Pavan Sukhdev is the head of the UN Green Economy Initiative and study leader of The Economics of Ecosystem Biodervisity Report.
In this interview with Climate Spectator editor Giles Parkinson, Suhkdev argues that the world needs new policies and new business thinking to balance its environmental books, and needs to measure natural capital.
Giles Parkinson: Welcome Pavan. I guess one of the premises of this green economy initiative which you’re involved in is that we’re reaching an environmental credit crunch. How close are we to that?
Pavan Sukhdev: I think we are actually very close, depending on which aspect of the environment you look at. I think fresh water, for instance, is already a problem in many, many parts of the world, not least Australia. I think we are at a point where food security is an issue and I believe we are close to a point with coral reefs where their survival and therefore the dependence of 500 million people around the world who live close to or are dependent on their fisheries. That’s also very, very close. So we are kind of hitting multiple limits and it’s recognising that and seeing how new policies, new business thinking and new people awareness can address these issues is the challenge.
GP: Part of the thinking with the green economy initiative and TEEB for Business is that we can bring some of these assets onto the balance sheets of corporations, or get them to account for it in the way they do business.
PS: We can certainly, for a start, bring natural capital onto the country’s balance sheet, which we don’t do now. Today we have a bizarre situation where our biggest asset is not on our balance sheet as a country and I think that’s wrong. That’s a mistake because you tend to then not account for depreciation. Indeed you don’t measure it and therefore you don’t manage it. Natural capital, most of which are in the form of public goods, clean air, fresh water, nutrients and water from the forest to the field; the value of biodiversity, pollination, all that stuff, basically is free. So, it doesn’t figure in GDP calculations, it doesn’t figure in savings and the net result is that when it gets lost, you don’t notice. You know there are no alarm bells ringing. There’s no headline screaming saying that ‘natural capital declined 8 per cent this year’ – shock, horror. Nobody says that because nobody’s measured it. That’s the challenge.
GP: It must surely be a huge challenge because we’ve been talking for 20 years about greenhouse gas emissions. How do we get other such things onto it?
PS: Onto the national balance sheets?
GP: Yes.
PS: I think there is a way. Firstly where there is a will, there is a way. Let’s create the will first. And I think the will is also partly political mood, but partly people awareness. The reality is just that this is not in people’s minds as yet and that’s part of the challenge. How do you get them to realise that there’s a problem? And when that happens, then there’ll be two strands of action. One is corporations will be asked to start recognising their externalities; in other words, the impacts on nature of their business… normal business. Now, I’m not saying there’s anything illegal about any of this. This is normal business impacts of a corporation on nature. It’s just that because nature’s flows are free, so we don’t account for that. And secondly at the country level, at the government level we need to start recognising forests as a store of carbon, but also as a store of biodiversity. We need to start recognising fresh water, lakes and rivers and so on and wetlands. We need to start recognising coral reefs and start recognising coastal areas. So, there’s a way of beginning to reflect these in the accounts of society in the national balance sheet. You can begin with what’s easy and what today is easy is just reflecting forests as a store of carbon. Later on… And that’s via satellite account, so we’ve got enough data to do that. You start doing that and then you start reflecting the other values of the forests as well. And then you start reflecting fresh water. So, it’s a step by step process. Look, we have an incomplete balance sheet, right?
GP: Yes.
PS: So, now if you want the perfect balance sheet, then goodbye. See you in a hundred years’ time, right? But if you want a reasonably good balance sheet, start now, start with forest carbon.
GP: Ok. How would it work though for companies in the sense of how would they bring such matters into the way that they do business? I think there’s the Trucost report which estimated that there were $2 trillion of biodiversity and other environmental losses from the activities of the largest corporations in the past year. How do we account for that? Are we to put that on their profit and loss statements or…?
PS: No. We are not saying that. Basically you can’t because these are public losses, so these are the impacts on the public of the operations of a company. So, you should account for them as externalities; in other words, disclose them in additional annexure, so that’s the direction that we are asking for. In a company today you have contingent liabilities. Now, you put that in as an annexure, right? It’s disclosed. It’s not part of P and L. It could be. We need to recognise these costs which are externalities. What do we mean by that? It’s basically carbon emissions which are a cost to society overall. It means mispriced fresh water. There’s no harm in using fresh water. The question is what price? It means pollution; anything that is not controlled and not governed and its impacts. So, all of these are calculable impacts on society and what we’re saying is they should be calculated and they should be reported on an annual basis. Of course it’s easier said than done. You need to have standards as to how you calculate emissions. Is it up to your product or is it the entire lifecycle of the product? Do you account for just what your company did or do you also take into account what you inherited? So, even with something ‘simple’ as carbon, there is a technology to it, but we need to move this forward. You can decide. Here is a standard. Let’s go this way.
GP: But unless you give corporations a reason to act; in other words, to make money or to save money , they’re probably not going to act, are they?
PS: Well, they act on their own for their main purpose, which is to enhance profits, which is basically to achieve shareholder capital as in financial capital, but in addition corporates also act based on regulation. So, a corporate will disclose contingent liabilities, it will disclose directors’ bonuses, not because it feels like doing so because it’s part of P and L, but because guess what? Someone has told it to. So, laws can be imposed. Accounting regulation can be imposed. There was a time a hundred and some years ago when balance sheet events didn’t exist. It waited for Mr Arthur Andersen to see a steamer sinking in a lake in the US to realise oh my God, I need to put in a disclosure. So, essentially we’ve evolved today’s balance sheet and today’s reporting requirement. There’s a lot in there already. What we’re saying is take it one step further.
GP: Can you give us some insight and the sorts of recommendations that you’ll be making when the report is delivered in September or October?
PS: There are actually a few reports on the corporate side where we’ve already suggested that corporations should start recognising their externalities; in other words, calculating it and working with their accountancy bodies to set standards and at a later stage start setting requirements towards disclosing these externalities. We’d like them to focus on the carbon externality because that of all the externalities that is actually the easiest one to compute and then there’ll be others to follow including forests and fresh water and biodiversity and so on. So, that’s as far as the corporates are concerned. And what we’re saying with the policymakers is that it’s really important to stop the economic invisibility of nature. Start valuing these flows in terms of the human welfare benefits that you do see and you do measure. Attach the origin of that to the cause which is nature and then recognise that, look, if there is a flood or there is a drought, what you are saying is that you’ve lost the field and the … forest - then you need to connect the loss to the flood or the drought. What we are saying is just be holistic in the way you are account for these effects. Don’t just measure the end result and say, oops that was a loss and we need to spend some more GDP to correct it, but actually work to prevent the loss.
All of this means having policies where nature and its flows are valued, which means payments for ecosystem services. It means resource taxes. Payments for ecosystem services include stakeholder rewards right down to the community level in some cases. It means things like getting small markets operating for fresh water, biodiversity markets, biodiversity banking, wetland banking. It means basically also getting the whole visibility going by national accounting. Today the system of national accounts does not actually account for natural capital and we are asking for that to happen. Once again starting with what’s easy and then moving forward.
GP: One of the problems with the whole carbon issue has been that it is portrayed in public policy debates as a cost, even though long term it may well be a benefit. How do you get over that public policy issue about let’s not pay an extra two dollars for whatever and to get these laws and these recommendations and these markets into effect?
PS: By telling the policymakers they are already paying an extra not two, but twenty or forty or eighty dollars. They are already paying that cost. It’s just that it’s not coming through to you today. It’ll come to you later or through your children or your grandchildren. These are costs that your society bears. It may not be you as the individual or you as the corporation, but by emitting carbon dioxide you have hurt your future economy, right. Now, this is the whole point. So, we have to be once again holistic in the way we recognise costs, not only count the cost to me personally, but to the society in which I am.
GP: Can you give me an example how implementing some of the measures that you’re proposing will actually bring a benefit rather than a cost?
PS: Absolutely. Oh no, we’ve got our report that’s coming out in September which is on local governments, we’ve got literally a hundred examples. So, here’s a lovely one. Where a decision had been made outside Kampala (Uganda) to get rid of a swamp in order to convert those forty square kilometres into agricultural land, someone then in their department noticed well actually the swamp is in fact a natural waste management facility because the sewerage from Kampala was going in there and being treated by the swamp grasses and the swamp water. And then they worked out how much it would cost to set up a sewerage treatment plant. Well, guess what? It was about nine or ten times what they would get by converting the land into agricultural. Then they decided to change the decision. It’s an actual example.
Another one from New Delhi where they had decided to convert a lot of land (on the banks of the Yumana Rivera) into more space for construction and housing and they found once again when they did the calculations… the gentleman who did them is one of our team… they found the value of the wetland in terms of absorbing shocks from river floods and in terms of providing livelihood for the poor in that area was much higher than converting it into more construction. So, they changed that decision as well. So, the policy can respond if you work out the economics properly and not just look at economics in terms of how much does company A or company B make in profits, but rather look at it in terms of how much does the benefit flow to society change by doing this choice?
GP: Any particular examples for Australia then and how this might apply?
PS: I think water is a very interesting area … how fresh water is priced and to look at the relative return on investment of actions such as afforestation and reforestation as a way of enhancing fresh water stocks and fresh water capacity versus the other more mechanical means such as desalination plants and so on. So, I think that’s a calculation that’s well worth doing. I’m not sure if it’s been done as yet, but it’s worth doing that.
GP: And you’re meeting with some government ministers during your visit here I understand.
PS: Yes.
GP: What will you be recommending to them or what will you be telling them?
PS: Well, I’m actually here to ask them for their support … firstly I’ll be reporting to them the progress that is being made in developing countries, in China and India and in fact actually in some African countries as well on greening their economy all the way from fresh water… from solar water heaters in China to India’s natural capital regeneration projects to Uganda’s organic farming to Bangladesh’s solar PVs and so on. So, there are a lot of success stories and I want to get a sense from the Australian government as to whether they’re interested in cashing in on the window of opportunity that we believe is there for the next five, eight years.
GP: What sort of opportunities are you talking about?
PS: We’re talking about new technologies. I mean there’s a lot of new technologies that are being brought to the table, but a lot of this it seems to be now coming out and is being captured by China and India and a few other majors and I’m just wondering whether Australia wants to sit back and wait while it gets overtaken or does it want to just step forward and change?
GP: In talking to people about these ideas, about the green economy and accounting for biodiversity, what sort of resistance are you getting? Why are you getting it? And from where are you getting it?
PS: To be honest the resistance is as much… is basically vested interest resistance because for instance there are a lot of subsidies that are in play today. The International Energy Agency, the IEA, has come out with a report which says that price subsidies on fossil fuels are about $US557 billion dollars per annum. Now, you know the numbers that are needed for sorting out the costs of climate change litigation. They are much lower than that. And the IEA have not even calculated the production subsidies because there are issues with some of its members and estimates are difficult to do in the case of production, but various people have said of the order of a $US100 billion. So, let’s say $US650 billion worth of fossil fuels subsidies, then there are $275 billion which is the Food and Agriculture Organisation’s estimate of agriculture subsidies, then there’s probably the most dangerous of all which is the $20 odd billion worth of bad and ugly fishery subsidies. There is like a trillion dollars worth of subsidies out here. What is going on? We need to ask why you are doing that?
GP: That’s a fair amount of vested interests and I think as we’ve seen in the discussion of the carbon debate and even the resource rent tax… which you’ve mentioned as a possible measure… when those vested interests get mobilised they are able to dominate completely the public debate.
PS: Sometimes they can and sometimes they don’t and really it is up to the government to step in there and create a sense of balance and order and at the end of the day governments work, and should work, in the interests of the citizen. And that is part of the problem I think. We have to go back to the nexus between the corporation and the government and examine it and I think part of the problem is actually the solution which is that it’s… the government’s revenues are so dependent upon corporation taxes and indeed that it tends to become difficult for a government to enact something which requires a change in that corporate tax law.
In fact the answer is the problem itself which is that you don’t have enough resource rent taxes. If you had enough resource rent taxes or in fact not even taxes… They are really resource rents... you have mispriced resource rents. You have effectively super normal profits being created in corporations which you are not taxing because resource rents are too low. They may have been set a hundred years ago by a lease, right. So, that being the case, clearly it is a question of government wisdom and leadership in government to address these issues.
GP: But that’s a mighty big nexus to break.
PS: Of course it is. But what’s the point in breaking small ones?
GP: You’ve been described as the Nicholas Stern of biodiversity. Is that a description that you feel comfortable with?
PS: I feel embarrassed, but at the same time flattered by that because I think Nick Stern is one of my inspirations and indeed the Stern Review is the inspiration for the TEEB Report for which I am study leader. I must say that Lord Stern is also an advisory board member of the TEEB project. And I think what Lord Stern did in an outstanding way is to make society at large recognise the economic impacts of climate change and the reality that the economic choice that we are making is in fact a bad choice. If we delay action or if we take no action, then that it is a bad economic decision and not the other way around. In other words, that the benefits of early action exceed the costs.
GP: In Australia … there is inertia on, for instance, the carbon debate and other such things. Is that really your sense of what’s happening in the broader world in either developed or developing countries?
PS: It is the case in some developed countries, but I’m quite impressed in my travels and in my conversations with the sorts of initiatives being taken in some of the developing world, in particular China and India and many countries who have really stepped forward and are working quite actively with the United Nations environment programme towards the transition towards a green economy. And we have something like twenty governments who have expressed interest to us to investigate and work upon how they can transition towards a green economy.
And of course there are few leaders in Europe especially who are well on the way towards a green economy in terms of renewables – renewables as part of the energy source in terms of building retrofits, in terms of working towards materials and energy intensity of production. So, there are a few leaders who are kind of well known and well established, but what is impressing me is actually the kind of leadership being shown by the developing world.
GP: Ok, Pavan, thank you very much for joining us.
PS: You’re welcome. All the best.
Pavan Sukhdev is visiting Australia as a guest of the Centre for Policy Development.
Pavan Sukhdev is the head of the UN Green Economy Initiative and study leader of The Economics of Ecosystem Biodervisity Report.
In this interview with Climate Spectator editor Giles Parkinson, Suhkdev argues that the world needs new policies and new business thinking to balance its environmental books, and needs to measure natural capital.
Giles Parkinson: Welcome Pavan. I guess one of the premises of this green economy initiative which you’re involved in is that we’re reaching an environmental credit crunch. How close are we to that?
Pavan Sukhdev: I think we are actually very close, depending on which aspect of the environment you look at. I think fresh water, for instance, is already a problem in many, many parts of the world, not least Australia. I think we are at a point where food security is an issue and I believe we are close to a point with coral reefs where their survival and therefore the dependence of 500 million people around the world who live close to or are dependent on their fisheries. That’s also very, very close. So we are kind of hitting multiple limits and it’s recognising that and seeing how new policies, new business thinking and new people awareness can address these issues is the challenge.
GP: Part of the thinking with the green economy initiative and TEEB for Business is that we can bring some of these assets onto the balance sheets of corporations, or get them to account for it in the way they do business.
PS: We can certainly, for a start, bring natural capital onto the country’s balance sheet, which we don’t do now. Today we have a bizarre situation where our biggest asset is not on our balance sheet as a country and I think that’s wrong. That’s a mistake because you tend to then not account for depreciation. Indeed you don’t measure it and therefore you don’t manage it. Natural capital, most of which are in the form of public goods, clean air, fresh water, nutrients and water from the forest to the field; the value of biodiversity, pollination, all that stuff, basically is free. So, it doesn’t figure in GDP calculations, it doesn’t figure in savings and the net result is that when it gets lost, you don’t notice. You know there are no alarm bells ringing. There’s no headline screaming saying that ‘natural capital declined 8 per cent this year’ – shock, horror. Nobody says that because nobody’s measured it. That’s the challenge.
GP: It must surely be a huge challenge because we’ve been talking for 20 years about greenhouse gas emissions. How do we get other such things onto it?
PS: Onto the national balance sheets?
GP: Yes.
PS: I think there is a way. Firstly where there is a will, there is a way. Let’s create the will first. And I think the will is also partly political mood, but partly people awareness. The reality is just that this is not in people’s minds as yet and that’s part of the challenge. How do you get them to realise that there’s a problem? And when that happens, then there’ll be two strands of action. One is corporations will be asked to start recognising their externalities; in other words, the impacts on nature of their business… normal business. Now, I’m not saying there’s anything illegal about any of this. This is normal business impacts of a corporation on nature. It’s just that because nature’s flows are free, so we don’t account for that. And secondly at the country level, at the government level we need to start recognising forests as a store of carbon, but also as a store of biodiversity. We need to start recognising fresh water, lakes and rivers and so on and wetlands. We need to start recognising coral reefs and start recognising coastal areas. So, there’s a way of beginning to reflect these in the accounts of society in the national balance sheet. You can begin with what’s easy and what today is easy is just reflecting forests as a store of carbon. Later on… And that’s via satellite account, so we’ve got enough data to do that. You start doing that and then you start reflecting the other values of the forests as well. And then you start reflecting fresh water. So, it’s a step by step process. Look, we have an incomplete balance sheet, right?
GP: Yes.
PS: So, now if you want the perfect balance sheet, then goodbye. See you in a hundred years’ time, right? But if you want a reasonably good balance sheet, start now, start with forest carbon.
GP: Ok. How would it work though for companies in the sense of how would they bring such matters into the way that they do business? I think there’s the Trucost report which estimated that there were $2 trillion of biodiversity and other environmental losses from the activities of the largest corporations in the past year. How do we account for that? Are we to put that on their profit and loss statements or…?
PS: No. We are not saying that. Basically you can’t because these are public losses, so these are the impacts on the public of the operations of a company. So, you should account for them as externalities; in other words, disclose them in additional annexure, so that’s the direction that we are asking for. In a company today you have contingent liabilities. Now, you put that in as an annexure, right? It’s disclosed. It’s not part of P and L. It could be. We need to recognise these costs which are externalities. What do we mean by that? It’s basically carbon emissions which are a cost to society overall. It means mispriced fresh water. There’s no harm in using fresh water. The question is what price? It means pollution; anything that is not controlled and not governed and its impacts. So, all of these are calculable impacts on society and what we’re saying is they should be calculated and they should be reported on an annual basis. Of course it’s easier said than done. You need to have standards as to how you calculate emissions. Is it up to your product or is it the entire lifecycle of the product? Do you account for just what your company did or do you also take into account what you inherited? So, even with something ‘simple’ as carbon, there is a technology to it, but we need to move this forward. You can decide. Here is a standard. Let’s go this way.
GP: But unless you give corporations a reason to act; in other words, to make money or to save money , they’re probably not going to act, are they?
PS: Well, they act on their own for their main purpose, which is to enhance profits, which is basically to achieve shareholder capital as in financial capital, but in addition corporates also act based on regulation. So, a corporate will disclose contingent liabilities, it will disclose directors’ bonuses, not because it feels like doing so because it’s part of P and L, but because guess what? Someone has told it to. So, laws can be imposed. Accounting regulation can be imposed. There was a time a hundred and some years ago when balance sheet events didn’t exist. It waited for Mr Arthur Andersen to see a steamer sinking in a lake in the US to realise oh my God, I need to put in a disclosure. So, essentially we’ve evolved today’s balance sheet and today’s reporting requirement. There’s a lot in there already. What we’re saying is take it one step further.
GP: Can you give us some insight and the sorts of recommendations that you’ll be making when the report is delivered in September or October?
PS: There are actually a few reports on the corporate side where we’ve already suggested that corporations should start recognising their externalities; in other words, calculating it and working with their accountancy bodies to set standards and at a later stage start setting requirements towards disclosing these externalities. We’d like them to focus on the carbon externality because that of all the externalities that is actually the easiest one to compute and then there’ll be others to follow including forests and fresh water and biodiversity and so on. So, that’s as far as the corporates are concerned. And what we’re saying with the policymakers is that it’s really important to stop the economic invisibility of nature. Start valuing these flows in terms of the human welfare benefits that you do see and you do measure. Attach the origin of that to the cause which is nature and then recognise that, look, if there is a flood or there is a drought, what you are saying is that you’ve lost the field and the … forest - then you need to connect the loss to the flood or the drought. What we are saying is just be holistic in the way you are account for these effects. Don’t just measure the end result and say, oops that was a loss and we need to spend some more GDP to correct it, but actually work to prevent the loss.
All of this means having policies where nature and its flows are valued, which means payments for ecosystem services. It means resource taxes. Payments for ecosystem services include stakeholder rewards right down to the community level in some cases. It means things like getting small markets operating for fresh water, biodiversity markets, biodiversity banking, wetland banking. It means basically also getting the whole visibility going by national accounting. Today the system of national accounts does not actually account for natural capital and we are asking for that to happen. Once again starting with what’s easy and then moving forward.
GP: One of the problems with the whole carbon issue has been that it is portrayed in public policy debates as a cost, even though long term it may well be a benefit. How do you get over that public policy issue about let’s not pay an extra two dollars for whatever and to get these laws and these recommendations and these markets into effect?
PS: By telling the policymakers they are already paying an extra not two, but twenty or forty or eighty dollars. They are already paying that cost. It’s just that it’s not coming through to you today. It’ll come to you later or through your children or your grandchildren. These are costs that your society bears. It may not be you as the individual or you as the corporation, but by emitting carbon dioxide you have hurt your future economy, right. Now, this is the whole point. So, we have to be once again holistic in the way we recognise costs, not only count the cost to me personally, but to the society in which I am.
GP: Can you give me an example how implementing some of the measures that you’re proposing will actually bring a benefit rather than a cost?
PS: Absolutely. Oh no, we’ve got our report that’s coming out in September which is on local governments, we’ve got literally a hundred examples. So, here’s a lovely one. Where a decision had been made outside Kampala (Uganda) to get rid of a swamp in order to convert those forty square kilometres into agricultural land, someone then in their department noticed well actually the swamp is in fact a natural waste management facility because the sewerage from Kampala was going in there and being treated by the swamp grasses and the swamp water. And then they worked out how much it would cost to set up a sewerage treatment plant. Well, guess what? It was about nine or ten times what they would get by converting the land into agricultural. Then they decided to change the decision. It’s an actual example.
Another one from New Delhi where they had decided to convert a lot of land (on the banks of the Yumana Rivera) into more space for construction and housing and they found once again when they did the calculations… the gentleman who did them is one of our team… they found the value of the wetland in terms of absorbing shocks from river floods and in terms of providing livelihood for the poor in that area was much higher than converting it into more construction. So, they changed that decision as well. So, the policy can respond if you work out the economics properly and not just look at economics in terms of how much does company A or company B make in profits, but rather look at it in terms of how much does the benefit flow to society change by doing this choice?
GP: Any particular examples for Australia then and how this might apply?
PS: I think water is a very interesting area … how fresh water is priced and to look at the relative return on investment of actions such as afforestation and reforestation as a way of enhancing fresh water stocks and fresh water capacity versus the other more mechanical means such as desalination plants and so on. So, I think that’s a calculation that’s well worth doing. I’m not sure if it’s been done as yet, but it’s worth doing that.
GP: And you’re meeting with some government ministers during your visit here I understand.
PS: Yes.
GP: What will you be recommending to them or what will you be telling them?
PS: Well, I’m actually here to ask them for their support … firstly I’ll be reporting to them the progress that is being made in developing countries, in China and India and in fact actually in some African countries as well on greening their economy all the way from fresh water… from solar water heaters in China to India’s natural capital regeneration projects to Uganda’s organic farming to Bangladesh’s solar PVs and so on. So, there are a lot of success stories and I want to get a sense from the Australian government as to whether they’re interested in cashing in on the window of opportunity that we believe is there for the next five, eight years.
GP: What sort of opportunities are you talking about?
PS: We’re talking about new technologies. I mean there’s a lot of new technologies that are being brought to the table, but a lot of this it seems to be now coming out and is being captured by China and India and a few other majors and I’m just wondering whether Australia wants to sit back and wait while it gets overtaken or does it want to just step forward and change?
GP: In talking to people about these ideas, about the green economy and accounting for biodiversity, what sort of resistance are you getting? Why are you getting it? And from where are you getting it?
PS: To be honest the resistance is as much… is basically vested interest resistance because for instance there are a lot of subsidies that are in play today. The International Energy Agency, the IEA, has come out with a report which says that price subsidies on fossil fuels are about $US557 billion dollars per annum. Now, you know the numbers that are needed for sorting out the costs of climate change litigation. They are much lower than that. And the IEA have not even calculated the production subsidies because there are issues with some of its members and estimates are difficult to do in the case of production, but various people have said of the order of a $US100 billion. So, let’s say $US650 billion worth of fossil fuels subsidies, then there are $275 billion which is the Food and Agriculture Organisation’s estimate of agriculture subsidies, then there’s probably the most dangerous of all which is the $20 odd billion worth of bad and ugly fishery subsidies. There is like a trillion dollars worth of subsidies out here. What is going on? We need to ask why you are doing that?
GP: That’s a fair amount of vested interests and I think as we’ve seen in the discussion of the carbon debate and even the resource rent tax… which you’ve mentioned as a possible measure… when those vested interests get mobilised they are able to dominate completely the public debate.
PS: Sometimes they can and sometimes they don’t and really it is up to the government to step in there and create a sense of balance and order and at the end of the day governments work, and should work, in the interests of the citizen. And that is part of the problem I think. We have to go back to the nexus between the corporation and the government and examine it and I think part of the problem is actually the solution which is that it’s… the government’s revenues are so dependent upon corporation taxes and indeed that it tends to become difficult for a government to enact something which requires a change in that corporate tax law.
In fact the answer is the problem itself which is that you don’t have enough resource rent taxes. If you had enough resource rent taxes or in fact not even taxes… They are really resource rents... you have mispriced resource rents. You have effectively super normal profits being created in corporations which you are not taxing because resource rents are too low. They may have been set a hundred years ago by a lease, right. So, that being the case, clearly it is a question of government wisdom and leadership in government to address these issues.
GP: But that’s a mighty big nexus to break.
PS: Of course it is. But what’s the point in breaking small ones?
GP: You’ve been described as the Nicholas Stern of biodiversity. Is that a description that you feel comfortable with?
PS: I feel embarrassed, but at the same time flattered by that because I think Nick Stern is one of my inspirations and indeed the Stern Review is the inspiration for the TEEB Report for which I am study leader. I must say that Lord Stern is also an advisory board member of the TEEB project. And I think what Lord Stern did in an outstanding way is to make society at large recognise the economic impacts of climate change and the reality that the economic choice that we are making is in fact a bad choice. If we delay action or if we take no action, then that it is a bad economic decision and not the other way around. In other words, that the benefits of early action exceed the costs.
GP: In Australia … there is inertia on, for instance, the carbon debate and other such things. Is that really your sense of what’s happening in the broader world in either developed or developing countries?
PS: It is the case in some developed countries, but I’m quite impressed in my travels and in my conversations with the sorts of initiatives being taken in some of the developing world, in particular China and India and many countries who have really stepped forward and are working quite actively with the United Nations environment programme towards the transition towards a green economy. And we have something like twenty governments who have expressed interest to us to investigate and work upon how they can transition towards a green economy.
And of course there are few leaders in Europe especially who are well on the way towards a green economy in terms of renewables – renewables as part of the energy source in terms of building retrofits, in terms of working towards materials and energy intensity of production. So, there are a few leaders who are kind of well known and well established, but what is impressing me is actually the kind of leadership being shown by the developing world.
GP: Ok, Pavan, thank you very much for joining us.
PS: You’re welcome. All the best.
Pavan Sukhdev is visiting Australia as a guest of the Centre for Policy Development.