Andrew Simms and the costs of pollution

Big new report from the UN.

The cost of pollution and other damage to the natural environment caused by the world\’s biggest companies would wipe out more than one-third of their profits if they were held financially accountable, a major unpublished study for the United Nations has found.

OK, they make the usual mistakes: they\’re counting all the pollution in the production processes as if they\’re costs to be carried by the company rather than the consumers of the products made by such companies and processes. But other than that, yes, there are externalities, yes, we\’d like to include them in prices so that they are taken care of:

The report, led by economist Pavan Sukhdev, is likely to argue for abolition of billions of dollars of subsidies to harmful industries like agriculture, energy and transport, tougher regulations and more taxes on companies that cause the damage.

Again, not taxes on the companies, taxes on the activities, so that they are priced properly. Yes, consumers should and rightly will take the hit. But other than that, as a basic piece of logic, fine.

This is a tad silly though:

Trucost did not want to comment before the final report on which sectors incurred the highest \”costs\” of environmental damage, but they are likely to include power companies and heavy energy users like aluminium producers because of the greenhouse gases that result from burning fossil fuels.

Aluminium plants are, by their very nature, heavy enery users, this is true. Which is why the bigger plants, where the energy usage is most intense, tend to be beside hydro plants: the hydro plants and dams often built specifically so as to attract the aluminium plants. Northern Quebec, the Pacific North West, Iceland….the Al plants are in these places so that they can get lots of cheap power from dams.

But OK, at least the report is working along the right lines. There are externalities, they should be internalised, nature should indeed be priced just as with any other scarce resource.

And then here\’s Mr. Andrew Simms:

Yet in exercises like this, we quickly hit the paradox of environmental economics. By putting a price on nature, hopefully it makes it less likely that we will treat the world, and its natural resources, as if it were a business in liquidation. Yet there is a point when it becomes meaningless to treat the ecosystems upon which we depend as mere commodities with a price for trading. For example, what price would you put on the additional tonne of carbon which, when burned, triggers irreversible, catastrophic climate change? Who would have the right to even consider selling off the climate upon which civilisation depends? The avoidance of such damage is literally priceless.

Well, that drives a stake through the heart of carbon cap and trade, carbon taxation, the Stern Review, Kyoto, Copenhagen and all the rest really, doesn\’t it?

For as we all know, something which is priceless has no price. So everything we try to do about pricing nature, internalising the externalities, won\’t work for we cannot assign a price. Strange that someone who has been arguing for so long (however badly) on matters environmental turns out to be so, umm, mental.

1 thought on “Andrew Simms and the costs of pollution”

  1. Anglesey Aluminium recently closed due in part to the nuclear plant, that was built specifically to power it, not being renewed as the eco nutters didn’t want a replacement nuclear, carbon free plant built!
    The Aluminium workers have been offered work in Saudi Arabia for a multiple of what they were being paid in one of the poorest county in the UK!

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