Externalities Are All Around Us - Why Do We Keep Ignoring Them?

The effects of climate change are all around us - whether we recognize it or not. And chances are… you’re recognizing it.

Climate change was formally addressed back in the 1990s, but we’ve understood the science of heat-trapping gasses since the mid-1800s (ever hear of Eunice Foote?), and the fragility of our environment as far back as the late 1700s, so why have we been so slow to correct our course?

Well, that depends on who you ask. However, one hypothesis is that climate change, for the past few decades, has largely been “unseen” by the Global North. 

Going back to the ‘90s, scientists understood that the Earth was rapidly warming (remember when we called it ‘Global Warming’ ?!) due to the greenhouse effect caused by the release of greenhouse gasses from the burning of fossil fuels. We knew that ocean levels were rising and that the Poles were at risk, but this was all pretty distant from our lives and homes.

Fast forward to the 2000s and we’ve now seen that climate change has affected communities in the Global South. Whether that be islands in the South Pacific or farmlands in Africa, climate change was ripping through these areas causing widespread destruction that persists today. Here in the Global North, we may have had celebrity fundraisers or offered some material relief to these nations, but we still had internalized what was right in front of us.

Today, the effects of climate change are now affecting every person in every corner of the world.

COVID-19 changed the world as we knew it, and in many ways, people’s eyes were opened to the world around them. There has never before been a time when the world was more connected - it’s a strange thing how calamity, loss, and destruction can bring people together.

As we enter a new world, post-COVID, it seems that this attitude of connectedness persists. People have become more aware of their personal impacts, their business’ impacts throughout the supply chain, and how every action has a reaction.

This isn’t a new concept, but in the world of business, it felt like it was a bit more difficult to find a company connecting the dots of their impacts pre-COVID. We call this process internalizing our externalities and it basically means we’re measuring, understanding, and reducing our impacts throughout a product’s entire lifecycle; even if we don’t have to. Take the textile industry for example - for every material choice we make, there will be impacts on people, water, soil, and air and what those impacts are will vary depending on the material. And how much of those impacts you see and or feel will depend on where in the world you reside. As things stand today, most businesses aren’t typically charged or penalized for many of those impacts.

Now, let’s take that concept and blow it up on a global scale. The fossil fuel industry and all of its by-products are the largest contributors to climate change on the planet (accounting for over 75% of global greenhouse gas emissions and nearly 90% of all carbon dioxide emissions). The production and use of their products (coal, oil, natural gas), have had impacts on people, water, soil, and air - aka externalities - that the industry was not always accountable for. What has the fossil fuel industry done to internalize these externalities? Not a whole lot.

Just in the first six months of 2023, there have been three massive climate-related issues that are making the effects of climate change indisputable.

In India’s Ballia region, nearly 100 people have died due to heat-related ailments in the first three weeks of June; summer is just getting started. With temperatures soaring to well over 100F and increasing humidity, those most vulnerable (children and the elderly) are backed into a corner. 

With little to no technology to combat the heat, citizens are forced to make due in the unbearable conditions. To make matters worse, their own government refuses to connect the extreme heat to the rise in fatalities - and you can bet the fossil fuel industry won’t take the fall for India’s record summers over the years. Making a direct correlation is still an argument.

Canada has seen a spike in wildfires, making them the new California. While it’s become a sort of macabre joke here in the Golden State that we have 5 seasons (Spring, Summer, Fire, Fall, and Winter), Canada’s latest string of wildfires is extraordinarily bizarre.

Fires are starting earlier, becoming more intense, and destroying more land than previously recorded. And while these fires are typically started due to human error or natural events, like lightning strikes, the warming of the planet - fueled in large part by the burning of fossil fuels -  created the conditions to make these events more disastrous year after year. Worse yet, they won’t pay for the damage they’ve done.

California’s homeowners continue to see a rise in home insurance costs, with some providers pulling out coverage altogether for new homeowners. The reason being? Wildfire risk and high construction costs.

This may seem like a subtle change in policy and some out there may say “Well that’s just California! It’s always been expensive and challenging to live there - just move out!” A valid point, but no one should be forced to leave their home due to climate change and its side effects.

It’s not Californians’ fault that wildfires continue to ravage the state, nor is it the insurance companies’ fault that they need to protect their bottom line, but the fossil fuel industry’s hands aren’t clean in this one; it seems like an easier argument to place the blame there when people have to relocate if they lose their home to fire.

California’s woes pale in comparison to the number of people globally who have been displaced by climate change. According to UNHCR, since 2008, the annual average of people displaced by climate-related events globally is 21.5 million. Who’s most at risk? Developing nations in the Global South and low-income communities. 

In some ways, climate change is the equalizer the world should have seen coming from a mile away (and actually, some did). No matter how wealthy you are or where you live, you will be impacted by climate change. With proper intervention, however, we can curb the fossil fuel industry’s destruction, and France has set out to potentially do just that.

This week, France will be holding the Summit for A New Global Financing Pact to “collectively rethink the global financial architecture of international solidarity and climate action by proposing concrete solutions to create a fairer, more effective and more responsive global financial system.” Global financial institutions, including World Bank, will convene to discuss how global financial systems can better protect biodiversity, reduce inequalities, and combat climate change. 

Greenpeace International has called for a tax to be imposed on big oil companies, which they suggest could generate between $200-$300 billion USD to be used to better protect and adapt communities in the Global South to climate change. A tax like this would be groundbreaking and seems like the only way forward, considering fossil fuel companies are against curbing production and there is no viable way to incentivize the industry while also driving down emissions. 

Externalities are all around us and the world is finally starting to take notice. Climate change has everyone’s attention, but what we do about it hangs in the balance. Time is running out and there has never been a better time to hold the fossil fuel industry accountable for their actions.