Opinion – Why? Economese in good Portuguese: Do we need to choose between economy and environment?

If someone who cares about the environment is asked how much a company or country should pollute, it seems reasonable to assume that the answer is “zero”. However, the truth is that, in the model of society we live in today, it is impossible to have zero pollution. Most activities in the economy generate some kind of “waste” or “environmental harm”. And we know that, as was noticed during Covid-19’s expansion around the world and the consequent lockdown, it is impossible (and undesirable) to completely stop the economy from reaching that zero. People need to eat, work, etc., and in all these activities, some kind of exploitation of the environment is inevitable, with by-products such as pollution, deforestation, reduction of biodiversity. So what should be “optimal” wear? That is, how much pollution is acceptable given society’s needs? How much use of environmental resources can be tolerated for them to be depleted in the long run? The answer to these questions is not so easy.

In traditional economics, it is customary to think that there is a trade-off between economic development and environmental preservation. That is, for the economy to grow, it will be necessary to sacrifice a little of the environment, or for the preservation of ecosystems it will be necessary to give up the monetary gains of individuals, companies, countries, etc. One form used to illustrate this idea in books is that of a curve, called the “production possibility frontier”. The curve shows that an increase in environmental protection involves an opportunity cost of lower economic production. Thus, each society will have to weigh its own values ​​and decide whether it prefers more economic production and less environmental protection, or some other combination of the two elements. Based on this choice, the optimal amount of pollution that a country should generate will then be derived. But how are countries going to make this kind of decision?

Doing these accounts is quite complicated. “Environmental protection” is not something that is on the market. There is no price or value given to protecting natural resources. Therefore, it is difficult to compare economic gains (more easily monetized) with environmental gains or costs. But, if countries choose to grow economically at the expense of the environment, they will certainly bear these costs in the future, including in monetary form.

For example: because of global warming and climate emergencies, it will be more costly to produce food. There may also be an increased incidence of some diseases related to climate change or as a result of human actions such as deforestation (insect-borne diseases such as malaria) or air pollution (such as asthma and respiratory diseases in children and the elderly). These diseases will bring costs to the government with hospitalizations and treatment. Climate change could also generate exposure to new pathogens that could trigger other pandemics (such as Covid’s) in the future.

This raises clear questions for the trade-off that, in order to achieve economic gains, environmental protection must be sacrificed. In the long run, of course, growth that is not concerned with environmental depredation will be unsustainable. So are the environment and the economy so incompatible?

Currently, the market is signaling in another direction. Especially in the current context of climate emergency and the demand for sustainability, initiatives are increasingly emerging showing how the implicit value of natural resources can be translated into economic gains, going in the opposite direction to this trade-off. A classic example is carbon credits, which, in a very simple way, are certificates issued to a person or company that has reduced its greenhouse gas emissions, and which can be exchanged on the market.

Thanks to products like this, many people started to bet on strategies that benefit the environment. Nowadays, there is a lot of talk around the world about subsidies for low carbon agriculture, ESG-type investments, sustainable business, circular economy etc. The data increasingly seems to confirm that natural resources and the environment are also economic assets.

Brazil is a country that, due to its wealth of natural resources (most of the world’s most extensive tropical forest, the Amazon, for example, is in our territory), would have much to gain by promoting this movement to monetize the environmental agenda. There are even those who say that this could be the key for Brazil to recover from the economic crisis created by the political decisions of recent years and by the Covid-19 pandemic. This would be the famous “green economic recovery”, which has appeared so much in political agendas, based on contributions and investments focused on reducing the emission of polluting gases and encouraging non-deforestation and the use of clean energy. This concept and others related to environmental economics will be addressed in a simple way, without “economese”, in our own publications.