Environmental accounting, AN OLD CASE-STUDY

CASE:

Imagine a factory located upstream that pollutes a river. It produces steel for the automotive industry. Downstream, local fishermen find they catch less fishes due to the pollution.

The article 4 of the Declaration of the Rights of Man and of the Citizen, most ancient written document on human rights (France revolution, 1789), gives the answer itself:

“Liberty consists in the freedom to do everything which injures no one else; hence the exercise of the natural rights of each man has no limits except those which assure to the other members of the society the enjoyment of the same rights. “

Since polluting a river undermines the possibility of “other members of society to enjoy the same right” or in this case, the same good, it is obvious that the action of polluting a river is illegal and punished and not permitted by most country’s laws. Actually the Spanish “Ley de Aguas” the art. 89, fifth title, states: “is forbidden every activity which is likely to cause the contamination or degradation of the public hydro domain…”

So, from the real world and the legal point of view, both company and fisherman have the right to use the river water, till they do not cause any damages.

If we assume there is no regulation, regardless of the approach we use to drive our choice, taking a decision is still easy:

• Cost/benefit (Environmental economists) : monetizing every entry in the system, both create prosperity but the company with the cost of pollution, so better the fisherman;

• Multicriteria analysis (Ecological Economists): we add indicators to have a better understanding, the result is the same, if the water is polluted, the community prosperity is undermined.

If finally, an agreement must be found to allow both use the river this is my solution:

• Put a cap on the pollution substances according to what the water can assimilate (ecological limits solution). For instance PH, Biochemical oxygen demand or B.O.D. etc.
• Control the fishstock to avoid decline and maintain it sustainable;
• Set a very high tax (or fines) in case the company overcomes the limit allowed, so that it is discouraged to pollute and oblige it to find more ecofriendly solutions for its business. If the cost of polluting is bigger than invest in technology to reduce contamination, the company will invest in that (market driven solution).

Of course the condition for it to work is that everywhere else the company can go, it finds the same conditions applied: if not, it will find another river to pollute at minor cost.

Comments Off on Environmental accounting, AN OLD CASE-STUDY / 28 Nov 2011 por Francesco Mazzeo
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