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How can leaving ecosystems alone be more profitable than exploiting them?
It is increasingly recognized that eco-services reduce risks, save money and create wealth for business,
industry and government. More progressive industries are therefore recognizing that ecosystems can
provide more value through their ongoing services than as items of one-off consumption. Whereas
eco-retrofitting urban areas can cost less than doing nothing, leaving regional ecosystems intact can
earn more than exploiting them. Ecosystems like forests, wetlands and reefs provide essential services
to society that can have a higher value as intact eco-productive systems than as consumption items.
For instance, it is now widely appreciated that forest catchments automatically purify water, prevent
floods and landslides, control insects, and so on. Nature can provide these goods and services at less
cost than resource-intensive engineering systems, such as mechanical water purification and sewage
treatment. After the 1927 flooding of the Mississippi, for example, engineering structures were built
to try to control future floods. These levees made the great 1993 Mississippi flood far worse than
it would otherwise have been, as more catastrophic floods result when higher levees are breached.
After that, hundreds of millions of dollars were spent moving towns, removing engineering works
from the Mississippi floodplain, and restoring natural environmental flows. Generally, however, the
old engineering approach is still replicated around the world. New Orleans, for example, is being
redeveloped on parts of the same flood-prone land (as were some Australian towns after floods). The
new levees may be higher and homes may be built above ground level, but we are still tempting fate.
This is especially the case given the unpredictable effects of climate change.
Wasn’t the case of New Orleans just a matter of bad governance?
Perhaps. The New Orleans fiasco was a matter of political failure in that there were many unheeded
warnings that flooding was almost inevitable, yet nothing was done.
6
Regardless of whether this
inaction was due to political priorities, ignorance, racism or ideology, the New Orleans story does
indeed raise broader issues of environmental governance. Many consider the essence of environmental
issues to be the transfer of private costs of development onto the general public, or ‘externalities’.
185
Eco-service Trading Schemes
However, in an era of ‘small government’ and privatization, governments are outsourcing more basic
responsibilities in the other direction. That is, more of the public costs of environmental protection
are being externalized to the private sector and NGOs [Figure 15]. Governments are not investing
in environmental restoration, as they once did, during Roosevelt’s New Deal, for instance. They
increasingly rely on private interests and markets – and unpaid volunteer and citizen groups – to
manage the environment.
7
However, private industry can simply choose
not
to act – with impunity.
They have no electoral mandate to take responsibility or positive action. Business contracts can be
breached, at least if there is appropriate financial restitution. But when the social contract is breached,
and environments are destroyed, there can be no restitution. For example, a US telecom company
received government funding for upgrading their systems to broadband, and simply did not carry out
their obligations. They ignored the public regulators. The CEO returned an enormous profit for the
shareholders by short-changing services and delivery, and was rewarded by roughly a billion dollars
in total for his services. His ‘inaction’, in effect, transferred wealth from consumers to shareholders,
while the public paid for government regulators to try to enforce the original agreements.
Public
Government
Costs of internalities
Costs of externalities
Costs of offsets
Responsibility for
environment
Taxes
Taxes
Responsibility for
environment
Industry
Figure 15 Brokering resource transfers
Small government ‘down-sources’ responsibility for environmental management to NGOs through small
grants, and ‘out-sources’ responsibility to industry through insurance, incentives and other mechanisms.
Offsets are in a sense taxes for pollution that bypass government. Government is therefore increasingly a
broker rather than a service provider. It mediates resource transfers between the community and industry.
Governments can still influence the amount of internalities (public benefits transferred to special interests)
and externalities (private costs shifted onto public) of development.
186
Positive Development
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