Placing a value on the environment through formal well-regulated markets is a better way to effect climate action and change the behaviours destroying our planet, writesΒ former Douglas Shire Mayor, Mike Berwick.
DURING A LIFETIME of environmental activism, I have been involved in various approaches to nature conservation: direct action and civil disobedience,Β the media, science, politics, catchment management and most recently, markets.
Late last year, the Federal GovernmentΒ announcedΒ the creation of a biodiversity market.
Many of my colleagues in the environmental sector regard markets with deep suspicion, equating them with unbridled capitalism β profit with no environmental or social constraints and minimal regulation.
Effective markets are typically driven by gains to the participants from the voluntary exchange of goods and services.
Our free and unencumbered consumption of ecosystem services βΒ the many and varied benefits to humans provided by the natural environment and from healthy ecosystems βΒ has widely beenΒ regarded by expertsΒ to be a βmarket failureβ, mainly because the environment has been an unrewarded participant.
In liberal democracies, although profit remains the primary objective for businesses, shareholders and investors, the market is regulated. For example, in the Australian employment market, employers are required to pay employees a minimum wage for the services they provide and it β largely β works, underpinned by the Fair Work Act 2009.
The modern economy, underwritten by increasing consumption of mineral resources, fossil fuels and other ecosystem services, has, for example, failed to constrain greenhouse gas (GHG) emissions. Farming, mining, manufacturing, transport, construction, infrastructure β even health and education βΒ have all resulted in widespread pollution,Β deforestationΒ and destruction of nature βΒ despite the existence of a host ofΒ environmental regulations.
Modern life increasingly consumes ecosystem services in almost everything it does to sustain us, while we consumers have all become used to using them free of charge. The result is that planetary health is declining rapidly.
Two recently released reports β‘Australia State of the Environment 2021‘ and the United Nations’ (IPCC) Intergovernmental Panel on Climate Changeβs 2021‘code red for humanityβ assessment β provide vivid and deeply disturbing testaments to that.
Yet, this βmarket failureβ can be corrected β by valuing and putting a price on those ecosystem services.
Witness the idea of putting a price on carbon, the mechanism most economists, think tanks and conservation non-government organisationsΒ advocateΒ as the most effective means to avoid overheating by GHGs and to return the atmosphere to a mix that avoids cooking the planet.
Of course, GHG pollution is only one of the crises facing humanity and the other ten million species with which we share Earth.
Direct, activity-based regulation is essential to prevent bad things like speeding on roads, workplace discrimination, fraud and industrial pollution. But it is inadequate to drive environmental best practice in industries such as farming, manufacturing, transport and the like.
You canβt make everyone buy an electric car or stop driving altogether. You canβt force farmers to invest in untested practices or restore landscapes they were once expected or required to clear. It costs money that people do not always have. The technology is not there. And they need to keep earning a living.
Markets, on the other hand, deliver things people want or need to pay for. And they can incentivise behaviour.
For markets to work for the environment, they need regulation β for example, by setting caps and putting a price on carbon emissions, which the new Government is attempting to achieve via the revamped safeguard mechanism.
In this model, big polluters are required to reduce their emissions to a set level β a βbaselineβ, which declines as practices improve and targets are strengthened. If they canβt (or wonβt) achieve this baseline, they must buy credits on the carbon market to βoffsetβ their emissions. Then, as demand increases and credits become scarce and more expensive, it will soon prove cheaper to reduce emissions than pay for offsets.
This is market-driven behavioural change.
Here, regulation is being used to correct a βmarket failureβ that has allowed us all to pollute for free. It’s about pricing GHG pollution. Similar mechanisms are needed for all forms of pollution and habitat destruction. Direct, activity-based regulation will do some of the heavy lifting β regulated markets are needed for the rest.
In the early stages, easy-to-reduce sectors of society, like electricity generation, will cover forΒ hard-to-reduce sectors, like airline travel. Nature-based offsets, like regenerating native vegetation to capture and store carbon (an example ofΒ carbon farming), can be used to offset hard-to-abate pollution until technology provides a more efficient solution andΒ market price drives the change from offsetting to emission reduction.
Experts agree that offsets are an essential component of achieving climate targets and that carbon sequestration (removal of carbon from the atmosphere to be stored in plants and soil) will remain essential long past achieving carbon neutrality, both to bring the atmosphere back to a level that avoids ongoing heating and to offset activities that cannot be avoided in modern society.
Our best endeavours in correcting the planet’s degradation through education, direct, activity-based regulations and grants βΒ although vital βΒ have proved inadequate on their own. Some would say theyβve failed dismally. Why? Because the economy, of which we are all inescapable participants, puts no value, monetary or otherwise, on the environment.
But now shareholders, customers and clients increasingly demand that the companies they invest in and products they buy be environmentally and socially ethical. This means profit is no longer the only motivation behind business decisions. It means producers and suppliers of goods and services increasingly seek certification for being socially and environmentally ethical.
The bottom line is that, in our globalised world, the market is potentially delivering the mechanism that direct government regulation has failed to provide.
Still, it is not quite that simple. The offsetsΒ companies buyΒ mustΒ do what they say theyβll do. They must be measurable and verifiable. Those measures do not always reliably existβ¦ yet. But it’s improving rapidly.Β
This is imperative for the market to have integrity, which is essential for market confidence. And for real outcomes that benefitΒ market participants βΒ the environment and humanity βΒ and ultimately the health of our planet.Β
Mike BerwickΒ AM was arrested during theΒ Daintree blockadeΒ that led to theΒ world heritage listingΒ of Queenslandβs wet tropical forests. He was awarded hisΒ Order of AustraliaΒ partly for its conservation. Mike is a senior policy advisor to environmental markets investor and project developerΒ GreenCollar.
