Environmental Economics – How It Came to Be, and Why It’s Here to Stay

The Cuyahoga River Courtesy of Noah Wilson/ Flicker Creative Commens. The Cuyahoga River fire of 1969 helped to ignite the environmental movement of the late 20th century.

The Cuyahoga River Courtesy of Noah Wilson/ Flicker Creative Commens. The Cuyahoga River fire of 1969 helped to ignite the environmental movement of the late 20th century.

For many people, the financial bottom line is the only bottom line that counts. Today, more so than ever before, political figures, industry leaders, business owners, and individuals are beginning to understand that without a healthy and sustainable environment, economic prosperity is impossible.

Jack Oswald, CEO of SynGest, member of Environmental Entrepreneurs (E2), and a self-proclaimed, “clean energy entrepreneur and a staunch capitalist,” declared in 2011, “I’m going to say what you don’t hear nearly enough – advancing new clean energy technologies while cutting global warming emissions will be very good for business.” Oswald’s company, SynGest Inc., has revolutionized the way that nitrogen fertilizer, used by American farmers and made from dirty fossil fuels, is produced. SynGest uses homegrown renewable materials such as crop waste to make the fertilizer at a lower cost, while simultaneously removing carbon dioxide pollution from the atmosphere. His company also creates jobs. Building his first operating plant will cost about $130 million and provide work for 350 highly paid construction workers. Furthermore, 200 permanent jobs will be created to operate and support the facility. OnEarth Magazine notes, “over 20 years, one SynGest biorefinery would generate a positive economic impact of $300 million, much of that in the local economy.”

Green action and sustainable decisions have the potential to promote great economic prosperity, if only given the opportunity.

During the beginning half of the 20th century, with few exceptions, economists showed little concern for resource exhaustion or environmental issues. Especially after World War II, focus was placed on big industry and rapid economic growth, with little regard for the effects that this growth was having on the environment.

When the Cuyahoga River caught fire in June 1969, people began to take notice. Despite the fact that this was at least the 10th time that the river had caught fire, Peter Dykstra of CNN notes, “the times, they were a-changing, and a burning river confirmed what many already believed: The environment was changing, too.” Rachel Carson’s book, “Silent Spring,” which had been published seven years earlier, had lit the spark. People were watching the environment changing all around them and they were ready to do something about it.

Despite this momentum, the economic recession of the early 1980s significantly hindered the budding environmental movement and turned people’s attention towards unemployment and financial uncertainties. Fear grew that new environmental regulations would derail the economy and prevent a return to productivity from the recession. The Reagan administration, which swept into office in 1980, quickly began advocating for rolling back environmental and other social regulations. Anti-environmentalists were appointed to top positions at the Environmental Protection Agency, the Department of the Interior, and the Forest Service. An executive order was issued which demanded that every major regulation be evaluated by a cost-benefit analysis.

If the environmental movement was to survive, it had to prove that it was not only economically viable, but also economically profitable.

In September 1982, a group of scholars met in Stockholm with the intentions of discussing and reforming the study of economics by creating a new sub-discipline: ecological economics. These ecological economists, as described by Mark Sagoff, “saw the economy as embedded in, and supported by, natural systems; nature was not simply a factor in, but the foundation of, economic activity.” These economists sought to integrate models of ecology and economics to provide scientific arguments for preserving the natural world in order to stimulate economic prosperity.

In the 1980s and 1990s, the environment was becoming a more popular topic than ever before. Membership in environmental groups boomed in the wake of environmental disasters such as the nuclear catastrophe at Chernobyl in 1986. For the first time, the degradation of the ozone layer was coming to the public’s attention.

Unfortunately, public concern dwindled once again in 1994 when Newt Gingrich’s, “Contract With America,” swept into congress, dedicated to curbing environment regulations. Public concern for the environment continued to decline after September 11, 2001 as national focus was directed towards globalization and the fight against terrorism.

Al Gore’s groundbreaking 2007 film, “An Inconvenient Truth,” brought to the public’s attention the devastating impacts of human actions on the environment. Much debate exists today of the long-term effectiveness of the film, but there is no doubt that it played an important role in brining the environmental debate back to the forefront of people’s minds.

During the 2008 financial crisis, as the stimulus package was being formed in congress many people asked themselves – what is it that we are trying to stimulate? Would this financial crisis be similar to that of the 1980s? Would the government turn its back on the environment in favor of stimulating the old, dirty industries?

Frances Beinecke, the president of the National Resources Defense Council, noted that over the next two decades, “$3 trillion will be invested in power plants, refineries, and other energy infrastructure in the United States; more and more utilities, manufactures, and investment firms want to redirect that money away from dirty, outdated equipment and into the latest clean tech. Put $3 trillion into global warming solutions, and America could become the world’s sustainable energy leader.

It’s not only the environmentalists who are calling for green solutions to economic problems. In 2007, financial analysts at McKinsey & Company, one of the world’s leading consulting firms, issued a report that examined the market potential of 250 technologies for reducing global warming, and concluded that we can reduce greenhouse gases at little or no net cost to the economy. In February 2014, the McKinsey Quarterly argued that the future of the industrial economy is a “circular economy,” which would allow companies to create greater value while simultaneously reducing their dependance on scarce resources. This new economic framework offers net material savings, decreased supply risks, and job creation.

In July 2007, the EPA did an economic analysis of the Lieberman-Warner Climate Security act, the strongest global warming bill to ever make it to the senate floor before being defeated in June 2008. The bill, like any cap-and-trade legislation, would increase the cost of energy delivered from fossil fuels while giving clean, alternative energies an enormous boost. This would in effect decrease the market price of alternative energy, making it a more cost effective and attractive option for consumers.

It was a blow to the environmental movement that the bill did not pass, especially at a time of national economic vulnerability, when the bill’s implications could have had both lasting economic, and environmental impacts. However, Frances Beinecke was quoted as saying that, “we have taken comprehensive global warming legislation farther than it has ever gone before; a national limit on global warming pollution is inevitable.” Despite the setback, environmental economics were brought to the forefront of the public’s attention.

More recently, businesses and individuals alike are beginning to appreciate that economic growth is a welcomed consequence of environmental sustainability.

In 2007, The United Nations Environmental Program (UNEP) launched its “Green Economy Initiative.” A green economy is one that is socially inclusive, environmentally sustainable, and economically productive. Since its establishment, UNEP has worked to implement its initiative all over the world. Successful stories of green economic initiatives can be found from Tunisia to Brazil, from China to Barbados.

In 2011, global investment in clean energy reached a high of $260 billion, despite the financial crisis. This figure represents investments in renewable energy, biofuels, and smart technology.

More and more companies are beginning to understand the necessity of environmental sustainability to their financial bottom line.

It is now time to bridge the gap between commercial-scale environmental progress and individual green actions. It is not just major corporations that can economically benefit from going green. The potential exists for the average homeowner to save huge sums of money by taking simple and sustainable green actions in their every day lives. As green options are becoming more affordable than ever before, there are few obstacles towards going green once people are made aware of the options that exist for them. Whether it is making household decisions more efficient, buying green products, or investing in green industries, a green economy is attainable for each and every household.

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