Note: Jonathan Boston is Director of Victoria University’s Institute of Policy Studies .This is the final part of the 4th Pallot Memorial Lecture, which he gave in Christchurch on 16 September 2009. If you would like to start from the beginning, read the first part here.
So, are there any solutions? Can the asymmetries that contribute to inertia be overcome? Or are we confronting a so-called ‘wicked problem’? These are problems which are inherently difficult, if not impossible, to solve because of their sheer complexity, the range of inter-dependencies, and the fact that every proposed solution merely creates other serious problems.
But even if we are dealing with a wicked problem, and thus have no prospect of a complete solution, there may still be scope for improving the situation. Moreover, there is no shortage of good ideas for correcting, or at least ameliorating the impact of, these asymmetries, many of which deserve close scrutiny.
Briefly, the proposed solutions can be divided into six categories – global, constitutional, institutional, accounting, financial/economic, and other.
- The global solutions include a new International Court for the Environment or a Court of Generations, a range of new international agreements and institutions, and new regional institutions like the European Union with powers to impose measures on sovereign states.
- The constitutional solutions include inserting provisions into constitutional documents to protect the environment and future generations, strengthening the voting rights of the young, creating special parliamentary seats for organizations representing the environment and future generations, establishing second chambers with a mandate to represent long-term planetary interests, extending the term of parliament, and providing greater support for parties and advocacy groups speaking on behalf of diffuse, long-term interests.
- The institutional solutions include the establishment of new governmental bodies charged with the role of being guardians of the interests of future generations, such as a Commissioner or Ombudsman for Future Generations, or bodies like the recently created Committee on Climate Change in Britain, established under the Climate Change Act 2008
- The accounting solutions include: establishing genuine investment measures or ‘green’ GDP measures which reflect changes in the value of environmental goods and services; developing ecological footprints which measure the demand for natural resources (whether at the individual, household, firm or national level), and ecological deficits which measure the difference between the ecological footprint and biocapacity; developing environmental sustainability indices (ESI); and various other methods of sustainability accounting – such as sustainable cost, natural capital inventory accounting, input-output analysis, and triple bottom line accounting
- The financial or economic solutions include green taxes and subsidies, market-based mechanisms designed to internalize externalities, and new approaches to the ownership and management of natural resources – for instance, via an ‘eco-social’ property regime or a global trust fund.
- The final category of solutions – ‘other’ – include educational campaigns to change voters’ time preferences and ecological understanding, and various regulatory mechanisms to promote sustainable development.
As will be evident, the various proposed solutions are intended to work in a number of different ways.
These include: limiting national sovereignty; giving the judiciary the right to override legislation incompatible with the interests of future generations; reducing the powers of legislative majorities; strengthening the political voice of those who speak on behalf of nature and/or future generations; reducing the current present bias in policy making through new countervailing bodies; changing how nations and firms value their activities in the interests of transparency and more prudent decision-making, and developing a stronger link between socio-economic systems and ecological or biophysical systems.
Cumulatively, the broad aim is to strengthen the incentives for wise stewardship of the Earth’s resources and enhance the capacity to hold decision makers, at all levels, accountable for the long-term consequences of their actions.
First, there are no simple, one-off solutions to the four asymmetries or the global collective action problem, and we would be foolish to place too much confidence in any single policy instrument, whether at the global, regional or national levels. What is needed is a concerted effort on many separate fronts, using a combination of measures.
In determining an appropriate strategy, we need to be mindful that some of the suggested solutions have already been tried in various jurisdictions – so there is at least some opportunity for policy learning and evidence-based decision-making.
Second, it is plain that some of the proposed solutions would be difficult and costly to implement, some are currently not politically feasible, and some would have significant deleterious effects. For instance, consider the impact of the various proposals on the democratic process: some would weaken democracy; some would merely change the political context within which the democratic process operates; while yet others would shift power to supra-national bodies – some of which would be moderately democratic, others not at all.
In my view, we should not embrace solutions which limit or undermine democracy; rather, we should seek measures that strengthen and improve our democratic institutions. There is no point, as Ludvig Beckman (2008, p.614) argues, ‘protecting the unborn from the consequences of our short-sightedness’ only to weaken ‘the power of future people to protect themselves’ or ‘rule themselves effectively’.
The quality of democracy in the future should not be compromised. Against this, it should be borne in mind that catastrophic environmental degradation is likely to weaken, if not overwhelm, democratic institutions (see Dyer, 2008).
In terms of proposals to address the four asymmetries, one is the establishment (or strengthening) of independent advocacy or advisory bodies charged with representing the interests of future generations (e.g. via a specific focus on sustainability or environmental goals). For instance, Hungary established, via legislation, a Parliamentary Commissioner for Future Generations in 2007.
The commissioner has many powers, ‘including the powers to review and propose legislation, to initiate administrative actions or judicial reviews of agency decisions, to order those illegally endangering the environment to stop their activities and restore the site they damaged, to evaluate proposed development projects…and to comment on and monitor international treaties’ (Science and Environment Health Network, 2008, p.17).
Likewise, as part of its far-reaching climate change legislation in 2008, the British government established a new, high-powered advisory Committee on Climate Change. This Committee is mandated to provide independent advice to the government on setting and meeting medium term carbon budgets and long-term emissions-reductions targets. It also reports to Parliament on the government’s progress in reducing emissions and achieving its carbon budgets, and conducts independent research and analysis (Boston, 2008).
Other British institutions worth considering are the Carbon Trust and the Sustainable Development Commission. The Trust was established in 2001 as a government-owned company with the purpose of accelerating Britain’s move towards a low-carbon economy and develop commercially viable, low-carbon technologies. The Commission was established in 2000 and is now an executive non-departmental body that serves as an independent watchdog and adviser to the government on sustainability issues, scrutinizing governmental performance and monitoring progress.
New Zealand, of course, has had an independent Parliamentary Commissioner for the Environment (PCE) for more than 20 years (see Hawke, 1997). But the PCE is not well resourced and has modest powers. I do not pretend that increasing the resources of the Commissioner for the Environment would counter the imbalance in the power of current and future generations, but it would be a step in the right direction. There is also a case for establishing bodies like the Carbon Trust with specific pro-sustainability mandates.
Turning to the possible solutions to the current accounting asymmetries: there is a good case, in my view, for enhancing the quality and range of our non-financial measures of performance, both at the national and organizational level. This will help ensure that environmental impacts and other relevant considerations are more fully taken into account, and enable the interaction of the economy and the environment to be better understood.
Providing additional information to citizens and stakeholders will also make it easier to hold policy makers and organizations to account for any environmental (and other) damage they cause. Further, a broader set of performance measures and indicators will help reframe how we measure ‘success’ or ‘progress’ and thus influence perceptions and behaviour.
There is already a substantial academic literature on how to improve our systems of environmental accounting and considerable analytical work has been undertaken through the auspices of the United Nations, the OECD, the IMF, the World Bank and other major institutions (see Bebbington, Brown and Frame, 2007; Boyd, 2007; Buhrs, 2009; Molissa and Wittneben, 2008; Nordhaus, 2006; Stiglitz Commission, 2009; United Nations, 2003).
At the national level, a plethora of new, revised and complementary metrics have been proposed. These include measures of genuine investment – which incorporate changes in manufactured (or built) capital, human capital, natural capital, social capital, and the knowledge base – (see Arrow, et al., 2004), measures of net changes in natural capital and the quality of ecosystems, and various indices of economic growth that take into account the environmental consequences of that growth – such as a green GDP measure (and other departures from standard GDP measures).
Locally, Statistics New Zealand (2009), in collaboration with other departments, has produced a sustainable development framework, and the various indicators employed within this are now part of New Zealand’s official statistics. Thus far, however, such measures appear to have had little impact on the public consciousness or governmental decision making.
Interestingly, China undertook some pioneering analytical work several years ago, and published (in September 2006) a set of green GDP accounts for 2004 – compiled by the Chinese National Bureau of Statistics and the State Environment Protection Administration (see Chinese Government, 2006).
The official report estimated that the damage due to environmental pollution was about US$66 billion (NZ$100 billion), representing about 3% of GDP. Although this was less than some independent estimates, the results were sufficiently concerning that the report for 2005 was apparently suppressed and government support for the green GDP methodology was withdrawn.
The original intention of the Chinese authorities was to assess the costs arising from the depletion of five types of natural resources – land, minerals, forest, water and fishery resources – and two types of environment costs – pollution (i.e. water, air, solid wastes and accidents) and ecological damage. But because of data limitations, the 2004 report covered only environmental pollution costs – and even then, only 10 of 20 identified pollution types.
For instance, it did not include groundwater pollution or soil contamination. It was estimated that if all the discharged pollutants from point source had been properly treated or disposed of during 2004, the cost would have been in the region of 7% of GDP.
Obviously, attempting to estimate and value natural resource depletion (or enhancement) and environmental damage (or restoration) poses large conceptual and methodological issues (see Arrow, et al. 2004). These include defining what is to be counted and determining how best to monetize environmental degradation (e.g. the damage caused by greenhouse gas emissions, the loss of species or objects of natural beauty, etc.).
Measuring changes in the health or quality of ecosystems and the services they provide is, of course, equally challenging. Yet, if we do not seek to estimate such costs and benefits, there is a risk that they will be hidden or invisible. Environmental assets will thus be under-valued, and it will remain hard to quantify how current consumption is likely to affect future well-being. Worse, economic policy making will continue to be guided by particular metrics, such as GDP, which have significant limitations as indicators of economic performance or social progress.
There are of course many ways of altering our current national accounting systems to incorporate environmental considerations, each with its advantages and disadvantages, and each with its advocates and detractors. For instance, the relative merits of composite and complementary measures remains contested.
Perhaps this is an area where New Zealand can demonstrate some leadership. After all, this country has been a pioneer in the field of public sector accounting, the field to which the late Professor Pallot contributed so much.
In my view, the accounting profession has a particular responsibility to engage in the debate over how to improve our accounting systems, at both the national and organizational levels, so that they better reflect critical ecological considerations and values. It is heartening that some within the profession are already contributing to this debate; may this work prosper.
To conclude: Edmund Burke commented over two centuries ago in his Reflections on the Revolution in France (1790) that: ‘Society is indeed a contract … a partnership … between … those who are living, those who are dead, and those who are to be born’.
There is overwhelming evidence that humanity today is not keeping its side of the inter-generational bargain. Rather than bequeathing a flourishing and fruitful environment to those who will follow us, we are running up a huge environmental debt – a debt that will impair the quality of life on Earth and afflict billions of people for generations to come.
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