Talk about externalized costs!

World’s top corporations cause $2.2 trillion in environmental damage

A study currently underway for the United Nations is calculating the cost of pollution and other environmental  damage caused by the 3,000 biggest public companies in the world. The study, which will be published this summer, has found that the economic cost of environmental damage by these top 3,000 companies is $2.2 trillion dollars, or more than one-third of their profits if they were held financially accountable. This includes greenhouse gas emissions, other pollution, and water degradation. The final amount is likely to increase once additional costs – like toxic waste – are incorporated.

In an article about this upcoming report, the Guardian newspaper wrote: “The report comes amid growing concern that no one is made to pay for most of the use, loss and damage of the environment, which is reaching crisis proportions in the form of pollution and the rapid loss of freshwater, fisheries and fertile soils.”

So basically, what this upcoming report says is that a big chunk – about 1/3 – of the profits that these big companies are making is due to the fact that they are not paying the full costs of operating. They are shoving a whole range of costs – from pollution to climate change to water depletion – onto communities around the world – onto us! Communities around the world are bearing the costs with degraded health, soil, water and climate change. That’s just not fair.

In the Story of Stuff film, I talked about how externalized costs allowed me to buy a little radio for the irrationally low price of $4.99. This report in a good first step at showing the global scale of externalized costs. If we’re going to get our economy and environment back in order, a top priority must be forcing companies to pay the full costs of production. In economist-speak, this means internalizing externalities. That would be a strong motivator to get companies to invest in the cleaner, less polluting approaches and encourage all of us to avoid superfluous consumption. If the true cost of that cotton t-shirt or iPod was really included in the price tag, we might think twice before chucking and replacing it before we really need to. Think about that next time you look at those insanely low prices on so much consumer stuff – who is really paying the full cost of producing all this? Apparently not the companies which make it!

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