The threats and impacts from climate change today and for the future to communities urban and rural, large and small, and both Republican- and Democratic-leaning are very real.  Being a non-believer does not omit you from climate change’s repercussions.  Negative impacts are happening, intensifying and becoming more frequent, and present intense challenges to people’s health, productivity, and ongoing livelihoods, as well as the stability of an economy as untold and incalculable damage is done to buildings, transportation infrastructure, municipal services and centralized energy grids.

How U.S. States Prepare for Climate Change Impacts

While nations develop their own climate change assessments collecting observed changes in weather, air and ocean temperatures, frequency of weather events and the like by making projections of what is likely to occur in the near, medium and long-term future, these observations are grouped by region so as to provide meaningful and implementable guidance to sub-regions within a country.  But every country as well as every particular region has unique climate conditions that interact with climate change impacts.  As such, sub-regions within a country would benefit from creating custom climate plans that address their particular vulnerabilities based on their particular climate types, unique geological and hydrological attributes, population needs and agricultural requirements, and the availability and type of natural resources available to them.  One main instrument that is being effectively implemented at both the state and local levels in the U.S. is a ‘Climate Change Action Plan’.

‘Climate Change Action Plans’ Are Roadmaps to a More Sustainable Future

A Climate Change Action Plan is a comprehensive strategy that details the key areas and steps a region or community will take to reduce its contribution to climate change.  Namely, the plan focuses on specific areas a community will take action to reduce greenhouse gas (GHG) emissions into the atmosphere, the most significant driver of continued climate change on the planet. These actions are myriad from promoting the use of renewable sources of energy, to incenting public transportation commuting, to decreasing landfill and incineration waste through recycling efforts, to supporting and promoting local agriculture and sustainable farming practices, to reducing carbon emissions from long transports of products, to creating strategic zoning requirements to limit greenfield[1] development, to offering tax incentives for green building development, to promoting new technology development through pollution cap-and-trade schemes.  The plans are actionable, measurable, and forward-looking and usually include declining carbon emission targets based on some baseline year (i.e., 1990 GHG emission levels).

Who is Involved in Creating Climate Action Plans and How Are They Assessed?

Climate Action Plans are usually developed by a diverse committee of community stakeholders that include politicians, citizens, business leaders, activists, and environmentalists to name but a few.  Once a comprehensive climate action plan is developed, it is approved by a state or municipal legislature and becomes an entity governed and enforced by state or city law.  Action plans are often reviewed and assessed yearly, every fifth year and each decade.  Assessment reports detail progress made; goals met, not-met and exceeded; and work remaining to be accomplished.  These regular assessments are also used to inform and build progressively future-forward looking reports.

U.S. States With Operable Climate Change Action Plans

In the U.S., states, cities and towns hold the primary responsibility to develop and implement a climate change action plan. Given the size of the U.S., the natural variability of climate change impacts to various sub-regions, and that governing authority is held most critically at the state and local levels of government within the 50 United States, U.S. States have led the charge in developing Climate Action Plans for their jurisdictions.  Today, just 21 of the 50 U.S. states plus the District of Columbia have developed and/or enacted into law a formal Climate Change Action Plan.  Those states include (with year the Climate Action Plan was formalized):

• California: 2009
• Colorado: 2011
• Connecticut: 2013
• Delaware: (Governor established committee to develop action plan in 2015 but no formal statewide action plan approved)
• Florida: 2008
• Hawai’i (expected to have been completed by end of 2017)
• Maine: 2010
• Maryland: 2008
• Massachusetts: 2011
• Minnesota (inter-state-agency led effort since 2008 but lacking a formal statewide action plan)
• Michigan (Michigan Department of Health released its first Climate Action Plan in 2011)
• New Hampshire: 2009
• New York: 2010
• North Carolina (inter-state-agency led effort since 2012 but lacking a formal statewide action plan)
• Oregon: 2010
• Pennsylvania: 2011
• Rhode Island: 2014
• Vermont: (State-agency led adoption of Climate Action Plan by Governor Executive Order of 2012)
• Virginia: 2008
• Washington: 2012
• Washington, District of Columbia: 2013
• Wisconsin (ad hoc network assessing climate change impacts and developing climate preparedness strategies. No formal state action plan developed)

What Do These Four (Republican-leaning) States Have in Common?

Of the above states, all but four (i.e., Florida, Michigan, North Carolina, and Wisconsin) were Democratically-leaning in the last national election of 2016.

Water-Battering in Florida and North Carolina

It is interesting to dissect why these four Republican-leaning states may be the only ones to date, that have pursued some form of climate policy, even without force of state law to implement.  The state of Florida and its many coastal communities both on the Atlantic and Gulf of Mexico are deeply vulnerable to rises in sea level and flooding from extreme storm events. North Carolina juts out into the Atlantic Ocean and often bears a large brunt of hurricanes and tropical storms that move northward up the eastern coast of the U.S.  North Carolina’s Outer banks –  an island chain – are highly vulnerable to extreme storm events that have become more frequent and intense over the last several decades and are expected to continue. It is safe to assume that for the Republican-leaning states of Florida and North Carolina, sea level rise, extreme storm destruction, and flooding are the main climate change impacts driving thoughtful action plan development.

Water Availability in Wisconsin and Michigan

The climate change issues facing water resources are slightly different for Wisconsin and Michigan.  These two U.S. states are seriously concerned about their Great Lakes.  Wisconsin borders two:  Lake Superior and Lake Michigan.  Michigan is shaped by four of the five great lakes:  Wisconsin’s two along with Lake Huron and Lake Erie.  The great lakes are one of the world’s largest freshwater reserves.  Their aesthetic and recreational appeal are not to be underestimated.  More important is their combined essentialness in supporting municipal water supplies to citizens in both the U.S. and Canada (since the Great Lakes share a border with both countries), industrial production as well as necessary agricultural irrigation.  The Great Lakes Basin spanning more than 1,200 kilometers (750 miles)  supports 25 percent of Canada’s and 7 percent of America’s agricultural production and supplies freshwater to more than 30 million people (10 percent of the U.S.’s total population, 30 percent of Canada’s)[2].  Impacts to the deterioration, degradation, and contamination of these critical freshwater resources from climate change are and should be taken very seriously.  Lives and livelihoods literally depend on these Great Lakes.  It comes as no surprise that Michigan’s ‘Climate and Health Adaptation 2010-2015 Strategic Plan’ focuses on three main priority areas including:

1. Improving emergency planning for heat events,
2. Monitoring air quality,
3. Monitoring health impacts of water quality and quantity[3].

Wisconsin also has three main focus areas of its “Climate Change and Emergency Preparedness Plan” including a) collaborating and coordination emergency strategies with other public partners, b) supporting infrastructure areas of potential impact from climate change such as water management, energy efficiency, and public health safety, and most comprehensively, c) build a ‘resilient’ watershed strategy to prevent further fresh water pollution and contamination through agricultural runoff (i.e., pesticides and fertilizers) and flooding events while restoring ecosystem functions that support high water quality[4].

Climate Change Is Not a Political Story (Sorry to Disappoint)

What’s the take-away?  Climate change is not and should not be political.  Just because one particular political party is more inclined to not accept most or all of scientists’ observations about global climate change and their projections about the likely impacts to water, land, air and ocean, and communities does not mean that because one is politically-inclined towards one direction, deny climate change you must.  The bigger truth is when climate change is recognizable through individuals actually experiencing its impacts within their respective communities, it is necessary and directionally correct to take action to reduce those impacts and to develop a forward-thinking plan to ensure that the impacts do not take more of a negative toll on a community than it otherwise would.  That is called planning for impacts that are likely to come.  In IPCC lingo, climate change impact planning is called ‘adaptation’ and building ‘resiliency’.

What Does an ‘Action Plan’ Look Life for Everyday Decision-Making?

This type of forward-looking planning is utilized by individuals, families and communities for all types of recognizable scenarios and events.  We plan on what we will cook for Thanksgiving day, which necessarily means we must pre-order our Turkey or Ham, pre-buy the food stuffs to make our particular side-dishes, ensure we have the right amount of dishes and that they are washed and ready to be used.  We anticipate the needs we have for Thanksgiving and we make sure they are fulfilled so that Thanksgiving goes off without much of a hitch and meets the needs for all participants.

A similar planning process goes into applying for college. We don’t just select a school to attend by its zip code.  And we don’t begin our studies by sitting in a random class on the first Fall semester day.  No, attending a higher-education institution requires planning, study, a strategy for writing your application, sitting for a required standardized test, as well as seeking out personal or professional recommendations to accompany an application to be reviewed by the school’s administration.  Most individuals are looking to get into the best school they can attain or the school with the best reputation for a particular path of study.  This endeavor requires research, self-awareness of what will be best personally for one’s fulfillment and professional goals, setting a plan in place to complete all the necessary requirements of an institution, application of study and work, to hopefully reach the end goal of being accepted.

The Importance of Developing an Action Plan for Climate Change

New towns and cities that don’t strategically think about and plan for their long-term growth become disadvantaged.  Municipalities must think about their infrastructure needs, housing requirements, employer base, energy requirements, as well as how and where development should go.  Without careful consideration of where a municipality wants to be 10, 25 even 50 years from now, unplanned growth brings congestion, inefficient housing capacity, air pollution, long commutes, and an economy vulnerable to suburban flight.

U.S. States with No Climate Change Action Plan

To date, 34 U.S. States have yet to implement a Climate Change Action Plan that acknowledges climate change impacts will affect their particular State.  Those 34 States have not yet taken individual responsibility to work with other states or countries to be part of the solution toward mitigating the main driver of climate change and to thoughtfully detail a course of action that is practical and measurable to reduce GHG emissions from a diverse set of tools within their grasp.  Those states include:

• Alabama
• Alaska
• Arizona
• Arkansas
• Georgia
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Jersey
• New Mexico
• North Dakota
• Ohio
• Oklahoma
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah (although Salt Lake City has developed a 2015 city plan)
• West Virginia
• Wyoming

That the majority of U.S. states has yet to fundamentally acknowledge their individual roles in combating climate change nor taken any concrete action towards mitigating GHG emissions and developing adaptation strategies to protect their citizens from the highly likely impacts of climate change, is at a minimum, reactionary, and at best, reckless.

Action Plans Support Adaptation and Resiliency to Climate Change Impacts

Action plans are maps that lead us toward an ideal future we would like to realize.  Having no plan usually means that forward-momentum towards wanted goals is haphazard, chaotic, and ultimately, lacking the necessary steps to reach a desired state.    It also means that these 34 states are not supporting the rest of the globe in supporting a primary mandate for all inhabitants on this planet earth:  significantly reducing GHG emissions into the atmosphere so as to ultimately arrest climate change by the next century:  2100 and beyond.  The New York Times reported that CO₂ emissions will grow dramatically for the year 2017, roughly two percent over the previous year’s levels, erasing total global emission reductions for the last three years[5].  This is not the direction we need to be heading.  Now, in all fairness, this rise in CO₂ from industrial production is mainly due to the rapidly developing economies of both India and China.  Total GHG emissions for the U.S. has been in decline for nearly five years straight.  The problem, however, is that starting in 2017, that rate of GHG emission decline has begun to de-accelerate, and is expected to continue de-accelerating over the coming years in somewhat direct response to the Trump administration’s roll-backs of domestic climate protections, denial of environmental safeguarding funding measures, and granting of new oil and mining drilling rights on formerly protected lands – decisions that fuel the release of greater GHG emissions.  Every year that goes by that more GHG emissions are introduced into the atmosphere versus less, makes future year impacts from climate change more certain, more extreme, and more detrimental to the human condition.

Contact Kate Gaertner today to see what Triple Win Advisory can do to help your business and industry increase sustainability to result in a “triple win” for company profit and long-term competitive advantage, societal well-being, and successful environmental pollution mitigation.

Kate Gaertner

[1]Greenfields are lands that are currently, untouched by development.  They are land in their natural state and which provides valuable environmental ecosystem services that would otherwise be degraded or destroyed through human development of the land.

[2] EPA. (2017).  Great Lakes Facts and Figures.  U.S. Environmental Protection Agency.

[3] Adaptation Clearinghouse.  Preparing for Climate Change in Michigan.  Georgetown Climate Center.  Retrieved from http://www.georgetownclimate.org/adaptation/state-information/overview-of-michigans-climate-change-preparations/overview.html

[4] Adaptation Clearinghouse.  Dane County, Wisconsin Climate Change and Emergency Preparedness Plan.  Georgetown Climate Center.  Retrieved from http://www.adaptationclearinghouse.org/resources/dane-county-wisconsin-climate-change-and-emergency-preparedness-plan.html

[5] Plumer, Brad and Popovich, Nadja. (2017, November 13).  CO₂ Emissions Were Flat for Three Years.  Now They’re Rising Again.  New York Times.

*Climate Action Plan image is taken from the Portland-Multnomah County 2009 Climate Action Plan.

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Borrowing phraseology from The Week Magazine, the below may be seen as ‘Boring but Important’ and also…critical at this moment in history.

Perhaps, more relevant, given the momentum in Oregon to vote on some form of a Cap-and-Trade for Industry during the legislature’s short-session this February (2018), below is worth a quick read.

Which Type of Tax is Preferable?

You’ve probably heard both terms at various times if you’ve been following discussions about how to mitigate climate change.  Carbon Tax is a fairly simple concept to understand but it is a hot potato politically.  Cap and Trade is a market-driven (and hence, more palatable to conservative-minded capitalists) approach to regulating atmosphere-polluting industries (think:  paper mills, electric utilities, cement producers) but its implementation is complicated and more opaque to understand.  Both methods to tax carbon extraction and use are important and can be very effective in significantly cutting CO₂ emissions into the atmosphere; which gives us a fighting chance to dramatically reduce greenhouse-gas emissions at the state and national level in order to make our personal (and yes, we should all consider the impacts of climate change personally) contribution to the global goal (a.k.a. the Paris Climate Accord of 2015) of keeping the earth’s global temperature rise below 2^o C from pre-industrial levels. Below is a quick cheat-sheet, so to speak, on Carbon and Cap-and-Trade Tax schemes.  Schemes in this sense are how these tax systems operate or function.

The quick on Carbon Tax:

• A carbon tax is a straight tax (think: a defined percent increase in the cost per gallon of gas) that will ultimately make the use of fossil fuel energy more expensive for the end-consumer.
• The tax would apply to all fossil fuel energy (petroleum, oil, coal, natural gas) that we use to power our automobiles, cool/heat our homes, and provide electricity for our various needs.
• The carbon tax can be applied at various levels within an economy, either “upstream” – to the companies that extract and refine fossil fuels – or “downstream” – to companies that utilize carbon energy inputs and to consumers (you and me).
• The idea of a carbon tax is to ‘incent’ individuals and companies to substitute their use of fossil fuel energy for something else, ideally, renewable forms of energy (i.e., solar, wind, tidal, geothermal, and hydro).
• To mitigate the increase cost of energy (required to heat/cool our homes and drive our cars and power our utilities), most carbon tax schemes call for a net transfer (or redistribution) of the revenue raised to be re-invested in public service projects (e.g., increased public transportation infrastructure) and income subsidies, that support consumers and communities most affected by the increased cost of energy, to support the switch to renewable energy sources.
• A carbon tax has to be sufficiently large to be effective in changing the “hearts and minds” of companies and individuals to make the switch from fossil fuel energy inputs to renewable energy options.  Otherwise, people begrudgingly absorb the extra energy costs and keep the status quo of carbon energy use.

The quick on Cap-and-Trade:

• A Cap-and-Trade “tax” is applied to identified high greenhouse-gas (GHG) emitters or polluters. These emitters are usually medium-to-large companies within certain industry sectors.
• A cap-and-trade system is designed through the trading of (GHG-emitting) permits that companies buy and sell through an auction.
• A State (such as California) determines (or sets) the total level of CO₂ emissions that will be allowed for any given year. Often, the state will decrease total allowable CO₂ emissions incrementally over the course of the cap-and-trade time period (e.g., five, 10, 20 year periods).
• How the “tax” scheme works:
  • Most companies have to purchase their tradeable CO₂ permits for the year.
  • For companies that emit less atmospheric CO₂ than allowed, they can sell their “unused” permits to other companies for a profit.
  • For companies that emit more atmospheric CO₂ than allowed, they must buy “unused” permits from other companies for a fee, or…they must pay a penalty to the state for exceeding their permitted CO₂ levels for the year.
• The benefits of a cap-and-trade system include:
  • Established GHG emission reduction targets are set and can be effectively managed through the permitting system.
  • The system, although state regulated, is a pro-market-driven scheme where companies control how they manage and mitigate their GHG emissions by allowing a “spill-over” valve through permit-buying as well as incremental target reductions to be met over a gradual period of time.
  • Cap-and-trade is seen as an effective mechanism to foster company-driven technological innovation in order to meet GHG-emission reduction targets.
• Cap-and Trade Schemes are complicated to set-up and can take many years to successfully design and implement.  Some of the variables that require deep consideration include:
  • Total GHG-emission targets to set
  • Number of permits to employ
  • How permits are assigned, priced and purchased
  • Identification of type and number of companies, sectors and industries to participate in scheme
  • Enforcement of GHG emissions and targets to be met

Awareness and Citizen Activism Make a Difference

Lobbying efforts to congressmen by citizens about our feelings and preferences for these carbon tax options are worthwhile. 

See below for the Cap-and-Trade Law currently in place in California:

http://www.nytimes.com/2011/10/21/business/energy-environment/california-adopts-cap-and-trade-system-to-limit-emissions.html

https://www.vox.com/energy-and-environment/2017/7/15/15955756/california-climate-brown-ab398-cap-and-trade

Note: Oregon has introduced a Cap-and-Trade bill in the House for consideration:  House Bill 2135:  https://olis.leg.state.or.us/liz/2017R1/Downloads/MeasureDocument/HB2135

Greater citizen and industry awareness and support of the bill are necessary precursors for the mitigation of climate change.

Contact Kate Gaertner today to see what Triple Win Advisory can do to help your business and industry increase sustainability to result in a “triple win” for company profit and long-term competitive advantage, societal well-being, and successful environmental pollution mitigation.

Kate Gaertner

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The Skinny on Fossil Fuel

Fossil fuels are carbon energies. Those carbon energies are gas, natural gas, oil and coal. Don’t forget: shale gas (a.k.a. horizontal drilling and hydro fracking) is also included in this mix. So, when we hear talk about carbon taxation, that’s what it is referring to: our use of gas, natural gas, oil, and coal for heating, electricity, cooking and automobile use.

Carbon Pricing

Since (if not quietly decades before) the momentous Paris Climate Accord in December 2015, where 195 nations (all except Nicaragua and Syria) agreed to support collective action to mitigate further warming of the planet, carbon pricing has been in the news, actively discussed, and prominently argued but with very scattered momentum. California has led the U.S. ‘pack of States’ in passing cap-and-trade legislation. Oregon has a cap-and-trade bill in its House but looks to need more business support than it currently enjoys. We can also look to Canada, a fundamentally more progressively-inclined country than America, to see that two of its largest Provinces (Quebec and Ontario) have cap-and-trade programs in place, the most recent one (Ontario) passed in late spring of last year. Through the Western Climate Initiative (WCI), established in 2008, U.S. States and Canadian Provinces are working together to combat climate change by linking their individual cap-and-trade “markets” to make them more robust, accepted, and give them broader reach. Come 2018, Ontario’s, Quebec’s and California’s cap-and-trade markets will be linked. Europe is a decade ahead of N. America on the implementation of a cap-and-trade system for its participating members (currently 31 countries: 28 EU members plus Iceland, Liechtenstein and Norway), having ratified its own emissions trading system (EU ETS) in 2003, with the formal launch in 2005.

Carbon Tax vs. Cap-and-Trade

In an earlier post, I detailed the difference between a Cap-and-Trade system versus a ‘simple’ Carbon Tax.  I noted Cap-and-Trade schemes are much more prevalent (and fundamentally more palatable legislatively) because they are considered a market-driven approach to curbing greenhouse gas (GHG) emissions that cause climate change. Another way of saying the same thing: cap-and-trade programs support the neoclassical economic paradigm of how markets should operate and work that is nearly globally accepted today.  Cap-and-trade regulates high-GHG gas emitters, namely targeted, pollutive industries, and ideally, forces them to change the way they do business and/or employ new technologies that reduce GHG emissions into the atmosphere.

What’s the Difference Between the Two?

Carbon taxation is simpler but has a much higher hurdle to jump politically. Taxation can be on high-carbon users, emitters, carbon refiners, distributors or end-users…or some combination of the above. A carbon tax is a straight tax on the use of carbon inputs (gas, oil, natural gas, and coal). In capitalist-driven economies, straight taxes are labelled bad, and not welcome. There’s a reason there are so many lobbyists camped out in Washington, D.C., clamoring to have dinner with Legislators and these days, Scott Pruitt, Head of the U.S. EPA. There are two necessary twists of the carbon tax, as I mentioned in an earlier post, that are necessary and critical for overall public (and ultimate legislative support): the tax must be high or significant enough to curb carbon use and the revenues raised from the tax must be earmarked and allocated towards individuals and communities most directly affected by energy price hikes the carbon tax will actualize.

A Third:  Carbon Footprints

Now, there is a third type of carbon-reducing scheme that has been batted around the globe in various iterations for a while. It targets individuals. You may have heard of the carbon footprint initiative. It can be analyzed and tracked by both individuals and organizations. And, there is great worth in doing so. It provides some “Ah ha” moments where a minor change in behavior or organizational process can produce large carbon use reductions.

A Fourth?  CarbonX

I was just recently introduced to another type of carbon market by Jim Newcomer. It’s being called a “peer-to-peer carbon trading company”. The platform is CarbonX, founded by two brothers and one son of the companies ConsenSys and Blockchain, employing Block Partners as strategic advisors to the new initiative. CarbonX states that its goal is to “encourage individuals to make smart choices about their carbon consumption” or “invest in carbon reduction programs and then distribute offsets via major retailers and brands as loyalty tokens, helping to incent people to make carbon-friendly decisions in their day-to-day purchases of goods and services.” CarbonX utilizes Ethereum, similar to Bitcoin but more secure and ‘democratized’, a cryptocurrency payment methodology. You can read more about CarbonX here.

Questions to Ponder

Here are my questions to you. Are Bitcoin and now Ethereum (launched in 2015) the new Paypal alternatives? Are they here to stay? How many of you use these cryptocurrency systems to buy and exchange goods and services online (and offline, for that matter)? Do you think this new currency can be the critical mechanism to change people’s behaviors in how they view, use, and buy goods and services that are carbon-free or at a minimum, carbon-neutral (i.e., any carbon inputs are offset so that the total effect on the atmosphere is zero)? And/or do you believe this CarbonX platform has the ability to more forcefully nudge retailers and manufacturers of consumer products to adopt organizational systems, processes and practices that will progressively make carbon energy use obsolete?

I want to hear your thoughts!   

Contact Kate Gaertner today to see what Triple Win Advisory can do to help your business and industry increase sustainability to result in a “triple win” for company profit and long-term competitive advantage, societal well-being, and successful environmental pollution mitigation.

Kate Gaertner

Image by Chris Potter at ccPx.com

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Countries and economies are all assessed on how much incremental growth has accrued over the last analyzed period – usually quarterly and annually – to determine if an economy is growing, getting better, doing well, progressing, and being “productive”. That incremental growth is encapsulated in the analytic metric of Gross Domestic Product (GDP). GDP has become the singular, dominant measure of the health of a nation’s economy as well as the well-being of a nation’s citizens. When Trump, the current U.S. President, says he thinks America’s GDP can grow at a rate of three percent annually to the current independent economic forecast estimates of 1% growth, the underlying assumption of the assertion is that his administration has the ability to drive economic growth and citizen prosperity faster than a more incremental growth rate. The problem is GDP was never created to be used in its present incarnation and it most definitely was never meant to measure economic or social well-being.

The History Behind the Creation of GDP

The GDP concept was first introduced in the early 1930’s by Simon Kuznets, the chief architect of America’s national accounting system. At that point in time, GDP was designed to be a particular measure of economic activity for the nation. Back then, the U.S. Bureau of Economic Analysis described GDP’s purpose as being a way to answer questions such as, “How fast is the economy growing?”, “What is the pattern of spending on goods and services?”, “What percent of the increase in production is due to inflation?”, and “How much of the income produced is being used for consumption as opposed to investment or savings?”.1    The use of GDP as a measure of economic progress and stability as well as human well-being was further cemented at the tail-end of World War II at the Bretton Woods Conference (New Hampshire). The leaders of forty-four allied nations convened to set-up a “process for international cooperation on trade and currency exchange”1. The thinking behind the idea was improvements in economic well-being should be a strong catalyst for “lasting” world peace.1  Economic well-being was first and foremost achieved through continuous economic growth. The Bretton Wood Conference birthed key international economic and monetary governing bodies including the International Monetary Fund (IMF), and the International Bank for Reconstruction and Development (IBRD), now part of the World Bank.1   Of course, the financial might and world-view of the U.S. dominated both of these institutions. Thus, U.S. economic policy and measurement become the de facto standards for both. Over the course of the last three quarters of a century, GDP has become the primary measure of economic progress for nearly all nations on the globe.4

GDP as a Kitchen Sink Measurement

Equating economic growth with economic progress and human well-being is a problem. Money spent rebuilding from natural disasters (such as Hurricane Katrina, Sandy, and Harvey) factors into positive GDP. Federal funding of adding nuclear warheads to existing arsenal grows GDP. Companies that produce products known to cause cancer, disease and death such as cigarettes, flame-retardants in children’s sleepwear, unknown ingredients in cosmetics, and the cocktail of harsh chemicals used to dye clothing worn by men and women all support a growing GDP, if company revenues and product sales increase. Urban sprawl, suburban growth, highway infrastructure development all contribute to a positive GDP while the downside of these developments is deforestation, soil degradation, air smog, water contamination (think: Flint, Michigan’s contaminated river water thought to be easily treated for human consumption), biodiversity loss, declining fish populations, coral reef bleaching, and untold human suffering from water and land contamination from unregulated or illegal industrial chemical dumping. These human tolls are not factored into GDP. What is included, fairly or unfairly, is the cost of taking care of chronically sick and dying individuals.

Natural Disasters Make for A Positive GDP

The cost of massive cleanups like the 2010 Deepwater Horizon BP oil spill in the Gulf of Mexico had innumerable and not sufficiently quantifiable negative repercussions to the natural environment, communities and individuals within the Gulf of Mexico, but is positively attributed to a growing GDP. By the Natural Resource Defense Council (NRDC)’s tally, 35% of the American Gulf Waters had to be closed to fishing, putting thousands of fishermen out of work. Thousands upon thousands of wildlife perished including dolphins, wales, fish, sea turtles and birds. Important and precious ecosystems were contaminated for many decades or altogether destroyed including wetlands and estuaries around the Gulf Coast.2  In the calculation of a nation’s GDP, both positive and negative market-driven economic production and services are included. What is not included is the long-term, devastating and ultimately, incalculable toll natural and human-induced disasters have on the economic and social well-being of a national community.

The Missing Factor in GDP

Continuous market-driven economic growth is a poor indicator for measuring increases (or decreases) in human suffering, mental well-being, educational opportunities, professional development, cultural enjoyment, contentment, good health, happiness, and supportive and in-tact family units, to name a few important factors that most people agree are important for a productive, constructive, and meaningful life. Constanza et al., 2014 (economists all) offer a compelling argument to stop the misuse of GDP to measure social well-being: “Because GDP measures only monetary transactions related to the production of goods and services, it is based on an incomplete picture of the system within which the human economy operates. As a result, GDP not only fails to measure key aspects of quality of life; in many ways, it encourages activities that are counter to long-term community well-being.”3

Rethinking GDP as “The” Economic Measure

Long-term human well-being should be equated to an economy that is operated sustainably. That means stopping the depletion of natural resources, reducing our use of ecosystem services that are detrimental to their long-term survival (i.e., deforestation, fishery collapse, topsoil erosion, groundwater aquifer depletion, salinization of surface waters), and mitigating pollution-inducing activities that threaten both the Earth’s self-regulating systems and our very survival on this planet. Endless, continuous economic growth should not and cannot be our singular national goal. Economic growth for its sole sake is a path toward certain destruction – to our way of life, to the natural environment as we currently know it, to species diversity, to resource availability, and to community vibrancy and resiliency. We need to start having more voluminous and varied discussions on the fallacy of continuous economic growth at all levels of government, and within every communities and organization large and small. One clear signal that constant, ever-increasing economic momentum is false and not the measure of good economic growth would be for the Securities and Exchange Commission (SEC) to change or drop its requirement of public companies to report quarterly and annual financial results to the financial markets (U.S.’s Wall Street). In this way, companies would be free of the burden to report growth for growth sake with all the negative costs actualized against their stock price and market cap, and instead, guide industry and organizations through responsible growth that supports economic activity and vibrancy (think: profit) alongside sustainable social well-being that inherently embeds environmental stewardship into the equation. Consensus around a new economic paradigm shift needs to be developed, agreed upon, and implemented (on a global scale) so that economic and social well-being is measured rightly, more accurately, and most importantly, fundamentally sustains human communities for centuries to come.

A suggested intriguing read: Naomi Klein’s book (2014), This Changes Everything: Capitalism vs. The Climate. 

Contact Kate Gaertner today to see what Triple Win Advisory can do to help your business and industry increase sustainability to result in a “triple win” for company profit and long-term competitive advantage, societal well-being, and successful environmental pollution mitigation.

Kate Gaertner

References:

1) Costanza, Robert; Hart, Maureen; Posner, Stephen; Talberth, John. (2009, January). Beyond GDP: The Need for New Measures of Progress. The Pardee Papers, No. 4.

2) Suatoni, Lisa. (2011, January 11). The Evaluation of Deepwater Horizon’s Environmental Toll (Challenges of a Novel Oil Spill).

3) Costanza, Robert; Hart, Maureen; Kubiszewski, Ida; Talberth, John. (2014). A Short History of GDP: Moving Towards Better Measures of Human Wellbeing. Solutions, Vol. 5, Issue 1, pp. 91-97.

4) The Kingdom of Bhutan is a singular country where the measure of GDP is not used but rather, Gross National Happiness (GNH). Since 2004, the Bhutan government has organized four international conferences to bring greater global awareness of the GNH index.

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