Paying for the environmental damage they do would render global industries unprofitable overnight

The externalities are massive.

Grist's David Roberts reports on a paper produced by environmental consultancy Trucost, which assess the value of the externalities used by the world's industries, and comes to an astonishing conclusion:

Of the top 20 region-sectors ranked by environmental impacts, none would be profitable if environmental costs were fully integrated. Ponder that for a moment. None of the world’s top industrial sectors would be profitable if they were paying their full freight. None!

Backtracking a bit. An externality is a cost or benefit of production which is not internalised into the cost of production. If I use electricity to make widgets, I have to pay for it; but if I "use" the atmosphere to make widgets, by releasing pollution into it, then I don't have to pay a dime.

What that means is that the standard logic of the free market – that voluntary transactions will always make everyone better off – breaks down. If I make £1 profit from each widget I produce, but cause £2 of damage to the environment, then my incentive is to keep pumping out widgets, even though there's a net loss of £1 to the world for every one I make.

The standard economic response to this problem is to call for externalities to be "priced in". If I have to pay the £2 damage that my pollution causes, I won't make widgets until I clean up the production process.

That is the logic behind calls for a carbon tax, but it actually applies to a lot of environmental problems. The Trucost paper looks at water use, land use, air pollution, land and water pollution, and waste as well as just greenhouse gas emissions, and puts a cost on each of them. And when it does, it finds that a lot of industries might not be profitable if they had to pay the full cost of what they do:

(Click to embiggen)

Coal power generation in Eastern Asia, which generates revenues of $443.1bn, has a natural capital cost of $452.8bn (that's unpriced natural capital – the report already takes into account the various ways in which industries are forced to price in their externalities), largely due to greenhouse gases. Cattle ranching in South America, with revenues of $16.6bn, has capital cost of $353.8bn, due to the unpriced cost of land use. And so on.

You can quibble the figures – and doubtless many will – but what is clear is they are large. Really, really large. Many of the biggest industries in the world can only exist because they don't have to pay the true environmental cost of what they do. The word "unsustainable" is thrown around too much these days, but it seems to fit here.

Argentine Cattle. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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What does François Bayrou's endorsement of Emmanuel Macron mean for the French presidential race?

The support of the perennial candidate for President will boost Macron's morale but won't transform his electoral standing. 

François Bayrou, the leader of the centrist Democratic Movement and a candidate for the French presidency in 2007 and 2012, has endorsed Emmanuel Macron’s bid for the presidency.

What does it mean for the presidential race?  Under the rules of the French electoral system, if no candidate secures more than half the vote in the first round, the top two go through to a run-off.

Since 2013, Marine Le Pen has consistently led in the first round before going down to defeat in the second, regardless of the identity of her opponents, according to the polls.

However, national crises – such as terror attacks or the recent riots following the brutal arrest of a 22-year-old black man, who was sodomised with a police baton – do result in a boost for Le Pen’s standing, as does the ongoing “Penelopegate” scandal about the finances of the centre-right candidate, François Fillon.

Macron performs the most strongly of any candidate in the second round but struggles to make it into the top two in the first. Having eked out a clear lead in second place ahead of Fillon in the wake of Penelopegate, Macron’s lead has fallen back in recent polls after he said that France’s rule in Algeria was a “crime against humanity”.

Although polls show that the lion’s share of Bayrou’s supporters flow to Macron without his presence in the race, with the rest going to Fillon and Le Pen, Macron’s standing has remained unchanged regardless of whether or not Bayrou is in the race or not. So as far as the electoral battlefield is concerned, Bayrou’s decision is not a gamechanger.

But the institutional support of the Democratic Movement will add to the ability of Macron’s new party, En Marche, to get its voters to the polls on election day, though the Democratic Movement has never won a vast number of deputies or regional elections. It will further add to the good news for Macron following a successful visit to London this week, and, his supporters will hope, will transform the mood music around his campaign.

But hopes that a similar pact between Benoît Hamon, the Socialist Party candidate, and Jean-Luc Jean-Luc Mélenchon, the Left Front’s candidate, look increasingly slim, after Mélenchon said that joining up with the Socialists would be like “hanging himself to a hearse”. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.