By Todd Lemons
Environmentalists and scientists have done a great job in educating people that climate change is real, and of its catastrophic consequences. But the idea that these groups alone are going to solve the problem is completely fantastical because the root cause of climate change is a broken economic model.
Everything we consume is highly leveraged, with the real total cost of ownership being far greater than its current price reflects. Since the dawn of humankind, we have been extracting from nature’s bounty and consuming. Nature then replaces what we consume. But, at some point in the mid-twentieth century, our population and the growth in consumption rates began to outpace what man and nature could produce. We then started running a budget deficit in terms of environmental capital. In other words, we started draining our environmental trust fund. With half the planet just beginning to consume and the population set to double in our children’s life, this trend is only set to continue.
No amount of social conditioning alone will overcome this biological predisposition to consume quickly enough to save us from the veritable cliff we’re headed for. Why do I believe this? Across Indonesia, fires are set intentionally to clear biodiverse, carbon rich forests for conversion to oil palm, for use in cookies, candies, cakes, crackers, ice cream, shampoo, soap, lotions and cosmetics. I’m the founder of InfiniteEARTH, an organisation that saves rainforests under imminent threat of slash and burn conversion to oil palm plantations. After seven years of hard work, we won the right to protect and manage 162,000 acres of peat swamp forests on the island of Borneo.
But palm oil companies don’t clear forests for oil palm because they’re evil. They do so because it makes perfect economic sense to do so – because these rich stores of biodiversity and carbon are more valuable as oil palm plantations than they are as natural forests.
Launching clever campaigns to convince people to reduce, recycle, reuse, and repurpose is terrific, but it won’t address the faulty extractive economic model that undervalues rainforests and other non-renewable natural resources in favour of junk food and personal care products.
So who should we look to for an answer? Businesses can certainly play a role, and are increasingly recognising that climate change presents a series of long term risks and running into stranded assets. Although this shift and recognition is certainly positive coming from the business world, it is unfortunately not going to move us nearly far or fast enough to decarbonise the economy, which requires us to cut GHG emissions by at least 80% by 2050 to stabilise the planet’s climate system. And focusing on corporations, as many environmentalists do, only exacerbates the problem by giving the consumer a free pass.
Instead, we should be addressing how to include the total replacement costs of the natural resources used, not just their extraction costs and start paying the real price for the things we consume.
A mechanism that can help kickstart this is via Environmental Mitigation Credits, which comes in many forms. A carbon credit, (often called a carbon offset) “is a financial instrument that represents a tonne of CO2 (carbon dioxide) or CO2e (carbon dioxide equivalent) gases. These credits are generated by either reducing or removing emissions from the atmosphere or by reducing future CO2 or CO2e emissions with the development of renewable energy and other sustainability projects that displace manufacturing and industrial activities which consume fossil fuels. Governments, industry and even ordinary individuals may use these credits to satisfy Corporate Social Responsibility (CSR) objectives, or to achieve a ‘neutral footprint’ by offsetting the damaging carbon emissions they generate in their daily activities.”
At InfiniteEARTH, we produce 4.5 million of these credits per year from our Rimba Raya biodiversity reserve, which is the largest privately-funded tropical wetlands reserve and the largest privately-funded orangutan reserve in the world. That’s the equivalent of removing one million cars from the roads every year. That’s enough to mitigate the palm oil related deforestation footprint of 32 billion candy bars per year. That’s enough to mitigate the annual carbon footprint of 350,000 Americans or nearly half a million Europeans. For an average 1% price premium, companies could be embedding environmental replacement costs into the price of their products. That’s a mere one cent price increase on a 99-cent candy bar!
If it seems hard to believe that an extra 1% could mitigate all of these externalities, then consider this: our global economy is worth $80 trillion dollars. That's the value of all goods and services traded worldwide. A 1% environmental mitigation fee would amount to $800 billion dollars. Or put another way, adding 1% to all the goods and services we consume would create an Environmental Super Fund that would dwarf the total aggregate budget for all environmental NGOs worldwide (the annual budget of the world's largest environmental NGO, WWF, for example, is just $250 million).
It’s time to start investing in our future and stop condemning the next generation to a lower standard of living than our own. If we have any chance of continuing life on this planet, then we must begin to transition to a regenerative economy and pay for the real price of all goods and services.
Todd Lemons is the Chairman of Veridium. For 28 years, he has been a recognised specialist in the development of market-based solutions to environmental challenges.
Opinions expressed in View articles are solely those of the author.