Trump Rejects Global Cooperation on Climate Change

June 2, 2017

Previous | Next

Yesterday, President Trump announced his attention to withdraw from the Paris Accord on Climate Change. In doing so, he carried his nationalist, “America First” thinking to a new extreme.

The Paris Accord represented a breakthrough in international cooperation to address the most pressing global issue of our time, dramatic climate change due mainly to the buildup of greenhouse gases in the atmosphere. Countries can continue to argue and negotiate over their relative contributions to a solution. But the important thing is that almost every country–Syria and Nicaragua were the exceptions–agreed to join in the effort, each setting targets for the reduction in fossil fuel emissions. Even if some of the targets were more ambitious than others, and some will not be met, the world will be better off because of the agreement. The United States can be proud of its leadership in bringing the nations of the world together in this cause.

Donald Trump views such agreements through the eyes of a businessman accustomed to driving hard bargains. Each deal is a zero-sum game, where each side’s gain is the other side’s loss. Trump’s speech reveals that he is narrowly focused on the costs to the American fossil fuel industry, not the benefits of controlling climate change or creating cleaner energy industries. That makes his economic analysis flawed from the start. He counts only jobs lost but not new jobs to be created. He claims that our large fossil fuel reserves are “sufficient to lift millions of America’s poorest workers out of poverty,” but fails to mention that developing those reserves would, according to scientists, send climate change out of control and produce dire economic consequences. New York’s attorney general is currently investigating the possibility that Exxon Mobil may be defrauding its investors by placing a higher public value on its reserves than it knows to be realistic.

Because he looks at the world from a narrow “America First” point of view, President Trump tries to minimize the American responsibility for the problem while placing as much blame as possible on poorer countries, especially China. True, China is currently the world biggest emitter of greenhouse gases, but that’s partly because it’s so big, and it has only recently been developing its fossil fuels. China is only sixth in per-capita emissions, and it is now making large investments in clean energy. The United States is still first in per-capita emissions, and “with just over 4% of the world’s population, is responsible for almost a third of the excess carbon dioxide that is heating the planet” (New York Times). Developed areas like North America and Europe have been filling up the atmosphere with carbon emissions for a long time, while poorer countries have only joined them recently. It’s only fair that developed countries should lead the way in energy transformation, and they are starting to do so. But one reason they have been reducing emissions is that they have been exporting their problem by offshoring a lot of their manufacturing operations to poorer countries.

Trump claims that even without the accord, “the United States…will continue to be the cleanest and most environmentally-friendly country on earth,” That is simply not true. An Environmental Performance Index developed at Yale ranks the United States 43rd in air quality, 22nd in clean water, and 44th in climate and energy policies. The Trump administration’s efforts to roll back environmental regulation certainly won’t help. But by denying we have a problem, Trump can claim that we have nothing to gain and everything to lose from the proposed solution. “The Paris Climate Accord is simply the latest example of Washington entering into an agreement that disadvantages the United States, to the exclusive benefit of other countries.” One could argue the opposite, that Trump is disadvantaging the U.S. by withdrawing from the fight for clean energy, which may allow countries like China to assume leadership in developing the industries of the future.

Trump is especially critical of the Green Climate Fund, the United Nations fund through which richer countries help poorer countries transition to cleaner energy. Without it, very poor countries like India say they cannot afford to leave their coal in the ground. Trump claims that the fund “is costing the United States a vast fortune.” In fact, we have pledged only $3 billion, about $10 for each American, which Trump now refuses to pay. But 5.5 trillion in proposed tax cuts? No problem.

Most experts believe that the world will continue to progress toward cleaner energy with or without the support of the U.S. government. But the pace of change is already too slow, and may now slow further. The world needs every country doing as much as it can to avoid a costly environmental disaster. The last thing it needs is the withdrawal of the United States from its longstanding role of international leader at this critical time.


This Changes Everything (part 3)

April 19, 2017

Previous | Next

A key question in the political debate over energy is whether governments should have a strong energy policy at all. The conservative answer is essentially no. Government should not “pick winners and losers,” but remain neutral toward different energy sources and let the market decide. It is the “invisible hand” of the market that is most rational and fair. If fossil fuels are what sell, then we should continue extracting them.

Naomi Klein, on the other hand, sees our heavy reliance on environmentally dangerous sources of energy as a massive market failure. Fossil fuels are both more profitable for producers and cheaper for consumers than they should be, because market participants are not paying the full environmental cost. The planet, not the market, will dole out the consequences, including heavy costs for poor people who never got the benefits of high consumption. In this case, the market outcomes are neither rational nor just. Klein doesn’t say it in exactly these words, but the root of the problem is capitalism’s propensity to privatize benefits while socializing costs.

That is the basic argument for strong public policies–local, national and international–to facilitate a transition to cleaner energy as soon as possible.

Democratic resistance

Since the fossil fuel industry has accumulated enormous economic and political power, the only solution Klein sees is a massive democratic resistance movement. She sees such a movement emerging as the conflict between private interests and the public interest becomes clearer.

The fossil fuel industry is on a collision course with the climate, since it is planning to extract and burn far more carbon than scientists say the atmosphere can safely absorb. The valuation of fossil fuel companies on the stock market is based on the future profits projected on the basis of those plans, so they have strong incentive to keep going.

What really encourages resistance is that extractors are “pushing relentlessly into countless new territories, regardless of the impact on the local ecology (in particular, local water systems), as well as the fact that many of the industrial activities in question have neither been adequately tested nor regulated, yet have already shown themselves to be extraordinarily accident-prone.”

Resistance is growing especially in the Pacific Northwest, led especially by “resurgent Indigenous Nations, farmers, and fishers whose livelihoods depend on clean water and soil, and a great many relative newcomers who have chosen to live in that part of the world because of its natural beauty.”  For many people, climate change is still a somewhat abstract notion, but a threat to the local water supply is not.

And what could be more democratic than a popular demand for clean water? “Having the ability to defend one’s community’s water source from danger seems to a great many people like the very essence of self-determination.”

Of course, the success of a broad environmental movement remains to be seen. Truly transformative social movements are historically rare. Klein cites the example of anti-discrimination movements that achieved only partial victories. The movement for African American rights succeeded in outlawing the most obvious forms of discrimination. But it has not achieved the “massive investment in jobs, schools, and decent homes” that would be needed to eliminate the large racial gap in wealth and income. On the other hand, the labor movement of the 1930s achieved more substantial economic gains. In that instance, the crisis of the Great Depression shifted popular opinion dramatically to the left, producing the New Deal wave of progressive legislation. The climate crisis may require a political change of that magnitude.

Global responsibility

What makes the challenge of climate change so daunting is that it requires developed countries not only to curb their own fossil fuel emissions but to help poorer countries curb theirs. Klein believes that this is a matter of both economic necessity and moral justice.

“Developed countries, which represent less than 20 percent of the world’s population, have emitted almost 70 percent of all the greenhouse gas pollution that is now destabilizing the climate.” The richer countries not only have a history of appropriating other peoples land, labor and resources (especially through slavery and colonialism), but they have also appropriated the sky, “gobbling up most of our shared atmosphere’s capacity to safely absorb carbon.”

That puts developing countries in a real bind. They are told that they must limit their fossil fuel emissions just when they are starting to industrialize. But the cheapest and easiest way for them to develop is to use the most readily available sources of energy, without bearing the costs of environmental protection or innovative technologies.

They cannot break this deadlock without help, and that help can only come from those countries and corporations that grew wealthy, in large part, as a result of those illegitimate appropriations….With many of the biggest pools of untapped carbon on lands controlled by some of the poorest people on the planet, and with emissions rising most rapidly in what were, until recently, some of the poorest parts of the world, there is simply no credible way forward that does not involve redressing the real roots of poverty.

The United Nations Framework Convention on Climate Change (1992) recognized this when it asserted a principle of “common but differentiated responsibilities.” The nations of the world are all in this together, but the countries that have gotten the richest on fossil fuels have a special responsibility to switch to cleaner energy, as well as to help finance that transition in poorer countries.

One reason why emissions are falling in the United States (although not enough) but rising in poorer countries is that we have offshored so much manufacturing, especially to countries with weak environmental policies. The system is very profitable, but it complicates efforts to combat global warming.

In Klein’s view, the solution is not just for richer countries to contract their economies, while poorer countries expand theirs on the same old fossil-fuel model. That would just redistribute emissions, not reduce them. The challenge is for all countries, rich and poor alike, to agree to develop differently.

What kind of populism?

In a previous post, I mentioned Klein’s point about bad timing: Climate change became an issue just “at the peak of free market, end-of-history triumphalism.” She is hopeful, however, that other social problems such as growing inequality have helped discredit that ideology. If so, conservative politicians may be losing some of their cultural legitimacy, and a progressive counter-revolution may be in the making.

In this context, what should we make of Donald Trump’s “populism”, which arrived on the scene after Klein’s book was written? It is a little different than mainstream conservatism, since it encourages some government interventions in markets, especially restrictions on global free trade to protect US. manufacturing. (What exactly those restrictions would be is not clear.) When it comes to energy, it is worse than conservatism, since it is not so much energy neutral as pro-fossil fuel. Our new EPA Administrator is Scott Pruitt, who as Attorney General of Oklahoma consistently represented the interests of fossil-fuel companies. Our Secretary of State is Rex Tillerson, the former CEO of Exxon-Mobil. Neither Trump nor Pruitt has accepted the scientific consensus on climate change.

Trump seems obsessed with jobs in coal mining and pipeline construction. He has not shown much interest in creating new kinds of jobs or training workers to perform them.  Klein, on the other hand, points to the economic potential of clean energy. One study she summarizes is from the Canadian Centre for Policy Alternatives:

[I]f $5 billion is spent on a pipeline, it produces mostly short-term construction jobs, big private sector profits, and heavy public costs for future environmental damage. But if $5 billion is spent on public transit, building retrofits, and renewable energy, economies can gain, at the very least, three times as many jobs in the short term, while simultaneously helping to reduce the chances of catastrophic warming in the long term.

Trump’s brand of populism is a reactionary one favoring traditional industries and jobs. But the very fact that many of his supporters are disillusioned with establishment conservatism may create some room for a more progressive populism favoring a more innovative and sustainable economy. Whether public opinion will shift in that direction in time is hard to say. If history is any guide, the old economy may have to show even more signs of failure before people will turn to something new.

This Changes Everything (part 2)

April 18, 2017

Previous | Next

Naomi Klein’s book is a plea for strong action to combat climate change. On the one hand, she argues that renewable energy technologies “have become radically more efficient and affordable, making a full transition to the power they provide both technologically and economically feasible within the next few decades.” On the other hand, she sees methods of fossil fuel extraction becoming more and more dangerous. Natural gas is a popular alternative to coal, but fracking threatens water supplies, and gas obtained by fracking emits methane at a rate 30% higher than conventional gas. Public policy should focus on curbing fossil fuels and developing cleaner alternatives, both as quickly as possible.

Much of the book is a critique of more limited solutions that require fewer changes to our way of life. They treat climate change as “a narrow technical problem with no end of profitable solutions within the market system….” Change your lightbulbs and buy a different kind of cleaning liquid, and we’ll be fine.

Wishful thinking

Klein is rather disappointed in the environmental movement, which she says has failed to live up to its initial promise. Back in the 1970s, twenty-three federal environmental laws were passed, including the Clean Air Act, the Clean Water Act, the Wilderness Act, the Endangered Species Act and the Toxic Substances Act. But this legislative progress largely ground to a halt when the changing political climate brought Ronald Reagan to the White House. With free-market capitalism once again the reigning ideology, many of the new environmental groups tried to work within the system rather than challenging it. Many relied on donations from the same fossil-fuel companies that were also pushing environmental deregulation, and some even made their own investments in the fossil-fuel industry. Their reluctance to challenge the economic power structure forced them “to place their hopes in solutions–whether miracle products, or carbon markets, or ‘bridge fuels’–that are either so weak or so high-risk that entrusting them with our collective safety constitutes what can only be described as magical thinking.”

In the negotiations leading up to the Kyoto Protocol (1997), the United States insisted that emissions reduction be accomplished through “cap-and-trade” rather than direct emissions limits. Under cap-and-trade:

[P]rojects that were employing practices that claimed to be keeping carbon out of the atmosphere—whether by planting trees that sequester carbon, or by producing low carbon energy, or by upgrading a dirty factory to lower its emissions—could qualify for carbon credits. These credits could be purchased by polluters and used to offset their own emissions.

Ironically, even this market-based solution was too radical to be ratified by Congress, but it was adopted in other countries, notably the European Union.

In theory, the emissions in the atmosphere could come out the same whether a polluting company reduced its own emissions or paid someone else to reduce theirs. The problem was that it was too easy to game the system. The alleged reductions that qualified for credits were sometimes illusory. Companies were accused of adopting dirty methods of production so that they could then earn credits for eliminating them. “Even conservative sources estimate that between 1/3 and 2/3 of carbon credits bought into the [European Union’s Emissions Trading System] ‘do not represent real carbon reductions.'”

In the following decade, the cap-and-trade bills introduced by President Obama came out of the US Climate Action Partnership, a coalition of environmental groups and large polluting companies. The bills would have given energy companies “free allowances” covering 90 percent of their existing emissions, so the most they would have to do to keep right on polluting was to buy credits to offset the other 10 percent. But again, even that plan was too radical to pass Congress.

Fixing the earth or fixing ourselves?

Klein is especially critical of technological fixes that promise to counteract the greenhouse effect of whatever emissions industry fails to control. One that has received a lot of attention is Solar Radiation Management, which would attempt to limit the amount of sunlight that reaches the earth. We might spray large amounts of sulfate into the stratosphere, with an effect similar to major volcanic eruptions that have been known to reduce global temperatures in the past. Among the objections Klein cites:

  • It could create a permanent haze over the earth, eliminating blue skies and interfering with astronomy
  • It could impede the production of solar energy
  • It would not address the underlying causes of climate change
  • It would not deal with other effects of climate change, such as increased carbon in the oceans, with detrimental effects on marine life and the aquatic food chain
  • Once started, it would have to be continued indefinitely; otherwise, “all the warming that you had artificially suppressed by putting up that virtual sunshade would hit the planet’s surface in one single tidal wave of heat, with no time for gradual adaptation.”

Apart from the scientific details, Klein questions the conception of humanity and nature that underlies proposals of this kind. We would be tinkering with the entire planet as if it were a machine that we could fine tune. The greatest danger is that the earth would “go wild in ways we cannot imagine,” since we don’t understand the whole biosphere well enough to know in advance what it would do. In the words of MIT microbiologist Sallie Chisholm:

“Proponents of research on geoengineering simply keep ignoring the fact that the biosphere is a player (not just a responder) in whatever we do, and its trajectory cannot be predicted. It is a living breathing collection of organisms (mostly microorganisms) that are evolving every second—a ‘self-organizing, complex, adaptive system’ (the strict term). These types of systems have emergent properties that simply cannot be predicted. We all know this! Yet proponents of geoengineering research leave that out of the discussion.”

Klein’s reference to complexity theory in this context suggests to me that environmentalism is part of a paradigm shift that has been taking shape for some time. The machine metaphor for understanding natural systems is under attack, and a more creative model of reality is emerging. (See especially the writings of complex system theorist Stuart Kauffman.) Our relationship to nature is coming to be seen more as a creative partnership and less as a dominance hierarchy.  As a sociologist of gender, I notice the same theme of partnership vs. dominance running through the study of gender relationships. That connection makes sense. In Western patriarchal culture, nature has been conceived as feminine and controllable, while mankind has been conceived as masculine and controlling. Klein also develops a parallel between women’s fertility and the fertility of the earth, both of which have been objects of male regulation. It is this entire worldview that is now being challenged.

Klein sums it up well when she says, “The earth is not our prisoner, our patient, our machine, or, indeed, our monster [i.e., our Frankenstein monster to get back under control]. It is our entire world. And the solution to global warming is not to fix the world, it is to fix ourselves.”


This Changes Everything

April 17, 2017

Previous | Next

Naomi Klein. This Changes Everything: Capitalism vs. the Climate. New York: Simon & Schuster, 2014

Journalist Naomi Klein spent five years delving deeply into the problem of climate change and what it may mean for our capitalist way of life. She concludes that up until now the world has been failing to tackle the problem effectively, and that’s mainly because the necessary steps “fundamentally conflict with deregulated capitalism, the reigning ideology for the entire period we have been struggling to find a way out of this crisis.”

The first part of her statement is widely accepted, at least among scientists and most world leaders. The 2009 climate summit in Copenhagen set a goal of limiting average global temperature to no more than 2 degrees Celsius above what it was when countries first turned to coal to power the industrial revolution. That would require the richer countries to reduce their carbon emissions “in the neighborhood of 8-10 percent a year.” So far that isn’t happening. According to the EPA, US carbon emissions dropped only 2.9% between 2014 and 2015, and only 11.7% over the ten-year period from 2005 to 2015. In the world as a whole, that drop was offset by increased emissions from developing countries.

Much more controversy surrounds the question of what to do about it. Many people hope for a technological fix that could solve the problem with minimal impact on our habits of production and consumption. Economic conservatives want to limit changes to what can occur through market mechanisms such as consumer demand for greener products, while minimizing the role of government regulation. Liberals are willing to entertain government measures like a carbon tax, but are suspicious of calls for a more radical economic transformation.

Klein is willing to think more radically, since she regards climate change as a real game changer. It poses  a massive threat; it is happening rapidly; and it forces us to rethink how we have related to nature and organized our economic lives.

[T]he real reason we are failing to rise to the climate moment is because the actions required directly challenge our reigning economic paradigm (deregulated capitalism combined with public austerity), the stories on which Western cultures are founded (that we stand apart from nature and can outsmart its limits), as well as many of the activities that form our identities and define our communities (shopping, living virtually, shopping some more).

No doubt people prefer little problems with little solutions to big problems requiring big solutions. That makes Klein’s book a tough sell. Nevertheless, it’s worth reading, just in case she may be right.

The “greatest market failure”

The roots of the climate problem lie deeper than capitalism, in the relationship to nature that Klein calls “extractivism”.  She defines this as “a nonreciprocal, dominance-based relationship with the earth, one purely of taking. It is the opposite of stewardship….” Both Western religion and Western science conceived nature as a subordinate thing to be used for the benefit of spiritually or mentally superior humanity. Although these ideas preceded industrial capitalism, “the ability to harness the power of coal to power factories and ships is what, more than any single other factor, enabled these dangerous ideas to conquer the world.” The expansion of production and consumption in the modern market economy was built on the foundation of fossil fuel extraction.

Implicit in the notion of the “free market” was the freedom to dominate nature. (Klein also sees domination in the relationship of capital to labor and rich countries to poor countries, a point I’ll return to later.) As long as producers and consumers of fossil fuels “pay nothing for the privilege of treating our shared atmosphere as a free waste dump,” the “invisible hand” of the market fails to channel self-interest toward the general good. Since the true cost of burning fossil fuels is not factored in when calculating corporate profits or consumer prices, neither producers nor consumers have enough incentive to change their behavior. That’s especially true if much of the environmental damage they are causing hasn’t happened yet or is happening somewhere else on the planet. Klein quotes the Stern Review on the Economics of Climate Change when it calls that problem “the greatest market failure the world has ever seen.”

Part One of Klein’s book is called “Bad Timing.” The world was starting to hear about scientific evidence of global warming in the 1980s, around the same time that “neoliberal” economic policies were on the ascendancy. Those policies aimed to use low taxes and deregulation to free up private capital while restricting public action. After the collapse of the Soviet Union, conservatives declared the historical struggle among economic ideologies over and free-market capitalism the winner. A grand market failure was not something they wished to consider, let alone correct. “A belief system that vilifies collective action and declares war on all corporate regulation and all things public simply cannot be reconciled with a problem that demands collective action on an unprecedented scale and a dramatic reining in of the market forces that are largely responsible for creating and deepening the crisis.”

That is why the debate over climate change is so deeply polarizing. For social critics, the climate issue is the most powerful argument against deregulated capitalism. And for precisely that reason, the defenders of that retrograde brand of capitalism have strong motives to deny or minimize the problem.

Global climate and global trade

Another bit of bad timing is that the era of global climate agreements is also the era of global free-trade agreements, and the two have conflicting goals. Klein describes Ontario’s Green Energy and Green Economy Act, which Al Gore praised as the “single best green energy [program] on the North American continent.” In order to promote renewable energy and give manufacturers of materials like solar panels incentives to come to Ontario, it included a requirement that a certain percentage of materials be locally sourced. However, the World Trade Organization ruled that this “protectionist” provision violated the terms of the North American Free Trade Agreement. Global free-trade pacts have stronger enforcement mechanisms than international agreements to reduce carbon emissions, so “trade trumps climate.”

Global free trade contributes to climate problems in other ways. China has become “a free trader’s dream…and a climate nightmare.” Corporations feeling burdened by environmental regulations or high labor costs can offshore their manufacturing operations to developing countries. There costs can be contained by low environmental and labor standards, which go together in a package deal. “The same logic that is willing to work laborers to the bone for pennies a day will burn mountains of dirty coal while spending next to nothing on pollution controls because it’s the cheapest way to produce.” That is certainly a capitalist logic, at least in one form. Producing cheap goods for export is not the only way to compete in the global marketplace, but it is an obvious way for a poor country wishing to industrialize quickly.

The resulting loss of manufacturing jobs in countries like the United States puts pressure on less educated workers to hold onto jobs in the fossil fuel industry if they have them, and to oppose environmental regulations that threaten those jobs. (Instead of working to raise environmental standards internationally, President Trump proposes to lower them domestically, protecting coal jobs by joining the global race to the bottom.) Another downside is that the goods imported from overseas that could have been produced at home have to be shipped, another big contributor to fossil fuel emissions.

Managing the economic transition

Klein maintains that running the economy on renewable energy is becoming technically feasible, but the private sector will not make the transition fast enough on its own. The profits from using fossil fuels are too great, and the profits from large-scale investments in solar or wind power are too uncertain. She sees an expanded role for governments and community cooperatives in fighting carbon emissions and promoting cleaner alternatives.

Some fossil fuel production can be curbed through carbon taxes that reflect the true cost to society of that production. Government can also charge higher royalty rates for oil, gas, and coal extraction. These additional revenues can then be devoted to investing in the “post-fossil fuel future, as well as to helping communities and workers adapt to these new realities.” Some forms of production are so irrational from an environmental perspective that they need to be banned outright. In order to get at the least accessible coil, oil and gas, companies are “blasting the bedrock of our continents, pumping our water with toxins, lopping off mountaintops, scraping off boreal forests, endangering the deep ocean, and scrambling to exploit the melting Arctic.”

Until the day comes–if it ever does–when renewables can provide as much energy as fossil fuels do now, we will need to reduce energy consumption. Here too, Klein believes that private self-interested decisions will have to be supplemented by new public policies. For example:

That means cheap public transit and clean light rail accessible to all; affordable, energy-efficient housing along those transit lines; cities planned for high-density living; bike lanes in which riders aren’t asked to risk their lives to get to work; land management that discourages sprawl and encourages local, low-energy forms of agriculture; urban design that clusters essential services like schools and health care along transit routes and in pedestrian-friendly areas….

Although she is a critic of contemporary capitalism, Klein is not as radical as some authors I have read. She does not call for an end to capitalism as such, or an end to economic growth altogether. That would be a problem especially for the less developed countries, which contain a majority of the world’s people and are counting on economic growth to lift millions out of poverty. She summarizes what she does hope for in a section called “Growing the Caring Economy, Shrinking the Careless One”:

Obviously a huge number of jobs would be created in the sectors that are part of the green transition—in mass transit, renewable energy, weatherization, and ecosystem restoration. And those sectors that are not governed by the drive for increased yearly profit (the public sector, co-ops, local businesses, nonprofits) would expand their share of overall economic activity, as would those sectors with minimal ecological impact (such as the caregiving professions…).

The richer countries, which are farther along in the transition to a service economy, might center their lives less around acquiring–and powering–material things. But they could be compensated by living lives richer in human relationships and services. (I wouldn’t be the first sociologist to suggest that modern urbanites and suburbanites sacrificed a degree of human community in their rush toward material prosperity.) Meanwhile the locus of material progress could shift more to the poorer countries. But higher standards of environmental protection would need to spread everywhere.





Environmental Debt (part 2)

January 23, 2015

Previous | Next

Amy Larkin argues that by failing to factor in the future environmental costs of present economic activity, businesses are incurring debts that will have to be paid by someone. Externalizing such costs from business to society at large, and even future generations, boosts profits and makes environmentally damaging practices seem more economical than they really are. Since environmentally friendly practices are often less profitable in the short run, how can a free-market economy embrace them?

Private initiatives

One hopeful sign is that some corporations and their accounting firms are beginning to see the need for more “integrated” accounting, which includes environmental costs in financial calculations. “In November 2011, Puma became the first multinational corporation to create an integrated report that converted environmental information and data into monetary terms. The company’s 2010 Environmental Profit & Loss statement (EP&L) quantifies and monetizes environmental impact and integrates it into the operational P&L.” The results were startling: Puma found that its earnings would have been 75 percent lower if it had been charged the full cost of its operations.

Integrated accounting is challenging. Ideally it would include the cost of a product from “cradle to grave,” including the cost of disposing of it safely. Puma only got as far as “cradle to gate” accounting, the costs incurred in getting products to market. The more costs are considered, the more production and consumption practices may need to change to reduce them.

Larkin provides many examples of companies that are looking beyond short-term profits and trying to develop more sustainable ways of operating. Tiffany’s has taken initiative to reform mining practices, where “irresponsible mines, large and small, caused serious problems with water pollution, dislocation of local people, cyanide and heavy metal pollution and human rights abuses.” One incentive for Tiffany’s was to disassociate such practices from the image of their jewelry, which is supposed to be about “celebration and pleasure and memorializing love.”

Walmart shocked the retail world in 2006 by launching its sustainability initiative, vowing to “be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustain people and the environment.” This has been controversial with the company’s own shareholders, some of whom accused the leadership of socialism. (What socialist idea will they come up with next–decent wages?)

Unilever is the world’s largest ice cream company and a leader in methods of refrigeration. They decided to phase out hydrofluorocarbons (HFCs, a major contributor to climate change) from their coolers because they anticipated future regulations. They didn’t want to “get caught in costly and difficult supply problems reacting to a new regulatory framework imposed upon us,” in the words of their Vice President of Sustainability. They also went a step further, setting up an advocacy office to push for new industry standards and stricter regulation.

This brings up the point that social problems require social solutions. If only one company incurs the short-term costs of change, it may put itself at a competitive disadvantage and be punished by the market. The goal has to be for environmentally friendly innovations to be adopted throughout an industry, either through cooperative agreements or new regulations, or both. Larkin herself was a keynote speaker at the Sustainable Refrigeration Summit of the Consumer Goods Forum, an organization representing 400 retailers and manufacturers. Shortly after, the CGF board approved a recommendation to phase out HFCs.

Public initiatives

Larkin also praises far-sighted government initiatives when they have occurred. She cites the substantial health and financial benefits that have come from the Clean Air Act of 1963. More recently, however, “government is actually proving less reliable than business these days when it comes to environmental protection.” She doesn’t get into the politics of it, but clearly one of our major political parties has become steadfast in its opposition to new environmental legislation. The White House solar panels are a clue: Jimmy Carter had them put in, and Ronald Reagan had them taken out.

One area in which Larkin sees a role for government is in building a new energy infrastructure, with a smart grid and new storage capacity technology. Because renewable energy will be less centralized, it is “more complicated to ramp up than building a new Hoover Dam or a big nuclear power plant. Decentralized energy means that many players, many financiers and many regulations must align before taking action.” Larkin says that building the new energy infrastructure will cost about as much as going to war with Iraq. (One wonders why it’s so much easier to get support for war than for a safer and more sustainable energy system.)

One state that has moved ahead on its own is California. The California Solar Initiative (CSI) provides free solar installations for building owners who will make a ten-year commitment to buying solar power. With an annual budget of $3 billion, CSI provides more energy than Duke Energy gets from a new coal plant with similar up-front cost. But the environmental cost is much greater for dirty coal than for clean solar. The refusal to make such social investments will cost society more in the long run.

The challenge

At the end of her book, Larkin describes our current dilemma very bluntly. “If coal and oil cost their true prices based on new financial rules, how will that melt down the economy? If coal and oil continue to be underpriced, how will that melt down the environment?”

Opposition to making businesses accountable for environmental costs is understandable, since doing so seems very threatening to our present economy. Consumer prices would go up; some businesses would fail; some workers would lose their jobs. But carrying on business-as-usual will cost us more in the long run. The solution is a transition to business practices that can succeed without imposing such heavy environmental costs. If we are willing to share the start-up costs, new industries can flourish. The solar and wind energy industries each employ more workers than the coal industry already.

[M]any phenomenal technologies and systems are just coming to market or in development for water and energy efficiency. They will be deployed rapidly and at full scale only when their competitors no longer receive a financial advantage by overusing and polluting these same natural resources with no financial penalty. That means that we, the public, might have to spend more in the short term to provide these first movers a strong market advantage.

Change is hard, and no doubt there will be winners and losers. But if we can make the transition, we should see a net gain in the health and prosperity of the nation.