Resources are finite (or, Eating our seed corn)

Biodiversity loss

By John Waugh, Senior Consultant in Social and Ecological Resilience

As a thought experiment, let us accept, for the sake of argument, that all the value that exists in the world is now present in the world, as defined by planetary boundaries.

Humanity are the collective asset owners of a steady state world. In our world, what we mean when we talk about “creating value” is actually the manipulation (reassigning, relabeling, etc.) of value. We can either conserve or consume value, but when it is gone, it is gone.

Yet, incentives for asset preservation are under-developed. Take the case of extractive industries (including not only hydrocarbon and minerals, but forestry, fisheries and agriculture under industrial conditions). They are incentivized to exploit some assets, but to discard others. For example, industrial logging doesn’t only remove trees; it removes forest ecosystems. Mining degrades watersheds. Industrial demersal fisheries scour the benthos and discard bycatch. Everywhere, extraction incurs debt to future generations by eroding the quality and quantity of benefits that can be derived from such assets. Such industries can be said to be “doubly extractive” in their positive pursuit of some tradeable assets.

In Ovid’s tale, Hermes rewards the hospitality of two peasants, Philemon and Baucis, with a self-filling wine jug. We treat our planetary system like it too were self-filling. A more apt model might be Aesop’s goose, because passing a tipping point in a complex system will produce an irreversible, catastrophic outcome. The effort to wring more and more gold from our planetary goose is short-sited and asset-destroying. Electric vehicles appear to be a tremendous step forward in terms of low emissions development. But is it? The International Energy Agency reports that EVs grew from 17,000 to 7.2 million between 2010 and 2019. Some estimates suggest that EV numbers could jump to 250 million by 2030. Needless to say, lithium prices doubled between 2016 and 2018.

The demand for lithium and other minerals, especially nickel and cobalt, necessary for EV batteries may have already been exceeded, leading suppliers to turn their attention to unexplored and unprotected deep sea hydrothermal vents, as well as open new surface mines. In the near term, climate policies will give greater priority to protecting supply chains than they will to the environmental impacts of lithium extraction. And common methods of lithium extraction are very damaging to biodiversity – one method requires 500,000 gallons of water to extract 1 ton of lithium. One of the world’s major sources of lithium, the so-called “lithium triangle” of South America, is itself a water-stressed biodiversity hotspot. Yet the full supply chain impacts of lithium production have not been fully evaluated. As St. Bernard of Clairvaux warned in the 11th century, l’enfer est plein de bonnes volontés ou désirs, restated in a later English proverb as “the road to hell is paved with good intentions.” Indeed.

Our transition to a low emissions economy must also respect other planetary boundaries. We cannot continue to demolish the pathways by which biological systems transform imposed energy gradients (e.g., solar energy) into growth and productivity, manifested as biodiversity. The Anthropocene Mass Extinction is a product of our degradation of this capacity. To prosper, we must become better asset managers. Ultimately, we must rethink how value is signaled, which means rethinking money.

Simplification of the system through excessive resource extraction reduces the system’s self-organizing capacity.

As Ozymandias lamented:

“Look on my Works, ye Mighty, and despair!
Nothing beside remains. Round the decay
Of that colossal Wreck, boundless and bare
The lone and level sands stretch far away.” (Shelley)

Discussion questions:

  • What would a business proposition for resource extraction look like in a steady-state world? How can we incentivize stewardship? What incentives are intergenerational?
  • Given that ESG is inherently incrementalist, can ESG alone drive the transition to an economy based upon the premise of finite resources? Why/why not?
  • What are the different mental models for thinking about value? When an economy is reframed to consider limits, what will change? If growth in quality replaced growth in quantity, would there be any physical limit to growth on a finite planet?

In February 2021, Preventable Surprises held a week-long online dialogue to set an investor agenda for biodiversity loss. In this Chatham House-rule, text-only online format, participants were invited to discuss and respond to a series of  “provocations” – short texts written by leading experts, designed to yield creative thinking, test the wisdom of the crowd and challenge the status quo. We are publishing these provocations on our blog this month in an effort to broaden this conversation

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