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Production sectors cost trillions in damages to world environment – UN-backed study

Executive Director of UNEP Achim Steiner.
UN Photo/Paulo Filgueiras
Executive Director of UNEP Achim Steiner.

Production sectors cost trillions in damages to world environment – UN-backed study

Primary production and processing in such sectors as agriculture, forestry, fisheries, mining, oil and gas exploration and utilities cost the world economy $7.3 trillion a year in damage to the environment, health and other vital benefits for humankind, a new United Nations-backed report warned today, calling for stricter ecological sustainability.

High impact business sectors in fact make an economic loss when such environmental costs as the negative impact on natural resources, pollution and greenhouse gasses are accounted for, according to the study, ‘Natural Capital at Risk – The Top 100 Externalities of Business,’ released at a Business for the Environment summit in New Delhi.

“The current business model creates significant environmental externalities,” the report stressed, using the term for by-product costs such as greenhouse gas emissions, loss of natural resources, loss of nature-based services such as carbon storage by forests, climate change and air pollution-related health expenditure.

“However, businesses and investors can take account of natural capital impacts in decision making to manage risk and gain competitive advantage,” it said, noting that consumer demand is set to grow significantly over the next few years with the increase in middle class consumers against a backdrop of increasing resource scarcity and the degradation of natural ecosystems.

“Forward-looking companies are already recognizing that the key to competitiveness in an increasingly resource-constrained world will hinge in large part on escalating natural resource efficiencies and cutting pollution footprints,” Under-Secretary-General and Executive Director UNEP Achim Steiner, said.

“The numbers in this report underline the urgency but also the opportunities for of all economies in transitioning to a Green Economy in the context of sustainable development and poverty eradication.”

According to the report, the global top 100 environmental externalities alone cost the economy world-wide around $4.7 trillion a year in terms of the economic costs, or 65 percent of the total primary sector impacts identified.

The majority of the costs are from greenhouse gas emissions at 38 percent, followed by water use (25 percent), land use (24 percent); air pollution (7 percent), land and water pollution (5 percent) and waste (1 percent).

The highest impact sectors by region include coal-fired power in eastern Asia and northern America which rank as first and third respectively - an estimated $453 billion annually in eastern Asia and $317 billion in North America in the damage impact of greenhouse gas emissions, and health costs and other damage due to air pollution. In both instances, these social costs exceeded the production value of the sector.

The other highest impact sectors are agriculture, in areas of water scarcity, and where the level of production and, therefore, land use is also high. Cattle ranching in South America, at an estimated $354 billion ranks second. Wheat and rice production in southern Asia rank fourth and fifth, respectively.

Iron, steel and ferroalloy manufacturing ranks sixth at $225 billion. Cement manufacturing globally accounts for six percent of carbon dioxide emissions, and eastern Asia produces an estimated 55 percent of the world’s cement, coming in at seventh.

The report was authored by Trucost, an environmental data company, for The Economics of Environment and Biodiversity for the Business Coalition (TEEB), a UNEP-backed biodiversity-appreciation programme that draws together expertise from the fields of science, economics and policy to enable practical actions.