A Sustainable True-Cost Economy Promises an Escape from Massive Water Pollution

by Brent Blackwelder

Brent Blackwelder

A year ago, I wrote about how a true-cost steady state economy would deal with water pollution. Last August, the alarming green slime at the west end of Lake Erie was so bad that it shut down Toledo’s water supply for half a million people. Who would pay the tremendous damages caused by the green slime? Certainly not the industrial agricultural interests who were responsible for about two-thirds of the problem!

Our current U.S. economy routinely lets polluters off the hook and even rewards them with subsidies, and the same is generally true for the global economy. During the past twelve months, water pollution has gone from bad to worse as exploding rail freight trains loaded with tar sands oil have caught on fire, causing derailments and spilling contaminants into rivers.

Many people are under the mistaken impression that violations of the Clean Water Act are rare. The Potomac Riverkeeper Network has just completed an analysis of water pollution violators in a section of the Potomac River Basin. (full report forthcoming; for background, see the Potomac Riverkeeper Network’s Upper Potomac River Basin campaigns.) Basin wide, there are over 2000 facilities with permits to discharge pollutants into the Potomac River. Of the 293 facilities in the Upper Potomac region, more than 10% had violated their permit conditions during the last three years! Just think of the increased enforcement costs if a region jumps from 5% to 10% non-compliance. The enforcement workload doubles!

Reports from the Pacific coast, from California to Alaska, are disturbing because they indicate that some fisheries and shell fisheries may be on the tipping point of collapse. Worldwide, we are seeing industrial civilization screw up clean water through nutrient loading from gigantic crop monocultures and animal factory slums. It’s a recipe for catastrophe. Several dead zones at the mouths of great rivers like the Mississippi have gained notoriety, but the public is not aware that there are now hundreds of such zones worldwide.

Animas River.Schatzl and Pickles

The Animas River before the toxic metals of the Gold King Mine spill turned it bright orange. Photo Credit: Schatzl and Pickles.

The latest water pollution debacle occurred just this month (August 2015) in the Colorado Rockies. A state of emergency was declared as the Animas River turned orange when millions of gallons of toxic heavy metals and carcinogens from the Gold King Mine spilled and created a hazardous mess at the very peak of summer recreation.

Recreation in this part of Colorado is a crucial component of the economy. One river outfitter has had to lay off over twenty employees. Agencies have allowed the leakage at gold mines like the Gold King Mine to persist for years without being cleaned up.

These accidents would be far less likely to occur in a sustainable steady state economy. A steady state economy would not incentivize pollution. It would not allow externalization of pollution and health costs, and it would eliminate subsidies for extraction of hardrock minerals and fossil fuels. Globally, an estimated $600 billion per year in subsidies is provided annually to the fossil fuels industry, in contrast to $100 billion for wind, solar, and other renewable energies.

A sustainable economy would place genuine value on the many benefits provided by clean water and free flowing rivers, including diverse fisheries, a variety of recreation activities, beautiful scenery, and a healthy water supply. The global economy looks upon water more as a commodity, and trade agreements attempt to facilitate the privatization of water. A sustainable true-cost economy, on the other hand, does not externalize pollution impacts or exclude from economic calculation the numerous but less tangible benefits obtained from free-flowing rivers.

A sustainable true-cost economy holds so much promise, but the immense challenge of transitioning to such an economy can seem daunting. Tackling our water pollution crisis illuminates some highly actionable steps we could take immediately to start making a steady state economy a reality.

The Securities and Exchange Commission (SEC) could take an initial step toward a true-cost economy by requiring the many companies reporting to it to disclose their pollution impacts (externalities). Impossible you say? A few years ago it seemed impossible to get the SEC to require disclosure of CEO salaries. But guess what? It just happened—thanks to leadership by Senator Elizabeth Warren (D-Mass) along with tremendous grassroots pressure.

The SEC will now require publicly-owned corporations to disclose how much their CEOs make compared with the median wage of their workers. The Washington Post reported that the pay gap between executives and unskilled workers is about 300 to 1, not 30 to 1 as most Americans think. This precedent-setting action by the SEC should be followed by other campaigns directed at the SEC, starting with action on externalities.

In a true-cost economy, the price tag for goods and services that cause serious damage to life support systems would be so high that such products would not be produced. We would do well to recall that there is no economy on a dead planet. Critics who say that civilizations are nowhere close to causing ecosystem collapses do not consider the scientific evidence on planetary boundaries, nor the lessons from past collapses of societies. I think we should seize on the outrage over all the water pollution disasters in 2014 and 2015 and push for new economic structures that will provide long-term solutions.

Giant Mats of Green Slime in Lake Erie Signal a Need for New Economic Approaches to Pollution

by Brent Blackwelder

BlackwelderFor the past 40 years, I have spent family summer vacations in Northern Michigan to enjoy a fresh water paradise of small lakes and rivers, along with the Great Lake Michigan.

Ghanbani, Slimeade

What does this have to do with economic growth? Photo Credit: Haraz N. Ghanbari of AP

This year, not all of the Great Lakes turned out to be great: Lake Erie was covered with massive algal mats at its western end, forcing the closure of Toledo’s water supply that serves 400,000 people. A sample of the intake water for Toledo looked like a glass of thick green slimeade.

So, what is the link between this latest water pollution debacle, economic growth, and a true-cost economy? I will argue that in a steady state, true-cost economy, there would be much less reliance on pollution regulations. The chief tool would be bans, along with significant harm charges, on those products and processes that threatened public health or jeopardized the functioning of life support systems for the earth.

What causes me to advocate such a major change in the U.S. approach to pollution can be seen in three big water pollution events this year. My CASSE blog in March dealt with two significant water pollution events earlier this year–the coal-processing spill that shut down the water supply to Charleston, West Virginia, and the bursting of a coal waste storage pond in North Carolina, sending toxic sludge 70 miles downstream in the Dan River.

In my March blog, I discussed better economic approaches to pollution that would be pursued in a true-cost, steady state economy.  Before going into these approaches, it is important to understand the huge frustration that the American public was experiencing in the 1960s from hundreds of water pollution incidents and the failure of governmental bodies to put a halt to this.

In the early 1970s, many of us worked to obtain the 1972 Clean Water Act that featured the promise of making waters of our nation fishable and swimmable by 1986. Two remarkable examples helped drive public awareness and force Congress to enact this law: the Cayahoga River catching on fire and Lake Erie becoming a dead lake.

If someone had told us that 40 years later Lake Erie would experience massive green slime algal mats, we would have said, “No thanks, we need a truly strong law that would bring back Lake Erie from the dead, not a law so permissive that four decades later we would have a monster slime blob in 2011 stretching 120 miles from Cleveland to Toledo, followed by yet another huge slime mass in 2014.”

So now we are confronted with the abysmal failures of the regulatory system at the state and federal level, along with the tepid responses to the latest pollution disaster in Lake Erie. The time has come to demand a change to our economic approaches to pollution and begin the transition to a true-cost, sustainable economy.

To get down to brass tacks on the Lake Erie green slime, we must recognize that the chief cause is agricultural runoff. According to Don Scavia, director of the Graham Sustainability Institute at the University of Michigan, “the primary driver is the amount of phosphorus entering Lake Erie from agriculturally dominated watersheds.” The state of Ohio reports that two thirds of the phosphorus comes from farm lands.

So let’s start calling for a national ban on gigantic animal factory farms with hundreds and hundreds of animals crowded together. Such factory slum operations would not occur in a steady state economy. They are a microcosm of what happens with too much growth in numbers and pollution. When any population of animals or people get into overly crowded conditions, pollution overwhelms the carrying capacity of the land and water, disease increases, and violence breaks out.  Today, industrial agriculture is increasing in size and adverse impacts, although organic farming is making inroads.

While pushing for bans, we should also demand harm charges for the damages bad agricultural practices have on lakes. Look at the cost of losing a city’s water supply, the health costs, and the costs to the recreation economy in the region. Today animal factory operations and industrial agriculture escape monetary responsibility for the many harms they cause.

The Securities and Exchange Commission (SEC) could require businesses to disclose their pollution externalities when they file their annual financial reports. The Dodd-Frank Act requires companies to disclose conflict minerals in their supply chains, thus setting a precedent for the SEC to act. Revelation of these pollution externalities would constitute the first step in forcing the creators to cover their true costs of production.

My argument runs counter to the major thrust taken to deal with air, land, and water pollution since Earth Day 1970, which was primarily a regulatory approach. Some of the pollution laws have worked quite well, providing crucial health benefits and safeguarding ecosystems, but many are not set to deal with the magnitude of the pollution issues of the 21st century. For example, powerful bee-killing pesticides are causing collapses of bee colonies nationwide. Such pesticides should be banned since they threaten human food supply, about two thirds of which depends on the pollinators. Other pesticides and herbicides kill vegetation relied upon by butterflies such as the monarch that needs milkweed to lay its eggs on.  Bans are possible. Several European countries banned the powerful herbicide atrazine in the early 1990s, but this poison is widely used in the United States despite substantial scientific evidence about its health impacts.

The response taken by environmental groups and official state and federal agencies to the grotesque pollution of Lake Erie has been primarily to call for better regulation, which leads to more bureaucratic procrastination and few results. No one has called for a ban on bad practices of industrial agriculture or called for a shutdown of the big, filthy animal feedlots that are a cesspool of pollution and disease. These should be outlawed! It is not impossible. The Michigan legislature did ban phosphorus in lawn fertilizer.

The industrial agriculture system has grown so large in the United States that it is transgressing planetary boundaries, causing algal blooms and dead zones in lakes, bays, and estuaries. Certain parts of the economy, like those associated with industrial animal slums, need to shrink. Bans and harm charges must become frequently used economic tools.

A Practical Proposal to Erase Externalities

by Randy Hayes and Brent Blackwelder

As the global economy grows, it expands into pristine habitats, interferes with critical ecosystems, consumes more resources, and emits more pollutants. Many activities that fall under the banner of economic growth are undercutting the planet’s ecological systems. At the heart of this tragedy are pollution damages that are imposed on society but not factored into company costs. These damages are called externalities because they are externalized by the businesses generating them.

Every day, producers of myriad products impact the biosphere in ways unknown to customers, investors, and policy makers in both host and home countries. By not undertaking the measures necessary to protect ecosystems, these companies avoid responsibility for the damages. And because they have failed to account for the true costs of their businesses, they can sell their products at lower prices than more ecologically responsible companies, gaining an unfair advantage and reaping undeserved profits.

The consumption patterns in many product markets would change if the true costs of production were reflected in the prices of the products, or even if customers, investors, and policy makers had better access to accurate information. There are many possible paths to full internalization of these externalities, but there is no clear map of the territory. As the United Nations Environmental Programme puts it, “in the current absence of sufficient and comparable company disclosures on the environmental impacts of operations and supply chains,” it is difficult to puzzle our way out of the dilemma. In fact, it is virtually impossible to achieve a sustainable economy unless something is done about pollution externalities.

A true-cost economy would align our economic system with nature’s life support systems. Biologists teach us that each living system has feedback loops that allow it to adjust and operate within carrying capacity limits. The human economy is no exception, but we’ve short-circuited an important feedback loop by letting companies externalize the costs of their pollution. The time has come to adopt systematic rules that add pollution costs to the prices of goods and services. Such rules would provide critical information that is necessary to keep the scale of the economy within the planet’s carrying capacity. A true-cost system would solve real problems, but how can we put such a system in place?

A small change at SEC headquarters could have big effects.

The mission of the U.S. Securities and Exchange Commission (SEC) is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Although the SEC requires public companies to disclose certain financial information, it does not require them to disclose information about their health and environmental externalities. Changing the requirements could produce widespread positive impacts.

Public companies are responsible for as much as one-third or more of all pollution externalities. By requiring these companies to track and report the costs that they typically externalize, we would not only set a legal precedent, but we would also begin to instigate the much deeper social and cultural changes needed to achieve a true-cost economy. If we can compel the largest and often most intransigent corporations to disclose how they are impacting the planet, truth and honesty can begin to displace “dark costs” and secrecy. With such a cultural shift, we will perhaps no longer be talking about imposing disclosure requirements, but rather enjoying increased cooperation and forthrightness.

In the meantime, the transition to a true-cost economy calls for mandatory, annual disclosure of externalities — ecological impact disclosures — by every company that falls under SEC jurisdiction (effectively all U.S. public companies and some foreign issuers as well). Adoption of ecological impact disclosures can be done by successfully petitioning the SEC, passing federal legislation, or both.

CERES (a prominent nonprofit organization), religious groups, and pension funds have pushed for shareholder resolutions and achieved important successes toward institutionalizing broader disclosures. Other groups have petitioned the SEC to adopt a flexible environmental, social, and governance (ESG) reporting framework, such as that developed by the Global Reporting Initiative. These efforts are worth applauding, but we need a bigger, bolder solution that confronts the magnitude of the problem and paves the way for a sustainable, true-cost economy.

The best route is to empower the SEC to force each public company to provide an annual ecological impact disclosure. Such a disclosure would be more effective than a flexible or voluntary framework — it would require specific data, reported in standard forms. Each reporting company would provide information about its own operations as well as those of other companies in its supply chain. In addition to aggregate, company-wide information, companies would provide site-specific data so that the public can determine where impacts are occurring.

Many investors have been calling for this sort of information to help them make better decisions about where to put their money. But this is precisely the kind of information that has been kept from the public for the past century. Keep an eye on the efforts at Foundation Earth over the next year to remedy this situation.

Randy Hayes is the founder of the Rainforest Action Network. Brent Blackwelder, a regular contributor to the Daly News, is the president emeritus of Friends of the Earth.