The price of destruction

Image: Catherine Sheila
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By RICARDO ABRAMOVAY*

Water, solid waste, biodiversity erosion, atmospheric pollution and greenhouse gas emissions are some of the gratuitous and destructive uses that the economic system makes of nature

The global economy is based on the growing use of services offered by nature, on which companies depend – but which they systematically destroy – and for which, at least until now, they pay nothing or almost nothing. Brasilia's fundamentalist fanaticism and the business organizations that shamefully support it consider that this is the best of both worlds for Brazil to grow. That is why both the Brazilian Rural Society and the National Confederation of Industry struggle with the European proposal to prohibit the entry into the continent of products coming from recently deforested areas and the “frontier carbon adjustment mechanism“, a project under public consultation and which may come into force from 2023.

The starting point for understanding what it is about is in a important business report prepared with the support of global giants such as Standard Poor and Trucost consultancy. This report shows that if the 1.200 largest global corporations had to pay for their use of nature, this cost would exceed their net earnings. In other words, they would close the doors.

Despite all the scientific and technological progress, the cheapness of modern renewable energies, the expansion of the electric vehicle fleet in the world and the breakneck pace of the digital revolution, the hidden costs (that is, those that are not incorporated into product prices) of use of nature increased by 48% between 2015 and 2018. In 2019, they were 77% higher than the net income of the 1.200 largest global corporations.

Water, solid waste, biodiversity erosion, atmospheric pollution and greenhouse gas emissions are some of the gratuitous and destructive uses that the economic system makes of nature. These data demonstrate that the contemporary economy is still fundamentally extractive, despite the undeniable gains in efficiency obtained since the industrial revolution.

Instead of considering that this fictional economic world is eternal, no less than two thousand companies are already working with an “internal price” of carbon in their planning, according to the Carbon Disclosure Project. The reasoning is that at some point this internal price (fictitious) will actually be charged. The longer this charge takes, the more the impacts of extreme weather events will be devastating for society and for the companies themselves.

The question that the business administrator in tune with the present (and not clinging to backwardness and fanaticism) has to answer is: what are the changes in the range of products and in the technologies adopted so that his company's offer to society stops destroying the nature and contribute to regenerating it? Charging for carbon encourages the adoption of products and techniques that do not need to be used.

This charging for the use, hitherto free, of the biosphere is already starting to be put into practice in what the World Bank calls carbon pricing instruments (carbon pricing instruments). In 2021, the World Bank survey reveals the existence of 64 regions or countries that put a price on carbon. In 2020, these instruments reached 15,1% of global emissions and this coverage increased significantly, reaching 21,5% of emissions in 2021. In China, this is already a national policy that covers 30% of its emissions.

In most cases, prices are still far below what is needed to stimulate the technological changes that will lead to the decarbonisation of the economy. The IMF estimates that this price, on average, is three dollars per ton. It will have to rise to $75,00 per ton by 2030. But the world in which emitting greenhouse gases costs nothing is coming to an end. Carbon pricing instruments are becoming more ambitious.

The World Bank also mentions Frontier Adjustment as an important mechanism to stop the destruction of the climate system. That is, the product whose price is competitive because it does not include the cost of destroying the climate system, will be taxed and burdened to enter Europe. Without a high price for greenhouse gas emissions, this destruction will not be stopped, as shown by the fact that no less than 80% of the energy used in the world comes from fossil fuels, almost thirty years after Rio+20.

All of this implies a fundamental transformation in the functioning of contemporary markets. At the heart of this transformation is the growing need for production processes to be rigorously tracked. Since market prices shadow costs that society pays for in the form of fires, droughts, floods, landslides, rising sea levels, pollution, forest devastation and melting glaciers, accurate information about how how the economy uses nature will become increasingly important in business transactions. The digital revolution tends to make these instruments cheaper, but it is obvious that they are not free.

To protest against these costs is to claim the right to promote economic growth at the expense of the destruction of nature. It is not surprising that this right is being claimed by an extreme right-wing government, supported by what the Brazilian business community is most backward about. Countering this backwardness and placing Brazil back in global multilateralism by promoting a regenerative economy that makes valuing nature the basis of our prosperity is a decisive part of the country's democratic reconstruction program.

*Ricardo Abramovay is a senior professor at the Institute of Energy and Environment at USP. Author, among other books, of Amazon: towards an economy based on the knowledge of nature (Elephant/Third Way).

Originally published on UOL portal.

 

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