Gaylord Nelson was a US senator in the 1960s who was integral in the modern environmental movement.

He was famous for saying, "The economy is a wholly owned subsidiary of the environment, not the other way around." The Clean Energy Future plan outlined by Prime Minister Gillard yesterday is the first tiny step towards an economy that holds the senator's sentiment at its core. For the first time, Nature has found her way into every crevice of the economy. Every day fresh clean air is produced by trees and plants the world over. Water is treated by the filtration of rocks and plants. Resources are grown by action of the Sun's rays. And the young of our future fish dinners are sheltered in the corals and mangroves of the world. Many more important services are provided as well. How much does Mother Nature charge us for these services? Nuthin'. Free of charge, we are provided with an environment that is conducive to our life and prosperity on this planet. The idea that our economy relies on services performed by Nature was popularised by Amory and Hunter Lovins and Paul Hawkins in their influential book Natural Capitalism, published in 1999. With the subtitle, "creating the next industrial revolution", the book described 'natural capital' as "natural resources and ecological systems that provide vital life-support services". In 1997 it was estimated that the total value of the assets and services that Nature provides free for us worldwide was worth US$33 trillion per year. Global GNP was US$18 trillion at the time. Burning fossil fuels - oil, gas and coal - releases carbon dioxide to the air. For a while, no one paid that much heed. But eventually it was realised that this can have planet-altering consequences. In other words there is a cost associated with large quantities of that gas being released. In economic circles, it's known as an 'externality' because no one pays for this cost, not the consumers, nor the businesses. Mother Nature does her part in soaking up the carbon dioxide, through the giant buffer that is the world's oceans, and millions of plants inhaling CO2 and exhaling oxygen. But this free service is not able to keep up with our demand for it. Carbon dioxide in the atmosphere has increased from about 280 molecules for every million molecules of air (known as parts per million or ppm) in pre-industrial times to 393 ppm today. We need to start finding and paying for ways of performing the same task ourselves to avoid a significant disruption to our usual climate. Either that, or we have to reduce our demand for the service. In essence, this is what the carbon tax - moving into a greenhouse gas emissions trading scheme - is designed to do. It aims to lower demand for the natural service of carbon sequestration by raising the cost of activities that call upon it. Put another way, it places a price on dumping waste gas into the air. The 'externality' is now a waste management cost. The government's new 'Clean Energy Future' plan has the support of key independents in the lower house and the Greens in the Senate. It will pass parliament with no trouble. That means from July 2012, the top 500 carbon emitting companies in Australia will need to pay $23 per tonne of carbon dioxide they release. The costs will be passed on to their customers, pushing up the cost of living. The plan has far reaching effects. But what is more significant is that it is one of the few examples of environmental externalities being incorporated into our economy.

The excise on petrol is another example. The 38 cents added to each litre of petrol sold goes some way toward paying for the costs associated with air pollution. Somewhat ironically, it also helps pay for new roads. Licences to dump waste or fines for polluting waterways are also costs imposed on business in order to manage the environmental impacts. But the environment, and the goods and services it provides, have not traditionally been incorporated into our economy. It is only now, as the human population levels reach a point where our activities, en masse, have the ability to significantly change our environment irrevocably that it has begun to be a problem. As waters became undrinkable, fields poisoned and oceans depleted we realised the full import of the uncosted externalities. Slowly, we are working out how to make someone pay. With the almighty dollar the driving force in our society, pricing our natural capital is the only way for the environment to be given the regard it is due. It is speaking to the treasury in terms it can understand. This won't be the last environmental externality that is included in our economy. In fact it is likely to be just one of many more. Clean water, clean air, arable land, wild fish, and healthy forests are all features of our environment that are our natural capital. But to keep land aside for filtering water or estuaries free from development so fish can breed means someone else is not able to make money from the same space. If our assets are to be retained as natural capital, then the money to fund it needs to come from somewhere. A greater recognition of our natural capital will allow such funding to be considered. Putting a price on the release of carbon dioxide is just the first step of what will become a long road of environmental economics. It marks a shift in our thinking towards a more environmentally aware economy. One in which the economy is recognised in the subservient role it plays.

http://www.abc.net.au/environment/articles/2011/07/11/3266863.htm