Sunday, December 11, 2011

Environmental concerns prove to be only tiny piece of puzzle
MEASURES of economic wellbeing are great at assessing the value of the land and minerals we own and mine, but poor at reflecting the other side of the coin: the cost of resource depletion and land degradation due to agriculture, mining and development.

They are worse still at capturing the cost of pollution - where it causes illness, it can actually push up the gross domestic product of the health sector - and the value people placed on loss of species and ecosystems.

On resource depletion, the Herald/Lateral Economics wellbeing index borrows a model from the Australian Bureau of Statistics, which estimates the cost of land degradation based on impact on land values and yield rates.

In 2009-10, this was equivalent to $406 million. But this alone does not tell the story. The index must also reflect the value of new mineral discoveries and the cost of the exploration. Once these are factored in, it reaches $1.05 billion. While this may sound large, it is small in relative terms - just 0.1 per cent of net national income.

''If you are looking at resource depletion it has a small impact on wellbeing, and if you are looking at it quarter-to-quarter you would hardly notice the change,'' the chief executive of Lateral Economics, Nicholas Gruen, says.

This is not a universally held view. Left-leaning think tank the Australia Institute placed much greater weight on the impact of environmental damage in a report released earlier this year.

Gruen says he expects some people will be surprised by the low cost of resource depletion. ''But when you think these things through, technology keeps improving and we keep finding new resources,'' he says.

''Even if you were starting to end up with fewer reserves, the other thing that happens is we get much better at mining and processing.''

He gives the example of the central Victorian goldfields - an asset that was written off after the 19th century but where resources companies have recently returned with some success.

On climate change, the index weighs the cost and likelihood of three scenarios - that the world does nothing to cut emissions and temperatures rise by more than 5 degrees, that the increase is between 2 degrees and 3 degrees, and that the Copenhagen Accord goal of limiting warming to 2 degrees is achieved.

Estimates of the cost of each scenario are taken from the Garnaut Review; the probability of each happening from a climate models review by the United Nations Environment Programand emissions data from the International Energy Agency.

On current evidence, Lateral Economics concludes there is a 5 per cent chance of the worst-case scenario, a 70 per cent chance of 2-3 degrees warming and 25 per cent chance of less than 2 degrees. The net present value last year of the future economic damage caused by climate change was estimated at $400 million.

On environmental and ecosystem health, the wellbeing index database includes the Yale Environmental Performance Index, which assesses agriculture, forestry, biodiversity and air pollution. But, in what is likely to be a controversial assessment, the results are given no dollar weighting. .

Gruen calls it ''the Spice Girls question'': when people are asked what they ''really, really want'' in financial terms, ecosystems do not rate well.

''People say they want a clean environment and they care about air pollution. They will rally around the Franklin Dam, but if you tell them something is endangered it is hard to see any evidence of the extent to which they are prepared to pay for that,'' he says.

Nation richer, older and a little bit wiser
WELLBEING has risen even more quickly than gross domestic product, thanks to the boom in Australia's commodity export prices and big improvements in the combined knowledge of its people, according to five years of historical data from the Herald/Lateral Economics Index of Australia's Wellbeing released today. Read more:

Putting a figure on inequality adds to strength of statistical spotlight
New numbers are to the press as shiny bottle caps are to magpies. Statistics have the power to shape a debate or provide oxygen to an issue. From a major bank's survey of consumer confidence to a political party's targeted release of ''internal polling'', numbers are often used to bring publicity to a company or a cause. When even condom manufacturers use surveys to get publicity, you know what the new maxim must be: statistics sell.
Read more:

When the Best Start in Life Turns Out to be an Early Start
HUMAN capital - the skills and know-how of our people - is the biggest positive contributor to wellbeing after net national income. The index measures it through a combination of indicators that track learning and innovation.
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Distribution of Money Makes a Big Difference
MONEY isn't everything - but it is a major driver of national and individual wellbeing.

Happy to live longer but mental illness and obesity still need to be dealt with 
IF LIFE expectancy at birth is any measure, Australians are some of the healthiest people on Earth.
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by Adam Morton
The Sydney Morning Herald
December 9, 2011

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