What We Don't Price, We Don't Value!

Introduction

For decades, environmental advocates have championed the idea of pricing carbon, arguing that attaching a clear financial cost to emitting carbon dioxide and other greenhouse gases from burning fossil fuels is essential. This would transform what has been cost and consequence-free acts of pollution into financially accountable ones. Yet, despite its critical importance, carbon pricing had previously struggled to establish itself in the financial mainstream. The patchwork of inconsistent policies from nation to nation has led to a fragmented and often ineffective system. Now, as we face environmental and social oblivion, the need to use price to value and protect our indispensable natural assets has never been more paramount.

The climate crisis is accelerating, with record-breaking temperatures, more extreme weather events, more floods (and droughts), and fires becoming more frequent and severe. The social costs, including displacement, health issues, and economic losses, are also mounting. This urgency underscores the need to recognise and account for the environmental costs of fossil fuel consumption through robust carbon pricing mechanisms.

The Role of Carbon Markets: Accounting for What Matters

Carbon markets do not privatise or exonerate pollution or polluters. They are simply accounting systems, like any other, that assign value where the lack of it has led to the obscene denigration of that which we have considered ours to use freely, at no cost. By failing to assign value to our natural environment, we have allowed for its wilful, unchecked degradation and destruction.

The basic premise of carbon markets is straightforward: they aim to reduce fossil fuel consumption and utilise carbon credits to offset emissions that cannot be eliminated. This system recognises that intangible, yet indispensable natural assets, have been taken financially for granted and thus, essentially, laid to waste.

What we don’t price we don’t value!

Effective carbon markets ensure that the true cost of environmental damage is reflected in the price of goods and services, incentivising businesses to innovate, adapt, and reduce their carbon footprints.

Since nature provides for this and a myriad of other services at no cost, we have become used to a take-what-you-can approach. The result? Pollution, degradation, climate change, and a false security that nature's services will never cease to function no matter how exploitative and abusive we all are. To try to reverse this process and better value the atmosphere, carbon markets put a price on using increasingly rare space in the atmosphere for greenhouse gas pollution. The more space you occupy with pollutants, the more you pay in theory, so the incentive develops to take up less space (i.e., pollute less).

We all now recognise and accept that we must pay for the use of space, be it for our possessions (banks and storage facilities), for our vehicles (car parks or garages), for our waste (recycling and disposal bins) or ourselves (homes and hotels). Yet we still resist applying this same principle to the way we use our most precious space, the atmosphere.

Shortcomings of Financial Systems: A Call for Change

Traditional financial systems have fallen far short of protecting the planet, and capitalism needs to change its priorities to avoid catastrophic environmental and social detriment. Capitalism, as it currently stands, prioritises short-term exploitation and gain over long-term sustainability. The inherent problem lies in the failure to account for the true value of natural assets. Without a financial framework that recognises the worth of clean air, water, and biodiversity, these resources are depleted without regard for the days to come.

Making the Invisible, Visible: Pricing as a Shield

Pricing carbon and other natural capital assets makes them visible in financial terms. Now, though, as we face expanding environmental and social risks, there is a paramount need to use price to value and shield the assets that invisibly, for the most part, underpin our well-being. This visibility is crucial for illuminating both the value of saving and protecting these assets and the cost of losing them. When these assets have notable financial value, protecting them becomes a logical and compelling proposition for businesses and policymakers alike.

By quantifying the economic benefits of preserving ecosystems, such as the role woodlands play in carbon sequestration or the importance of wetlands in flood mitigation, we can create stronger incentives for conservation. This economic visibility helps align private and public interests and investments in maintaining and restoring natural resources.

The Evolution of Value in the Global Economy

The global economy is evolving from valuing traditional tangible goods, such as manufactured products, to now placing greater importance on intangible assets. Brands, apps, intellectual property, service industries, and advanced research and development are now seen as the pillars of modern economic value. This shift opens the door to new ways of thinking about what backs up money as legal tender. The rise of the digital economy illustrates how non-physical assets can drive substantial value creation. This paradigm shift provides a framework for integrating environmental assets into financial markets, recognising their essential role in supporting economic stability and regenerative growth.

The Case for Environmental Assets as Financial Instruments

The emergence of alternative ideas about what backs up money as legal tender (think digital and cryptocurrencies) is an important consideration. If transactions of once-esoteric homemade digital currencies are credible and acceptable, why not biodiversity units, nature credits, or carbon credits resting on the underlying value of lasting environmental health? The emergence of alternative ideas about financial backing reflects a broader trend toward recognising the intrinsic value of sustainability. Carbon credits can fund large-scale woodland creation schemes; BNG credits can be catalysts for habitat restoration and creation. By establishing these instruments as credible financial assets, we can drive investment toward sustainable practices and technologies.

Building a Sustainable Capitalist Model

Capitalism needs to evolve to prioritise long-term environmental and social well-being over short-term profits. This requires a fundamental shift in how we all define success and measure economic progress. By incorporating carbon pricing and other environmental considerations into our financial systems, we can create a model of capitalism that supports truly sustainable development. This new model would emphasise metrics like social return on investment (SROI) and alignment with the United Nations Sustainable Development Goals (UN-SDGs), uniting business performance with broader societal goals.

The Role of Innovation and Technology

Innovation and technology will play a crucial role in this transition. Digital platforms can enhance the transparency and efficiency of carbon markets, making it easier for businesses and individuals to participate. Blockchain technology, for example, can provide secure and transparent tracking of carbon credits, ensuring that emissions reductions are verifiable and preventing fraud. Similarly, advancements in AI and data analytics can optimise regenerative land management and enhance the effectiveness of remote data acquisition and monitoring habitat creation and restoration.

Education and Public Awareness

Educating the public about the importance of carbon pricing and environmental protection is essential. When people understand the financial and ecological benefits of sustainable practices, they are more likely to support policies and initiatives that promote these goals. Public awareness campaigns, educational programs, and transparent communication from policymakers can help build the necessary support for carbon pricing. Engaging communities through participatory approaches can also foster a deeper connection to environmental issues, driving grassroots support for sustainable policies.

Embrace a Sustainable Future

The urgency of pricing carbon cannot be overstated. As we face unprecedented environmental and social challenges, it is imperative that we recognise the true value of our natural assets. By integrating carbon pricing into the financial mainstream, we can create a more sustainable and equitable economy that prioritises the well-being of both people and the planet. This transition requires international cooperation, innovative thinking, and a commitment to redefining value in a way that ensures a prosperous future for all. Embracing this change will not only protect our environment but also promote social equity and economic resilience.

Acknowledgements

Pricing the Priceless by Paula DiPerna .

The above piece was heavily influenced by the work and writing of Paula Diperna including a number of quotes taken very closely from the original text. I have and continue to recommend the book as a must-read for those interested in the intersection of financial systems and the natural world.