April, 2013 | Environmental Debt

No Nature, No Business: The Cost of Climate Change and the Financial Crisis

First published on CSRWire, April 15, 2013

No Nature, No Business is the underlying assumption that must guide all financial regulations and international climate treaty negotiations. I can imagine buy-in actually coming from a majority of both the world’s businesses and governments as a new level playing field is built.

I would never have imagined that my faith in corporations telling the truth would supersede my faith in governments telling the truth. But there is a change in the weather.

Our environment has become so consistently terrible that its effects on business are now undeniable, unpredictable and expensive. In multinational boardrooms and executive suites across the world, environmental problems are now noted as primary risk factors; derailing corporate success —even survival.

And corporations are beginning to step out and speak up.

Governments Fail To Connect Environmental Harm To Business Risks

Governments, not so much.

When extreme weather destroys 15 percent of the world’s cotton crop, corporations are hit with higher costs, shortages and unpredictable P&Ls. But governments do not yet connect the costs of climate change and pollution to the financial crises at hand – or the government’s bottom line.

Even though the external costs of coal and oil in the U.S. total more than $1.1 trillion (the 2012 deficit), these costs were not mentioned during the recent U.S. Congressional debate about the sequester. This “environmental debt” has not yet entered our governments’ financial deliberations.

One exception: China recently noted that the cost of its environmental degradation comes to 3.5 percent of the country’s GDP. That’s a game-changing number and most certainly lower than the true cost.

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Countries and Companies Can Agree: Something’s Gotta Give

First published in the Huffington Post, April 9, 2013

China admits to having a big problem. This admission alone is big news. China’s own Ministry of Environmental Protection now estimates the costs of this degradation at $230 billion for 2010, or about 3.5 percent of its Gross Domestic Product. (This estimate came before Beijing’s recent air quality crisis and the 15,000 dead pigs found floating in Shanghai’s water supply.) As Americans, we are a large part of China’s professed problem — both the causes and the solutions. Much of this pollution is caused by China’s huge consumption of the coal-fired energy that keeps its factories running round the clock as well as the manufacturing process itself.

How much of China’s exports go to the United States? In 2011, China exported $400 billionof goods to the United States and imported $104 billion of our goods, giving China a $300 billion trade surplus and United States politicians and economists agita. In 2009, according to the WTO, 25 percent of China’s total exports went to the United States. How much of China’s pollution is created by American demand and consumption of cheap Chinese goods, from clothing to computers and everything else?

But herein lies the opportunity. Right now, we do not pay the real price of any of our goods because we are not paying for their environmental degradation. But the Chinese government is now debating how much to spend on remediation, how much to spend on changing factories and electrical plants to cleaner technologies, and how much to spend on new agricultural practices. Numbers in tens of billions of dollars are being tossed around as necessary expenditures for protecting the country from untenable losses of viable water, land and