Why Ecological Economics?

or Why modern environmental management requires the integration of Ecology and Economics

To answer this question we must first explore what ecological economics is and how it fits in with the modern environmental management system of sustainable development. To understand the modern environmental paradigm we must compare it with the prevailing management system, then illustrate the importance of ecological economics and the key role it plays as part of sustainable development.

Ecological economics is based on the partnership of human economics (how people make their living, procure food, provide roofs over their heads and many other necessities that they might require (Common, 1995), and ecology (which deals with the habits of living organisms, modes of life and their relationship to their surroundings (Common, 1995). Ecological economics is based on the human perspective and is therefore anthropocentric. In other words, it is in the way humans make their living has to be related to and have direct bearing on the surrounding environment within which they live. It is about the big picture.

Ultimately ecological economics is about sustainability. The need to meet the needs of present generations without compromising the needs of future generations (WCED, 1987). This suggests that there are limits to the amount of resources to which the present population can use so that the future population has access to use the same resources and standard of living. In today's management environment, sustainability and all that it encompasses is paramount; the precautionary principle, intergenerational equity, climate change and conservation of biological diversity, these ideals are all part of ecological economics.

It would seem that not only are we to integrate ecology and economics, but several other disciplines should not be overlooked, as ecological economics has to relate to societies, politics, businesses, educational establishments and the sciences; humanitarian, natural and engineering (Soderbaum, 2000). The modern day environmental manager can never be an expert in all of these fields, but knowledge of them is essential if we are to be successful in our endeavours to achieve a sustainable future with the help of ecological economics.

To understand the importance ecological economics has in modern environmental management systems, it is beneficial to compare it to the prevailing environmental management ethic. The prevailing management system focuses on how humans can use the eco-systems to more effectively enhance human wealth and welfare (Farber, Bradley, 2000). This system has the rather optimistic belief that given enough time and technical skill, the decline of natural resources can be reversed or even replaced by human technology. This is also known as weak sustainability. In the meantime, while we patiently wait for this technology to appear, the rate of non-renewable resource depletion is ever increasing.

One could say that the future of these resources is discounted. By this we mean that an activity that has immediate or short-term benefits, but major environmental implications for future generations (such as CFC's and ozone depletion or carbon dioxide and the greenhouse effect), are deemed to carry less and less weight the further into the future we look (Pearce, Turner, 1990). When we relate this to the way in which resources are used, then the higher the discount rate the quicker the depletion of those resources occurs. The future generations are discounted against, therefore the ideals of sustainability and conservation are dismissed. The belief is, we need to survive now, technology will take over in the future and find ways and means to create that which we are destroying in the present.

Modern environmental management however puts strong emphasis on; how ecosystems work, how ecosystems are critical for survival and the careful maintenance of the ecosystems is essential to maintain a healthy economy now and in the future. Sustainable development and ecological economics are the building blocks of modern environmental management. We seem to have moved full circle away from the prevailing management paradigm.

If we are to have enough resources for now and in the future we must adopt ecological economics, strong sustainability and a zero discount rate. Strong sustainability puts the emphasis squarely on only using resources so that they can be replenished at the same rate as they are being consumed (for every tree that is cut down, one should be planted in its place and so on). In the case of non-renewable resources, such as oil and coal, we must obviously look at alternatives.

A major characteristic that is common with all environmental problems is the issue of externalities. This is in relation to the way in which markets operate with respect to the environment. Today the costs involved with making a product are really only reflected as costs of production, they do not take into account the cost to the environment and eco-systems that help produce the raw materials to make the product. They also do not take into account the cost that the pollution that is created in making the product can have as it is carried downstream or in the atmosphere to neighbouring businesses or properties. These costs are not reflected in the price of the end product and ultimately market failure arises (Hodge, 1995).

As part of the modern environmental management system ecological economics endeavours to put a value on pollution externalities, exploitation of the global commons to name just a few. This can be done with policy or new techniques. Such as pollution taxes that would encourage a firm to change the way in which it produces an item to be more environmentally friendly and create less pollution, and therefore get charged less tax.

With relation to the global commons, if something is not owned then it gets exploited. An example of this is our oceans; fisheries are getting fished out, migratory routes are changing and species are becoming extinct (Miller 1999). This does not include the environmental harm done by fishing practices, oil spills and pollution. This degradation occurs due to the fact that no one owns the oceans or atmosphere or space, therefore if there is no party to answer to what or who is to stop the exploitation.

Ecological economics is about the triple bottom line being factored into every decision, every process and every product. Consideration of environmental, economic and social factors for the product lifecycle is essential for a sustainable future. If the example of petrol were to be considered one would need to consider the following factors: the environmental cost related to the extraction of the oil, risk of hydrocarbon leaks, operation of machinery creating greenhouse gases while extracting. There is the need to refine the oil in order to produce petroleum products, the vast amount of greenhouse gases involved in this process and the energy needed to produce the products. Ultimately the petrol being burned in the engines of vehicles creating even more greenhouse gases. This is very simplified yet emphasises the impact petrol has on the environment. Yet could world economies survive without petrol?

The recent hurricanes in the Gulf of Mexico have demonstrated the effect a natural catastrophe can have on world economies. A litre of petrol has increased from 90 cents to $1.40 in Australia alone, and still climbing. Alternatives such as ethanol blends are essential. In 2000/01 approximately 18 billion litres of petrol and 12 billion litres of diesel were consumed in Australia (AIP, 2001). There are currently negotiations to make a blend of 10% Ethanol to 90% petrol, in the hope that the costs can decrease to approximately $1.20 per litre and possibly further. With this in mind the scenario of a product that can replace petrol can be produced from a renewable resource, where the energy to produce the ethanol is created from the actual waste from within the process by producing methane. No resource is extracted from the ground, greenhouse gas emissions are minimal, any CO2 present can be extracted from the methane to further reduce emissions, and a non-renewable resource can now last longer. The potential is phenomenal. If the 10% ethanol scenario currently being considered in Australia were to go ahead the ethanol industry would boost its economy by selling 0.18 billion litres of ethanol for a total of $2.16 Billion AUD. When one considers the triple bottom line of this the savings are incredible. When one considers the cost effectiveness of being able to produce a litre of ethanol for a lot less than previously by utilising the resources recovered and clean energy generated from the process waste, to use back in the process or for sale off site, the savings are phenomenal.

In modern day environmental management, ecological economics is essential. It is a way of counting the true cost of a product. It helps us to endorse the fact that discount rates must be kept at zero. It makes us realise that we cannot survive economically without caring for the eco-systems with which we rely on for so much. It conceptualises the fact that equality between borders, socially, physically and economically, is essential for our survival. It is helping us to realise the real cost of externalities and it shows us that it is paramount that exploitation must cease. Our future will inevitably suffer unless human behaviour shifts its focus to the modern day environmental management system of sustainable development. Ecological economics is an integral part of sustainable development. Ecological economics is an essential part of every day life.

References

Australian Institute of Petroleum, 2001, Road Transport Fuel
Consumption in Australia, at Australian Institute of Petroleum website http://www.aip.com.au/industry/fact_trans_fuels.htm [accessed 26/09/2005].

Common, M., 1995, Sustainability and Policy, Cambridge University Press.

Farber, S., Bradley, D., Ecological Economics Explained, Web resource, http://www.fs.fed.us/eco/s21pre.htm., accessed 21/03/2002.

Hodge, I., 1995, Environmental Economics, MacMillam Press Ltd.

Miller, G. Jr., 1999, Living in the Environment—11th edition, Brooks/Cole Publishing.

World Commission on Environment and Development, 1987, Our Common Future, Oxford University Press.

Pearce, D.W., Turner, R.K., 1990, Economics of Natural Resources and the Environment, Harvester Wheatsheaf.

Soderbaum, P., 2000, Ecological Economics, Earthscan Publications.