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Sissu's photos.  Beginning At Geysir area then farm setting on the way to Gullfoss, then from Snaefellsnes the first Days of August.  The glacier has obviously melted to almost no vicinitu from the West side.

Whoops! Ten Common Mistakes to Avoid in Building your Sustainability Program

editors | 22 June, 2010 08:14

by William (Bill) Wiley P.E., wileywun@gmail.com

In Building a sustainability program, it is important to not trip over these common mistakes.  A successful sustainability effort takes time and you will make mistakes- but a little forewarning may help ease your way.  Some of these are simple and readily apparent, other may take more thought and commitment.  In any case you are now aware.

Buying compostable or recyclable materials without the means to compost or recycle them. Many products today proudly proclaim their recyclability or compost ability, but be careful. Many compostable products require specific conditions( e.g. temperature, humidity, etc) Likewise many  recyclable products make sense where there is a local facility that accepts them. Failure to look at these important issues before you commit can leave egg on your face.

Carbon footprint vs. Ecological footprint.   Although it’s a prerequisite to understand your “carbon footprint” today, do not overlook the other aspects of your project or proposal.   It does you little good to focus on CO2 reductions when you increase water use or increase land disturbance.   An interesting case study is the controversy over Concentrated Solar in Arizona.

Use of manufacturer’s claims for your application. Many products today come with broad claims of saving  X amount of water or reducing CO2 emissions by Y amount annually.   These claims are usually based on  ‘best case’ conditions and clearly do not match your use. As an example, a waterless urinal manufacturer ‘s  claim of saving up to 40,000 gallons of water annually per fixture, did not hold up in computing  actual usage in a  high-rise building with multiple fixtures , a higher female/male ratio and where fixture replacement was  from existing low flow fixtures.   An important corollary to this example is to not use these claims in calculating YOUR ROI on this investment.

Use of Recycled amount or Recycled percentage as a metric.   Recycling is good, but it should not be the ultimate goal. Your goal should be to increase material use efficiency and reduce that not used, whether it goes to a landfill or is recycled. A mature program should actually reduce its material recycled over time.

Failure to engage your employees.   Employees are an organization’s ambassadors to the world. They interact with stakeholders of all kinds at schools, churches and even at grocery stores.  In today’s social media world, they also may ‘talk’ to people around the world.  In many cases, they carry more credibility than the official company spokespersons (think BP). Failure to educate and interact with them on a regular basis will undermine your effort.

Doing  ‘Sustainability ‘without having good risk management and compliance programs in place. Nothing can undo all your good work sooner than multiple NOVs or a major faux pas.   For example, a public ethical lapse or a major spill can destroy  a reputation instantaneously .   Aramark CEO Joseph Neubauer said it well when he said:  ”It takes a minute to undo what it took a lifetime to build.” 

Lack of a Sustainability  governance structure. Many organizations give the sustainability program to an enthusiastic employee and send them away to do good often with the admonition to keep costs down. This is a recipe for failure.  Lack of support from the C-suite, including authority to build an internal governance/implementation structure will doom your program to be just another initiative.

Green only. In the media, sustainability is often portrayed as an environmental program or initiative. Getting past this “green only’ concept with all your stakeholders (including employees and management) is a difficult, but critical step.   Broadening your program to address your customer needs, employee health and safety, local community support, etc.  is just as important  to the sustainability of your organization as are the traditional environmental and financial metrics.

Save money only. Part of the recognized benefit of sustainability is looking at ways to be more eco-efficient, often by tackling those low hanging fruit.  If you use resources wisely, you can reduce costs and reduce waste.  Both can save your organization money.  However, at some point in your program you will likely have to spend some capital to buy more efficient variable speed motors, hybrid vehicles or upgrade air conditioning,  as examples. Failure to invest will limit your potential long-term benefits.

Failure to stay up- to date.   Your customers, stakeholders, investors, and regulators are all revising their views of the world and what they deem important.   For example, Wal-Mart’s supplier initiative was a big wake-up call to many companies, especially those that ended up losing business.  Similarly, shareholder initiatives on carbon disclosure and transparency caught many major companies off guard. Finally, Twitter and Facebook and numerous blogs can radically and quickly affect your company image – as well as your next day at work.

These are a few of the common mistakes that organizations make in their sustainability journey.  With that said, everyone makes mistakes and unless they are fatal you can survive and build a sustainable organization that we all can be proud of.   For more tips see my earlier article on implementing a sustainability program, Lessons from the Sustainability Trenches.

References:

Neubauer, Joseph.    Reputation Rx:  CEO Quotes http://www.reputationrx.com/Default.aspx/CEOREPUTATION/CEOQUOTES

Wiley, William D. PE, 2010, Lessons from the Sustainability Trenches; 14 Tips to Achieve Sustainability in Journal of Environmental Management, June 2010.

About the Author

William (Bill) Wiley P.E. was Senior Manager for Sustainability for Arizona Public Service Co. from 2007 through 2010.  He is also adjunct professor for University of Phoenix, teaching science and ethics classes. From 1991 through 1994, he was Deputy Director of the Arizona Department of Environmental Quality. He is registered Professional Engineer in Arizona and has several publications on water, business process improvement and environmental management.

 

Copyright 2010 Journal of Sustainability (format) and Bill Wiley  (content)

Could it be Satan! by Mr. Critical

editors | 22 June, 2010 08:03

by Mr. Critical, MrCritical@JournalofSustainability.com

  An ''old lefty'' friend of mine has retired to an idyllic  Caribbean isle. Sort of idyllic, if you ignore the cardboard shanties. Ken built himself a castle, [fortified.] There he putters in his garden, writes his Marxist blog and plays the stock market. He also gives lots of money to good causes, which makes him feel very good. Curiously I happen to have another friend here in the US, a native of this island. His feelings about Ken are somewhat different. "I hope he understands, that when the revolution comes, we will kill him."

   May has dedicated her career to avant guard installation art. Her most recent show featured an artist who piled 13 tons of some unspecified industrial waste on the gallery floor. It smells. The critics were thrilled. "Ms. X's installation deals with issues of consumption and toxicity."  One might ask just how it "deals" with those issues. It doesn't really say anything. It's just there. My suggestion that one might actually consider these very issues in selecting a piece was met with a firm refusal.

"Good art is never polemical."

  And Kim, an Albanian-American albino atheist, who has become quite wealthy selling insurance. But nevertheless quite bitter. "If I had been a white, [instead of WHITE,] Presbyterian I would be much richer." Kim sees this as a massive social injustice, somehow equal to that suffered by victims of actual famines and wars. [Sadly the other children did say mean things back in grade school, but today Kim does belong to the country club.]

   And Martin. Heir to a big hunk of a major timber fortune, He also feels very good about all the money he gives to the Sierra Club. The way he sees it, is that if he didn't make all that money from the bad things daddy's company does, he wouldn't have it to give to the good causes. Or take "eco-vacations" with the carbon footprint of Godzilla. The mind boggles.

   So----------- I am Mr. Critical. I do not shy away from judgement. I will happily  point out that something is wrong here. [As I learned from Mr. Wilbur, when someone tells you that being judgemental is bad, something fishy is going on.] But just what is wrong here?I am not suggesting, for example, that making money is evil. I would like a great deal more of it myself.

   When you talk with Ken, what quickly comes to the surface is his bitterness. He is a brilliant guy. An astute political analyst. And a very witty writer. And no one pays any attention. But then, why would anyone pay attention to the rich guy  spewing  Marxist rants? It's the guy in the street, in the trenches, who has the authority, who gets the respect as a revolutionary. [And the rich guy who gets respect as an investment advisor.]

copyright 2010 Journal of Sustainability

Garden Life on Earth

editors | 18 June, 2010 13:51

by Barry Carter, bcarter@igc.org
 
Web Pages:
ORMUS - http://www.subtleenergies.com/ormus/index.htm
Forest - http://www.subtleenergies.com/ormus/bmnfa/index.htm
Donate - http://www.subtleenergies.com/ormus/donate.htm

 

Most people have a favorite disaster scenario. Some favor global 
warming, others favor peak oil. Financial collapse is the favorite of 
many people but geological cataclysm is favored by others. Regardless 
of which disaster you may favor, the most immediate problem that 
develops, as a result of any disaster, will be related to food 
shortages. Already it is estimated that one billion people are 
starving on earth.

Most disasters reduce food production or availability. Climate change 
causes flooding, drought and unseasonable freezes which all reduce 
food production. Peak oil reduces the availability of petro chemicals 
for fertilizer and pesticides as well as the fuel to transport food 
for long distances. Financial collapse makes it more difficult for 
everyone to produce and purchase food. Geological cataclysm can even 
cause an ex-president to apologize for policies that reduced the 
local food supply in Haiti in favor of imported rice from the USA.
Even social disasters are most likely to cause suffering through 
starvation. When the structures we have built to serve us loose their 
way and begin to believe that we are here to serve them, they try to 
monopolize our sources of supply. Whether these are corporate 
structures, government structures, belief structures or religious 
structures does not change this pattern.

Regardless of one's favorite disaster scenario, certain things can be 
helpful for the people in our communities. Here are some things that 
I think we all need:

Clean air to breathe.
Clean water to drink and bathe in.
Nutritious food to eat.
Energy for heating, cooling, lighting, transportation and communication.
Materials for making and modifying the structures we live in and 
the clothing we wear.
Good health.


Since many people cannot do a lot in their daily lives to insure that 
they have:

Clean air to breathe.
Clean water to drink and bathe in.
Energy for heating, cooling, lighting, transportation and communication.
Materials for making and modifying the structures we live in and 
the clothing we wear.


I think it is most worthwhile to focus on doing what I can to insure 
that my local community has:

Nutritious food to eat.
Good health.


In service to these goals, I have been gardening organically since 
1969. I believe that the more available this kind of info is, to the 
people on the ground, the more all will benefit.


I am also engaged in a related area of "grassroots" research. Several 
hundred non-academic researchers around the world are exploring the 
agricultural and social implications of some newly rediscovered 
minerals that significantly improve the growth, taste and nutrition 
of food grown in soils where they are applied. We have accumulated 
many reports of significantly increased plant productivity, 
nutrition, freeze tolerance and drought tolerance.


These minerals can be concentrated using simple kitchen chemistry on 
sea water or rock source materials. (Anyone with access to fire and 
salt water can concentrate them.) They can also be concentrated from 
the air or from fresh water using simple mechanical "traps". You will 
find a number of links to pages which describe the results of using 
these minerals for plant growth at:

http://www.subtleenergies.com/plant-lynx.htm

The simplest method for concentrating these minerals from sea water 
is also described on the page above and other open-source methods are linked.

I think that it is also helpful to realize that growing soil 
increases carbon sequestration and that the use of these minerals 
with keyline plowing has doubled productive soil depth in one year.

The best way to guard our life on Earth may be to garden locally.
 
 
copyright 2010 Barry Carter and Journal of Sustainability

We Hear Talk

editors | 16 June, 2010 16:04

Dear Editors:

People hear talk of energy; coal, oil, nuclear and solar, but the real issue is not energy – it is authority. Government has taken authority away from the citizen and we must take it back. There will be no need for tax credits, grants, incentives, subsidies of any kind. There will be no NREL. We will use businesses to do our own shopping for energy, light, heat and cold.

There are squadrons of people who have gained favor with government and will not easily go along with this; people with grants, with government contracts, people who sell solar tax credits, people who work for government labs.

Who will do what we do if you take away our grants, they will ask. I say maybe no one, maybe no one needs what you do.

What this influential mass of our population has been good at is having us forget. Forget what works, forget how to walk, how to ride a bicycle, forget clothes lines, windows and skylights. Forget inexpensive, traditional ways of using the sun and instead create a new “solar” energy that is patented, financed by investment bankers, expensive and subsidized by tax money.

There is another way to run society. Government makes rules we play by. They do not handle society’s money. Government must guide by curbing what it bad, not by pretending to create good things. Government has no source of good things except by taking.

How have our buildings regressed in this solar age to have so few windows and skylights to need the electric lights on all day?

We can light, heat and cool our buildings without Government. Businesses can sell the equipment, even solar equipment like windows without government “help”. But, people couldn’t have new ideas, could they, without government grants to Universities and labs, could they? Yes they could, and have and will again. America need not extinguish itself.

Sincerely,

Steve Baer

President

Zomeworks Corp.

1011 Sawmill Rd

Albuquerque, NM  87104

Phone: 505-242-5354 / 800-279-6342

Fax: 505-243-5187

zomework@zomeworks.com

www.zomeworks.com

Is it time for Open Source sustainability-related technology? Open source solar trackers?

editors | 14 June, 2010 15:33

By editors, editors@JournalofSustainability.com

In a well-considered book, “The Starfish and the Spider” (Portfoilio, 2006), Ori Brafman and Rod Beckstrom give a name to something that many of us have been vaguely aware of: decentralized organizations.  Unlike traditional hierarchical organizations, decentralized organizations are leaderless, flat and thrive when divided.  The preferred metaphor for the latter characteristic is the starfish, which can replicate itself from a single arm, because as a decentralized organism it contains all major organs in each arm; but the mythological Hydra is just as appropriate a metaphor.

Historians are aware of the success of the decentralized Apaches against the centralized Spanish.  Hackers are aware of the success of eMule and Bittorrent, and Open Source software (the old Informix datablades, the Sun servers, Mozilla, to name a few).  The rest of us have heard of Wikipedia, Alcoholics Anonymous, and communes.  Brafman and Beckstrom didn’t discover the phenomenon. They just publicized it. I wouldn’t say they discovered it.  I refer the reader to manuscripts by Rainer E. Zimmerman, posted on arxiv.org 4 and 5 years before Brafman and Beckstrom’s book.  The articles are entitled “Decentralization as organizing principle of emergent urban structures,” and “Reconstructing Bologna.”

The authors introduce a nuanced approach to the phenomenon, placing hierarchical and decentralized organizations on either end of a continuum.  They then give examples of “hybrid” organizations that fall somewhere in between these two extremes, on a so-called “sweet spot.”  One might think of it as a “Goldilocks effect.”  GM, for example, was a traditional hierarchical organization that granted partial autonomy to the lowest levels.

Is it time for Open Source sustainability-related technology?  The question is timely, given that for example many of the pioneering solar patents of the 1960’s and 70’s have run their course.  One of our favorite solar trackers is 4,175,391 (1979), a passive tracker by Steve Baer of Zomeworks (A promising candidate for 2014 is an active tracker, 5,317,145 (1994) by Ron Corio of Array Technologies, also here in Albuquerque.).  Baer’s tracker is passive and uses Freon (TM).  It could easily serve as a platform for an open source passive solar tracker.

We googled the phrase “open source solar” and found some postings relating to open source electronic circuits for a solar tracker.  There is an organization that publishes “Open Source Ecology” (http://openfarmtech.org/index.php/Main_Page).  Their website has a blog with Forum containing several open source hardware designs.  But otherwise there is no equivalent of http://sourceforge.net for solar technology.  For those of you who are not hackers, Source Forge is a leading depository for open source software.  Sourceforge is not a not-for-profit organization.  According to their website, “SourceForge.net is owned and operated by Geeknet, Inc., a publicly traded US-based company.”  

The Journal of Sustainability would like to host open source sustainability-related technology.  The Journal is owned by Research & Design, formerly an S-Corporation, now a partnership.  We formerly hosted ads on the Journal website.  Now, like Twitter, we simply lose money on it.  We have an open source product of our own that we have been working on for a few years now.  Stay tuned and we’ll be announcing it shortly.

copyright 2010 Journal of Sustainability

What If Markets Have Always Been Distorted? Would It Then Be a Good Fix to Add Fair Trade Margins to Correct Distorted Agricultural Market Prices? [Part 1]

editors | 12 June, 2010 11:58

By Lucio Muñoz,

Independent Qualitative Comparative Researcher / Consultant, Vancouver, BC, Canada  Email:   munoz@interchange.ubc.ca

Abstract

          It has always been assumed that we live in a world of perfect markets, where supply and demand interactions work magically in the absence of market distortions or externalities.  Today we know we live in a world ruled by overproduction and overconsumption, which promote ongoing wasteful, polluting and degrading social and environmental processes.  Is it possible that the traditional perfect market’s assumptions can be responsible for these negative outcomes through the creation of supply and demand scenarios that only meet at the lower pure economy price; and therefore lead to economic market flooding and waste?  If yes, that means that we have been living in distorted markets all this time, market that do not reflect the  right price; and these distortions need to be corrected now to ensure that the traditional perfect market reflects sustainability rules.

          The general goals of this paper are: a) To introduce the notion of the right  market price, the traditional market price, and the corrected market price and to show how they can be related to ensure traditional market sustainability; b)To extend this notion to the right  agricultural market price, to the traditional agricultural market price, and the corrected agricultural market price and to point out how they can be linked to ensure that agricultural markets are consistent with sustainability rules; and c) To list some relevant specific and  general conclusions.  

Introduction

a) The market assumptions.

          The main market assumptions can be summarized as follows:

i) Pure supply and demand interactions determine the price in the traditional perfect market. 

          You can produce and consume as much as you want as long as there are buyers and sellers, there is no scarcity, and there are no limits to growth.  Prices then are determined solely by the free interaction of supply and demand; and when the world works this way, this is socially optimum.

ii) No market distortions.

          As a consequence of the perfect market assumptions, there are no market distortions such as social and environmental and other costs associated with production and consumption affecting other parties.  Externalities are assumed to be insignificant or zero and therefore, if they exist, they fall outside the dominion of the market.

iii) No true sustainability concerns.

          Therefore, the are no true sustainability concerns under the traditional perfect market, only economic concerns matter.

iv) The same assumptions hold for the agricultural market.

          The agricultural market price is determined at the point that supply and demand meet in an environment without distortions or externalities. Only economic sustainability is relevant in traditional markets, including the agricultural market.

v) In summary.

          In the past, it has always been assumed that we live in a world of perfect markets, where supply and demand interactions work magically in the absence of market distortions or externalities.  Amegashie(2006) points out that institutions like the World Bank follow these perfect market assumptions literally to support their decision making process and policy recommendations even so these conditions may not exist in the real world.  Hence, it has always been assumed that economic sustainability has nothing to do with true sustainability.  Under these assumed conditions then, it is normal to claim that any action that violate these assumptions will distort a market.   For example, it is said that fair trade pricing violates traditional supply and demand rules(Callahan 2008) as these laws as mentioned above are assumed not to be distorted.

          This situation makes it easy for traditional economists/planners to ignored or brush off issues just because they fall outside those market assumptions or to suggest solutions that eliminate the academic pressure or need to internalize them.  In other words, if issues falling outside the assumptions like social and environmental equality and justice and related problems such as fair trade are present, they will be ignored as traditional economists/individuals consider them exogenous issues.  Tarnoff(2004) expresses his frustration with the inability of traditional economic theory to deal with issues such as fair trade.  The author believes that it can be argued too that because it has been assumed all this time that demand and supply in the perfect market have nothing to do with environmental issues we are now dealing with a growing global warming puzzle.  It has been pointed out that to link the need to deal with global warming with the greening of agricultural activities the traditional market price in agriculture needs to be adjusted to reflect among other things a green margin making the global warming price higher than the traditional market price(Muñoz 2008); and then they will be responsive to green supply and demand pressures.

b) The practice.

          A hard look at reality leads to the following facts:

i) There are market distortions. 

          Current knowledge indicates that there are social, environmental and other negative externalities associated with market forces and these costs on third parties are real and should also be reflected in market prices, but since they have been assumed to be minimal or nonexistent or falling outside the model, they have not yet been included.  This has led to market prices that have been or are lower than they would be if externality costs or margins were added to arrive at the right market prices. This situation is not a socially optimum position.

ii) Distorted supply and distorted demand interactions have led to lower prices. 

          Ignoring market distortions has sent the wrong signals to the market. Not reflecting the cost of distortions or externalities means that we have markets ruled by the interactions of dirty supply and dirty demand, and therefore, leading to lower prices than if we had added the externality margins left out to the traditional market price. Dirty here means that supply and demand considerations do not reflect the cost of externalities.

iii) The results of living in a distorted market reflecting only the economic side.

          Simple economic theory suggest that lower prices than they otherwise should have been would lead to more production and  more consumption and to the promotion of ongoing generation of waste, pollution, degradation, and the social and environmental neglect.

iv) The same implications are true for agricultural market.

          The agricultural market price is determined at the point where dirty supply and dirty demand meet as this process takes place in an environment full of distortions or externalities that are not reflected in that price.  Lower agricultural prices then have led to overproduction and overconsumption in agricultural markets.

v) There are true sustainability concerns.

          Today, there seems to be a consensus that we need to deal with the externalities associated to economic development, specially socially and environmental distortions, to be able to build the foundations of true sustainability.

vi) In summary:

          Today we know we live in a world ruled by overproduction and overconsumption, which promote ongoing wasteful, polluting and degrading social and environmental processes; and it is clear today that this situation is not sustainable.  Besides markets being poorly priced or distorted because of the traditional market assumptions mentioned above, a second wave of distortions comes when providing subsidies, which encourage not just more overproduction and overconsumption, but also commodity dumping.  Dumping is leading to a third wave of market distortions as protectionist voices, justifiably or not, lead to ongoing trade unpredictability, and therefore, unsustainability. For example, Davis(2009) points out how the European Union may be relying on antidumping laws to remain competitive in areas and industries where it not longer has a comparative advantage.

          In other words, we know that the economy must incorporate the cost of distortions to be truly sustainable and to promote responsible economic, social, and environmental behavior. Under these real conditions then, it is wrong to claim that actions taken to correct distorted markets will distort them more as these actions are needed to correct them. For example, we should expect that if prices allow producers to meet their economic goals while meeting their social and environmental responsibilities, then we would be encouraging positive economic behavior on all producers, not just on so called fair trade producers.  Hiscox(2007) points out that fair trade works in promoting positive economic behavior because it allows profitability while being able to provide better social and environmental rights.  The key to the economic structure and positive impact of fair trade on local economic, social and environmental conditions is found in the especial relationship connecting fair trade producers with ethical demand(Hayes and Moore 2005).

          Under this line of thinking, corrected markets encourage responsible economic behavior leading producers towards the optimization of production or the socially optimal output, which may lead to the following: a) It will make it more difficult for traditional economists/planners to ignore or brush off issues that fall outside traditional assumptions such as fair trade margins and other externality based actions; b) It may induce them to incorporate them in their models as they would be then endogenous issues; and c) It will satisfy critics of the old economic model as now they should expect to see an adjusted economic thinking that is able to deal with all issues as endogenous issues.  Actions in this direction appear to be under way.  For example, now the term “sustainable consumption” is being used in OECD countries not only from its economic aspects but also from its related social and ecological aspects indicating attempts to internalize social and environmental issues in sustainable consumption policy implementation(OECD 2008).

The need to better understand the implications of poorly price and corrected markets

          Current knowledge shows that there are more than just economic issues in a market, and therefore, the traditional market price, including the agricultural market price, may be distorted as they do not include externality margins.     It has been recently indicated that from the point of view of sustainability, the perfect market is not sustainable(Muñoz 2001).  Hence, poorly price markets would not reflect social, environmental, and other externalities, making issues such as fair trade in general and agricultural fair trade in particular fall outside the economic domain while corrected markets would make those externality issues endogenous to market economics.

          Then, the following questions and their implications are relevant: What if markets, including agricultural markets, have always been distorted? Would it then be a good fix to add fair trade margins to correct distorted agricultural market prices? This paper provides a production and consumption framework that makes it possible to contemplate the market implications of living under the rule of underpriced markets and of corrected markets.

Goals of this paper

          The general goals of this paper are: a) To introduce the notion of the right  market price, the traditional market price, and the corrected market price and to show how they can be related to ensure traditional market sustainability; b) To extend this notion to the right  agricultural market price, to the traditional agricultural market price, and the corrected agricultural market price and to point out how they can be linked to ensure that agricultural markets are consistent with sustainability rules; and c) To list some relevant specific and  general conclusions.

 

Methodology

          First, the terminology used to present the ideas in this paper is listed.  Second, some operational concepts are presented, discussed and implications analyzed.  Third, the notion of the real market price, its components, and implications are introduced.  Fourth, it is pointed out how the traditional market price is derived from it and relevant implications are mentioned.  Fifth, it is described how the traditional market price can be corrected to reflect social and environmental sustainability requirements.  Sixth, the implications of different price structures and markets on production and consumption are summarized.  Seventh, the idea of the clean market is pointed out graphically and analytically. 

          Eighth, the notion of the real market price is applied to the agricultural market.  Ninth, the notion of the traditional market price is presented in the agricultural context.  Tenth, the notion of the corrected market price is expressed in agricultural terms to reflect social and environmental responsibility in agriculture.  Eleventh, the implications of different price structures and markets on agricultural production and consumption are summarized.  Twelfth, the idea of the clean agricultural market is pointed out graphically and analytically.  And thirteenth, some relevant specific and general conclusions are provided.

Terminology

          The terminology used to convey the ideas in this paper are listed below.

Table 1

----------------------------------------------------------------------------------------------

SE = Social externality                         EE = Environmental externality

OE = Other externalities                       GM = Green margin

SM = Social margin                              OM = Other margins

FTM = Fair trade margin                      P  = Traditional market price

RMP = Right market price                   DMP = Distorted market price

DM = Dirty market                               D = Dirty demand

S = Dirty supply                                    DP = Dirty price

CM = Clean market                               D* = Clean demand

S* = Clean supply                                  CP = Clean price

TMP = Traditional market price           CMP = Corrected market price

Mi = Margin “i”                                     RAMP = Right agricultural market price     

AMi = Agricultural margin “i”              TAMP = Traditional agricultural market price

RM = Right market                                CAMP = Corrected agricultural market price

TM = Traditional market                       AFTM = Agricultural fair trade margin

CoM = Corrected market                       Q* = Clean quantity

AMi = Agricultural margin “i”              AP  = Traditional agricultural price    

AGM = Agricultural green margin        CAM = Corrected agricultural market  

ASM = Agricultural social margin        TAM = Traditional agricultural market

Pi  = Price “ i ”                                       Qi  = Quantity “ i “

-------------------------------------------------------------------------------------------------

 

 

copyright 2010 Journal of Sustainability and Lucio Muñoz

What If Markets Have Always Been Distorted? [Part 2]

editors | 12 June, 2010 11:54

[continued]

 

Operational concepts

a)  About distortions.

i) Social externalities(SE): the social issues or distortions  associated with economic development such  poverty, landlessness, homelessness, relocation processes,  access to  basic food, education and  health .

ii) Environmental externalities(EE): the environmental issues or distortions associated with economic development such as waste(e.g. industrial waste), pollution(e.g. global warming), and degradation(e.g. ecosystems).

iii) Other externalities(OE) : any other issue or distortion associated with economic development besides social and environmental externalities affecting external actors or markets.

iv) Externality gap:  If we assume that the distortions or externalities associated with traditional economic development fall within these three categories, then an externality gap can be identified with the help of Figure 1 below.  For example, if we assume now that traditional economic development is taking place at point “b” in Figure 1 and that development  reflecting externalities is taking place at point “c”, then the externality gap is the space between supply S1 and S*. Hence, at point “c” there is a clean market and at point “b” there is a dirty market.

b) About Margins.

i) Social margin(SM): to cover the cost of making business socially friendly

ii) Green margin(GM): to cover the cost of making the business environmentally friendly.

iii) Other Margin(OM):  to cover the business cost of dealing with others non-social, non-environmental externalities.

iv) Fair trade margin(FTM): compensates for the cost of being both social(SM) and environmental(GM) friendly at the same time.

v) The margin range: the difference between right market price(RMP) and the distorted market price(DMP).  For example, if we assume that the right market price(RMP) is P2 in Figure 1 above and we assume that the distorted market price(DMP) is P1, then the margin range is the distance from point “c” to point “b” or the difference P2 – P1.

c) About prices.

i) Right market price(RMP): the market price that also reflect  all externality margins.

ii) Distorted market price(DMP): the market price that does not includes some or all externality margins.

iii) Cleanest price: the cleanest price then would be the right market price(RMP) as it includes all externality margins.

iv) Dirtiest price:  the dirties price would be the traditional perfect market price(P) as it leaves out all externality margins.

v) Corrected market price(CMP): the market price that aims at being both socially and environmentally friendly at the same time as this price includes social and green margins.

vi) Price implications:  the right market price(RMP) as the cleanest price should be expected to encourage processes of responsible production and consumption while the distorted market price(DMP), especially at its dirtiest price, should be expected to lead to irresponsible production and consumption.

        From Figure 1 above, it can be seen that the right market price(RMP) is determined at point “c” where the price P2 reflects all externalities and therefore, this is the cleanest price.  It can also be seen that a distorted market price(DMP) is determined at point “b” and that this price P1 is the dirtiest price as it reflects no externalities.  It can also be seen that distorted market prices or dirty prices are lower than right market prices(P1 < P2); and therefore, overproduction and overconsumption will show under dirty prices.

          Notice that if we assume that P2 is the corrected market price(CMP) in Figure 1 above, then point “c” indicates the meeting point of a socially and environmentally friendly market; and society would be better off producing and consuming at this point.  It should also be indicated that the corrected market price(CMP) is greater than the distorted market price(DMP) and again economic flooding and waste would take place under distorted prices as they are lower..

d) About dirty markets(DM).

i) Dirty demand: socially and environmentally irresponsible demand(D).

ii) Dirty supply:  socially and environmentally irresponsible supply(S).

iii) Fully dirty market: a market ruled by the interaction of socially and environmentally irresponsible supply(S) and demand(D) at the same time.

iv) Partially dirty markets: a market with a socially and environmentally irresponsible supply(S) or demand(D).

v) Market implications: the perfect market is a fully dirty or irresponsible market as it is driven by both dirty supply and dirty demand at the same time; and therefore, the perfect market price is a dirty price as it is socially and environmentally irresponsible.  When markets are missing either a dirty supply or dirty demand we have imperfect markets or partially irresponsible markets.  It can be seen that all dirty markets lead to a dirty price(DP), fully or partially.

          If we assume that P1 in Figure 1 above is the traditional market price(P), which does not reflect any externalities, then point “b” reflects the interaction of dirty supply(S1) and dirty demand(D), a fully dirty market(DM) with a fully dirty price(DP), where DP = P1 = P.

e) About clean markets(CM).

i) Clean demand: socially and environmentally responsible demand(D*).

ii) Clean supply:  socially and environmentally responsible supply(S*).

iii) Fully clean market:  a market ruled by the interaction of socially and environmentally responsible supply(S*) and demand(D*) at the same time.

iv) Partially clean markets: a market with a socially and environmentally responsible supply(S*) or demand(D*).

v) Market implications: corrected market price(CMP) is a fully clean price as it is determined by the interaction of both clean supply and clean demand at the same time; and the corrected market is a clean market. When markets are missing either a clean supply or clean demand we have imperfect markets or partially responsible markets.  All clean markets lead to a clean price(CP), fully or partially.

          If we assume that P2 in Figure 1 above is a socially and environmentally responsible price or corrected market price(CMP), then point “c” reflects the interaction of clean supply(S*) and clean demand(D*), a fully clean market(CM) and a full clean price(CP), where CP = P2 = CMP.

Stating the notion of the right market price

a) The nature of the price.

          The right market price(RMP) was defined above as the traditional market price(P) plus all externality/distortion margins(∑Mi), which can be expressed as follows:

1)   RMP = P + M1 +  M2 + M3 + M4…. + Mn

                          n

2)   RMP = P + Mi

                         i=1

b) The supply and demand scenario.

          The structure of the right market(RM) as can be seen in point “a” in Figure 2 below, i.e., the right market price shifts the supply curve to the left:

          Hence, the right market(RM) structure can be expressed as follows:

3)   RM = S3.D at Q3

          The above indicates that the right market(RM) reflects the interaction of the right supply S3 and the right demand D leading to a quantity Q3 that is lower than the traditional market quantity Q1 and to a price RMP that is higher than the traditional market price, TMP = P. 

         

c) Implications.

          The right market(RM) should lead to less production and less consumption as it has a higher price(RMP) than the traditional market price(TMP) as it can be seen in Figure 2 above.

          Notice that RMP  >  TMP and that Q3  <  Q1 and therefore, the higher the price, the less consumption and production should be expected.

Deriving the traditional market price

a) The nature of the price.

          One implication of the operational concepts listed above is that the traditional market price(TMP) can be derived by subtracting all externalities margins from the right market price(RMP) as indicated below:

                                n

4)   TMP = RMP -  Mi

                               i=1

          Substituting for RMP we have:

                            n               n  

5)   TMP =  (P + Mi ) -    Mi

                           i=1           i=1

          Canceling terms we get:

6) TMP = P

          Hence the traditional market price(TMP) is P, which is assumed to be externality neutral.

b) The supply and demand scenario.

          The structure of the traditional market(TM) as can be seen in point “b” in Figure 2 above can be expressed as follows:

7)   TM = S1.D at Q1

          The above indicates that the traditional market(TM) acts at the interaction of the traditional supply S1 and the traditional demand D leading to a quantity Q1 that is higher than the right market quantity Q3 and to a price TMP that is lower than the right market price RMP. 

c) Implications.

          The traditional market should lead to more production and more consumption as it has a lower  price(TMP) than the right market price(RMP) since it does not reflect any externality margins as it can be seen in Figure 2 above.

Deriving the corrected market price

         

a) The nature of the price.

          The corrected market price(CMP) is the price that also reflects social margins(SM) and green margins(GM), but it does not includes other margins(OM) as it is intended to make the market social and environmentally friendly at the same time.

          The right market price(RMP) in Formula 1 above can be reorganized as follows to extract the corrected market price(CMP):

8)   RMP = P + (M1 +  M2) + (M3 + M4 +…. + Mn)

          If we make margin M1 = SM ,  make margin M2 = GM  and if we assume  margin OM = M3 + M4 +…+Mn, then we can rewrite Formula 8 as:

9)   RMP = P + (SM +  GM) + (OM)

10)   RMP = P + SM +  GM + OM

          Formula 10 above says that the right market price(RMP) is the traditional market price(P) plus the social margin(SM), the green margin(GM) and other margins(OM).

          If we make margin OM = 0, then we get the corrected market price(CMP) as this price reflects only social and environmental externality margins, which is stated as follows:

11)   CMP = P + SM + GM

          Hence, the corrected market price(CMP) is the traditional market price(P) plus the social margin(SM) and the green margin(GM) to reflect social and environmental concerns at the same time.

          As the fair trade margin(FTM) is defined as the sum of the social margin(SM) and the green margin(GM), then FTM = SM + GM.  We can now restate Formula 11 to express the corrected market price(CMP) in terms of fair trade margins(FTM) as shown below:

12)   CMP = P + (SM + GM) = P + FTM,   where  FTM = SM + GM

          Then, we can see that the corrected market price(CMP) is the traditional market price(P) plus the fair trade margin(FTM).  In other words, the corrected market price(CMP) is a socially and environmentally friendly price.

b) The supply and demand scenario.

          The structure of the corrected market(CoM) as can be seen in point “c” in Figure 3 below, which can be stated as:

13)   CoM = S*.D at Q2

          The above shows that the corrected market(CoM) works at the intersections of the corrected supply S* and the corrected demand D leading to a quantity Q2 that is higher than the right market quantity Q3 and lower than the traditional market quantity Q1 because the corrected market price(CMP) is lower than the right market price(RMP) and higher than the traditional market price(TMP). 

c) Implications.

          The corrected market(CoM) should lead to responsible production and consumption as it reflects social and environmental concerns in its price while the perfect market should go towards irresponsible production and consumption with its lower price, which is the reason why quantity Q2 is smaller than quantity Q1 in Figure 3 below.

Summarizing the production and consumption implications in the market

          We can use Figure 3 below to point out some relevant implications:

      

          a) when prices do not reflect the cost of dealing with externalities, as in point “b”, we should expect to produce more and consume more, perhaps on the scale of conspicuous attitudes; and therefore, we should expect to see ongoing generation of waste, pollution, ecosystem and social degradation as externalities are left out of economic solutions; b) The more prices reflect the cost of dealing with externalities as in point “c” and “a”, we should expect less consumption and less production to take place, perhaps with more focus on basic needs; c) When prices reflect social and environmental externalities, we can create a market where social and environmentally responsible production and consumption can take place; and d) the gap between supply S* and S1 is equal to the fair trade margin(FTM).  Hence, adding the fair trade margin(FTM) to the traditional market price(TMP) leads to a corrected market price(CMP) and to more responsible production and consumption as compared to the traditional perfect market(TPM) as it is the case in point “c”.

          Notice that at point “c” we should expect responsible behavior while at point “b” we should expect irresponsible behavior.

          To be clear, S3 is to the left of S* because S3 includes all possible externalities and S* includes only social and environmental externalities.

 

copyright 2010 Journal of Sustainability and Lucio Munoz 

What If Markets Have Always Been Distorted? [Part 3]

editors | 12 June, 2010 11:51

[continued] 

The clean market

          When a market reflects social and environmental responsibilities at the same time, it is a fully clean market as indicated in the operational concepts, and therefore, the corrected market(CoM) is a fully clean market and the corrected market price(CMP) is a fully clean price.

          It can be seen in Figure 4 below that there is a fully clean market when socially and environmentally responsible supply(S*) and demand(D*) interact at point “c” leading to a fully clean price, CMP, and a fully clean quantity Q* = Q2.

The right agricultural market price(RAMP)

          The structure of the right market price(RMP) in Formula 1 above can be restated in terms of the agricultural context as follows:

14)   RAMP = AP + AM1 + AM2 + AM3 + AM4…. + AMn

          The formula above says that the right agricultural market price(RAMP) is equal to the traditional agricultural price(AP) plus the sum of all agricultural externality margins(∑AMi ).

          As it can be seen in Figure 5 below, the right agricultural market price(RAMP) is determined by the interception of supply S3 and demand D at the point “a” and leading to quantity Q3.

The traditional agricultural market price(TAMP)

          The structures of the traditional market price(TMP) in Formula 5 and Formula 6 above can be rewritten in the context of the traditional agricultural market price(TAMP) as shown below:

                                   n                n  

15)   TAMP =  (AP + ∑AMi ) -    ∑AMi

                                   i=1             i=1

          Canceling terms we get:

16)   TAMP = AP

          And therefore, according to Formula 16 the traditional agricultural market price(TAMP) is AP, which is assumed to be externality neutral.

          As it can be seen in Figure 5 above, the traditional agricultural market price(TAMP) is determined by the interception of supply S1 and demand D at the point “b” and leading to quantity Q1.

The corrected agricultural market price(CAMP)

          The structure of the corrected market price(CMP) shown in Formula 11 and Formula 12 above can be presented in terms of agricultural market concerns as indicated below:

          Rewriting Formula 11 in agricultural terms, we get the following:

17)   CAMP = AP + ASM + AGM

          Formula 17 indicates that the corrected agricultural market price(CAMP) is the traditional agricultural market price(AP) plus the agricultural social margin(ASM) and the agricultural green margin(AGM) to reflect agricultural social and environmental concerns.

          Rewriting Formula 12 above in agricultural terms knowing that AFTM = ASM + AGM, we get the following:

18)   CAMP = AP + (ASM + AGM) = AP + AFTM,  where AFTM = ASM + AGM

          From Formula 18 we can see that the corrected agricultural market price(CAMP) is the traditional agricultural market price(AP) plus the agricultural fair trade margin(AFTM). In other words, the corrected agricultural market price(CAMP) is a socially and environmentally responsible agricultural price.

          This corrected agricultural market price(CAMP) can be seen at point “c” in Figure 6 below.

Production and consumption implications in the agricultural market

        From Figure 6 above we can extract the following implications: a) when agricultural prices(AP) do not reflect the cost of dealing with externalities, as in point “b”, we should expect to produce more and consume more, perhaps on the scale of conspicuous attitudes; and therefore, we should expect to see ongoing generation of waste, pollution, ecosystem and social degradation as externalities are left out of economic solutions; b) The more agricultural prices reflect the cost of dealing with externalities, we should expect less consumption and less production to take place, perhaps with more focus on basic needs; c) When agricultural prices reflect social and environmental externalities, we can create an agricultural market where social and environmentally responsible production and consumption can take place; and d) the gap between supply S* and S1 is equal to the agricultural fair trade margin(AFTM).  Hence, adding the agricultural fair trade margin(AFTM) to the traditional agricultural market price(AP) leads to a corrected agricultural market price(CAMP) and to more responsible production and consumption as compared to the traditional agricultural perfect market(TAM) as shown in point “c”.

The clean agricultural market

          There is a fully clean agricultural market when the agricultural market meets its social and environmental responsibilities at the same time.  So the corrected agricultural market(CAM) is a fully clean market and therefore, the corrected market price(CAMP) is a fully clean price.  This is because it is determined at the interception of responsible supply(S*) and responsible demand(D*) as shown in Figure 7 below:  

          It can be seen in Figure 7 above that there is a fully clean agricultural market when socially and environmentally responsible supply(S*) and demand(D*) interact at point “c” leading to a fully clean agricultural market price, CAMP, and a fully clean quantity Q* = Q2.     

Specific conclusions

          Low prices are expected to encourage more production and more consumption; and the lowest price should be expected to lead to overproduction and overconsumptive behavior, a situation that is not socially desirable.  By assuming that externalities from development in general, and from agricultural development in particular, are irrelevant and not reflected in traditional market prices, we seem to have created a distorted market and price system that encourages overproduction and overconsumption.  In other words, by assuming that demand and supply structures are externality neutral, we have forced them to meet at the lowest price possible in the market leading to ongoing market flooding and waste. 

          By adding the fair trade margin to the traditional market price or the agricultural fair trade margin to the traditional agricultural market price we can correct markets to induce the interaction of their supplies and demands at a point where responsible production and consumption can take place.  In other words, by adding fair trade margins to the traditional price we are creating the conditions that make fair trade issues endogenous economic issues.  In a fully clean market, we should expect less production and less consumption than in a fully dirty market as shown above.

         

General conclusions

          If the cost of dealing with development externalities is real, which it is, traditional markets, including agricultural markets have always been distorted as they have never reflected and do not reflect now externality margins in their pricing mechanisms.  If traditional markets have always been distorted, then adding fair trade margins to the traditional market price and fair trade agricultural margins to the agricultural market price would be good measures to correct distorted markets and create an environment that induces responsible production and consumption behavior. And doing this would make externality issues in general and fair trade margin issues in particular endogenous economic issues.

          In other words, fair trade issues in general, and agricultural fair trade issues in particular fall outside market theory because they are assumed out of the model; and this situation can be corrected as shown in this paper by adding appropriate externality margins to the traditional market price.

References

Amegashie, J. Atsu, 2006.  The Economics of Subsidies, Crossroads, Vol. 6, n. 2 , pp. 7-15, Milan, Italy.

Callahan, Gene, 2008.  Fair-Trade Coffee: Not Worth a Hill of Beans, The Christian Science Monitor, August 08, Boston, MA, USA.

Davis, Lucy, 2009.  Ten Years of Anti-Dumping in the EU: Economic and Political Targeting, ECIPE Working Paper No. 02,  Brussels, Belgium

Hayes, Mark and Geoff Moore, 2005.  The Economics of Fair Trade: A Guide in Plain English, Newcastle Business School, Northumbria University, Newcastle, UK.

Hiscox Michael J., 2007.  Memo prepared for the conference on Europe and the Management of Globalization, Princeton University, February 23, Princeton, NJ , USA

Muñoz, Lucio, 2001.  The Traditional Market and the Sustainability Market: Is the Perfect Market Sustainable?, The International Journal of Economic Development's Symposium on Sustainable Development: Theoretical and Pragmatic Issues, Gedeon M. Madacumura and Desta Mebratu, PhD(Eds), Vol. 3, No. 4, October, Elizabethtown, PA, USA.

Muñoz, Lucio, 2008.   Agriculture and Global Warming:  Should the Biofuel Route Be Expected to Be a Socially Friendly Agricultural Policy?, Biocombustibles, REDESMA, Vol. 2(2), Section VIII, July, La Paz, Bolivia.

Organisation for Economic Co-Operation and Development(OECD), 2008.  Promoting Sustainable Consumption: Good Practices in OECD Countries, Paris, France.

Tarnoff, Richard, 2004.  Fair-Trade Critiques Lack Common Sense, The Georgia Straight, News and Views, February 19, Vancouver, BC

copyright 2010 Journal of Sustainability and Lucio Muñoz

The Voices of Solar: Dr. Benjamin Luce

editors | 01 June, 2010 07:49

by Rose Marie Kern, author@rosemariekern.com

www.RoseMarieKern.com

www.SolarRanch.com

 

Ben Luce is a professor of physics at Lyndon State College in Vermont.  He has been the Co-Chairman of the Coalition for Clean Affordable energy, and President of the New Mexico Solar Energy Association.  In addition to teaching, he is a strong advocate for renewable energy and sustainable living in New England. 

When Cervantes wrote, “Maddest of all, is to see life as it is, and not as it should be”, he was describing the soul of Benjamin Luce. 

Ben was born in Cambridge, Massachusetts.  His father was a physicist and his mother, an artist.  As a child his mother took him to art galleries, and he tagged along with his family as they explored alternative living structures in Vermont. 

As he grew up, Ben acquired his father’s love of math and science, but his mother’s creativity is evident in the branch of physics he pursued, which involves the intricate and often beautiful patterns created by the nonlinear dynamics of nature.

In particular, Ben developed an intuition for how systems can change when they are subject to changes, or “perturbations”, and how the transitions can be especially dramatic and hard to predict in the presence of non-linear feedback loops. During his years working Los Alamos Laboratories in New Mexico, which have a substantial program in climate change research, he realized how this phenomenon was dramatically evident in the mathematics of Global Warming. 

”Much scientific analysis is designed around the concept of beginning with a well understood system, and then examining how small changes affect the system. I started looking at climate change in the same spirit, only to realize that not only are climate dynamics nonlinear, meaning that small changes could have dramatic consequences, but that the perturbations we have imposed are not small to begin with! This disturbed me greatly, and made me much more interested in trying to figure out how to avert climate change than in studying it further.” 

He began researching methods of preventing climate change in 1995, and became convinced that renewable energy generation has the best potential in the long term.  In particular, he feels that this more promising path dramatically increases energy efficiency coupled with the development of renewables and a hydrogen economy that utilizes fuel cells, and hopes that these advancements can be phased in fast enough to prevent environmental disaster.

Ben feels that there is excellent potential for success technologically, but that politics coupled with economics are very serious and difficult barriers to be overcome.  At the same time he notes that politics and technological progress are also non-linear phenomenon, so that there is no room for cynicism.

“People assume they have a complete view of the world they live in, but they don’t know what they don’t know.  We need to find a crack in their assumptions and exploit it, so they more fully realize how the way they live affects us all.” 

Ben definitely sees the world as it is, but what motivates his soul is a vision of how it should be. 

 

copyright 2010 Rose Marie Kern and the Journal of Sustainability

The Voices of Solar: The Prine Family

editors | 01 June, 2010 07:43

by Rose Marie Kern, author@rosemariekern.com

www.RoseMarieKern.com

www.SolarRanch.com

 

”Solar is something an individual can do for themselves.”

Michael Prine is a Technical Analyst for the Computer & Information Resources & Technology(CIRT) center at UNM.  Elaine is a storyteller and homemaker.  Both of them, along with their son, Keith, have donated hundreds of hours to solar energy educational and outreach activities.

Mike and Elaine Prine live a mile south of the University of New Mexico in a house that uses solar electricity and solar hot water heating.  Mike calculates the house to be about 35-50% self sufficient.  The creation of their solar electric system has been the result of both a love of the technology and a true concern for the future of the environment.

In 1990, Mike and Elaine saw a movie called “After the Warming”, where author James Burke foresaw the outcome of how global warming would affect the planet.  It also predicted that energy shortages and related issues would become critical , and advocated solar energy independence as an option. 

On 10/30/90, in a blizzard, Mike and Elaine went to Solo Power (a division of Zomeworks) and bought their first solar panels and batteries.

Remembering that time, Elaine chuckled and said “Did you know that if you buy two solar panels, they multiply?”

The Prine’s neighbors have been known to knock on their door during a power outage and ask how it is that they have lights and TV on.

Mike Prine’s passion for technology, and background in electronics, allowed him to design and implement a household system with monitors attached to all major appliances.  He keeps detailed records of the family’s electrical use.

Elaine’s job was to determine how best to arrange the daily activities of the family’s home life so that high electrical usage occurred during maximum solar gain.  “I learned quickly that you don’t do laundry on a rainy day.”

Mike believes in the future of solar energy as a distributed energy source.  “Solar is something an individual can do themselves.  It doesn’t require a major government project – anybody can do it.”

“Most people don’t consciously think about where their energy comes from, or the long term consequences of most power generation,” says Elaine.   She also asserts that electronics in general and renewable energy in particular is an area that has not been open to women. She would like to see more young women encouraged to pursue these careers.

 

In 1991, Mike and Elaine joined NMSEA.  They put together solar display units,  and began educating the general public through exhibits at fairs and events in Albuquerque.  They continue this tradition today.

 

copyright 2010 Rose Marie Kern and the Journal of Sustainability

 
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