That’s why our global coalition of economists & activists today published a report on initiatives all over the world to keep oil in the soil. The EJOLT network and Oilwatch say that keeping most oil in the soil is the best way to slow climate change, prevent resource wars and move towards an energy transition. The report tracks successful campaigns and innovative proposals that aim to stem the flow of crude at the source.

Bill McKibben’s translation of the climate science in an article for The Rolling Stone – Global Warming’s Terrifying New Math – went viral in the US. Never before have so many people in the US taken to the streets for the climate and this has been accompanied by a wave of divestments from the fossil fuel industry. In May 2013, the international press also warmed to the fact that there are a lot of unburnable fossil fuels. “Unburnable carbon” has become a buzz phrase in The Economist and in The New York Times. But while that welcome story is now developing in the North, one tends to forget that movements fighting oil extraction have been alive and kicking in the South for two decades.

The idea of leaving oil underground was perhaps born in the Niger Delta. In 1995, the Ogoni managed to expel Shell from their territory. Their proposal to “leave oil in the soil” was picked up by the Nigerian based Environmental Rights Action and in 2006, the Ecuadorian organisation Acción Ecológica proposed to leave in the ground 850 million barrels of oil from the ITT (Ishpingo, Tiputini Tambococha) wells located in the Yasuní National Park, home to some of the world’s richest biodiversity and the ancestral home of the Huaorani and other un-contacted indigenous tribes. Their proposal was pushed by the then Minister of Energy and Mines, Alberto Acosta, and endorsed by President Rafael Correa. Ecuador would make a financial effort for the good of indigenous peoples rights, biodiversity and that of humanity. The country requested foreign contributions equivalent to about half of the money that would have been earned, some US$ 3.6 billion in total, paid over a period of ten years. These contributions would be deposited in a trust fund jointly administered with the UNDP. It formed on 3rd August 2010 and the money will be used for social investment, environmental reparations in oil areas, and the development of energy alternatives. The offer is in place and the money is arriving, but far from fast enough. At any time now, Rafael Correa is expected to announce plan B. If burnt, it would produce 410 million ton of carbon dioxide. See the EJOLT video on Yasuni to understand why that would be a tragedy with global consequences far beyond the added carbon.

Of course, the idea to leave some fossil fuels in the ground is much older than that. Svante Arrhenius, a Swedish chemist and Nobel laureate, published the first articles on climate change in 1896. Arrhenius announced that by burning coal found underground, industrialised countries were releasing more and more carbon dioxide in the atmosphere and that this would increase temperatures. He could not know that in the twentieth century coal burning worldwide would increase seven-fold. In this sense, the proposal to leave some of the oil, coal and gas underground is not new but more reasonable than ever.

EJOLT’s Yasunization report highlights why the EU should urgently support initiatives such as the Yasuni and grassroots proposals to leave oil in the soil. The concept has caught such fire with similar proposals laid out in many other oil-extraction countries that it needed a new word: yasunize. “Towards a Post-Oil Civilization. Yasunization and other initiatives to leave fossil fuels in the soil” gives a historical perspective from Ecuador and Nigeria, features a successful campaign in Colombia, advocates against the dirtiest forms of crude and argues why Kenya should not exploit recently discovered oil.

The report also charts the rise of fracktivism, shows how glocal alliances for climate justice are formed by grassroots communities at both ends of the pipeline and explains how oil exploration in offshore waters in Italy, Spain and other European crisis-stricken countries may lead to increased regional and territorial conflicts.

Other chapters deal with the international legal grounds for stopping extraction in National Parks and in Indigenous territories, economic mechanisms for keeping oil in the ground and last but not least: the political ecology of the Yasuni initiative and what is has to offer in terms of new radical forms of environmental governance.

As Nnimmo Bassey from Oilwatch International and Friends of the Earth Nigeria says: ‘Leaving the oil underground does not translate to losses but savings. We must learn to save. The oil under the soil is still our oil. We must not exploit every resource simply because we have it.’

We know the task ahead is daunting, but we are hopeful. When the movements in the North and the South meet up, they could form a global force that turns the short-term economic agenda upside down. There are local and global reasons for “Yasunizing” the world. They’re all in the report, so now let’s take them out there!

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Total proven international fossil-fuel reserves already contain about 3 times as much carbon as what we can burn and still have a reasonable chance to stay below the internationally agreed 2°C target. That’s why there is no ethical, environmental or social justification for mobilising reserves with above-average environmental and social impacts, including deep sea oil, tar sands, or fracking for shale gas, destroying riverine delta ecosystems and other wetlands, densely populated farmland, biodiverse forests or coral gardens.

Our policy recommendations and questions to policymakers are:

• EU governments should urgently revise their mining laws to rule out any further exploration for fossil fuels on their territories and marine zones, and start negotiations for a global ban on fossil fuel exploration

• Which one third of proven reserves shall we consume, and which are the two thirds to be left in the ground?

• Capping the carbon input would complement existing policies and enhance their effectiveness

• Energy companies, private and public, should be obliged to disclose the carbon content in their reserves as a basis for distinguishing burnable from unburnable fuel

• Initiatives for ‘leaving oil in the soil’ at socially and environmentally vulnerable reserve locations should be supported politically and financially as a first step towards establishing an inventory of ‘unburnable reserves’

• The Ecuadorian Yasuni ITT area deserves immediate support

• As an immediate measure, the EU should consider a fund for contributing to such initiatives

Read more in the 4 page EJOLT briefing on Unburnable fuel

We, organisations assembled here, bear witness to a global extractivist boom that is leading to great misery for many hundreds of millions of the Earth’s people and destroying the very basis for life and its reproduction in significant parts of the Global South, and also the Global North. It is corporations, financiers and the rich that benefit, and not the majority of peasant and working class peoples. This extractivist, growth fixated and profit oriented maldevelopment model is expanding capital’s reach and destroying our common goods of water, land, air, forests and oceans. In this phase of global capitalism, power relations are shifting, with emerging economies and corporations of the Global South joining the traditional actors of the Global North in plundering and colonising the natural resources of South and North. Extractivism is not just the activity of resource extraction but a development model, which organises the political, socio-economic, gender and cultural dynamics within society and the state and its institutions.

We specifically note that:

1.          International financial institutions are encouraging extractivism as the major engine to fuel economic growth.  On the back of the financial crisis, financiers and investment bodies are looking for new areas for profitable investment, mainly financialised forms of profit making, with natural resource extraction representing a site for rapid and substantial accumulation.

2.          While MNCs, TNCs and their financial backers promise jobs and development on the back of new growth, we instead witness rising poverty and inequality in communities and nations significantly impacted by extractivism.

3.          Extractivism is characterised by intertwined collusion between state and corporations, with major public finance investments, poor transparency in deals, and corruption. This collusion, linked to state intervention  and poor regulatory frameworks, results in major tax losses and capital flight in countries affected by extractivism.

4.          Extractivism encompasses sites of extraction, processing activities, the transportation of raw goods, and the nodes of exportation. We, thus, see extensive impacts beyond local areas.

5.          Extractivism is resulting in the displacement of peasant, indigenous people and rural populations, as land is grabbed for mining, oil extraction, plantations and dams. The rights of indigenous populations to make decisions about their land and to veto developments they reject is consistently violated.

6.          Water theft accompanies and is often a motivation for land grabs as agricultural corporations, investment companies and wealthy individuals search out new sources of fresh water, one of the scarcest natural resources and already subject to open financialisation, which trend will greatly escalate in the future. Extractivist activities consume enormous quantities of water, resulting in water shortage and water pollution.

7.          Extractivism destroys natural resources and whole eco-systems upon which the livelihoods and reproduction of peasant and indigenous populations depend. Because women are the majority of the world’s producers (70-80% of domestic food production in SSA, for example), and are primarily responsible for caretaking natural resources held in common, this trend is particularly harmful to them.

8.          Many forms of extractivism emit greenhouse gases which significantly contribute to climate change, the effects of which (floods, droughts, and irregular rainfall patterns)negatively impact upon poor peasant and working class urban populations.

9.          Workers in extractivist and linked industries, many of whom are migrants, earn low wages, are subject to dangerous work, exposed to toxic chemicals, and increasingly subject to contract and informal conditions of work. Women workers experience particular oppression: sex for work at the point of recruitment, sexual harassment, rape and inappropriate facilities.

10.       Women’s unpaid labour has been central to the accumulation strategy of mining and other extractives corporations for centuries. The migrant labour system maximises profits for mining capital by inhibiting family migration and locating responsibility for the social reproduction of the work force and the next generation of workers in the rural areas.

11.       Extractivism leads to rising militarisation in and repression of communities resisting extractivism, including extra-judicial killings, torture, persecution and harassment of activists. Women experience gender specific violence, including rape and sexual harassment by private security and state police/military.

We recognise and celebrate the struggles of communities and movements around the world fighting extractivism, and struggling for their land, livelihoods and their very lives. In acknowledging the might of the MNCs and TNCs, their financial backers, and our very governments, we commit to building the power of communities and movements by further linking and unifying our struggles against different forms of extractivism.

We have agreed the following concrete actions for the year ahead:

• We endorse the climate space proposals that have been presented to us (attached separately)
• We specifically agree to support a common day of action, Global Frackdown, on 19^th October 2013, bringing in other struggles against extractivism- we will link the day of action to a day of action against TNCs
• We all commit to link our struggles and build a common global political platform and movement against this current form of highly destructive extractivism
• We will build on and develop existing alternatives such as the Million Climate Jobs Campaign
• We specifically agree to support local communities reassert their rights over the commons, as a key point of emphasis in our activism and work. Other suggested areas for emphasis are land and food sovereignty; women, gender and extractivism; labour and the transition away from damaging extractivism; post-extractivism agenda etc.
• We will work together, and in alliance with other organisations/initiatives doing similar work, to develop a global interactive map of struggles/resistances against extractivism
• We will make every effort to engage the labour movement in a dialogue about how to transition into a future based on a radically different extractivist  model to create jobs that do not harm the natural environment
• There was a proposal to convene a global conference on extractivism, possibly running parallel to the World Economic Forum
• Intersect with other global processes related to corporate and state accountability.

The United Nations first issued a handbook on a System for integrated Environmental and Economic Accounting (SEEA) in 1993. SEEA introduces nature’s environmental and economic assets and the ‘environmental cost’ of their degradation and depletion into the System of National Accounts (SNA) (UN, 1993).

Asset accounts (see Figure 1) measure the value of opening and closing stocks of economic and environmental assets, and their changes during an accounting period. Changes in assets are brought about by the formation and consumption of produced and natural capital (assets) and other non-economic influences such as discoveries, natural disasters or natural regeneration. The latter, i.e. ‘other asset changes,’ are recorded outside of income and production accounts and affect the conventional indicators of cost, income, product and capital formation. National environmental accounting requires adding up inputs, outputs and environmental impacts, and combining them into environmentally adjusted (‘greened’) indicators. The SEEA uses both monetary values (prices and costs) and physical weights (in particular the mass of material flows) to this end.

According to Bartelmus’ review, case studies of green accounting have applied market valuation mostly to natural resource depletion. In the absence of market prices for non-produced natural assets, natural resource rents earned by selling resource outputs in markets are used for estimating the net present value and value changes (notably from depletion) of an asset. For environmental degradation, maintenance costs of avoiding or mitigating environmental impacts can be applied. A few studies used damage valuations of environmental impacts.

However, we may ask how we could possibly give a money value to the loss of biodiversity (in the present rapid extinction) by any of these methods? We do not know what we are physically losing (which species disappear – micro-organisms, for instance); much less, can we give money values to such loss?

Bartelmus sees a particular strength of green accounting as the measurement of environmental costs caused by economic agents of households and enterprises. According to him: ‘The well-known polluter/user pays principles hold the responsible agents accountable for their environmental impacts’ and ‘it can assess the economic and ecological efficiency of different environmental protection measures by governmental and non-governmental organisations’.

Critics, however, argue that the use of market values amounts to ‘pricing the priceless’ categories of nature. In their view, assessing environmental assets and their services in monetary terms ‘commodifies’ nature, or turns the products and services of nature into merchandise or commodities with money prices, whose intrinsic value should not be subjected to market preferences .

See also:

New ecological macroeconomics

Reference

Bartelmus, P. (2008) ‘Measuring sustainable economic growth and development’ , in C.J. Cleveland (ed.) Encyclopedia of Earth, available online: http://www.eoearth.org/article/Measuring_sustainable_economic_growth_and_development#gen4 (accessed 7 May 2012).

United Nations, UN (1993) Handbook of National Accounting System of Integrated Environmental and Economic Accounting – System of Integrated Environmental and Economic Accounting, 198 p.

The book started its life when the author was asked in 2003 to write an early report for the Sustainable Development Commission under the Labour government in the United Kingdom. The key questions posed by Jackson are whether an economy based on the perpetual expansion of ‘debt-fuelled’ consumption of materials and energy can be ecologically sustainable and socially viable, let alone economically stable.

These questions have been asked since the late 1960s and 1970s by Nicholas Georgescu-Roegen, Kenneth Boulding, Herman Daly, Robert Ayres and the school of ecological economists to which Jackson has long belonged with his early work on the social psychology of consumption. Peter Victor (2008) too has recently elaborated an ecological macroeconomic model for the economy of Canada. These well-written contributions represent important contributions as formative texts in the emergence of a new ecological macroeconomics.

Ecological economists see the economy as composed of three levels. There is on top the financial economy (that got out of hand, and whose representatives now want to impose ‘debtocracy’ everywhere), there is then the real, productive economy of manufacturing, services and wage employment; but there is also the bottom layer or engine room of the real-real economy involving flows of energy and materials and accumulation of waste such as excessive amounts of carbon dioxide. This view of the economy goes back to Frederick Soddy in the 1920s, an often-cited Nobel Prize winner in Chemistry and a monetary reformer.

Ecological economists have also long recognised that economic growth is not well measured. Jackson, for instance, recalls well-known critiques of economic growth since the 1960s, and research on the lack of correspondence between GDP growth and increased happiness beyond a certain income per capita threshold (about USD 15,000).

It has been noted that consumer debt increased very much before the economic crisis of 2008 and that public debt has since increased enormously in many countries. Ecological economists are against increasing this debt, because they are sceptical about economic growth. Debt cannot ‘fuel’ growth, because economic growth is literally fuelled by fossil fuels. Increased debts can furthermore only be settled by inflation (money loses value), by impoverishing debtors, or by even more economic growth. Jackson calls repeatedly for ‘financial prudence’, not simply because of the risk of default, but more because debt repayment implies increased economic growth, which in rich countries is to be avoided for ecological and social reasons. The ecological reasons are clear. If world economic and population growth trends of 2007 would continue, then in order to keep carbon dioxide concentration below 450 ppm, the carbon intensity of the rich economies would have to decrease over 100 times by 2050, a goal that would be impossible to achieve. There are also other compelling ecological arguments against increased economic growth stemming from ‘peak oil’, other resource limits and biodiversity loss.

No less forceful is Jackson’s discussion on well-being, happiness, prosperity and the capabilities for ‘flourishing’ – used by Jackson to refer to the development of human potential, self- and social realisation, or ‘épanouissement’. It is not to be achieved by compulsory consumption of positional goods. Stopping economic growth is not only sound and feasible from the ecological–economic viewpoint but is also a good idea in terms of the social revaluation of the commons. Indeed, Jackson insists that biological evolution, including the evolution of humans, has gained more by co-operation (as Kropotkin argued) than by competition, complementing critiques of development by Arturo Escobar, Wolfgang Sachs and similar authors, as well as doctrines of economic degrowth (‘décroissance’) in France and Italy by Serge Latouche and other authors.

The thesis that the economy can be managed without growth while avoiding the consequent collapsing of investment and increase of unemployment is radical enough. Jackson and Victor both outline detailed recommendations for policy-makers based on a new ecological macroeconomic theory. If there is no economic growth, then unemployment will increase, given the trend to increased labour productivity (because of technical change and the drive for profits). To address ‘the stigma of unemployment’, Jackson calls for support for the so-called Cinderella sector (which, remembering William Morris, one could call the ‘News from Nowhere’ sector of happy horticulturalists and artisans). This sounds naïve, but it is well thought out, as a key virtue of this sector is its low labour productivity and the capacity to provide massive gainful employment. Jackson mentions other policies like a basic universal citizen’s income and work sharing, as well as investments in renewable energy and in ecosystem restoration and enhancement. However, since such investments are unlikely to give a high rate of return in money terms, the share of savings (or taxes) and the role of the public sector of the economy will have to grow. Does this means a retrenchment of capitalism? This final question remains unanswered.

References:

Jackson, T. (2011) Prosperity without Growth: Economics for a Finite Planet, London: Earthscan.

Victor, P. (2008) Managing Without Growth: Slower by Design, Not Disaster, Cheltenham: Edward Elgar.

Further reading:

Ayres , R.U. , van den Bergh , J. and Gowdy , J. (1998) ‘Viewpoint: weak versus strong sustainability’ , Tinbergen Institute Discussion Papers 98–103/3 .

Boulding , K. (1966) ‘The economics of the coming spaceship earth’ , in H. Jarrett (ed) Environmental Quality in a Growing Economy , Baltimore : Johns Hopkins Press .

Daly , H. (1973) Toward a Steady-state Economy ,  San Francisco : WH Freeman & Co .

Escobar, A. (2011) Encountering Development: The Making and Unmaking of the Third World (New in Paper). Princeton University Press.

Georgescu-Roegen , N. (1971) The Entropy Law and the Economic Process , Cambridge, MA : Harvard University Press .

Kneese , A. and Ayres , R.U. (1969) Production, consumption and externalities, American Economic Review , 59 : 282 – 297 .

Latouche, S. (2010) Farewell to growth. Polity.

Sachs, W. (1993) Global ecology and the shadow of development. Global ecology: A new arena of political conflict, 3, 22.

The concept also includes people’s views of the natural world and the universe and their cosmology; environmental philosophy, values and ethics; and local and personal knowledge of the environment, including traditional ecological knowledge. Further, it includes, citing Ostrom (1990), the organisation of human societies by the evolution of various kinds of resource management institutions (formal and informal, governmental and non-governmental).

References:

Berkes, F. and Folke, C. (1994) Investing in cultural capital for sustainable use of natural capital , in A. Jansson et al. (eds.) Investing in Natural Capita, Washington, DC: Island Press.

Ostrom, E. (1990) Governing the commons: The evolution of institutions for collective action . New York: Cambridge University Press.

Further reading:

Berkes, F., Folke, C. (1992) A systems perspective on the interrelations between natural, human-made and cultural capital. Beijer International Institute of Ecological Economics, the Royal Swedish Academy of Sciences.

Further reading:

Greer, J., Bruno, K. (1996) Greenwash: The reality behind corporate environmentalism (pp. 28-30). Penang, Malaysia: Third World Network.

Karliner, J. (2001) A brief history of greenwash. CorpWatch. March, 22, 2001.

Kerret, D. (2005) ATTICLE: Greenwash or Green Gain? Predicting the Success and Evaluating the Effectiveness of Environmental Voluntary Agreements 1. Penn St. Envtl. L. Rev., 14, 31-721.

Lightfoot, S., Burchell, J. (2004) Green hope or greenwash? The actions of the European Union at the World Summit on sustainable development. Global Environmental Change, 14(4), 337-34.

Lyon, T. P., Maxwell, J. W. (2011) Greenwash: corporate environmental disclosure under threat of audit. Journal of Economics & Management Strategy, 20(1), 3-41.

Since then, CSR has emerged as a form of voluntary self-regulation for firms for managing their engagement with society in the face of increasing pressure from organised civil society and the general public to address the negative environmental and social impacts of companies, particularly transnational ones. From a political economy point of view the ascendancy of contemporary CSR is traceable to the deepening of economic globalisation under neoliberalism, and the emergence of its political counterpart, ‘the good governance agenda’ (Hoogvelt, 2001).

CSR broadly acknowledges that firms are more than just producers and sellers, with legal and moral obligations in terms to the people they employ, their customers, neighbours, future generations and thus to society at large. CSR initiatives frequently focus on the conception, implementation and monitoring of internal charters steering internal decisions on social responsibility. Operationally, CSR embraces issues which range from reducing negative environmental impacts on production sites and of products, respecting workers’ rights, implementing racial and social antidiscrimination policies and ensuring financial and managerial transparency. Among the cornerstones of CSR mechanics are the monitoring and reporting processes.

The enormous success of CSR initiatives today has a great deal to do with their internationalisation and standardisation through transnational institutions and networks, such as the Global Compact of the United Nations. The Global Compact asks that signatories commit to principles of transparency, implementation of external monitoring and to proactively implement partnerships – or at least some form of engagement – with civil society. The Global Reporting Initiative (GRI) is a standard set of monitoring and reporting processes and indicators. CSR initiatives, however, are mainly driven by the need for corporate risk management, and often geared towards buying ‘social license to operate’.

As such, much CSR activity is still situated in corporate governance and risk-management departments. This is reflected in the increasing role of CSR in intra-firm business mechanisms, with transnational corporations requiring their manufacturers to adopt CSR policies in order to protect themselves from liabilities that might be incurred down their manufacturing lines and/or supply chains. Adopting a CSR policy has also become a prerequisite in some countries or sectors for participation in public procurement processes.

A very large and lucrative industry of private consultancy has evolved around CSR processes. Structurally, the very existence of the CSR industry encourages the de facto outsourcing of the bulk of CSR activities, which ironically jeopardises the internalisation of the CSR ethos by business models and throughout all levels and departments of firms, including accountancy. The environmental liabilities of firms are not included in their balances and ‘bottom lines’, unless they become due through court cases or social agitation.

A major concern with CSR is that corporations can quite easily implement apparently robust policies without having to change actual behaviours or reduce impacts on the environment or on people (Clapp and Utting, 2008). CSR is implemented as an add-on to ‘business as usual’ and initiatives often boil down to a series of statements, overarching policies, charters and monitoring programmes which are concluded with an annual set of social partnerships and social sponsoring programmes, with little effect. While some proponents sincerely believe that CSR means fundamentally changing business practices with respect to social/environmental responsibility, others feel that CSR at best leads to green-washing.

Accordingly, CSR policies have attracted the attention of NGOs that have emerged to scrutinise CSR reports and compare them with actual corporate behaviour. NGOs use CSR policies and reports as leverage with which to expose and influence companies’ that violate their own codes of conduct, but this work can be challenging, because it is not in the interest of companies to render their functioning entirely transparent, and because the accurate and detailed monitoring and follow-up of CSR claims is very time and resource consuming. For these reasons, some NGOs accept funding indirectly, for instance via business councils to which the firms in question are members losing their independence and ultimately becoming co-opted.

There is also the scientific challenge of assessing the interactions and causalities between corporate CSR performance and financial performance. Whether a robust CSR policy improves business performance is highly questionable. While some early evidence points to the existence of some relationships between both strands of performance, their direction and prescription is far from having been ascertained (Scholtens, 2008). The lack of evidence to this effect means that in hard financial times, CSR programmes are the first to be cut under corporate belt-tightening measures.

References:

Clapp, J., Utting, P. (eds) (2008) Corporate Accountability and Sustainable Development, Delhi: Oxford University Press.

Hoogvelt, A. (2001) Globalization and the Postcolonial World: The New Political Economy of Development , 2nd ed, Baltimore: John Hopkins University Press.

Klein , N. (2000) No Logo: Taking Aim at the Brand Bullies, London: Flamingo.

Scholtens, B. (2008) ‘A note on the interaction between corporate social responsibility and financial performance’ , Ecological Economics , 68 ( 1–2 ): 46 – 55.

Utting , P. (2000) ‘Business responsibility for sustainable development’ , Occasional paper No. 2 , UNRISD , Geneva.

Useful link:

Global Reporting Initiative  [https://www.globalreporting.org/Pages/default.aspx]

The idea that taxation can be used to correct or internalise externalities was first introduced by A.C. Pigou in 1920 and has been generally accepted by economists as an efficient means to remedy inefficiencies in the allocation of resources, but it is understood that other social considerations such as equity, rights, political considerations and enforcement costs may tip the balance towards a preference for other policy instruments despite being less cost-effective. Pigou suggested that abatement should be pursued up to the point where the marginal cost of further abatement (reflected in the emissions fee) is just equal to the marginal benefit from reducing pollution. This ‘optimal pollution’ tax is widely referred to as the ‘Pigouvian rate’.

Most of the time, the ‘polluter pays’ principle takes the form of a tax collected by government and levied per unit of pollution emitted into the air or water. As a policy instrument for the control of pollution, a tax on emissions will theoretically reduce pollution, because firms or individuals will reduce emissions in order to avoid paying the tax. Under a range of market conditions, standard economists assume that pollution tax will generally be more cost-effective at reducing pollution than regulations: the total abatement cost of achieving a specified level of pollution reduction will generally be lower under a pollution tax than for a command-and-control approach that achieves the same reduction in pollution.

The ‘polluter pays’ principle has received support from most countries of the Organisation for Economic Co-operation and Development (OECD) and from the European Community (EC). In international environmental law, it is mentioned in Principle 16 of the 1992 Rio Declaration on Environment and Development. At the international level, the Kyoto Protocol is another tentative example of the ‘polluter pays’ principle: parties that have obligations to reduce their greenhouse gas emissions must theoretically bear the costs of reducing (prevention and control) such polluting emissions. However, we know that an excessive amount of carbon dioxide has been produced by burning fossil fuels for many decades, and the polluters have not paid anything, hence, the ecological debt (or carbon debt, or climate debt) owed by the industrial countries. The rest of the world is (as Ecuador’s former Foreign Minister Fander Falcon’ put it in Copenhagen in December 2009), as ‘passive smokers’, suffering the consequences without any compensation. Similarly, there is not the slightest intention internationally of forcing to pay for other very large externalities, such as biodiversity extinction.

Despite the fact that the ‘polluter pays’ principle was publicised by early conservationists as a means to reduce ecological pollution or in general ecological damages, many observers still consider it a ‘vague concept’. However, the Exxon Valdez case would be an example of its application. In 1989, the oil tanker ran aground and over 300,000 barrels of crude oil poured into Alaskan waters. Exxon was in principle required to pay USD 125 million in fines to the US Federal Government and the state of Alaska, as well as USD 900 million for a fund to be doled out by government officials for environmental projects, among other things. In addition, Exxon was put under tremendous political pressure to restore the shoreline. It thus engaged in an extensive and costly clean-up operation, with controversial results.

Most of the sophisticated theoretical developments of the ‘polluter pays’ principle that have been carried out in the neoclassical economics literature have relied on strong assumptions about the workings of the economy including competitive markets, profit-maximising firms, rational consumers, and, in mathematical terms, ‘well-behaved’ preferences and technologies for production. Thus, it should be remembered that relaxing one of these assumptions can alter the conclusions reached and thus that results must always be evaluated and interpreted with great care. Moreover, an ‘optimal level’ of pollution is often meaningless from an ecological point of view. It is indeed usually difficult for ecologists to establish a clear pollution threshold not to be exceeded. Most of the time, such objectives end up being the realm of uncertainty, where another policy principle may prevail, the precautionary principle.

Many local small- and medium-sized firms cannot internalise environmental costs in their products or finance cleaner technologies, and governments often lack the power to force (e.g. extractive) industries to internalise environmental costs. In sum, however, ecotaxes usually fit well into the ecological economics framework. Environmental taxes are tools for achieving two different kinds of government goals: the provision of public services and goods and the protection of environmental quality. The joint pursuit of both goals using taxation can thus enable government to justify doing more of both.

References:

Pigou , A.C. (1920) The Economics of Welfare, London: Macmillan.

Further Reading:

O’Connor, M. (1997) The internalisation of environmental costs: implementing the polluter pays principle in the European Union. International Journal of Environment and Pollution, 7(4), 450-482.

Ekins, P. (1999) European environmental taxes and charges: recent experience, issues and trends. Ecological Economics, 31(1), 39-62.