GLOBE-Net, March 21, 2012 - Can you place
a value on the impact to the atmosphere from industrial activity?
Or determine the cost to wetlands and forests loss due to
residential home construction? A professor at Simon Fraser
University says we can, and we should.
A new study from the Simon Fraser University School of Public Policy
is calling for governments and private sector industries to fully
cost the consequences of production and consumption on the natural
The study points out that the resources, ecosystems and wildlife
that make up Canada's natural resources are an essential component
to industry productivity. Yet industry has failed to factor in the
consequences of the impact of that productivity on Canada's natural
capital and markets have failed to fully price ecosystem goods and
"There is no advantage to waiting: any
delays in enacting policies to reduce greenhouse gas (GHG)
emissions only increases the total costs of reaching
"There is a growing need for full-cost pricing, a system that
adjusts market prices to reflect not only the direct cost of goods
and services, but also their impact on this country's natural
capital," says the report author, Nancy Olewiler, the Director of
the SFU School of Public Policy.
The study suggests that for full-cost pricing to succeed, it's
up to the Canadian government to create conditions that will allow
this. That includes;
- Eliminate energy subsidies to producers and consumers
- Implement full-cost pricing on air contaminants and greenhouse
- Encourage projects at the municipal and provincial level that
adopt this methodology
Olewiler says the benefits include "productivity gains,
potentially billions of dollars in savings for consumers,
businesses and governments; a strong environment supporting
sustainable industries and a simplified tax system." The study
suggests the Stephen Harper government should introduce full-cost
pricing in the upcoming spring 2012 federal budget.
The study defines Canada's stocks of natural renewable and
non-renewable natural resources as fossil fuels, minerals, forests,
fish and soils. It also includes environmental resources such as
the atmosphere, water, land and ecosystems.
Ecosystem goods and services are the flow of inputs from natural
capital used along with produced capital and labour to produce and
sustain the economy's goods and services and our wellbeing.
The full impact of utilizing these natural resources is rarely if
ever factored into productivity.
For example, water prices for household, industrial or
agricultural use typically reflect the operating and capital costs
of delivering the water, but do not include the impact of water
withdrawals on ecosystems. This can include loss of biodiversity,
impacts on drainage and storm runoff and depletion of surface and
"The cost to society from ignoring or undervaluing natural
capital in economic forecasting, modelling and assessments can lead
to public policy and government investment decisions that
exacerbate the degradation of soils, air, water and biological
resources and thereby negatively impact a range of economic and
The report points out that in many cases, depleting natural
resources often leads to the need for investing in expensive
substitute infrastructure that may actually cost more than
protecting the natural resource. For example, constructing or
enhancing water treatment facilities when the natural ability of
wetlands and forests to assimilate waste is lost to urban
The paper examines three areas of environmental policy
development that the federal government could introduce over the
next few years that supports its current objectives without
increasing the deficit. And it could create a Canadian methodology
to measure and value impacts on the environment and ecosystems that
would be unique in the world.
The full report "Smart Environmental Policy with
Full Cost Pricing" is available here.
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