Conservation Comment: Pay to sustain environment

You've heard of the Polluter Pays Principle (PPP), haven't you? It is a relatively simple idea, really.

When some of the costs of human actions or economic activity are borne by society at large, rather than entirely by those who benefit from those actions or activities, then society should act to ensure that these costs are internalised - ie, borne by those who are profiting - or that we are fully compensated for having to clean up or mitigate any resulting negative impacts.

An obvious example would be where someone discharges polluted water into a river, thereby degrading water quality and adversely affecting others who use that resource.

In such a case, government, representing society, can set and enforce water-quality standards for discharged waste water, thereby compelling some form of water treatment before release or imposing a rate at least equivalent to the costs of cleaning up the polluted waterway.

Another example would be the question of a carbon tax or other economic instrument designed to encourage reductions in carbon emissions and a shift to more carbon-efficient technologies, thereby lowering the eventual social costs of having to deal with the impacts of human-induced climate change.

Of course, it isn't that simple.

Although firms and their shareholders are the principal beneficiaries, the public also gains: employment and the expenditure of associated salaries and wages; the production of goods that people need or want; and further investment by shareholders.

Sometimes, the argument goes, these broader benefits outweigh the associated societal costs. Forcing producers to internalise all their costs could see some of them withdraw from the market or fail because their products are too costly. And that is where the arguments begin.

Who should pay what? Who benefits and who loses, in what ways, and by how much? How do you measure it all?

There is a flip side to this idea.

It involves the case where others benefit substantially from the actions of individuals or firms working in their own best interests. The most commonly cited examples are in the fields of education and healthcare. For example, individuals who pay for their higher education eventually benefit us all by becoming better skilled and more economically productive.

This is what economists call a 'positive externality' (as opposed to the 'negative externalities' discussed above): a benefit that is enjoyed by third-parties as a result of an action in which they are not directly involved.

We surely have an interest in promoting positive externalities.

So let's consider conservation. Some people work to maintain environmental quality or recover a degraded resource or ensure that we continue to benefit from the services that we get for free from properly functioning ecosystems: clean water; fresh air; productive soils; pollination; pest control.

Controlling erosion, protecting waterways and catchments, conserving biodiversity, and maintaining ecosystems, all produce positive externalities.

If we penalise those who create negative externalities, by applying PPP, shouldn't we be equally willing to support and reward those who produce positive externalities, to encourage them to continue doing so or do more?

After all, there are usually both direct and opportunity costs to their activities, which currently they bear privately, while we all benefit.

Aargh! a "subsidy", I hear you scream. But is it? Isn't it just sensible to reward those whose activities benefit society more broadly?

To me, accommodating a negative externality sounds like the real subsidy.

Paying to maintain environmental services is perhaps an idea whose time has come. It has elsewhere in the world. Why not here?

-Peter Frost is an environmental scientist who has worked on issues of environment and development overseas. He wonders if our current approach to environmental issues is sufficiently holistic.