The recent Australian federal election was aptly named the ‘climate election’. The debate leading up to the vote saw Australia grapple not with how an effective climate policy suite might look, but with how we should rank our environmental crisis among other pressing issues prevalent in Australian society (Cook 2016); issues such as jobs, education and welfare. It was this disagreement of priorities that exposed an ideological fissure dividing our nation; a split between Australians persuaded by scientific findings, and Australians pointing to economic sense. A debate between two ideological viewpoints is much like an argument in two separate languages; absolute agreement is not only unlikely, but downright impossible.
For this reason, I am going to make a case for the benefits of environmental policy in a traditionally alien economic framing. I’d like to throw in a disclaimer that discussions of climate change should never be limited to a solitary perspective. A complete exploration, through multiple framings, allows individuals and policy makers to approach issues as large and complex as climate change with resolve and confidence.
The State of Play
Many economists live by the mantra that the intervention of government in the economy should be minimised. Yet, even the father of economics, Adam Smith, felt that there is a role for government (Smith 1776). He believed that government should rectify market inefficiencies, providing what society needed yet no one wanted to produce. In economic terms: to limit negative externalities and incentivise positive externalities. Our environment, if its infinite complexity is shoved into the simplicity of the foundational economic model, is a public asset that’s perpetual existence has provided humankind with the resources we have required to build our society. In a way, the maintenance of our environment can be seen as a service that creates a positive externality, and maybe that’s why we see a lack of interest in such maintenance. This leads me to my point: in this framework, it’s the responsibility of government to fill the gaps in the market. To create policy that promotes environmental sustainability. Yet, we don’t have to look too hard to see that the Australian government has struggled and, to a degree, failed to implement climate policy. The factors that contributed to the retraction of the Gillard government’s Carbon Tax and Emissions Trading Scheme are many. Perhaps, though, instead of focussing on individual policy failings, we can change the way we view our environment.
A New Form of Conservation
Current climate policy only addresses one side of the equation; the reduction of our emissions, or alternatively, the reduction of our negative climate-based externalities. The other side – the promotion and production of positive externalities – requires much more attention. A renewed perspective that accounts for this other side will, realistically, add a layer of complexity to our economic model, where nature (and the land it occupies) is not simply taken at intrinsic or market value, but is rather valued as any other asset is. This is the concept of ‘Natural Capital’ where nature is a productive entity, with human societies living off the ‘interest’ of this capital (e.g. an apple is interest off an apple tree that is an asset) (Corson 2013). Integrating natural capital into the economic model is an act of conservation in itself. This is because it re-establishes the value of communal natural spaces, where factors such as oxygen production, natural water treatment, carbon storage and nutrient production all increase the value of the land. It requires alternate uses of land to establish greater value than that already created by the natural habitat. Correct evaluation of environments also allows governments to rationalise costs to maintain environments, just as there would be maintenance costs for infrastructure. All in all, this shift in thinking allows for climate, and indeed conservation policy, to fit within an economic framework. It also allows for the discourse around climate to change; to accommodate ideological differences and unite in a common language.
Viewing such a multifaceted issue as climate change through an economist’s lens is a drastic simplification. However, it is a necessary simplification to allow all members to engage in the debate. The challenge before us, particularly for those who share my love of economics, is to step outside our traditional ways of thinking and look at climate change through alternate framings. It is only through careful analysis of our thoughts and engagement with alternate perspectives that we can, as a country, and indeed a world, agree on the directions that we must take to combat the truly complex environmental issues of our times.
Cook, J 2016, ‘Consensus on consensus : a synthesis of consensus estimates on human-caused global warming’, Environmental Research Letters, vol. 11.
Corson, C 2013, ‘Grabbing Green: Markets , Environmental Governance and the Materialization of Natural Capital’, Human Geography, vol. 6, no. 1.
Smith, A 1776, The Wealth of Nations ( 1776 ) An Inquiry into the Nature and Causes of the Wealth of Nations.