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The combined effects of financial crisis, climate change and energy concerns mean that we must overhaul our ideas on governance and harness public opinion, argues Jacqueline McGlade, executive director of the European Environment Agency
The global financial, energy and environmental crises all have their roots in decades of intense natural resources extraction along with poor governance. The result is that a massive but largely hidden ecological debt has steadily built up. It is a toxic debt that will be difficult to repay in the face of climate change and unsustainable growth and consumption patterns, and is also a debt not fully accounted for either in financial rescue packages or in plans for greening our brown economies.
These crises have a number of common features, and if corrected promptly as part of fiscal reforms could synergize the emergence of more sustainable economies. These features include misleading market prices that do not properly cover all the costs and risks, hidden market incentives, opaque transactions, inadequate accounting of assets, a lack of precautionary mechanisms to respond to early warning signals, and a perverse social compass that has allowed massive inter-generational debts to accumulate.
Obscured in the shadows there are other very unsettling findings that include an absence of controls to address the destruction of natural capital, a lack of accountability, an unerring belief in models that have little connection to reality, and an excessive hubris in the place of ethics and common sense.
One of the main casualties of these crises has been the loss of public trust. People have witnessed extraordinary amounts of public funds being mobilised to prop up banks and industries that have taken unreasonable risks, enjoyed excessive bonuses and failed to adapt to changes in the business climate. Todays widespread demands for more information, supervision and accountability are hardly a surprise.
Natural resource accounting can provide part of the solution by presenting quantitative and monetary values for the goods and services that economies rely on, such as food, water, energy, timber and climate regulation. In a deregulated market, or one poorly linked to the physical reality of the underpinning resources, there is a severe risk of boom and bust cycles. The history of resource exploitation is littered with examples of what happens when the basics of accounting are missing.
* In fisheries management, laissez-faire markets, poorly timed interventions, politically driven regulation and a lack of real-time information about fish stock recruitment and abundance, have led to a history of extreme boom and bust cycles and the demise of many of the worlds fish stocks.
* In the rush to develop biofuels, both developed and developing countries lacked the ability to pull together resource accounts to allow them to regulate the growth of the market and fully analyse the impacts and unintended consequences on land use and commodity prices.
If the world is to green the brown economy and embrace a low-carbon future, a global accord on carbon accounting will be needed, including a significant increase in the categorisation of carbon credits for different forms of pollution.
Deforestation is a case in point. The new UN instrument, known as REDD for reducing emissions from deforestation and forest degradation in developing countries, has a primary focus on tackling illegal logging and forest clearance. But it also has another aim, which is to conserve and enhance forest carbon stores. To do this will require international cooperation, not only on the spatial coverage of different types of forest but also a much clearer accounting of the carbon contained within them and the water, biodiversity and soils required for their conservation and restoration.
Just as in managing a bank account, natural resource accounts can provide information about the quantities and qualities of the stocks and flows of natural capital and ecosystem services. The System of National Accounts
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