Accidents and natural disasters have long histories; therefore it may seem peculiar at first to think that these could now suddenly become significant factors in choking off economic growth. However, two things have changed.
First, growth in human population and proliferation of urban infrastructure are leading to ever more serious impacts from natural and human-caused disasters. Consider, for example, the magnitude 8.7 to 9.2 earthquake that took place on January 26 of the year 1700 in the Cascadia region of the American northwest. This was one of the most powerful seismic events in recent centuries, but the number of human fatalities, though unrecorded, was probably quite low. If a similar quake were to strike today in the same region—encompassing the cities of Vancouver, Canada; Seattle, Washington; and Portland, Oregon—the cost of damage to homes and commercial buildings, highways, and other infrastructure could reach into the hundreds of billions of dollars, and the human toll might be horrific. Another, less hypothetical, example: The lethality of the 2004 Indian Ocean tsunami, which killed between 200,000 and 300,000 people, was exacerbated by the extreme population density of the low-lying coastal areas of Indonesia, Sri Lanka, and India.
Second, the scale of human influence on the environment today is far beyond anything in the past. In this chapter so far we have considered problems arising from limits to environmental sources of materials useful to society—energy resources, water, and minerals. But there are also limits to the environment’s ability to absorb the insults and waste products of civilization, and we are broaching those limits in ways that can produce impacts of a scale far beyond our ability to contain or mitigate. The billions of tons of carbon dioxide that our species has released into the atmosphere through the combustion of fossil fuels are not only changing the global climate but also causing the oceans to acidify. Indeed, the scale of our collective impact on the planet has grown to such an extent that many scientists contend that Earth has entered a new geologic era—the Anthropocene. Humanly generated threats to the environment’s ability to support civilization are now capable of overwhelming civilization’s ability to adapt and regroup.
Ironically, in many cases natural disasters have actually added to the GDP. This is because of the rebound effect, wherein money is spent on disaster recovery that wouldn’t otherwise have been spent. But there is a threshold beyond which recovery becomes problematic: Once a disaster is of a certain size or scope, or if conditions for a rebound are not present, then the disaster simply weakens the economy.
Examples of major environmental disasters in 2010 alone include:
• January: a major earthquake in Haiti, with its epicenter 16 miles from the capital Port-au-Prince, left 230,000 people dead, 300,000 injured, and 1,000,000 homeless;
• April-August: the Deepwater Horizon oil rig exploded in the Gulf of Mexico; the subsequent oil spill was the worst environmental disaster in U.S. history;
• May: China’s worst floods in over a decade required the evacuation of over 15 million people;
• July-August: Pakistan floods submerged a fifth of the country and killed, injured, or displaced 21 million people, making for the worst natural disaster in southern Asia in decades;
• July-August: Russian wildfires, heat wave, and drought caused hundreds of deaths and the widespread failure of crops, resulting in a curtailing of grain exports; the weather event was the worst in recent Russian history.
But these were only the most spectacular instances. Smaller disasters included:
• February: storms battered Europe; Portuguese floods and mudslides killed 43, while in France at least 51 died;
• April: ash from an Iceland volcano wreaked travel chaos, stranding hundreds of thousands of passengers for days;
• October: a spill of toxic sludge in Hungary destroyed villages and polluted rivers.
This string of calamities continued into early 2011, with deadly, catastrophic floods in Australia, southern Africa, the Philippines, and Brazil.
GDP impacts from the 2010 disasters were substantial. BP’s losses from the Deepwater Horizon gusher (which included cleanup costs and compensation to commercial fishers) have so far amounted to about $40 billion. The Pakistan floods caused damage estimated at $43 billion, while the financial toll of the Russian wildfires has been pegged at $15 billion. Add in other events listed above, plus more not mentioned, and the total easily tops $150 billion for GDP losses in 2010 resulting from natural disasters and industrial accidents. This does not include costs from ongoing environmental degradation (erosion of topsoil, loss of forests and fish species). How does this figure compare with annual GDP growth? Assuming world annual GDP of $58 trillion and an annual growth rate of three percent, annual GDP growth would amount to $1.74 trillion. Therefore natural disasters and industrial accidents, conservatively estimated, are already costing the equivalent of 8.6 percent of annual GDP growth.
As resource extraction moves from higher-quality to lower-quality ores and deposits, we must expect worse environmental impacts and accidents along the way. There are several current or planned extraction projects in remote and/or environmentally sensitive regions that could each result in severe global impacts equaling or even surpassing the Deepwater Horizon blowout. These include oil drilling in the Beaufort and Chukchi Seas; oil drilling in the Arctic National Wildlife Refuge; coal mining in the Utukok River Upland, Arctic Alaska; tar sands production in Alberta; shale oil production in the Rocky Mountains; and mountaintop-removal coal mining in Appalachia.
The future GDP costs of climate change are unknowable, but all indications suggest they will be enormous and unprecedented. The most ambitious effort to estimate those costs so far, the Stern Review on the Economics of Climate Change, consisted of a 700-page report released for the British government in 2006 by economist Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. The report stated that failure by governments to reduce greenhouse gas emissions would risk causing global GDP growth to lag twenty percent behind what it otherwise might be. The Review also stated that climate change is the greatest and widest-ranging market failure ever seen, presenting a unique challenge for economics.
The Stern Review was almost immediately strongly criticized for underestimating the seriousness of climate impacts and the rate at which those impacts will manifest. In April 2008 Stern admitted that, “We underestimated the risks . . . we underestimated the damage associated with temperature increases . . . and we underestimated the probabilities of temperature increases.”
The Stern Review is open to criticism not just for its underestimation of climate impacts, but also for its overestimation of the ability of alternative energy sources to replace fossil fuels. The report does not take into account EROEI or other aspects of energy quality that are essential to understanding the economic advantages that fossil fuels have delivered. Since climate is changing mostly because of the burning of fossil fuels, averting climate change is largely a matter of reducing fossil fuel consumption. But as we have seen (and will confirm in more ways in the next chapter), economic growth depends on increasing energy consumption. Due to the inherent characteristics of alternative energy sources, it is extremely unlikely that society can increase its energy production while dramatically curtailing fossil fuel use. Once energy quality factors are taken into account, it is difficult to escape the conclusion that energy substitution will likely be much more expensive than forecast in the Stern Review, and that the price of climate change mitigation—originally estimated at 1 percent of GDP annually in the Review, but later revised to 2 percent—will likely be vastly higher, even ignoring any underestimation of climate change risks and rates.
Anther environmental impact that is relatively slow and ongoing and even more difficult to put a price tag on is the decline in the number of other species inhabiting our planet. According to one recent study, one in five plant species faces extinction as a result of climate change, deforestation, and urban growth. Many species have existing or potential economically significant uses; the yew tree, for instance, was until recently considered a “trash tree,” but is now the source for taxol, relied on by tens of thousands of people as a life-saving treatment for breast, prostate, and ovarian cancers. Sales of the drug have amounted to as much as $1.6 billion in some recent years. As species disappear, potential uses and economic rewards disappear with them.
Another study, this one by the UN, has determined that businesses and insurance companies now see biodiversity loss as presenting a greater risk of financial loss than terrorism—a problem that governments currently spend hundreds of billions of dollars per year to contain or prevent.
Non-human species perform ecosystem services that only indirectly benefit our kind, but in ways that turn out to be crucial. Phytoplankton, for example, are not a direct food source for people, but comprise the base of oceanic food chains—in addition to supplying half of the oxygen produced each year by nature. The abundance of plankton in the world’s oceans has declined 40 percent since 1950, according to a recent study, for reasons not entirely clear. This is one of the main explanations for a gradual decline in atmospheric oxygen levels recorded worldwide.
A 2010 study by Pavan Sukhdev, a former banker, to determine a price for the world’s environmental assets, concluded that the annual destruction of rainforests entails an ultimate cost to society of $4.5 trillion—$650 for each person on the planet. But that cost is not paid all at once; in fact, over the short term, forest cutting looks like an economic benefit as a result of the freeing up of agricultural land and the production of timber. Like financial debt, environmental costs tend to accumulate until a crisis occurs and systems collapse.
Declining oxygen levels, acidifying oceans, disappearing species, threatened oceanic food chains, changing climate—when considering planetary changes of this magnitude, it may seem that the end of economic growth is hardly the worst of humanity’s current problems. However, it is important to remember that we are counting on growth to enable us to solve or respond to environmental crises. With economic growth, we have surplus money with which to protect rainforests, save endangered species, and clean up after industrial accidents. Without economic growth, we are increasingly defenseless against environmental disasters—many of which paradoxically result from growth itself.
Unfortunately, in the case of climate change, there may be a time lag involved (even if we stop carbon emissions today, climate will continue changing for some time due to carbon already in the atmosphere), so that the end of economic growth cannot be counted on to solve the environmental problems that growth has previously generated.
The current tragic events in Japan bring an extra poignancy to this, the final excerpt from Chapter 3 of Richard Heinberg's new book 'The End of Growth', which is set for publication by New Society Publishers in September 2011. In this section Richard discusses the role of CLIMATE CHANGE, POLLUTION, ACCIDENTS, ENVIRONMENTAL DECLINE, AND NATURAL DISASTERS as a limitation to economic growth.
Source: Post Carbon