Category Archives: Ecological Economics

Ecological Economics, Ecological Management

Uncertainty and climate change

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Australian Economist, John Quiggin points out that uncertainty should increase intensity of climate change action.  He writes

…it’s a straightforward implication of standard economic analysis that the more uncertainty is the rate of climate change the stronger is the optimal policy response. That’s because, in the economic jargon, the damage function is convex. To explain this, think about the central IPCC projection of a 3.5 degrees increase in global mean temperature, which would imply significant but moderate economic damage (maybe a long-run loss of 5-10 per cent of GDP, depending on how you value ecosystem effects). In the most optimistic case, that might be totally wrong – there might be no warming and no damage. But precisely because this is a central projection it implies an equal probability that the warming will be 7 degrees, which would be utterly catastrophic. So, a calculation that takes account of uncertainty implies greater expected losses from inaction and therefore a stronger case for action. This is partly offset by the fact that we will learn more over time, so an optimal plan may involve an initial period where the reduction in emissions is slower, but there is an investment in capacity to reduce emissions quickly if the news is bad. This is why its important to get an emissions trading scheme in place, with details that can be adjusted later, rather than to argue too much about getting the short term parts of the policy exactly right.

…

Anyway, back to my main point. The huge scientific uncertainty about the cost of inaction has obscured a surprisingly strong economic consensus about the economic cost of stabilising global CO2 concentrations at the levels currently being debated by national governments, that is, in the range 450-550 ppm. The typical estimate of costs is 2 per cent of global income, plus or minus 2 per cent. There are no credible estimates above 5 per cent, and I don’t think any serious economist believes in a value below zero (that is, a claim that we could eliminate most CO2 emissions using only ‘no regrets’ policies).

For anyone who, like me, is confident that the expected costs of doing nothing about emissions, relative to stabilisation, are well above 5 per cent of global income that makes the basic choice an easy one.

Ecological Economics

New measures of national well-being are moving towards mainstream

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Alternative measures of national well-being are moving further towards the mainstream.

Economist Joseph Stiglitz writes in the Financial Times about a report, commissoned by the President of France he lead.   President Sarkozy, established the International Commission on the Measurement of Economic Performance and Social Progress, which produced a report on the measurement of economic performance and social progress.  Stiglitz writes about the report in the Financial Times article – Towards a better measure of well-being.

National income statistics such as GDP and gross national product were originally intended as a measure of market economic activity, including the public sector. But they have increasingly been thought of as measures of societal well-being, which they are not. Of course, good statisticians have warned against this error. Much economic activity occurs within the home – and this can contribute to individual well-being as much as, or more than, market production.

There are concerns, too, that a focus on the material aspects of GDP may be especially inappropriate as the world faces the crisis of global warming. Should we “punish” a country – in terms of our measure of performance – if it decides to take some of the fruits of the increase in productivity from the advancement of knowledge in the form of leisure, rather than just consuming more and more goods?

What we measure affects what we do. If we have the wrong metrics, we will strive for the wrong things. In the quest to increase GDP, we may end up with a society in which most citizens have become worse off. We care, moreover, not just for how well off we are today but how well off we will be in the future. If we are borrowing unsustainably from this future, we should want to know.

Flawed statistics may also lead us to make incorrect inferences. In the years preceding the crisis, many in Europe, focusing on America’s higher rates of GDP growth, were drawn to the US model. Had they focused on metrics such as median income – providing a better picture of what is happening to most Americans – or made corrections for the increased indebtedness of households and the country as a whole, their enthusiasm might have been more muted.

… Advances in research across a number of disciplines enable us now to develop broader, more encompassing measures of well-being. Such measures recognise that unemployment has an effect that goes well beyond the loss of income to which it gives rise. Health, education, security and social connectedness all are important to quality of life – but are not adequately reflected in GDP.

Newsweek reports:

The report recommends shifting economic emphasis from simply the production of goods to a broader measure of overall well-being, which would include the benefits of things like health, education, and security. It calls for greater focus on the effects on income inequality, as well as new ways to measure the economic impact of sustainability (climate change specialists like Nicolas Stern are members), and recommended ways to include the value of wealth to be passed on to the next generation into today’s economic conversation. What it didn’t do is come up with a quick and easy new way to tabulate a new measure of wellbeing. Some of the necessary yardsticks already exist; others still need to be invented.

Still, Sarkozy said he plans to shop the report all over the world. “France will open the debate on this report’s conclusions everywhere. It will put it on the agenda of every international conference, every meeting, every discussion where building a new economic, social, and ecological order is the objective,” he told the Sorbonne crowd. “France will fight for every international organization to modify their statistical systems by following the commission’s recommendations. It will propose to its European partners that Europe set the example by putting them into action. [France] will adapt its own statistical machinery in consequence,” he promised. Even the commission’s rapporteur admitted he wasn’t expecting Sarkozy’s strong reaction.

Ecological Economics, Ecosystem services

Michael Pollan interviewed in Vancouver’s the Tyee

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Systems thinking food writer Michael Pollan interviewed by Vancouver’s the Tyee after a talk in support of the University of British Columbia’s Farm. The interview – Garden Fresh – discusses US agricultural policy and resilience food systems:

On whether he’s trying to rally a movement in time to avert disaster, or just prepare us for the inevitable mess caused by scarcer oil, degrading ecologies, and global warming:

“It’s more the latter. We need to have these alternatives around and available when the shit hits the fan, basically.

“One of the reasons we need to nurture several different ways of feeding ourselves — local, organic, pasture-based meats, and so on – is that we don’t know what we’re going to need and we don’t know what is going to work. To the extent that we diversify the food economy, we will be that much more resilient. Because there will be shocks. We know that. We saw that last summer with the shock of high oil prices. There will be other shocks. We may have the shock of the collapsing honey bee population. We may have the shock of epidemic diseases coming off of feed lots. We’re going to need alternatives around.

“When we say the food system is unsustainable we mean that there is something about it, an internal contradiction, that means it can’t go on the way it is without it breaking up. And I firmly believe there will be a breakdown.”

Ecological Economics, Inequality

Machine Fetishism, Money and Resilience Theory

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Here comes the “resilience backlash”. After some considerable praising of resilience theory the last years – for example by Fast Company, Foreign Policy, and the Volvo Environment Award – human ecologist Alf Hornborg from Lund (Sweden), elaborates some harsh criticism in a forthcoming issue of the International Journal of Comparative Sociology. Although the article is almost impossible to summarize in a brief way – as it includes topics ranging from unequal exchange in the world system, “machine fetishism”, to the limitations of organizational learning – this quote captures the main criticism:

“In order to remain within acceptable discursive territory, politicians and researchers alike are expected to assume a profoundly critical stance vis-à-vis current patterns of consumption, transports, and energy use, yet continue to offer pathways to sustainability that do not seem too uncomfortable or provocative. This explains why the rallying-cry of the early 21st century is not ‘revolution’ (as in the early 20th century), but ‘resilience’.”

The key argument running throughout the paper is related to one of the weak spots of resilience theory: asymmetrical distribution of resources and power in social systems.

As a social scientist, I share Hornborg’s concern that resilience theory has been poor in elaborating the power dynamics of social-ecological change. On the other hand, Hornborg misses a range of issues that provide a much more balanced picture of what resilience is intended – and not intended – to do. Here are four quick points:

1. We know it

Yes Alf, “power” – however we choose to define it – has been problematic to integrate within the framework of social-ecological systems. On the other hand, resilience scholars are well aware of the problem, and some attempts have been made already. Elinor Ostrom – one of the most influential social science thinkers in the resilience community, but not at all mentioned in Hornborg’s article – has written extensively on the role of local collective action, institutions, and good governance. Her work does not explicitly deal with “power” as I assume that Hornborg would define it, but it does unpack the features of collective decision-making, how centralized policies often fail to deliver sustainable results, as well as the need for multilevel, nested institutions to deal with rapid market change and stresses. The wording might be different, but the main message is the same: communities and ecosystems are under severe pressure from globalized markets, and the impacts tend to affect the poorest the most. So, no disagreement there I assume.

2. We are getting there

There is a wide spread notion that resilience theory is advanced by ecologists trying to apply ecological theory on social systems (e.g. Hornborg pp. 253). This is not the case. In fact, there are a range of interesting attempts to integrate insights from complex systems theory, with social theory and ecology. Stephan Barthel’s work on social-ecological memory, as well as Henrik Ernstson’s work on the dynamics of power in social networks in urban ecology, are two great examples of how social theory is being integrated with resilience insights. Personally, I’m coordinating the collaboration with the Earth System Governance Project – an international research network that explores the role of agency, accountability, access, allocation, and adaptiveness in global environmental governance. Topics here include the possible creation of a “World Environment Organization”; the severe “trust-gap” between developed and developing countries in climate negotiations: and the international systems inability to create a legal framework to strengthen the security of environmentally induced migrants (e.g. “climate refugees”). It doesn’t get more political than this.

3. Resilience is not a theory about everything…

But sure, resilience scholars could maybe do more. On the other hand, there is a trade-off here. “Resilience” is – just like any other scientific theory – not a theory about everything. In my view, it is a theory of change in complex social-ecological systems, and a way to understand a range of novel institutional and political challenges.

4. … but it provides a range of interesting insights

And to wrap up: I’m not sure whether the suggestion that “the only way of achieving ‘sustainability’ would be by transforming the very idea and institution of money itself” (Hornborg pp. 257), is the way to go. It might be a matter of problem framings and political taste really, but I prefer the combination of practical, but disruptive social-ecological innovations that enhance human security in an ecological literate way. Might sound like an impossibility, but Chris Reij’s work in Niger and Burkina Faso, Elin Enfors’ and Line Gordon’s work on small-scale water innovations in sub-Saharan Africa, as well as the World Resources Institute  report “Roots of Resilience”, comes to mind.

The social sciences doubtlessly have a critical role to play for resilience thinking. But I’m not sure whether Hornborg really elaborates this role in an interesting, constructive and creative way.

Ecological Economics, Ecosystem services

Nonlinearity produces management opportunites for ecosystem services

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A new ecosystems service paper from Koch et al Non-linearity in ecosystem services: temporal and spatial variability in coastal protection has just come out in Frontiers in Ecology and the Environment.

While the Millennium Ecosystem Assessment found that nonlinearity in the provision of ecosystem services was likely to be an important factor complicating ecosystem management, there have been few quantitative examples of this nonlinearity in the literature. Consequently, scientists and managers often assume that ecosystem services are provided unvaryingly at a steady rate. This article provides quantitative evidence for seasonal and spatial nonlinearity in the provision of wave attenuation and coastal protection, an ecosystem service provided by marshes, mangroves, seagrasses, and coral reefs.

There is a great deal of interest in the literature right now in ecosystem services as a justification for conservation and as a tool for ecosystem management. Assumptions about linearity or nonlinearity of ecosystem service provision could have a huge impact on the success of this management. I found this paper interesting because it provides quantitative evidence for nonlinearity in space and time in the provision of key ecosystem services.

Ecological Economics

Drinking bottled water is drinking oil

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ScienceNOW reports a new paper by Peter Gleick and Heather Cooley in Environmental Research Letters that compares the energy use of bottled and tapwater:

… From start to finish, bottled water consumes between 1100 and 2000 times more energy on average than does tap water.

Bottled water consumption has skyrocketed over the past several years. In 2007, some 200 billion liters of bottled water were sold worldwide, and Americans took the biggest gulp: 33 billion liters a year, an average of 110 liters per person. That amount has grown 70% since 2001, and bottled water has now surpassed milk and beer in sales. Many environmental groups have been concerned with this surge because they suspected that making and delivering a bottle of water used much more energy than did getting water from the tap. But until now, no one really knew bottled water’s energy price tag.

Environmental scientist Peter Gleick of the Pacific Institute, a nonprofit research organization in Oakland, California, and his colleague Heather Cooley have added up the energy used in each stage of bottled-water production and consumption. Their tally includes how much energy goes into making a plastic bottle; processing the water; labeling, filling, and sealing a bottle; transporting it for sale; and cooling the water prior to consumption.

The two most energy-intensive categories, the researchers reveal in the current issue of Environmental Research Letters, are manufacturing the bottle and transportation. The team estimates that the global demand for bottle production alone uses 50 million barrels of oil a year–that’s 2 1/2 days of U.S. oil consumption. Determining the energy required to transport a bottle isn’t as straightforward. Some bottles of water travel short distances, but others are imported from far-off countries, which increases their energy footprint. Gleick and Cooley found that drinking an imported bottle of water is about two-and-a-half to four times more energy intensive than getting it locally, often outweighing the energy required to make the bottle.

All told, Gleick estimates that U.S. bottled-water consumption in 2007 required an energy input equivalent to 32 million to 54 million barrels of oil. Global energy demand for bottled water is three times that amount. To put that energy use into perspective, Gleick says to imagine that each bottle is up to one-quarter full of oil.

Ecological Economics, Ecosystem services

Creating new forest commons

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From Northern Woodlands Magazine an article about a forest commons movement the Vermont Town Forest Project – A Forest for Every Town:

Food is one of our basic needs, so it makes sense that many of these movements focus on it. No less essential to society, however, are other goods and services, which small groups of people in communities across the nation are trying to encourage with “buy local” campaigns. It makes sense that our other basic needs – water and shelter – can also be met locally.

That’s the basic premise behind the Vermont Town Forest Project, which was founded by the Northern Forest Alliance in 2004 “to help communities across Vermont maximize the community benefits derived from their town forests and to help support the creation of new town forests statewide.”

These benefits include everything from watershed protection, forest products, and wildlife habitat to public recreation and community rallying points. They function in the same way town commons have for centuries in New England and New York. Every community member is responsible for their stewardship, and every member also benefits from their presence.

The concept of town commons, and even town forests, is not a new one. In fact, the enabling legislation for creating town forests in Vermont was enacted in 1915. But these forests haven’t been on the top of everyone’s mind. At least until lately. Now, thanks to projects such as the Vermont Town Forest Project, they are experiencing an exciting revival.

… Hinesburg is fortunate to own not one but two town forests: the
“older” (it dates to 1940), composed of 837 acres of mixed woodlands,
and the “newer” (just purchased), with 301 acres boasting extensive
wetlands and calcium-rich soils.

Hinesburg’s forests exemplify town forest potential. They have
recreation: world-class mountain biking trails, along with skiing,
hiking, and horseback riding. They also serve as outdoor classrooms,
both for local teachers and for the University of Vermont, whose
students have conducted dozens of projects there.

And the older forest also has active forest management: one recent
harvest took out white ash, which was then milled and kiln-dried
locally and installed to replace the floor of the Hinesburg Town Hall,
which had been sanded so many times that the tongue of each
tongue-and-groove board was exposed. All this at a total cost of $2.48
per square foot, about what you’d pay commercially.

Ecological Economics, Ecosystem services

Losses from destruction of Nature dwarf losses from financial crisis

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At the IUCN meeting in Barcelona, the BBC interviews Pavan Sukhdev leader of the Economics of Ecosystems and Biodiversity an EU project intending to provide an economic assessment of global ecosystem governance in much the same way that the Stern review did for climate governance:

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

…The figure comes from adding the value of the various services that forests perform, such as providing clean water and absorbing carbon dioxide.

…Speaking to BBC News on the fringes of the congress, study leader Pavan Sukhdev emphasised that the cost of natural decline dwarfs losses on the financial markets.

“It’s not only greater but it’s also continuous, it’s been happening every year, year after year,” he told BBC News.

“So 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.”

…The first phase concluded in May when the team released its finding that forest decline could be costing about 7% of global GDP. The second phase will expand the scope to other natural systems.

Ecological Economics

Herman Daly on the Financial Crisis

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The Oil Drum has an article by the ecological economist Herman Daly on the Credit Crisis, Financial Assets, and Real Wealth. Daly writes:

The current financial debacle is really not a “liquidity” crisis as it is often euphemistically called. It is a crisis of overgrowth of financial assets relative to growth of real wealth—pretty much the opposite of too little liquidity. Financial assets have grown by a large multiple of the real economy—paper exchanging for paper is now 20 times greater than exchanges of paper for real commodities. It should be no surprise that the relative value of the vastly more abundant financial assets has fallen in terms of real assets. Real wealth is concrete; financial assets are abstractions—existing real wealth carries a lien on it in the amount of future debt. The value of present real wealth is no longer sufficient to serve as a lien to guarantee the exploding debt. Consequently the debt is being devalued in terms of existing wealth. No one any longer is eager to trade real present wealth for debt even at high interest rates. This is because the debt is worth much less, not because there is not enough money or credit, or because “banks are not lending to each other” as commentators often say.

Can the economy grow fast enough in real terms to redeem the massive increase in debt? In a word, no. As Frederick Soddy (1926 Nobel Laureate chemist and underground economist) pointed out long ago, “you cannot permanently pit an absurd human convention, such as the spontaneous increment of debt [compound interest] against the natural law of the spontaneous decrement of wealth [entropy]”. The population of “negative pigs” (debt) can grow without limit since it is merely a number; the population of “positive pigs” (real wealth) faces severe physical constraints. The dawning realization that Soddy’s common sense was right, even though no one publicly admits it, is what underlies the crisis. The problem is not too little liquidity, but too many negative pigs growing too fast relative to the limited number of positive pigs whose growth is constrained by their digestive tracts, their gestation period, and places to put pigpens. Also there are too many two‐legged Wall Street pigs, but that is another matter.

Growth in US real wealth is restrained by increasing scarcity of natural resources, both at the source end (oil depletion), and the sink end (absorptive capacity of the atmosphere for CO2). Further, spatial displacement of old stuff to make room for new stuff is increasingly costly as the world becomes more full, and increasing inequality of distribution of income prevents most people from buying much of the new stuff—except on credit (more debt). Marginal costs of growth now likely exceed marginal benefits, so that real physical growth makes us poorer, not richer (the cost of feeding and caring for the extra pigs is greater than the extra benefit). To keep up the illusion that growth is making us richer we deferred costs by issuing financial assets almost without limit, conveniently forgetting that these so‐called assets are, for society as a whole, debts to be paid back out of future real growth. That future real growth is very doubtful and consequently claims on it are devalued, regardless of liquidity.

Adaptation, Ecological Economics, Networks, Reorganization, Visualization

Shipping containers and world trade

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The BBC is planning to follow and report on the progress of a container around the world for a year.  They have painted a container and bolted a GPS transmitter to allow is readers to follow its progress around the world on their map (as I write this the container full of whiskey in Scotland).

The BBC named their project The Box after The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger an interesting book on the history of containerization and its effect on globalization by Marc Levinson (here is a book review from Ethan Zuckerman and an essay by Witold Rybczynski).

I read the book earlier this year and enjoyed it.  I would have liked more economic history and statistics in the book, but its main problem was that people mocked me when I told them I was reading a book about containers. However, containers have become an essential part of global trade and of its rapid growth.

Trends in world trade of total merchandise, intermediate goods and other commercial services, from 1988-2006 (100=1988). From WTO\'s World Trade Report 2008.
Trends in world trade of total merchandise, intermediate goods and other commercial services, from 1988-2006 (100=1988). From the WTO’s World Trade Report 2008.

Below are some maps of parts of global trade.  They give a bit of an idea of where such a container is likely to move between.

Structure of world trade of between 28 OECD countries in 1992. The size of the nodes gives the volume of flows in dollars (imports and exports) for each country . The size of the links stands for the volume of trade between any two countries. Colors give the regional respectively memberships in different trade organisations: EC countries (yellow), EFTA countries (green), USA and Canada (blue), Japan (red), East Asian Countries (pink), Oceania (Australia , New Zealand) (black). From Max Planck Institute for the Study of Societies.
Structure of world trade of between 28 OECD countries in 1992. The size of the nodes gives the volume of flows in dollars (imports and exports) for each country . The size of the links stands for the volume of trade between any two countries. Colors give the regional respectively memberships in different trade organisations: EC countries (yellow), EFTA countries (green), USA and Canada (blue), Japan (red), East Asian Countries (pink), Oceania (Australia , New Zealand) (black). From Max Planck Institute for the Study of Societies.

World trade imbalance web for the years 1960 and 2000. Directed network of merchandize trade imbalances between world countries. Each country appears as a node and the direction of the arrow follows that of the net flow of money. (Serrano et al 2007).
World trade imbalance web for the years 1960 and 2000. Directed network of merchandise trade imbalances between world countries. Each country appears as a node and the direction of the arrow follows that of the net flow of money. (Serrano et al 2007).

The book – The Box – includes lots of interesting history of the container system, and how as a system it lead to innovations, efficiencies, and had many unintendend consequences.  One example, is that it made many old ports obsolete which reshaping many city centres (over decades), but also the creation of new ports and the changes in container ships they triggered – caused ongoing shifts in global trade patterns.

One key cycle of change was a postive feedback between ship size and port attributes. Because the fuel consumption of a ship does not increase proportionately to the number of containers a ship can carry – containers ships have become bigger and bigger – which has had the effect of focusing trade into ports that can handle the large ships and the trade volume.  These big ports then lead to the construction of more bigger ships. Wikipedia lists the world’s busiest container ports – the top are Singapore, Shanghai, Hong Kong , Shenzen, and Busan.  This concentration of big ships in big ports has had the effect of making world trade unexpectedly (for economic theory) “lumpy.”  Paul Krugmann explains:

[Economic theory suggests] a country like China should export a wider range of products to a small country, like Ecuador, than it does to a big country, like the US. Why? Because Ecuador, being small, probably has fewer industries that are cost-competitive with Chinese exports. In fact, however, China seems to export a wider range of stuff to bigger economies.

A possible explanation is the lumpiness of transport costs: there are more container ships heading from China to US ports than to Ecuadorian ports, so that it’s worth sending over a bigger range of stuff. It’s like the reason there are fewer food choices in supermarkets on St. Croix (where we spent our last vacation) than in New Jersey — there’s just one boat with groceries coming over every once in a while, so you can’t keep, um, arugula in stock.

Reading the Box also makes it clear that while higher fuel prices will reshape trade patterns and probably boat designs, neither global trade patterns nor transportation costs will return to those of the 1960s or 1970s.  This is due to huge improvements in logistics that have radically dropped the labour cost for shipping goods long distances, and this has also decreased fuel costs.

The rapid expansion of skills in logistics is a hidden environmental efficiency of the moden world economy – in that it allows things to be moved around for less cost than earlier in history.  However as occurs with most increases in efficiency, modern society undoes the environmental advantages of efficiency by using the cost saving to simply move more stuff for the same amount of money.

Logistics makes at least parts of the world “flatter.” And the ease of making these connections appears to make it easier to spread tools and ideas as well as goods.  The World Bank claims that countries with the most predictable, efficient, and best-run transportation routes and trade procedures are also the most likely to take advantage of technological advances, economic liberalization, and access to international markets.  While countries with higher logistics costs are more likely to miss the opportunities of globalization.  The World Bank ranks countries using a logistics performance index which measures the ease with which the country connects to the global economy.  Singapore, Netherlands, and Germany are at the top as the most accessible; while Rwanada, East Timor, and Afghanistan are at the bottom of the rankings.

Of course, novel solutions also produce novel problems.  Discarded containers litter landscapes worldwide (finding uses for them has become a standard architecture project), container ports are centres of environmental and biotic pollution, and the ease of using containers is also useful for smuggling.

And at least my impression from reading The Box, was that containerization has not finished trasnforming the world economy.

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P.S. Ethan Zuckerman also has a long post Mapping a connected world discussing containers and world trade.