flowers. In the 19th century many people first made and subsequently lost a lot of money in building the railways that provided the necessary infrastructure for the following industrial revolution. Without the railway bubble there wouldn’t have been an industrial revolution. More recently we experienced the Internet bubble that imploded in 2000. Again many people lost a lot of money after others had made large fortunes. Yet the bubble laid the foundations for the digital infrastructure that is driving today’s world economy.

[...]

The housing bubble really is a consumption bubble. Americans have borrowed $1 trillion more than they earned in the past 10 years. And that money they have spent. Not on railways, digital infrastructure or, for that matter, on renewal energy projects. No, they spent that money on consumer goods, most of which have gone to waste by now. So the tragedy of the current bubble is that, after the dust is settled and the balances have been restored in the market, there is not much to celebrate. The party is simply over.

[...]

It is interesting and scary how much creativity of the brightest minds has gone in making money with money instead of in making money with new meaningful goods and services. Maybe history will record the present bubble as the ultimate example of what greed may ruin. Making money with money has proven to be a recipe for disaster. There is a clear and great need for a different approach. A new book by Woody Tasch, a former money manager and chairman of the Investors’ Circle, a non-profit network of angel investors, venture capitalists, foundations and family offices that, since 1992, has facilitated the flow of $130 million to 200 early-stage companies and venture funds dedicated to sustainability, points in an interesting direction. In Inquiries into the Nature of Slow Money Tasch makes the case for slow money. Tasch wants to “bind” money again. Not so much to the gold standard of the past, but to the soil. Investments should benefit the Earth on which we live. In his perspective that is the missing connection between the individual and the objective of a sustainable planet.

Read the whole article here.

In Gainesville, Solar Electric Industry Becomes Competetive

Friday, October 24th, 2008

Here’s a couple of good rules of thumb if you’re considering investing in solar power:

1. Before you rush out and attach photovoltaic panels to your Southern-sloping roof, install a solar hot water heater and/or a solar air heater for your home. Converting solar energy into heat is currently the most efficient way to use the stuff.

2. If you do decide to invest in solar photovoltaics (converting solar energy to electricity)—you may want to consider doing it in Gainesville.

From the Gainesville Sun:

Gainesville Regional Utilities has attracted the eyes of environmentalists across the nation for a trail-blazing plan to encourage solar energy production by agreeing to buy the electricity above market value for 20 years.

The plan — outlined to Gainesville city commissioners Monday — would be one of the first of its kind in North America.

Ed Regan, assistant general manager for GRU strategic planning, discovered the incentive, called a “feed-in-tariff,” on a fact-finding trip to Germany where the renewable energy market is booming.

“People are putting their pension funds into solar panels, holding companies are investing in renewable energy,” Regan said. “These are great investments because there’s a guaranteed price backed by German credit; in this case GRU’s credit is probably just as good.”

The idea behind the “feed-in-tariff” is substantially different from how most of the U.S. is now encouraging private investment in renewable energy and how GRU is now encouraging solar panel installation here in the Sunshine State.

Essentially, GRU would buy all the energy produced by a solar photovoltaic system — solar panels that convert sunlight into electricity — over the next 20 years for a guaranteed rate per kilowatt hour — the price would be set to make solar energy production competitive, if not profitable, in Gainesville.

“This is really a historic moment,” said Kellyn Eberhardt, Florida climate project associate with the Environmental Defense Fund, based in Sarasota. “This is the first time in North America that a municipally owned utility is considering a feed-in-tariff policy. These are big strides and a lot of eyes are upon you to see what will happen.”

[...]

GRU’s current incentive system offers a cash rebate of $1.50 per watt of photovoltaic panel installed.

For residential units, that can’t exceed $7,500, and for a business, it can’t exceed $37,500.

Because of those limits, Regan said the buildings with the greatest potential of solar capacity are receiving the least incentive to install the panels. Feed-in-tariff incentives would make large flat roofs — such as a grocery store or a mall roof — benefit the most from the incentive.

Regan said it would even encourage outside investment in placing panels on the rooftops.

Under the current system, the installer of the panels is paid by GRU for any extra energy not used at the house or business that is sent back to the grid — a process called “net-metering.”

Feed-in-tariff incentives would eliminate the cash rebate and net-metering.

Instead, GRU would buy all of the power produced by the solar panels at a fixed price that is usually higher than market price.

According to Regan, the price presented Monday has been calculated using the cost of installation of the panels and the cost of maintenance and repair over 20 years. It is set to make the energy production profitable.

“You’re allowed to beat the game, and that encourages innovation,” Regan said.

So how about it, Rest of Florida? Take advantage of your clean, renewable resources—the Sunshine State is potentially the Saudi Arabia of solar!

Watch out, Masdar City!

Read the whole article here.

VIDEO: Bush Blocks Product Safety

Friday, October 24th, 2008

What do you do when the rules favor the little guy over big business? If you’re George W. Bush, you re-write the rules.

The Wall Street Journal reports one of the Bush administrations last projects before leaving the White House will be to ram through a massive re-write of federal product safety rules aimed at protecting consumers. Essentially, this means that if you’re hurt by a defective product, your ability to sue the manufacturer will be severely limited.

John Haber, the American Association for Justice’s chief executive, called the move “the gift that keeps on giving for corporations.”

Here’s a video of the Wall Street Journal’s very skewed, pro-business, take on the story. When Alicia Mundy calls the Bush strategy “brilliant,” I can’t tell if she’s being sarcastic. (A fun game: count how many times she uses the phrase “tort reform,” a masterpiece of Republican framing.) And I apologize for the ad at the beginning of the video.

WASHINGTON — Bush administration officials, in their last weeks in office, are pushing to rewrite a wide array of federal rules with changes or additions that could block product-safety lawsuits by consumers and states.

The administration has written language aimed at pre-empting product-liability litigation into 50 rules governing everything from motorcycle brakes to pain medicine. The latest changes cap a multiyear effort that could be one of the administration’s lasting legacies, depending in part on how the underlying principle of pre-emption fares in a case the Supreme Court will hear next month.

Bush Administration officials are using their last days in office to rewrite a wide array of federal rules in order to block product safety lawsuits by consumers and states. WSJ’s Alicia Mundy reports. (Oct. 15)

This year, lawsuit-protection language has been added to 10 new regulations, including one issued Oct. 8 at the Department of Transportation that limits the number of seatbelts car makers can be forced to install and prohibits suits by injured passengers who didn’t get to wear one.

These new rules can’t quickly be undone by order of the next president. Federal rules usually must go through lengthy review processes before they are changed. Rulemaking at the Food and Drug Administration, where most of the new pre-emption rules have appeared, can take a year or more.

The Bush administration’s efforts to protect corporations that comply with federal rules from legal action have fueled a long-running power struggle between business interests, which support the efforts, and consumer groups and trial lawyers who have denounced the moves.

The U.S. Chamber of Commerce’s Institute for Legal Reform supports pre-emption as part of its campaign to “neutralize plaintiff trial lawyers’ excessive influence over the legal and political systems,” according to its Web site. “It’s exceedingly difficult for companies to comply with 50 different state standards,” the Institute’s president, Lisa Rickard, said in an interview.

The American Association for Justice, the trial lawyers’ lobby, is trying to formulate a strategy to undo pre-emptive rules. “This is the gift that keeps on giving for corporations,” said the association’s chief executive, Jon Haber.

Read the whole article here.

VIDEO: Whistleblower Bobby Maxwell Saves Taxpayers Millions—Gets Canned

Friday, October 24th, 2008

You may remember this story from the Washington Post last month detailing the Minerals Management Service’s descent into a hotbed of corruption, illegal drug use, and inappropriate sexual relationships with oil company executives.

It now appears that a government auditor of 20 years, Bobby Maxwell, tried to blow the whistle on the “cult of corruption,” as he calls it, back in 2003—and was promptly fired for his trouble.

They work for the United States government, and their job is to protect the United States taxpayer’s interest. It’s like they completely forgot that, like they just became part of the oil companies.

Watch the CNN report below:


Naomi Wolf: An Open Letter to Conservatives, Re: Bush’s Private Army

Thursday, October 23rd, 2008

Author (The End of America: Letter of Warning to a Young Patriot), prominent feminist, and outspoken progressive firebrand Naomi Wolf‘s letter to conservatives originally appeared on Alternet.org. The following is an excerpt:

Dear Conservative America:

I am reaching out with a warning to you that is as heartfelt as the one I have been bringing my fellow citizens for months. But you are the most important audience of all for this, because you hold the key to whether or not we can save our republic in time.

I have been arguing that we are seeing the classic building blocks being laid for a police state: My thesis in The End of America: A Letter of Warning to a Young Patriot is that we are seeing the classic 10 steps being set in place that always underlie a violent police state. My argument in its sequel, Give Me Liberty, is that we must rise up as tactically and effectively as patriots to stop this suppression of freedom.

I hope to persuade you of the profound moral repugnance a true conservative should feel for the plans that are afoot in this nation.

What is the newest news? The Army Times declared that “beginning Oct. 1 for 12 months, the (1st Brigade Combat Team of the 3rd Infantry Division) will be under the day-to-day control of U.S. Army North” … “the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities.”

They are tasked to help with “civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack …”

What this means is that U.S. citizens can now be “controlled” by the military on our streets through technologies — such as Tasers and rubber bullets — that terrify and torment and stun but do not usually kill citizens the way that citizens in Iraq are terrified, tormented and stunned by U.S. military forces.

Who will be “subdued,” according to the blueprint, if and when this military unit takes to our streets? The first group of Americans to be subdued is likely to be protesters; then, going by the blueprint, you will see the military using Tasers to subdue people who ask whether there is a warrant permitting agents to burst into their home, as happened at the RNC. People could be Tasered while protesting when voters are turned away by the wholesale purges of quarter-millions of voters from the rolls that Robert Kennedy Jr. has been documenting; or, there is likely to be Tasering and other kinds of subjugation of people protesting corrupted voting machines.

Why does this undermine American freedom? Federal laws, most notably the Posse Comitatus Act, have prohibited the military from being deployed within the United States for 200 years. Yet the Army Times reports that “expectations are that another, as yet unnamed, active-duty brigade will take over and that the mission will be a permanent one.”

The founders sought to keep soldiers off our streets because they knew how easily a standing army could subdue a population. That’s why the National Guard is answerable primarily to the governors of states and hence to the people of the United States. But the military is answerable to the commander in chief. These are the president’s troops. The president now has a personal army.

Read the rest of Naomi’s letter here.

Another Small Step for Wal-Mart

Thursday, October 23rd, 2008

Wal-Mart has a long way to go before it can seriously be considered a steward of the environment. In the social arena, its record is spotty at best, and includes allegations of sexism, child labor abuses, anti-union activity, low wages, and predatory pricing. Respect for local land and culture? Ehh, dicey, dicey.

But they’re making progress. In 2005, according to MSNBC, the retail giant announced “an environmental plan to boost energy efficiency, cut down on waste and reduce greenhouse gases tied to global warming.” This included designing a couple of experimental stores with concessions to environmentalists like photovoltaic solar panels, biofuel-capable boilers, and such. Window dressing? Probably. But a baby step in the right direction.

Yesterday, Wal-Mart took another tentative step forward in addressing concerns of its ecological footprint and concerns about its past failings on the human rights front. At the Beijing Summit, Wal-Mart CEO Lee Scott announced “that it will require manufacturers supplying goods for its stores to adhere to stricter ethical and environmental standards.”

The New York Times reported Lee’s prepared remarks:

Meeting social and environmental standards is not optional…. I firmly believe that a company that cheats on overtime and on the age of its labor, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honor its contracts, will ultimately cheat on the quality of its products. And cheating on the quality of products is the same as cheating on customers.

Although Lee reaches the wrong conclusion (We shouldn’t think we have to take care of our people and our environment because to do otherwise is “cheating”; rather, we should do it because to do nothing is to simply defer the costs to our environment and our health into the future, and in the end we’ll all end up “paying” more.), he’s on the right track.

More from NY Times:

To ensure suppliers are making changes, Wal-Mart said it would require three levels of audits: from the vendors themselves, from an outside party and from Wal-Mart, which will initiate more of its own random, unannounced audits.

Wal-Mart said the audits would assess factory working conditions as well as compliance by manufacturers with standards regarding air pollution, wastewater discharge, management of toxic substances and disposal of hazardous waste.

Of course, these improvements all depend on how the new regulations are enforced, and assumes no corruption of any link in the chain. Let’s keep our fingers crossed.

So, is Wal-Mart green now? Oh, no. Far from it. But they’re starting to wake up—and that’s something.

The World’s First Carbon-Neutral Farm

Thursday, October 23rd, 2008

The Castello Monte Vibiano Vecchio olive oil farm, north of Rome, is taking what they call a “360°” approach to sustainable farming in an attempt to become the first truly carbon-neutral farm.

The BBC reports the Italian olive oil farm and vineyard is implementing a whole host of innovations, including a new type of battery that can actually store captured solar power for days, providing energy even during long cloudy spells. Though the cost of the solar panels is admittedly high, the farmers fully expect to make their money back inside of 5 years. After that, it’s all gravy. And all fossil-fuel free.

They’ve even planted 10,000 trees to soak up any unforeseen CO2 emissions. Imagine that—planting 10,000 trees just in case.

Here’s an excerpt from the article:

[Austrian solar panel manufacturer] Cellstrom estimates the farm can save 4,500 litres of petrol every year and reduce CO2 emissions by 10 tons….

Solar power is just one of the ground-breaking technologies being applied to this farm….

They have bought a fleet of special miniature tractors that use a new generation of bio fuels. The farm says the new fuels will not be coming from food chain products like corn and therefore will not diminish world food supplies.

Then there are the farm’s boilers which are used to create heat in the olive oil production process.

They will use wood chips instead of methane gas, as in the past. The wood is a renewable source of energy found from supplies already on the farm.

Even storage tanks on the farm are being painted white to reflect sunlight away from earth, in an effort to cut the effects of global warming.

By the end of next year they hope to be the first farm, anywhere, to reduce their inherent net carbon footprint to zero – ie without using off-site offsetting projects.

“It will be great,” says Lorenzo, “to pass on this great, green enterprise to my children and their children.”

And when asked if it makes economic sense for a business to attempt all this, he replies: “Absolutely. We are not a charity.”

Read the whole article here.

Finding Your Community’s Sweet Spot

Thursday, October 23rd, 2008

Can you start a small, locally owned, socially and ecologically responsible business that’s capable of competing in a market of cheap, faceless, big-box stores?

In a word…yeah. If you do it right.

Author and eco-preneur Dave Pollard (Finding the Sweet Spot) explains the importance of community to the eventual success of your small business, and provides some helpful guidelines on how not to approach your startup—pardon the expression—ass-backwards. When you make your business plan, it’s not so much “if you build it, they will come”—it’s actually more like “if they need it, you should build it…and then they will come.” Although I don’t see that going on a t-shirt. Honestly, Pollard says it better.

From the How to Save the World blog:

Most small businesses, unfortunately, start with a product or service that they would like to provide and/or think they can provide well (usually one not very different from what already exists in the community), and then try to find a market and financing for it. This gets entrepreneurship exactly backwards.

The Natural Entreprise approach starts by going into the community and talking and meeting with its people, and discovering their unmet needs. Then, you work with your partners, your networks, prospective customers and suppliers, and members of the community to innovate a solution to that need that is significantly different from anything out in the market now. Something that prospective customers, as “co-inventors” of your product or service, are already sold on. Something the people you have met in the process of doing your research and innovation are likely so enthused about that they may well seek to invest in your enterprise, as partners with you. Something that the people in your community, having been involved in the design and development process, will want to encourage and support as something that benefits the whole community, not just the company’s absentee owners….

Many people are beginning to rebel against the offerings of these large, faceless, global oligopoly corporations, and rediscover the advantage of buying locally-made, healthy, carefully crafted products and services from producers who actually care about what they do and the people they do it for….

In a real sense a Natural Enterprise is a community within a community, and the principles and processes and values of the Natural Enterprise “community” and the neighborhood community in which it operates reflect and reinforce each other.

In his book [Companies We Keep: Employee Ownership and the Business of Community and Place], John Abrams explains how the dynamics of his company and the dynamics of the greater community in which it is located interact powerfully, and how his company and his community partner and help build and strengthen each other. It is essential that Natural Enterprises be involved and active and engaged in building and helping the neighborhood that is their home, and draw in return strength from that larger community.

I think one of the things that is so appealing about Natural Enterprise, beside the fact that it is instinctive and joyful, is that in our modern world we long for a renewed sense of community, to belong to a place as part of a group of people with common Purpose, and, as Dave Smith argues so eloquently, to be of use, of service, to that community. Natural Enterprise, as a community within a larger community, gives us that sense of belonging, purpose, and usefulness twice over.

Give people a real choice between a responsible, local, community-based Natural Enterprise and a sprawling, anonymous and indifferent industrial corporation, and it’s pretty obvious whom most will choose to do business with. They’re just waiting for you, and your Natural Enterprise, to give them that choice.

Read the whole article here.

At The End of America Premiere: Alec Baldwin and Naomi Wolf Talk Fascism

Wednesday, October 22nd, 2008

A funny thing happened on the way to The End of America.

Midway between Manhattan and the Hampton Film Festival premiere of her new documentary (based on the New York Times best seller) this weekend, filmmaker Annie Sundberg was held up because of a highway traffic accident.

So was the film. (Sundberg had the master tape with her.)

Rather than wait for the inevitable riot (you know how unruly those East Hampton mobs can get), author Naomi Wolf, Alec Baldwin, Jameel Jaffer of the ACLU, and co-director Ricki Stern took the opportunity to engage the audience in an impromptu question and answer segment on the historical parallels between fascist regimes and the current US government, and the gradual erosion of our civil liberties.

Here’s an excerpt of the transcript, as recorded by SpoutBlog‘s Karina Longworth:

Alec: It makes you look at that idea: do we care what the government is doing that’s stripping away the rights of people that aren’t Americans. That’s been a big, big part of this administration, is they believe you don’t care because it’s not Americans.

And that’s a really, really profound idea. I’ve always had one motto or one perspective that was leant to me, which is that America is special and America is different, but only in direct proportion to us doing great things and us doing good things. We live in an age now where you have a very tired, wheezing group of people who keep wanting to tell you, “America’s great. America’s great,” regardless of what we do. We just have to keep telling ourselves we’re great and we can go out there and torture people and do these horrible things.

Do you think this is the new reality? Or do you think that a new administration, an administration that ends with a vowel [pause for laughter], would be able to turn this stuff back and change things?

Naomi: Just before I answer that, the most important issue is these boots on the ground. And I should explain what that is, because the next president will have to deal with that.

The 1st Brigade of the 3rd Infantry Division has been deployed by George Bush to somewhere in the United States of America. So, that’s 3, 000 or 4, 000 warriors. And they aren’t answerable to Congress, they’re not answerable to the American people, they’re answerable to President Bush. Again from my study, this is never a good sign.

Alec: Where are they now?

Naomi: Nobody knows. I had the surreal experience of being on the “Today Show” this morning and having the “Today Show” give me a great big sound bite from their commander saying, “They’re here to save lives.” And they challenged me as if I was a fear-monger and a dangerous radical for raising the questions about them. And no one, including NBC, knows where they are.

Alec: They’re on 27 Highway, that’s why the tape isn’t here.

Naomi: Who are they and what are they doing? They are battle-hardened soldiers. They’ve spent two tours in Iraq. They were responsible for crowd control in Fallujah. And their original mandate according to the Army Times was crowd control here. They’ve got tasers, they’ve got rubber bullets. They’ve got tanks capable of killing 300 people. They’re armed. And I guess looking at what’s happening around the world in closed-in societies or in weak democracies, soldiers are often sent to monitor elections. Especially contested elections.

So, I don’t like them being here. And by the way, it violates 200 years of the Insurrection Act and Posse Comitatus, which kept us safe. And why did people around the world envy us? Because we’re safe from soldiers policing our streets. We have civilian police.

Audience member calling out: Why have we not read about it?

Naomi: That is really a very good question. I was just on the phone with a friend from the New York Times saying, “When are you guys going to run the story about where the 1st Brigade is and what they’re doing?” [He said] “It’s classified.”

Jameel: We just filed a request under the Freedom of Information Act, I guess this morning, asking for more information about this. But, they’ve only had a few hours to respond and they haven’t come up with a response yet. They may yet come back and say that the information is classified.

Naomi: And if is classified, none of us will ever be able to know, and if you know and tell us, they can prosecute you for a 10-year jail sentence. So this sucks.

[Audience laughs]

Alec: [Motioning to side of the room] Where are you? Ricki, come out for a second. Come and sit with me on my luxury bench here

[Baldwin moves over to the side of the piano bench on which he’s sitting. Ricki Stern, the co-director of the film, comes and sits next to him]

Alec: We’re just going to take another quick minute. I think one of the greatest things about when I come to these events, not just this film festival, but any great film festival, and see great narrative and documentary films, is this idea that this is the democracy in action that, I think, is really withering in the country that we live in right now. The corporate media assumes that people don’t want their day to be ruined. I’m somebody that used to read the New York Times every day, and basically watch morning news shows every day. I haven’t watched a morning news show in five years. And I might read the New York Times if I pick it up in somebody’s office while I’m waiting for them to finish on the phone. I get my news online, from other sources that I have more faith in.

This war is, in terms of how it was prosecuted, the worst thing this country has ever done. Vietnam fell and it did not make a bit of difference in anybody’s life here at all. All those [American] men who died were brave soldiers, and they should have not have been treated the way that they were treated when they came home, but in terms of Vietnam falling, in terms of our political stability and our economic stability, that meant nothing. It meant nothing. Now we go ahead and have this war that we have now, where is the protest against this war? Something tells me that there have been a lot of protests, but you just don’t see it on TV. It’s not covered by the media, because the media assumes that the lion’s share of Americans would rather watch Deal or No Deal.

So what was it that led you to make this film?

Ricki: Honestly we were asked. We met with Naomi and Avram Ludwig, the producer of this film, and some of the other people who were involved. They asked us if we would be interested in making it. I think probably from our other films that we had made. And when we met with Naomi early on she thought that it would translate well into a film because the images and the visual comparisons that you see in the film are ones that you don’t need words. They just resonate alone, just by seeing the comparisons. We tried to take her lecture of the book and put it into pictures.

Naomi: What got you interested in this, Alec?

Alec: I’ve said this before and it may seem modest to everybody here, but Bloomberg and the Republican convention really burned my ass. I mean, I was so upset that that happened in the city of New York that they weren’t going to have any protests allowed, it just really kind of drove me almost crazy.

I think both people running for president today – I think presidential candidates are like luggage in some old movie, with all those big stickers on them. Paris. Lisbon. Kyoto. Venice. Presidential candidates are owned by someone. But you still have to ask yourself, in this election, who’s the person who is going to turn back this assault? Who do we have the best chance of turning back this assault of our freedoms in this country? I still believe that the bulk of Americans are hard-working people. They work too hard, as a matter of fact. They pay a lot of money in taxes, and they want to be left alone and they want to live their lives in peace. They don’t need to be monitored by the National Security Agency on an ongoing basis.

Naomi: Alec, there is a question of who’s going to fix it. And I’m trying to tell you that if Barack Obama is elected by a miracle in a transparent, accountable election, we are not out of the woods.

Read the whole transcript here.

Rebuild the Economy by Investing in Natural Capital

Wednesday, October 22nd, 2008

For years, environmentalists have been trying to appeal to our better natures—pleading to humanity to preserve the environment simply for the environment’s sake. Clearly, that approach hasn’t worked out too well. But maybe the results of an EU-commissioned cost-benefit analysis will open people’s eyes.

From the BBC:

The global economy is losing more money from the disappearance of forests than through the current banking crisis, according to an EU-commissioned study.

It puts the annual cost of forest loss at between $2 trillion and $5 trillion.

Study leader Pavan Sukhdev says, “…whereas Wall Street by various calculations has to date lost, within the financial sector, $1–$1.5 trillion, the reality is that at today’s rate we are losing natural capital at least between $2–$5 trillion every year.” I’m no economics wiz, but these numbers are pretty clear. The services that forests perform that benefit mankind, such as providing clean water and removing carbon dioxide from the atmosphere, are being undercut by human activities. Not only do big companies need to add environmental impacts to their balance sheets, they need to start investing in eco-markets; if they want to stay in the black, they’ll have to get in the green.

In an article on investing in “nature’s capital,” also from the BBC, Andrew Mitchell has this to say:

A major new theme of this Congress of the World Conservation Union (IUCN) is about how we value natural capital, which up to now has not appeared on company balance sheets.

I believe the current financial crisis may force the global community to right that wrong, along with many others, because we all want a more stable economy.

However, in global markets today, rainforests are worth more dead than alive. Poor and often opaque governments, with little to sell, offer their rainforests to raise revenue, attracting largely risk capital with strings attached.

The only way to do this is to convert rainforests into something else, usually timber, beef, soy or palm oil that Westerners, and now prosperous Asians, have a burgeoning appetite for….

Seven billion tonnes of carbon dioxide (CO2) annually places rainforests just second to energy as a source of global emissions and is more than the entire world’s transport sector put together.

And it is not just about carbon. The world’s rainforests are a giant “utility”, providing services we all use but do not pay for.

The Amazon releases 20 billion tonnes of water into the atmosphere each day. This air-conditions the atmosphere, waters agri-business and underpins energy security from hydro to biofuels across Latin America on a gigantic scale.

Were it possible to build a machine to do this, every day it would consume the energy equivalent to the world’s largest hydro dam running on full power for 135 years; and the Amazon does all this for free. Now that’s natural capital and we are eroding it fast.

Pavan Sukhdevs’ landmark report, The Economics of Ecosystems and Biodiversity, published by the EU earlier this year, estimated the annual losses of natural capital to be, at the low end, equivalent to the value of the Indian stock market and, at the high end, the entire London stock market.

If what biodiversity does for us is so valuable, why is this happening? The answer is in part ignorance and, in part, that the global economy may no longer be fit for purpose.

The problem is that nature is priceless. What nature does for us is not valued economically. Whilst only financial and human capital drive human endeavour, and inputs from natural capital remain unrecognised, business proceeds on a false sense of security.

The economy, I believe, is at a truly historic tipping point where the global economy will rapidly need to incorporate the risks from the collision course that energy security, food security and environmental security are all on….

Markets are by no means perfect but they are inventive. Who would believe 30 years ago that a bottle of fashionable mineral water would sell for more than petrol. But left to itself, the global market puts a value on bottled water of 70bn euros per year but nothing on vital rain from rainforests.

A scheme to value forest ecosystem services in global markets could deliver financial flows at scale, in addition to those provided by carbon markets.

Some understandably fear turning natural capital into bonds or equities because the market can be a beast, but government funds sourced from taxation are unlikely to meet the $30-50bn annual bill for halting deforestation….

Rich nations, which have caused climate change, may have the financial muscle to help solve it and should find a way to recognise “real capitalism” inclusive not only of financial and human capital, but also natural capital.

If the global economy can, almost overnight, find two trillion dollars to cut the risk of Fannie May and Freddie Mac and the global banking community from going down the pan, surely it can find a fraction of that to cut the risk of forests going up in smoke.

The implication is clear. Governments, together with private industry, need to make it more financially attractive for poorer countries—where the bulk of deforestation is taking place—to preserve their forests than to destroy them. Putting a dollar value on them, while it may seem a bit ruthless, is a good first step. When companies’ bottom lines start going up in smoke, maybe they’ll listen.


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