Tag: natural capital

Accounting for Environmental, Health, and Climate Impacts in the Energy Sector

Published on December 5th, 2019 by - Blog Posts, News, Reports & Media Releases

Report author Skip Pruss

By Skip Pruss

This article is excerpted from the final of four policy briefs by former FLOW board chair, and former director of the Michigan Department of Energy, Labor, and Economic Growth, Skip Pruss, that make the economic case for government’s role in protecting the environment. The fourth policy brief, “Resetting Expectations: Accounting for Environmental, Health, and Climate Impacts in the Energy Sector” is available here to read or download.

Pruss’ first policy brief in the series, “Resetting Expectations: Government’s Role in Protecting Human Health and the Environment,” is available here in executive summary and in full.

The second policy brief, “Resetting Expectations: The Value of Natural Systems and Government’s Role in Protecting Water,” is available here to read or download as an executive summary or full report.

The third brief, “Resetting Expectations: The Multifaceted Benefits of Regulation for the Economy and Environment,” is available here in executive summary and in full.

FLOW will convene an environmental economics public listening session on Dec. 5 in Grand Rapids. We convened our first listening session on Nov. 13 in Traverse City (click this link to watch a live video feed of the event; blog coverage also available here).

Natural systems provide trillions of dollars of economic value annually but are largely unacknowledged as essential to our economic well-being. Government plays a critical role in protecting natural systems that provide wide-ranging economic benefits to industry, commerce, agriculture, recreation, and tourism, for present and future generations.

At the same time, perverse incentives remain in law and policy that are profoundly disruptive to the environment, the economy, social welfare, and a stable climate. Government subsidies for the development and use of fossil fuels undermine and negate the very protections and safeguards sound environmental regulations aim to preserve. These subsidies, some of which date back a full century, are harmful anachronisms that are contrary to the public interest and sound economic policy.

Environmental standards can also be a strong force for innovation within business and industry by reducing waste and production inefficiencies, inducing technological improvements, lowering costs, and mitigating environmental vulnerabilities. Environmental regulations can level the playing field within business sectors by setting industry-wide standards for protection and safeguards and by fostering competition for improvements among competitors.

This fourth brief—”Resetting Expectations: Toward a Full Accounting of Environmental, Health and Climate Impacts in the Energy Sector”—is the last in a series of policy briefs that examines the economic costs associated with government policies that do the opposite—imposing unnecessary and unaccounted for burdens on the environment, public health and the economy. Obsolete and inefficient government policies and programs impose additional costs on society and taxpayers by directly supporting activities that result in environmental degradation and diminishment of the ecological services provided by healthy and robust natural systems.

Fossil fuel subsidies persist in policy despite being demonstrably inefficient and more costly than clean energy alternatives because they serve powerful, deeply embedded, and influential special interests in global energy markets. The adverse environmental and climate consequences and associated economic costs from the production and use of fossil fuels are “negative externalities” unaccounted for in the price of goods and services. In economic theory, negative externalities are indicators of “market failure.”

An optimal regulatory framework would, consistent with established tenets of economics, assess the full range of costs and impacts of competing energy technologies. A rational regulatory framework would quantify and monetize the environmental, public health and economic costs and impacts from the production and combustion of oil, natural gas, and coal, and compare them against clean energy alternatives.

Full accounting of the direct and indirect economic effects of energy subsidies would enable government to make more rational, evidence-based decisions regarding the impacts of energy policy on the environment, the economy, public health, and the climate. It would also align with the fundamental purposes of the Public Trust Doctrine in advancing the most environmentally beneficial, healthful, and economically efficient policies to safeguard present and future generations.

Environmental protections and safeguards, implemented through government regulations, provide overwhelming economic and health-related benefits for society at large. Maintaining the functionality, vitality, and resilience of natural systems provides cascading economic benefits to industry, commerce, agriculture, recreation, and tourism, helping to assure these benefits for future generations. The environmental protections afforded by government regulations are substantial but are marginalized and, at times, negated by competing policies that cause environmental and economic harm.

Incentives are deeply embedded in economic policies in the form of subsidies provided to business and industry that degrade and diminish natural systems, resulting in substantial and permanent economic loss. Long established, yet function- ally obsolete, energy subsidies produce wide-ranging insidious and harmful effects on the environment, public welfare, and the economy. Despite this, demonstrably inefficient and detrimental subsidies for fossil fuels are pervasive both domestically and globally, and supported by long-standing powerful economic interests that are firmly integrated into our politics and our economy.

Government Must Protect the Great Lakes, our Greatest Source of Natural Capital

Published on September 4th, 2019 by - Blog Posts, High water, News

Report author Skip Pruss

By Skip Pruss

This article is excerpted from the second of four policy briefs by former FLOW board chair, and former director of the Michigan Department of Energy, Labor and Economic Growth, Skip Pruss that make the economic case for government’s role in protecting the environment.

The second policy brief, “Resetting Expectations: The Value of Natural Systems and Government’s Role in Protecting Water,” is available here to read or download as an executive summary or full report. FLOW will unveil the last two briefs in the coming months. (Pruss’ first report in the series also is available here in executive summary and in full.)

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Michigan lies at the heart of the Great Lakes, the largest fresh surface water system in the world. Harboring 95 percent of all fresh surface water in United States and 84 percent of all fresh surface water in North America, the Lakes are an enormous source of natural capital, providing direct health, economic, environmental, and ecological services to 40 million people. The Great Lakes system is a magnificent natural endowment. Sculpted by ancient retreating glaciers that left the largest interconnected body of fresh surface water in the world, the Great Lakes are truly globally unique.

We in Michigan are water rich. The Great Lakes support a $6 trillion regional economy. Water is our most valuable source of natural capital, bestowing billions of dollars in ecological services by providing fresh, potable water for consumption, recreation, agriculture, and industry. Freshwater aquatic ecosystems — our lakes, streams, rivers, groundwater and wetlands — provide drinking water, produce fish, nourish unique biological niches at the land and water interface, and provide diverse recreational opportunities. Wetlands are prolific biological nurseries harboring birds, insects, waterfowl, and aquatic organisms throughout the food chain, while purifying water, storing stormwater, recharging aquifers, and buffering nutrients — essential services that are largely unknown and unappreciated. Great Lakes fisheries alone provide more than $7 billion in annual economic benefits and support more than 75,000 jobs.

Photo: Great Lakes fisheries alone provide more than $7 billion in annual economic benefits and support more than 75,000 jobs.

With our water wealth comes special obligations of stewardship. The Great Lakes and their tributary rivers and streams belong to the public and are held in a public trust. Government, as trustee, has the responsibility to protect the trust waters from impairment and cannot allow diminishment of water quantity or water quality. Our people, our businesses, and our economy depend on the health and viability of our Great Lakes, and others less gifted by geography will set their sights on the Great Lakes. There will soon come a time when discussions about human rights in water, growing water scarcity, and the need for a more “equitable” distribution of Great Lakes’ water wealth will elevate in Congress and state legislatures.

A recent study conducted under the Resources Planning Act, a federal law requiring periodic resource assessments on forest lands and rangelands, indicates that of the 204 water basins in the United States, 145 basins will show decreases in yield over the coming decades and nearly half may experience monthly water shortages. While climate change is projected to increase precipitation in some northern regions of the United States, increased frequency of droughts will result in reduced river flows, less reservoir capacity, and decreases in soil moisture. Globally, the situation is much worse. The United Nations reports that today “over 2 billion people live in countries experiencing high water stress, and about 4 billion people experience severe water scarcity during at least one month of the year.”

Our abundant water resources will increasingly weigh to Michigan’s competitive advantage, but, more likely than not, Michigan will face future challenges from states that will be stressed by inadequate water supplies and who will look to our region with the belief and expectation that our water resources need to serve a larger geography. Our water wealth will be certain to attract a broad universe of water-dependent agricultural, commercial, and industrial private interests as well. At the same time, the chasm between the water rich and the water poor will grow. Great Lakes freshwater resources and the vital services they provide will only increase in value in a future where national and international water supplies become more stressed and attenuated.

Government, as the fiduciary charged with the protection of public trust resources, must use the tools and resources it has in terms of laws, regulations, and best practices to conserve and protect our water as a public good. Greater public understanding of the vital services water resources provide would empower citizens to participate more effectively in the political process and demand that policymakers and legislators take active measures to protect water. Intelligent, sensible water management and conservation practices and effective application of laws and regulations on the part of government to protect the waters upon which we all depend are imperative. Ultimately, our legal and moral authority to resist appropriation of our water wealth will be a function of how adept and effective we are as Great Lakes stewards in the conservation and protection of our waters.

And we must learn from our mistakes.

Natural Capital and the Value of Ecological Services

Published on August 26th, 2019 by - Blog Posts, News

Report author Skip Pruss

By Skip Pruss

This article is excerpted from the second of four policy briefs by former FLOW board chair, and former director of the Michigan Department of Energy, Labor and Economic Growth, Skip Pruss that make the economic case for government’s role in protecting the environment.

The second policy brief, “Resetting Expectations: The Value of Natural Systems and Government’s Role in Protecting Water,” is available here to read or download as an executive summary or full report. FLOW will unveil the last two briefs in the coming months. (Pruss’ first report in the series also is available here in executive summary and in full.)

 

The natural world provides a continuous stream of abundant, valuable goods and services. Air, water, soil, flora, and fauna upon which we all depend are relentlessly harvested, used, and abused without an appreciation of our dependency upon this natural capital and the value we derived from it. Nature-based capital, when unimpaired by outside stressors, is continuous and sustainable, providing a constant, renewed flow of natural resources that undergird the global economy.

Natural capital is the feedstock; nature also provides processes that continuously provide beneficial services. The list of ecological services nature provides is limited only by our evolving understanding of science. Fertile soils assisted by microbial action enabling nutrient absorption produce food and fiber and enable life. The hydrologic cycle purifies and refreshes our waters, absorbing floodwaters and recharging aquifers. Terrestrial and aquatic plants purify the air, sequester carbon dioxide, and produce oxygen. As integrated complex systems that thrive in the absence of human interventions, these ecological processes only scratch the surface of the sustainable services nature provides.

Calculating the services natural systems provide in dollars and cents does not mean that money is the only measure of nature’s value to human beings. Humanity depends on nature for inspiration, beauty, and spiritual and physical renewal. Scientific research has shown that living close to nature and spending time outside has significant and wide-ranging health benefits, reducing the risk of stress and disease. An economic measure of ecosystem services is merely one way of expressing their value.

The primary benefits and functions provided by nature-based services are set forth in the National Climate Assessment, a requirement by federal law calling upon the U.S. Global Change Research Program to “conduct a state-of-the-science synthesis of climate impacts and trends across U.S.
regions and sectors every four years.” Those benefits and functions of natural capital include:

  1. Providing provisioning materials, such as food and fiber,
  2. Regulating critical parts of the environment, such as water quality and erosion control,
  3. Providing cultural services, such as recreational opportunities and aesthetic value, and
  4. Providing supporting services, such as nutrient cycling.

The work of understanding and quantifying the economic benefits of natural capital and ecological services is very recent. Herman Daly, a Senior Economist in the Environment Department of the World Bank and co-founder and associate editor of the journal, Ecological Economics, is credited with being among the first to document both the value of natural systems and the costs of degrading the services nature provides. Robert Costanza, Paul Hawken, and Amory Lovins were also among the first to write widely on the abundant benefits of nature-based services as well as to probe deeply into the economic consequences of diminishing these services by degrading the environment.

The field of ecological economics is now well established. A recent report from the United Nations International Science & Policy Platform for Biodiversity and Ecological Services (IPBES), Regional Assessment Report on Biodiversity and Ecosystem Services for the Americas, quantified the annual value of ecological services provided by natural systems in the Americas. The analysis, involving the collaboration of over 100 scientists who reviewed more than 4,100 scientific publications, found that 40 percent of the planet’s capacity to provide nature-based services lies in the Americas, having a total annual value estimated at $23.4 trillion. This figure, incomprehensibly large, is even more remarkable given the fact that only 13 percent of the world’s population resides in the Western hemisphere.

We who reside in the United States and Canada enjoy a surfeit of world’s capacity to produce natural capital and ecological services. Eighty-seven percent of the world’s population lives in areas of the planet that offer only 50 percent more nature-based capital and ecological service value than the Americas have with one-sixth the population. North Americans also have a much larger ecological footprint; our relative wealth in natural resources works to conceal both our disproportionate consumption of global ecological services and the magnitude of the environmental challenges facing the rest of the world.

“The health of ecosystems on which we and all other species depend is deteriorating more rapidly than ever. We are eroding the very foundations of our economies, livelihoods, food security, health and quality of life worldwide.”

~IPBES Chair, Sir Robert Watson

The global capacity to produce nature-based capital and ecological services is finite. The “biocapacity” of the earth’s natural systems is a measure of the planet’s ability to supply and reproduce nature-based goods and services and absorb society’s waste products. It is nature’s banking system — a natural endowment that provides trillions of dollars of benefits annually to the global population — that is now being overdrawn.

In most of the developed world the consumption of natural resources exceeds the regenerative capacity of the earth’s natural systems. Quantifying and monetizing the earth’s biocapacity, as well as the ecological footprint of nations, are difficult and complex endeavors, but essential to advancing our understanding of our impacts on the environment and to formulating and implementing strategies that enable better stewardship of the natural systems on which we depend.

Resetting Expectations: the Value of Natural Systems and Government’s Role in Protecting Water

Published on August 9th, 2019 by - Blog Posts, News, Reports & Media Releases

Report author Skip Pruss

This is the second of four policy briefs by former FLOW board chair, and former director of the Michigan Department of Energy, Labor and Economic Growth, Skip Pruss that make the economic case for government’s role in protecting the environment. FLOW will unveil the last two briefs in the coming months.

Click here to read the full 2nd report. 

And in case you missed it, click here to read the full 1st report in the series and here to access its executive summary.

The health and well-being of our state, our country, and our planet are dependent on maintaining the productive capacity of nature and the services it provides. Though not widely recognized or acknowledged, “natural capital” and the services provided by healthy ecosystems have always been the foundation upon which societies thrive and prosper.

The relatively new science of ecological economics now provides the means of assessing and quantifying the value of natural capital and related ecological services. The science indicates that natural systems endow trillions of dollars of annual benefits that society overlooks and takes for granted, yet undergird all global economies. Determining the value of natural capital and the associated ecological services provides a means of measuring and understanding the economic value of the natural world. Accurate data and unbiased information about the value of nature and the services natural systems provide are essential to inform public policy and legislative action.

Although there are many human impacts that impair and diminish natural systems, reducing the value and economic efficiency of natural systems, no greater threat exists than the warming of the planet caused by the continued emission of anthropogenic greenhouse gases, primarily from the combustion of fossil fuels. Recent assessments indicate that greenhouse gas emissions will cause future damages of more than $50 trillion by 2050, and the economic burden will disproportionally fall on developing economies. Decarbonization of the global economy by transition to clean energy sources is imperative. The good news is that there is a clear consensus emerging that the energy transition is not only technically and economically feasible, but also that the global economic benefits from decarbonizing the global economy are substantial, including safeguarding the Great Lakes freshwater system from the worst effects of climate change. Government’s role in accelerating the energy transition is essential.

Michigan’s water resources are a rich source of natural capital and provide significant ecological services that will become more valuable over time. Our abundant water resources will increasingly weigh to Michigan’s competitive advantage, but more likely than not, Michigan will face future challenges from states that will be stressed by inadequate water supplies and from water-dependent agricultural, commercial, and industrial interests. Our legal and moral authority to resist appropriation of our water wealth will be a function of how adept and effective we are as Great Lakes stewards in the conservation and protection of our water.

In this, governance in Michigan is failing. The Flint water crisis is a stark lesson in the pitfalls of overriding and ignoring government standards intended to safeguard public health and safety. The PFAS crisis is attributable to the inadequacies of existing environmental laws, exacerbated by failed government leadership that ignored the findings and recommendations of the scientific professionals. Both the Flint crisis and PFAS concerns are incidents of a much larger systemic problem—groundwater contamination that is pervasive, yet is being ignored by policymakers and political leaders.

The water-related exigencies Michigan is experiencing call for broader application of the Public Trust Doctrine to reestablish and reaffirm government’s responsibility to protect and safeguard water resources for the benefit of the public. Recognizing the interdependence of natural systems and the importance and value of the ecological services that water resources provide, the Public Trust Doctrine must be applied aggressively and proactively to address conditions that have the potential to harm or impair commonly held water resources.

Report’s Key Facts

  • Science informs us that nature and natural systems endow trillions of dollars of annual benefits that society overlooks and takes for granted, yet undergird all global economies.
  • Though not widely recognized or acknowledged, “natural capital” and the services provided by healthy ecosystems have always been the foundation upon which societies thrive and prosper.
  • There is not only an absence of tension between environmental protection and economic performance, but in fact, the health of the environment and long-term economic growth and prosperity are mutually dependent and inextricably interconnected.
  • Although there are many human impacts that impair and diminish natural systems reducing the value and economic efficiency of natural systems, no greater threat exists than the warming of the planet caused by the continued emission of anthropogenic greenhouse gases, primarily from the combustion of fossil fuels.
  • Recent assessments indicate that greenhouse gas emissions will cause future damages of more than $50 trillion by 2050 and the economic burden will disproportionally fall on developing economies.
  • Climate changes predicted for the Great Lakes Region include increased precipitation with a larger percentage of annual rainfall occurring in heavy precipitation events causing flooding, increasing soil erosion and nutrient loadings to tributary streams and rivers. More precipitation will also increase the frequency and amount of sewage overflows and further the propagation of algae, including cyanobacteria resulting in declining water quality and beach health. 
  • Warmer lake water temperatures will affect the distribution of fish by advantaging warm-water species over cold-water species, change aquatic plants and benthic communities, and accelerate eutrophication.
  • Decarbonization of the global economy by transition to clean energy sources including safeguarding the Great Lakes freshwater system from the worst effects of climate change is imperative. The good news is that there is a clear consensus emerging that the energy transition is not only technically and economically feasible, the economic benefit of the global energy transition would range from $65-160 trillion by 2050.
  • Safeguarding water resources and the ecological services they provide will become more challenging in a world where rising demand encounters growing water scarcity.
  • Escalating future demand and competition for water resources, intensified by a warming climate, will enhance the value of Great Lakes water, potentially increasing the chasm between the water rich and water poor.
  • Policymakers must come to recognize the importance of applying the Public Trust Doctrine to modern societal needs, the imperatives of evolving science, and to ensure water equity.
  • FLOW advocates for an expanded application of the Public Trust Doctrine to act as a shield for protecting water resources against activities that would reduce the quantity or quality of water or threaten to diminish or reduce the value of the ecological services the waters provide to the public.

Government’s Role in Protecting Human Health and the Environment

Since the 1970s, history has shown that government interventions requiring protection for human health and the environment through more stringent environmental laws have not only improved baseline conditions of our environment like air and water quality, but have also improved overall economic conditions. These studies, some of which were described in the first policy brief in this series, demonstrate the economic value of government-mandated protective standards by quantifying the benefits of protections aimed at improving public health and safeguarding the environment, as well as the high cost to the economy and public health of failing to protect the environment through adequate regulation.

Our politics fail to take into account the overwhelming benefits accruing to the public by the protections and safeguards effectuated by environmental standards. Though the political narrative has recently evolved to the point where some political leaders publicly acknowledge that there is “no conflict between economic performance and environmental protection” recognizing that society can have both, the reality, clearly found in the relatively new field of environmental economics, is that economic prosperity, indeed the world’s economies, are ultimately dependent on protecting the planet and the valuable resources that well-balanced natural systems provide. In economic terms, there is not only an absence of tension between environmental protection and economic performance, but in fact, the health of the environment and long-term economic sustainability and prosperity are mutually dependent and inextricably interconnected.

It is imperative that political leaders, policymakers, and citizens come to understand this critical association.