Environmental Economics and Accounting

AN OLD CASE-STUDY

Imagine a factory located upstream that pollutes a river. It produces steel for the automotive industry. Downstream, local fishermen find they catch less fishes due to the pollution.

Both are flourishing businesses that produce wealth and prosperity for the community. But there is a problem environmental economists must deal with:

1. Can you suggest any criteria that could be used to decide on who has the right to use the river? The factory, the fishermen, both?

2. Can you propose any instrument or agreement to solve the problem?

Two distinct scenarios, two ways to face the future

Scenario 1. If decision makers are based on a short-term vision of reality, which only takes in to account monetary approach, it is obvious that the automotive industry can generate for the study case community very profitable incomes in -at least- the next 10 years. With such excess of dividends, fishermen and the rest of the families that life in the community could invest in the building of schools, hospitals or even local business. Indeed, they would ensure their social welfare for a while.

Industry by the river

 

Scenario 2. If decision makers consider the different approaches for environmental economics and how to value natural resources, they could project into the future and realize that in the long term vision fisher activities would be much beneficial for the welfare of the town and humankind in general. Instead of restrict themselves in the present, it is important to give value to other factors like time and thermodynamics, as defenders of the Ecological Party propose.

In that sense, they must consider that fishes that habit the river will be in a not too distant future more essential (they are at the based on the food chain) than steel to fabric cars. And who knows if in 50 years, people will continue driving cars…. As time passes, we can feel that disproportional human activities (based only in monetary terms) have delivered us into a climate change phenomenon and a current food crisis that every year makes millions of people die.

However, I firmly agree that every environmental valuation must consider economic factors (as Pigouvian Party and Coasian Party propose) when it’s time to make decisions, such as prioritize fisher activities or automotive industry in a community. That´s the only way to convince leaders and politicians (who have a more capitalism vision of reality) they need to invest money in the environment care for the benefit of future generations and the creation of more eco-efficient companies. After all, decision makers always demand accountability.

I don’t think the river belongs to the residents or workers in the factory of steel. Both are entitled to use it. But I think that the local government could lead a Cost Effectiveness Analysis (CEA) study case where they take in to account the benefits and disadvantages for moving out from a situation where the river is contaminated by car industry, to a scenario where it is prioritize fishing for the long term use. That could foster a community with less pollution where tourism attractions are based on biodiversity and species that feed from the fishes of the river. Obviously, it might be also interesting to study the benefits for economic growth the fact of having a more healthy community where there is no presence of chronic diseases caused by water pollution.

Comments Off on Environmental Economics and Accounting / 14 Dec 2011 por Iana Malaga Newton
Uncategorized /

Comentarios cerrados.