Philadelphia Reflections

The Accounting of Natural Capital

Libby_Bernick

Libby Beineck, the vice president of a British firm called Trucost, recently visited the Right Angle Club to explain how corporate accounting might be changed to adjust for any external costs to the environment. She is of Quaker ancestry, descended from Samuel Rhoads, the architect of the Pennsylvania Hospital, so the group was immediately congenial. Her company presently values the environment as having a capital value of $7.3 trillion and helps companies calculate how they are adding to, or subtracting from, the world's natural capital.

The club responded well to her message, proceeding to ask a number of friendly questions, a process which accelerated as the questions received thoughtful answers. We are, indeed, using up our heritage of environmental capital, and have led the developing world to imitate us. The thought has to occur that perhaps this sort of consumption is a stage of development, inevitably followed by a strong movement to reverse the damage. They used to keep the streetlights of Pittsburgh lit during the daytime, washed their curtains every week, and never painted a house white if they knew what was good for them. But all this was reversed in just a few years when Richard King Mellon decided he was tired of it and made it stop. Unfortunately, the net capital value of Pittsburgh has probably declined further, because people valued the steel industry less than the environment.

One member of the audience took a far longer view. It was probably Isaac Newton who declared that matter is neither created nor destroyed, it only changes its form. What we refer to as the natural environment was caused by volcanic eruptions and the impact of asteroids. Ultimately, the environment only lasts for the duration of the interval between meteorites and volcanos, and predicting the total dissolution of the environment by the next shift of tectonic plates, is anybody's guess. Ultimately, we are at the mercy of the extrapolation fallacy in all of this. We dare not predict that the next asteroid will hit us after the last one, with the same interval between them. We dare not predict that cheap oil will run out at present rates, or that shale gas will take its place in a completely fortuitous way. If you look at the ocean, there seems to be plenty of water needs have its salt removed, plenty of sunlight from the sun for eons to come, plenty of energy fused into the molecules of the earth. What you can't extrapolate very well at all, is how fast our scientists will find a way to release this limitless supply of energy so we can use it. Some people have more faith in our scientists than others do, so it seems best to conserve what we have. Or rather, to use it up as slowly as we can.

Originally published: Friday, October 11, 2013; most-recently modified: Thursday, June 06, 2019