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Pricing non-financial externalities
What if companies had to start paying for their impact on ecosystem services? The answer is an invoice for $7.3tn, roughly equivalent to 13% of global economic output.
The findings are based on an evaluation of the “environmental externality” costs of the world’s primary production sectors (agriculture, forestry, fisheries, mining, oil and gas exploration, utilities) and primary processing sectors (cement, steel, pulp and paper, petrochemicals).
The greatest costs derive from greenhouse gas emissions (38%), followed by water use (25%) and land use (24%). The bill for air pollution (7%), land and water pollution (5%), and waste (1%) is substantially lower.
The report highlights the external cost of specific sectors by region. Coal-fired power in east Asia ranks first, with an estimated footprint of $453bn a year. The same industry in North America is close behind, at $317bn. Several sectors are shown to be economically untenable in certain regions of the world, especially those with water shortages and other resource scarcities.
The annual impact on nature of south-east Asia’s $5.9bn cattle ranching and farming sector, for instance, are calculated at $29.1bn. The biggest disparity is in rice farming in northern Africa. Were water to be priced fully, each dollar earned by the...