Ecological Economics Ecological Economics and Sustainable and Sustainable

BusinessBusiness

Joshua Farley, PhDJoshua Farley, PhDUniversity of VermontUniversity of Vermont

Community Development and Applied Economics &Community Development and Applied Economics &Gund Institute for Ecological EconomicsGund Institute for Ecological Economics

IntroductionsIntroductions

BackgroundBackground What do you hope to get out of this What do you hope to get out of this

course?course? What is the unsustainable activity What is the unsustainable activity

described in your newspaper article?described in your newspaper article?

What is Economics?What is Economics? The allocation of scarce (available) The allocation of scarce (available)

resources among alternative desirable resources among alternative desirable endsends

Alternative: How people transform Alternative: How people transform nature to meet their needsnature to meet their needs

Sequence of 3 questions:Sequence of 3 questions:

What are the desirable ends?What are the desirable ends? What are the scarce resources?What are the scarce resources? How do we allocate?How do we allocate?

What else do we need to know before we What else do we need to know before we can decide how to allocate?can decide how to allocate?

Today’s GoalToday’s Goal

Provide brief general answers to the three Provide brief general answers to the three questions, from perspectives of:questions, from perspectives of: Neoclassical economicsNeoclassical economics Ecological economicsEcological economics This groupThis group

Examine the role and limitations of Examine the role and limitations of business in allocating resources towards business in allocating resources towards those ends.those ends.

Where do you Stand?Where do you Stand?

Desirable EndsDesirable Ends

The desirable ends for our economic The desirable ends for our economic system is continuous growth (i.e. growth in system is continuous growth (i.e. growth in GNP). GNP).

The purpose of business is to make The purpose of business is to make moneymoney

In my professional life, the most important In my professional life, the most important desirable end for me is salarydesirable end for me is salary

Desirable EndsDesirable Ends GrowthGrowth

Is this the dominant economic goal in the world today? Is this the dominant economic goal in the world today? Should it be?Should it be? Are people insatiable?Are people insatiable? Can capitalism survive an end to growth?Can capitalism survive an end to growth? What are the drawbacks to this goal?What are the drawbacks to this goal? How big should the economy be?How big should the economy be?

ProfitProfit Is this the dominant goal in your business? Is growth?Is this the dominant goal in your business? Is growth? Contrast this to assumptions of neoclassical economics Contrast this to assumptions of neoclassical economics

SalarySalary What about working conditions? Status?What about working conditions? Status? Most desirable job: operating a hedge fundMost desirable job: operating a hedge fund Goal for college students: 1975 “develop a meaningful philosophy of life” Goal for college students: 1975 “develop a meaningful philosophy of life”

to 2005 “make a lot of money”to 2005 “make a lot of money”

Scarce ResourcesScarce Resources

Technology and ingenuity will solve all our Technology and ingenuity will solve all our environmental problemsenvironmental problems What resources are required for economic What resources are required for economic

production? production? What drives solutions? Profits? If not, where What drives solutions? Profits? If not, where

will the resources come from?will the resources come from?

AllocationAllocation

The private sector is almost always more The private sector is almost always more efficient than the public sector.efficient than the public sector.

““Few trends could so thoroughly Few trends could so thoroughly undermine the very foundation of our free undermine the very foundation of our free society as the acceptance by corporate society as the acceptance by corporate officials of a social responsibility other than officials of a social responsibility other than to make as much money for their to make as much money for their stockholders as possible”stockholders as possible”

Nobel laureate Milton FriedmanNobel laureate Milton Friedman

AllocationAllocation

There is a fundamental conflict between There is a fundamental conflict between economic growth and environmental economic growth and environmental qualityquality

What is Ecological What is Ecological Economics?Economics?

Same basic questions…Same basic questions…

What are the desirable ends?What are the desirable ends? What are the scarce resources?What are the scarce resources? How do we allocate?How do we allocate?

……with changing answers: with changing answers: Coevolutionary economicsCoevolutionary economics

Hunter-gatherer economicsHunter-gatherer economics Accumulation = deathAccumulation = death

Economics of early agricultural societiesEconomics of early agricultural societies Depended on technological advanceDepended on technological advance Advent of property rightsAdvent of property rights

Industrial market economicsIndustrial market economics Use of non-renewable resources: FOSSIL FUELSUse of non-renewable resources: FOSSIL FUELS

Ecological economicsEcological economics Driven by the growing scarcity of natural capitalDriven by the growing scarcity of natural capital

What are the What are the Desirable Ends?Desirable Ends?

““If you don’t know where If you don’t know where you’re going, you might you’re going, you might

end up somewhere else”end up somewhere else”

Desirable EndsDesirable Ends A high quality of life for this and future generations.A high quality of life for this and future generations.

Where are we going?Where are we going?What ends does our society currently pursue?What ends does our society currently pursue?

Endless economic growth, more material Endless economic growth, more material consumptionconsumption Why has the US failed to sign on to the Kyoto Why has the US failed to sign on to the Kyoto

Protocol?Protocol? Why can’t women and children eat fish from Why can’t women and children eat fish from

Vermont?Vermont? We consume more than we produceWe consume more than we produce How long does it take to double How long does it take to double

consumption?consumption?

Subjective Well Being:Subjective Well Being:What makes people happy/satisfied?What makes people happy/satisfied? Money?Money?

(Not very, and only relative wealth once basic (Not very, and only relative wealth once basic needs are met)needs are met)

FriendsFriends Desiring lessDesiring less MarriageMarriage Religion/communityReligion/community Helping othersHelping others

The Smile FactorThe Smile Factor

Are Americans the happiest/most satisfied Are Americans the happiest/most satisfied people in the world?people in the world?

Are Americans getting happier over time?Are Americans getting happier over time? If we’re not deliriously happy, what’s the If we’re not deliriously happy, what’s the

justification for consuming 25% of the justification for consuming 25% of the Earth’s resources? Earth’s resources?

What makes people unhappy?What makes people unhappy?

Pursuit of material gainPursuit of material gain“young adults who focus on money, image “young adults who focus on money, image and fame tend to be more depressed, and fame tend to be more depressed, have less enthusiasm for life and suffer have less enthusiasm for life and suffer more physical symptoms such as more physical symptoms such as headaches and sore throats than others.” headaches and sore throats than others.”

Comparing yourself with othersComparing yourself with others Status is a never-ending tread-millStatus is a never-ending tread-mill

Quality of life = fulfillment of human Quality of life = fulfillment of human needsneeds

Much more than Much more than consumptionconsumption

Market goods only Market goods only one of many one of many human needshuman needs

Satiation occursSatiation occurs pseudosatisfierspseudosatisfiers

Needs the same Needs the same across time and across time and culture, how we culture, how we satisfy them differs satisfy them differs

Where does our current vision of Where does our current vision of the desirable ends come from?the desirable ends come from?

Three necessary intermediate Three necessary intermediate ends, in order of importance:ends, in order of importance:

Ecologically sustainable scaleEcologically sustainable scale Socially just distribution of Socially just distribution of

resources within and between resources within and between generationsgenerations

Economically efficient allocationEconomically efficient allocation

What are the What are the scarce resources?scarce resources?

First law of thermodynamicsFirst law of thermodynamics

Matter energy cannot be created or Matter energy cannot be created or destroyeddestroyed We cannot create something from nothing, We cannot create something from nothing,

nor nothing from somethingnor nothing from something All economic production requires raw All economic production requires raw

materials provided by naturematerials provided by nature Continuous Continuous physicalphysical growth of the economy is growth of the economy is

impossibleimpossible

Second law of thermodynamicsSecond law of thermodynamics Entropy never decreases in an isolated systemEntropy never decreases in an isolated system

Things fall apart, wear out, become uselessThings fall apart, wear out, become useless All economic activity generates wasteAll economic activity generates waste

It is impossible to do work or recycle waste It is impossible to do work or recycle waste without low-entropy energy: no economic without low-entropy energy: no economic production without energyproduction without energy There is only a finite stock of accumulated low There is only a finite stock of accumulated low

entropy matter/energyentropy matter/energy There is only a finite flow of solar energyThere is only a finite flow of solar energy

The ultimate limit to the physical size of the The ultimate limit to the physical size of the economic system is our ability to capture low economic system is our ability to capture low entropy provided by solar energyentropy provided by solar energy

Three Specific Scarce ResourcesThree Specific Scarce Resources

EnergyEnergy Ecosystem goodsEcosystem goods Ecosystem servicesEcosystem services

EnergyEnergy

Patent on steam engine 1769Patent on steam engine 1769Wealth Nations 1776Wealth Nations 1776

Finite stock of fossil fuels (finite flow of solar Finite stock of fossil fuels (finite flow of solar energy, which is a energy, which is a serviceservice))

Use = depletion; completely non-renewableUse = depletion; completely non-renewable Use = pollutionUse = pollution 1 barrel of oil = 20,000-25,000 hours of human 1 barrel of oil = 20,000-25,000 hours of human

labor labor Substitution very difficultSubstitution very difficult What’s the state of the stock?What’s the state of the stock?

The Hubbert curve-discoveryThe Hubbert curve-discovery

The Hubbert curve-productionThe Hubbert curve-production

Unconventional Fossil FuelsUnconventional Fossil Fuels

Alberta tar sandsAlberta tar sands Orinoco heavy crudeOrinoco heavy crude Shale oilShale oil Liquid coalLiquid coal Energy return on energy invested very lowEnergy return on energy invested very low Waste emissions extremely highWaste emissions extremely high

Waste EmissionsWaste Emissions

What Level of CO2 Reductions are What Level of CO2 Reductions are Required?Required?

KyotoKyoto SchwarzeneggerSchwarzenegger Germany’s G8 proposalGermany’s G8 proposal Stern ReportStern Report

Ecosystem Goods: Biotic Raw Ecosystem Goods: Biotic Raw MaterialsMaterials

We can use them We can use them up as fast as we likeup as fast as we like

If I use it, you can'tIf I use it, you can't Competition for useCompetition for use

Private property rights Private property rights commoncommon

Market goodsMarket goods Scarcity Scarcity price increase price increase innovation of innovation of

substitutessubstitutes Ecosystem structure, building blocks of Ecosystem structure, building blocks of

ecosystemsecosystems

Ecosystem ServicesEcosystem Services Structure generates function, ecosystem Structure generates function, ecosystem

functions of value to humans=ecosystem functions of value to humans=ecosystem servicesservices

Climate regulation, water regulation, Climate regulation, water regulation, disturbance regulation, etc.disturbance regulation, etc.

Waste absorption capacityWaste absorption capacity Capacity for ecosystem structure to reproduce Capacity for ecosystem structure to reproduce

itselfitself Habitat for biodiversity, nutrient cycling, without Habitat for biodiversity, nutrient cycling, without

which other services cannot exist.which other services cannot exist. Essential to human survivalEssential to human survival

Ecosystem ServicesEcosystem Services Provided at a given rate Provided at a given rate

over timeover time If I use it, you still can If I use it, you still can

(except waste absorption)(except waste absorption) Cooperative in useCooperative in use

Can't be owned: no Can't be owned: no property rights (except property rights (except waste absorption)waste absorption)

Non-market goods—no Non-market goods—no price signal price signal

Scarcity Scarcity price increase price increase innovationinnovation

The Special Case of Waste The Special Case of Waste Absorption CapacityAbsorption Capacity

Competitive in useCompetitive in use E.g. If the global climate absorbs US COE.g. If the global climate absorbs US CO22

emissions, it can no longer absorb China’semissions, it can no longer absorb China’s Can be assigned property rightsCan be assigned property rights

Government level regulations determine supply Government level regulations determine supply and ownershipand ownership

We’ve done it in the US for SOWe’ve done it in the US for SO22 emissions emissions Kyoto seeks to do this for COKyoto seeks to do this for CO22

Can be made into a market good through Can be made into a market good through regulationregulation

The Laws of EcologyThe Laws of Ecology• The raw materials converted into economic The raw materials converted into economic

products are elements of ecosystem structureproducts are elements of ecosystem structure• Ecosystem services are provided by a special Ecosystem services are provided by a special

configuration of ecosystem structureconfiguration of ecosystem structure

Ecosystem Services, uncertainty Ecosystem Services, uncertainty and Ignoranceand Ignorance

We often don't know what We often don't know what services are until they're services are until they're gonegone

The ozone layer The ozone layer Sardines and global climate Sardines and global climate

changechange Time lags: the passenger Time lags: the passenger

pigeonpigeon Sample size of one: Sample size of one:

uncertainty is unavoidableuncertainty is unavoidable How much risk do we accept How much risk do we accept

with life support functions?with life support functions?

What does this What does this mean for the mean for the economy?economy?

The Economic ProblemThe Economic Problem

Micro-allocation : how do we allocate resources Micro-allocation : how do we allocate resources provided by nature among different economic provided by nature among different economic products?products? Markets are favored approachMarkets are favored approach

Macro-allocation: How do we allocate ecosystem Macro-allocation: How do we allocate ecosystem structure between:structure between: Economic production, essential to our survivalEconomic production, essential to our survival Planetary life support functions, essential to our survivalPlanetary life support functions, essential to our survival

Life support functions have no price; markets alone Life support functions have no price; markets alone cannot solve this allocation problemcannot solve this allocation problem

Current StatusCurrent Status

Currents statusCurrents status

•Human made capital has grown more abundant, and natural capital more scarce•How big should the economy be?

Earth, Inc.Earth, Inc.

If the Earth were a business, how well would If the Earth were a business, how well would you assess the performance of its CEOs?you assess the performance of its CEOs?

We are disinvesting in natural capitalWe are disinvesting in natural capital How do you feel about this as a How do you feel about this as a

shareholder in Earth, Inc.?shareholder in Earth, Inc.? Can a business survive if it continually Can a business survive if it continually

disinvests in essential capital?disinvests in essential capital? Can an economy?Can an economy?

What caused the problems in your What caused the problems in your newspaper articles?newspaper articles?

Government?Government? Business?Business? Individuals?Individuals? Nature?Nature?

Supply ChainSupply Chain

Y=f (K, L)Y=f (K, L) Trace the chain of production from means to Trace the chain of production from means to

endsends Ultimate means Ultimate means product product By-productsBy-products

What are the relevant inputs?What are the relevant inputs? Product Product desirable ends desirable ends Does the firm pay the full cost of production? Does the firm pay the full cost of production?

Does the consumer?Does the consumer? Y=f (K, L, N; r) + wY=f (K, L, N; r) + w

Pencil -Timber -Rubber -Metal -Graphite -Pencil -Timber -Rubber -Metal -Graphite -Coal -Sunlight -CO2 -Depleted forest services Coal -Sunlight -CO2 -Depleted forest services -Mine tailings -Mining jobs -Logging jobs -Soil -Mine tailings -Mining jobs -Logging jobs -Soil -Landfill waste -Dirty water -Dirty air -Water -Landfill waste -Dirty water -Dirty air -Water -Paint -Chemistry jobs -Pencil making jobs -Paint -Chemistry jobs -Pencil making jobs -Mining machinery -Saws and sawmills --Mining machinery -Saws and sawmills -Minerals Oil -Garbage trucks -Landfill land Minerals Oil -Garbage trucks -Landfill land -Watershed degradation -Subsidies -Watershed degradation -Subsidies -Communication -Roads -Ships -Knowledge -Communication -Roads -Ships -Knowledge -Agriculture -Rubber trees -Managerial skills --Agriculture -Rubber trees -Managerial skills -Pencil making machineryPencil making machinery

Sustainability, Sustainability, Justice and Justice and EfficiencyEfficiency

What Resources are Critical to What Resources are Critical to Sustainability?Sustainability?

Must be essential with no good substitutesMust be essential with no good substitutes WaterWater EnergyEnergy FoodFood Ecosystem services (which includes the Ecosystem services (which includes the

ability for ecosystem goods to reproduce)ability for ecosystem goods to reproduce) InformationInformation

What are the Rules for What are the Rules for Sustainability?Sustainability?

Cannot deplete critical natural capitalCannot deplete critical natural capital Must maintain life support functionsMust maintain life support functions Must retain ability to renew itselfMust retain ability to renew itself

Cannot use up renewable resources faster than Cannot use up renewable resources faster than they can renew themselvesthey can renew themselves

Cannot spew waste into the environment faster Cannot spew waste into the environment faster than it can be absorbedthan it can be absorbed

Cannot use up critical non-renewable resources Cannot use up critical non-renewable resources faster than we develop renewable substitutesfaster than we develop renewable substitutes

What are the Principles of a Just What are the Principles of a Just Distribution?Distribution?

Each person is entitled to the products of Each person is entitled to the products of their own labortheir own labor

No one is entitled to take something away No one is entitled to take something away from someone else against their willfrom someone else against their will

Values created by nature or by society as Values created by nature or by society as a whole belong to society as a wholea whole belong to society as a whole

Whoever takes values created by nature Whoever takes values created by nature or society should compensate societyor society should compensate society

What about future generations?What about future generations?

Why is the value Why is the value of Natural Capital of Natural Capital

Increasing?Increasing?The laws of The laws of economicseconomics

What are the limiting factors ?What are the limiting factors ? Of production?Of production?

If we want more seafood, do we need more boats and If we want more seafood, do we need more boats and factories, or larger wild stocks?factories, or larger wild stocks?

If we want more timber, do we need more chainsaws or If we want more timber, do we need more chainsaws or more forests?more forests?

For human well-being?For human well-being? Material consumption doubles every generation.Material consumption doubles every generation. Do you want your grand-kids to have more air-conditioning Do you want your grand-kids to have more air-conditioning

or more ozone layer?or more ozone layer? More cars or more climate stability?More cars or more climate stability? More consumer goods or more ecosystem services?More consumer goods or more ecosystem services?

We need to invest in the limiting factorsWe need to invest in the limiting factors

The Demand Curve for Natural Capital The Demand Curve for Natural Capital (and other Essential, Non-substitutable Resources)(and other Essential, Non-substitutable Resources)

Natura l Capita l S tocks

Ma

rgin

al

Va

lue

Valuable:elastic demand

Critical: Perfectly

inelastic demand

Important: inelastic demand

Natural Capital stocks

Marg

inal valu

e

Demand curve for natural capital

Natura l Capita l S tocks

Ma

rgin

al

Va

lue

The Total Value of Natural CapitalThe Total Value of Natural Capital

Valuable:elastic demand

Important: inelastic demand

Natural Capital stocks

Marg

inal valu

e

Demand curve for natural capital

Critical: Perfectly inelastic demand

Conventional Economists: Conventional Economists: Missing the point….Missing the point….

Schelling (Nobel Memorial Prize in 2005): Schelling (Nobel Memorial Prize in 2005): “Agriculture and Forestry are less than 3% of “Agriculture and Forestry are less than 3% of total output, and little else is much affected. total output, and little else is much affected. Even if agricultural productivity declined by a Even if agricultural productivity declined by a third over the next half century, the per capita third over the next half century, the per capita GNP we might have achieved by 2050 we GNP we might have achieved by 2050 we would still achieve in 2051.”would still achieve in 2051.”

Market relevant Market relevant characteristics of characteristics of

resourcesresources

ExcludabilityExcludability Excludable resource regimeExcludable resource regime

One person/group can prevent another from using the One person/group can prevent another from using the resourceresource

Necessary for markets to existNecessary for markets to exist Ecosystem goods can generally be made excludableEcosystem goods can generally be made excludable Patents make information excludablePatents make information excludable

Non-excludable Non-excludable No enforceable property rights No enforceable property rights Can’t charge for useCan’t charge for use Some resources non-excludable by nature, including Some resources non-excludable by nature, including

most ecosystem servicesmost ecosystem services

Policy variablePolicy variable

RivalnessRivalness Rival resourcesRival resources

My use leaves less for you to useMy use leaves less for you to use All ecosystem goods are rivalAll ecosystem goods are rival

Non-rivalNon-rival My use does not leave less for you to useMy use does not leave less for you to use Inefficient to ration through prices; leads to Inefficient to ration through prices; leads to

under-consumptionunder-consumption Most ecosystem services are non-rivalMost ecosystem services are non-rival Information is perfectly non-rivalInformation is perfectly non-rival

Non-rival but congestibleNon-rival but congestible

Public Goods GamePublic Goods Game

Part of class gradePart of class grade Each of you begins with 60 points (a D-). Points Each of you begins with 60 points (a D-). Points

are rival and excludable.are rival and excludable. Can be donated to public good, made non-rival Can be donated to public good, made non-rival

and non-excludableand non-excludable N = number of studentsN = number of students Conversion rate of private good:public good = Conversion rate of private good:public good =

1.5/N:11.5/N:1 If everyone donates all their points, you each get If everyone donates all their points, you each get

a 90 (B+)a 90 (B+)

Round 1: Write down the number of points you Round 1: Write down the number of points you want to want to donatedonate. The remainder are yours. No . The remainder are yours. No one will know what you do but me. one will know what you do but me.

Round 2: Write down the number of points you Round 2: Write down the number of points you want to want to donate.donate. Everyone will know. Everyone will know.

Round 3: Same as round two, but you can also Round 3: Same as round two, but you can also donate points to punish those who contribute donate points to punish those who contribute less than average. Conversion rate of private less than average. Conversion rate of private good:punishment = 1:N/3 (punishment is also good:punishment = 1:N/3 (punishment is also private good) private good)

Lessons?Lessons?

Does greedy self interest generate the Does greedy self interest generate the greatest good for the greatest number?greatest good for the greatest number?

Bell curve of pro-social behaviorBell curve of pro-social behavior Role of altruistic punishmentRole of altruistic punishment

How do We Allocate?How do We Allocate?

Allocation MatrixAllocation Matrix

Rival

Non-rival

Excludable Non-Excludable

Market Good: Ecosystem structure,Fossil fuels, Waste absorption capacity (e.g. SO2)

Tragedy of the non-commons: patented information, e.g. Tamiflu, ozone safe refrigerants

Pure Public Good:Street lights, national defense, most ecosystem services, non-patented information

Open Access Regime:Unowned ecosystem structure, waste absorption capacity (e.g. CO2)

Non-rival, congestible

Club or Toll Good

Supply Chain and the Allocation Supply Chain and the Allocation MatrixMatrix

Where does each part of the supply chain fit into the Where does each part of the supply chain fit into the matrix?matrix?

stock flow resources such as ecosystem goods:stock flow resources such as ecosystem goods: Use = depletionUse = depletion We control rate of use, can be stockpiledWe control rate of use, can be stockpiled Transformed into what it producesTransformed into what it produces

Fund service resources such as ecosystem servicesFund service resources such as ecosystem services Particular configuration of stock flowsParticular configuration of stock flows Not transformed through useNot transformed through use Can’t be stockpiledCan’t be stockpiled We don’t control rate of useWe don’t control rate of use

Open access regimesOpen access regimes

Businesses/individuals gain all benefits Businesses/individuals gain all benefits from over-exploitation, share costs with from over-exploitation, share costs with everyoneeveryone

Leads to lower yields and higher costs for Leads to lower yields and higher costs for most speciesmost species

Generally unsustainable, unfair and Generally unsustainable, unfair and inefficientinefficient

Fish: “Tragedy of the commons”Fish: “Tragedy of the commons”

Pollution: “Tragedy of the commons”Pollution: “Tragedy of the commons”

Public GoodsPublic Goods

View sunset, $10View sunset, $10 Non-excludable so markets don’t provide Non-excludable so markets don’t provide

(underproduction)(underproduction) Non-rival so markets shouldn’t provide Non-rival so markets shouldn’t provide

(underconsumption)(underconsumption) What are options?What are options?

Information: The Tragedy of the Information: The Tragedy of the Non-commonsNon-commons

ProductionProduction How do we produce the right things?How do we produce the right things?

EflornithineEflornithine How do we produce them efficiently?How do we produce them efficiently?

Medicine, ‘anti-commons’Medicine, ‘anti-commons’ ConsumptionConsumption

How do we ensure people consume the appropriate How do we ensure people consume the appropriate amount?amount?

Alternatives to ozone depleting compounds, carbon Alternatives to ozone depleting compounds, carbon based fuelsbased fuels

Avian flu, HIV drugsAvian flu, HIV drugs

Are patents just?Are patents just?

Samuel Slater, Samuel Slater, “Father of American “Father of American Industry”Industry”

Developed countries Developed countries own 97% of all own 97% of all patentspatents

Raises costs for Raises costs for research that meets research that meets the needs of the poorthe needs of the poor

““Standing on the Standing on the shoulders of giants” shoulders of giants”

Efficient Efficient Allocation: The Allocation: The

Role of Business Role of Business and Governmentand Government

How are we addressing How are we addressing macro-allocation?macro-allocation?

For better or worse, government regulation is the For better or worse, government regulation is the main mechanismmain mechanism Limits to waste emissionsLimits to waste emissions Limits to resource extraction (mostly fisheries so far)Limits to resource extraction (mostly fisheries so far)

Voluntary personal measures: negligibleVoluntary personal measures: negligible Voluntary business measuresVoluntary business measures

Often done to pre-empt regulations, or get a jump on Often done to pre-empt regulations, or get a jump on competitioncompetition

e.g. Wal-Marte.g. Wal-Mart

What do you Think of Wall-Marts What do you Think of Wall-Marts efforts?efforts?

What was their motivation?What was their motivation? How will they contribute to sustainability?How will they contribute to sustainability? Is it enough?Is it enough?

What is the impact of regulations What is the impact of regulations and other government and other government

interventions on Business?interventions on Business?

SinksSinks Regulation of waste sector creates marketsRegulation of waste sector creates markets No regulation No regulation no waste industry no waste industry More regulation More regulation growth in waste industry growth in waste industry

E.g. carbon markets: converting methane to E.g. carbon markets: converting methane to energy could give triple dividendenergy could give triple dividend

Benefits those who anticipate it, may harm those Benefits those who anticipate it, may harm those who don’twho don’t

But also compensation for damagesBut also compensation for damages

Yet more regulation Yet more regulation no-waste industry no-waste industry Closing the loopsClosing the loops Waste outputs from one industry become Waste outputs from one industry become

resource inputs into anotherresource inputs into another

Future of Business: SinksFuture of Business: Sinks Emphasis must shift from managing waste Emphasis must shift from managing waste

outflows to handling materialsoutflows to handling materials Landfills become source, not sinkLandfills become source, not sink Industrial ecology and closed loop systemsIndustrial ecology and closed loop systems Increased reliance on ecosystem services Increased reliance on ecosystem services

Living machines, bacterial digesters, nutrient Living machines, bacterial digesters, nutrient cyclingcycling

Increased reliance on renewable energyIncreased reliance on renewable energy Ecological processes are solar poweredEcological processes are solar powered Energy from wasteEnergy from waste

EnergyEnergy

Regulations to curb global warmingRegulations to curb global warming Subsidies for alternative fuelsSubsidies for alternative fuels Mandated efficiencyMandated efficiency Rationing?Rationing?

California vs. BrazilCalifornia vs. Brazil Claims for just distribution, e.g. Louisiana, Claims for just distribution, e.g. Louisiana,

AlaskaAlaska

Future of Business: EnergyFuture of Business: Energy

Can’t do work without energyCan’t do work without energy Skyrocketing pricesSkyrocketing prices EfficiencyEfficiency Markets for new technologies?Markets for new technologies?

Is this good?Is this good? Return to the localReturn to the local Economic instability?Economic instability?

SourcesSources

Limits to extraction: bioticLimits to extraction: biotic Limits to extraction: abioticLimits to extraction: abiotic Mandated compensation for damagesMandated compensation for damages

Future of Business: sourcesFuture of Business: sources

Limits to extraction: bioticLimits to extraction: biotic Leads to increase in output, reduced costs of harvestLeads to increase in output, reduced costs of harvest Changing terms of trade (ag)Changing terms of trade (ag)

Limits to extraction: abioticLimits to extraction: abiotic EfficiencyEfficiency Markets for substitutes?Markets for substitutes?

Compensation for damagesCompensation for damages Internalizing costs of externalitiesInternalizing costs of externalities

Terms of trade: AgricultureTerms of trade: Agriculture

Market MechanismsMarket Mechanisms

TaxesTaxes Cap, distribute and tradeCap, distribute and trade Payments for ecosystem servicesPayments for ecosystem services Financial assurance bondsFinancial assurance bonds

Common Asset TrustsCommon Asset Trusts

Democratic decision-making, informed by Democratic decision-making, informed by scientific expertise and precautionary scientific expertise and precautionary principleprinciple

Sustainable quotasSustainable quotas Easier on sources, but possibly more Easier on sources, but possibly more

feasible for sinksfeasible for sinks

Information?Information?

What is role of business in solving the What is role of business in solving the problems described in your newspaper problems described in your newspaper articles?articles?

Will your business take these steps Will your business take these steps voluntary, from fear of regulation, or after voluntary, from fear of regulation, or after regulation?regulation?

ConclusionsConclusions Natural capital has become the limiting factor in Natural capital has become the limiting factor in

economic productioneconomic production Economy must move towards less waste and Economy must move towards less waste and

greater regulation of waste emissions to protect greater regulation of waste emissions to protect natural capitalnatural capital

Less resource extractionLess resource extraction Greater investments in knowledgeGreater investments in knowledge

ConclusionsConclusions Threat and OpportunityThreat and Opportunity ReactiveReactive

Regulations forced upon you, no control. Regulations forced upon you, no control. Tough to catch up with the leaders. Other countries Tough to catch up with the leaders. Other countries

well ahead of us.well ahead of us. ProactiveProactive

Can become leaders in a booming sectorCan become leaders in a booming sector regulations modeled on industry’s innovationsregulations modeled on industry’s innovations