Ecological Economics (DP IB Environmental Systems & Societies (ESS))

Ecological Economics

The relationship between economy and environment

• Ecological economics is a way of looking at how the economy fits into the bigger picture of the Earth's biosphere

  • It sees the economy as just one part of the larger natural world

• Unlike environmental economics, which focuses on how economic activities affect the environment, ecological economics goes further

  • It sees the economy as a subsystem of the Earth's biosphere

  • The social system, including human societies and economies, is considered a smaller part of the bigger global ecological system

Flows of energy and matter in the biosphere

• In ecological economics, the biosphere is seen as a system fuelled by solar energy

  • This solar energy sustains natural resources like air, water and soil

• These natural resources then flow into the economic subsystem

  • The economy uses these resources to produce goods and services

  • However, this production also generates waste and releases low-grade thermal energy back into the biosphere

• Generation of waste:

  • When industries or human activities produce goods and services, there are often by-products or waste materials created in the process. For example:

    • Factories manufacturing goods might produce chemical waste or packaging materials that are not reused or recycled

    • Agriculture can generate agricultural runoff, which includes pesticides and fertilisers, polluting water sources

    • Industries use water and release polluted water back into rivers. This affects not only the environment but also communities relying on clean water sources

• Release of low-grade thermal energy:

  • When energy is used in economic activities, not all of it gets converted into useful forms like electricity or mechanical energy

  • Some of this energy dissipates as heat, known as low-grade thermal energy

  • Examples include:

    • Burning fossil fuels for energy production in power plants—while some energy is converted into electricity, a significant portion is lost as heat during the process

    • The operation of vehicles and machinery also generates heat as a by-product

• Once waste materials and low-grade thermal energy are generated in economic activities, they are released back into the biosphere, which includes the Earth's atmosphere, land, and water bodies

  • This can have various impacts on the environment, such as pollution of air, water and soil, as well as contributing to climate change

Sustainable use of natural resources

• Ecological economics emphasises the importance of using natural resources sustainably

  • This means ensuring that we don't use up all our resources, leaving nothing for future generations

  • For example, many companies are increasingly adopting sustainable practices like using renewable energy sources or reducing waste to protect natural resources

• This approach applies the precautionary principle

  • This means being cautious and taking preventive action before extracting or using natural resources, particularly if the full impact of the particular activity is not known

  • This can help minimise the unforeseen environmental and social impacts of economic activities

Value of natural capital

• Ecological economics doesn't just focus on traditional forms of capital like money, land or property

  • It also considers natural capital, human capital (like skills and knowledge), and physical capital (like machinery)

• In ecological economics, natural capital—things like forests, oceans, and biodiversity—is considered just as valuable as human-made resources like electronic gadgets, clothing or other products

  • Recognising the full value of natural capital helps make decisions that benefit both the economy and the environment

  • National parks and reserves are examples of how countries prioritise protecting natural capital for the benefit of future generations and biodiversity conservation

Valuation of Ecosystem Services

• While environmental economics also considers the economic value of ecosystem services, ecological economics places even more emphasis on this

  • Ecosystem services are the benefits that people receive from nature, like clean air, water, and food

Global resource dynamics

• In ecological economics, it is recognised that there is an unequal distribution of natural resources between different countries

  • Some countries have lots of resources, while others have fewer

• "Resource-depleted" countries might pay "resource-rich" developing countries to protect their natural assets (also ensuring the protection of the valuable ecosystem services they provide)

  • This sometimes happens when developing countries risk using up their resources for economic development

  • For example, Norway pays Brazil to help protect the Amazon rainforest, which provides vital ecosystem services like carbon sequestration and biodiversity preservation

  • Another example might be wealthy nations in Europe paying nations in Africa to conserve wildlife habitats, such as savannahs and grasslands, to preserve biodiversity and support ecotourism

    • This helps prevent the overexploitation of natural resources in these developing countries, whilst also promoting conservation efforts and sustainable development

Looking beyond material value

• Ecological economics sees natural assets and resources as having value beyond just the material goods that can be extracted from them

  • For example, ecological economics sees forests as having value beyond just the timber they provide

  • Forest also provide ecological services, like habitat for wildlife, carbon storage and erosion protection

  • They also have aesthetic value for tourism and recreation, and ethical value for biodiversity conservation

• This can have economic benefits

  • For example, the tourism industry in countries like Costa Rica benefits from the preservation of their natural assets, including forests and biodiversity, contributing significantly to their economy

Tensions between countries

• Paying for ecosystem services can create tensions between countries

  • Countries that have depleted their natural assets in the past may pay others to preserve theirs

  • This can lead to debates about sovereignty and fairness

• Disputes often arise between developed countries, who are seeking to conserve global biodiversity and slow down climate change, and developing countries, who are prioritising their own economic development

Issues Caused by Payments for Ecosystem Services