This is a companion article to the proposed commons based institutions: A new economic paradigm: The next big challenge and Budgeting for “the commons” needs business “ecobalance” sheets.
To transform the economy to become self-regulating will require our learning how to make accurate physical measurements of our environmental impacts, and associate them with the dollars spent that paid for them. That’s not yet being done, far from it.
Nature builds economies with whole working parts: people, businesses, independent service providers, etc.,. They only deliver their products if all their parts work together, like machines and operators making a working unit. Our traditional measurement methods have just ignored that arrangement of the natural world. Understand our impacts we need our units of measure to match nature’s units of organization, otherwise our errors of measurement become extreme.
The following short article was submitted for the June 1 “Energy” issue of the UNCSD Rio Outreach Forum, but too technical for those discussions.
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It would seem odd, wouldn’t it,… to not count the charcoal used for a family barbeque in its energy use, because a neighbor brought the grilled burgers and vegetables over from their yard…? That’s almost exactly what happens when businesses don’t count the energy used by their outsourced services.
They’re treated as having no demand on nature, according to the ISO 14000 and LCA rules. The real error is evident comparing estimates by the normal rules with the global average and finding nearly all of them far below average, a sign of missing data.
The true totals show dramatically higher levels of real impacts for business
compared with estimates using the standard method people are using
My recent scientifically recognized paper, Systems Energy Assessment (SEA) (1) shows a corrected method, but making sense of such a big error is still a problem. It’s evidently exposing some enormous blind spot(s). The new method used my work on how economies naturally work, with businesses and their services working as individual self- organized units. That’s the critical insight that allowed making a closed account with the parts adding up to the total.
The true scale of the totals are shown to be far larger than standard estimates, commonly a ~500% difference. I concluede:
- We need to rethink our designs for sustainability, it changes everything to recognize the scale if direct impacts of using money, exceeding what efficiencies, innovation and consumer choices could alter.
- It clarifies sustainability is not being a resource supply problem. With impacts more or less equally distributed to all uses of money and proportional to GDP, it’s an economic demand problem instead.
For the wind farm case study in the paper, separate estimates for the traceable and untraceable energy using services were then combined, for everything the business paid for to operate. The services with unknown energy uses, now treated as “zero”, clearly make up the very large majority.
A factor for each type, a bit above or below Average Energy/$ , was studied and used for initial estimates. If further study seems worth the trouble, there are steps to refine the initial estimate and separate the value-added part.
Reasons why “average” is accurate as a first estimate of energy impact per dollar.
- All the money to pay for anything eventually goes to paying for human consumption, distributed widely like a sampling of GDP of the highly varied types of things people everywhere use money for in a year.
- World energy use is steadily proportional to GDP, changing by a slowly changing factor each year(2)
- Average is more accurate than zero, absolutely, and for larger samples likely to be more than less accurate.
Two technical “silver linings” are.
- It saves enormous amounts of effort to have an easy way to get the scale right for impact assessments and just devote efforts where it’ll be valuable later.
- It redefines and simplifies our environmental problem too, to know Money = Energy*k as a consistent physical measure the world over
The silver lining in why the economists didn’t solve it is the riddle of why of why the environment was hiding the data. The economists didn’t see why they couldn’t find the data, just accepted they had none and treated those energy demands as “zero” instead.
The silver lining is in why both businesses and their service providers are self-managing. They also build themselves and work by themselves. They interact with others independently, through the economic environment. They don’t need to be told how to do their jobs, just what service to deliver, and don’t report how they work.
They operate as living organisms really, what the whole economy is mainly made of. There are small ones inside bigger ones and big ones inside bigger ones, like organisms in ecology. They’re the living parts that animate our world and what we’re trying to steer, but our measurements, theories and policies overlooked they were alive.
1) Henshaw, P.F., 2011 System Energy Assessment (SEA)
2) Henshaw, P.F., 2009 Inside Efficiency – BioPhysical Economics talk
3) Henshaw, J.L., 2012 bio blurb & links
JLH