Of Jenga Towers and Environmental Offsets

Economist Robert Solow argued in his 1974 manuscript (1) that the benefits of manufactured capital are perfect substitutes for nature and sustainability can be achieved by accumulating capital in order to compensate the losses of nature based on an exchange value. This means that we can substitute 100 hectares of Amazon rainforest for 50 luxury handbags if the price is right. Forests, car parts, nuclear power plants, intellectual property and a new phone app are but a few examples of different forms of “capital” that are interchangeable in contributing equally to a collective sense of “wealth.” But why must all benefits to human beings be rolled into some definition of “capital?”

The fundamental supporting nutrients and climate regulation cycles of the planet are not resources and cannot be possessed. They are services or processes. Similarly, the tacit social relationships that bind communities together also form the basis of spiritual and aesthetic connections for unique human-social relationships. The flaw in conceiving of complex ecological and social relationships and processes as “capital” is compounded by the substitutable nature of one capital form with another. Under Solow’s logic (and the rest of neoclassical economic theory), society is sustainable (2) so long as overall per capita utility – measured monetarily and aggregated across capital forms – is stable or non-declining. Any one form of capital can be depleted as long as total overall capital is maintained or increased. In effect systemic problems associated with the loss of critical social and ecological structure are ignored in this equivalence.

The Substitution of Capital

Under a presumption of perfect substitution, natural resources are seen as nothing more than stocks perfectly dictated by prices, which presumably mirror the sum of fully informed and intrinsically self-interested individuals’ investments. Nothing irreplaceable is attributed to nature. Of course we know that the earth is a closed system and contains a finite resource base. This is fundamentally at odds with the notion of substituting nature for manufactured goods since substitution will cease when the ecological structure has been destroyed.

One of the most striking examples of substitution of a non-growing resource, which took millions of years to form, is the burning of fossil fuels for the industrial production of a range of tradable real and virtual goods. The creation and commodification of tradable carbon credits not only perpetuates the substitution of fossil fuel endowments with conjured permits of imposed value (i.e. by making fossil fuel depletion somehow socially acceptable), but it also masks the political economy behind the valuation of fossil-fuel derived energy and society’s dependence on this fuel source within an expanding economy.

Biodiversity, ranging from the diversity of alleles within genes to species richness, forms the basic building blocks of evolving ecological niches and specific ecosystem functions defining the characteristics of global eco-regions. Market-oriented “biodiversity offset” policies enhance species habitat elsewhere by inventing certified “equivalents” in order to substitute or compensate for the harmful impacts to specific species or habitats associated with development. Often the participation in these markets is based on regulatory mandate. In the United States, for example, these policies have increasingly been adopted in meeting state and federal regulatory requirements regarding development of wetland areas or degradation of endangered species habitat. Instead, private interests need only pay (i.e. substitute) for habitat enhancement elsewhere which is presumed functionally equivalent to the habitat lost. Meanwhile, the unrelenting drivers causing biodiversity loss fail to incorporate the constant imperative for the development frontier to expand beyond national borders. In the process of offsetting, different configurations of natural “capital” are assumed equivalent and hence substitutable despite the fact that scientific knowledge is not (and arguably can never be) accurate enough to fully understand the systemic impacts of species loss at the local and global scale.

Carbon offsetting employs a similar logic in inventing tradable commodities (e.g. carbon credits), which substitute carbon-emitting growth in manufactured capital in the global North with several dozen hectares of standing trees or small-scale renewable energy investments. In such a case, a one-hectare stand of trees is equivalent to the carbon emissions of a flight. Elsewhere, voluntary biodiversity or carbon offsets bank upon a moral sentiment for substitution related to assuaging the guilt of global North private interests or to add a market premium to their product.

The Teetering Jenga Tower

During a recent game of Jenga, I came across an easily observable yet startling metaphor for understanding this predicament of offsetting. Jenga is a popular game of wooden rectangular blocks stacked in perpendicular pairs of three. There are only 54 blocks within each game set that can be used and a limited number of actions that can be made. For example, blocks can only be stacked by interlocking perpendicular sets of three. Only one hand is permitted for removing a block and replacing it to the top of the tower. Each block is packaged and manufactured to be identical in shape and size. Once all blocks are stacked as a tower, the objective is for each player to remove one block from anywhere along the tower, save for the three highest levels, and replace it on the top, continuing the perpendicular stacking. The law of gravity eventually takes over, as the balance of blocks being stacked on the top of the tower is not commensurate to the foundation of the tower from where blocks are being removed.

Like the Jenga game with its 54 blocks, our earth contains finite resources which are literally extracted at the base (raw minerals and natural resources), and used and glorified in expanding production and consumption markets as exemplified by sparkling skyscrapers reaching ever higher in the sky. The objective of the game is for each competitor to maximize his or her utility by successfully transferring a block while making it harder for an opponent to follow suit. Both competitors are aware that one of them will eventually lose (i.e. the tower will collapse), but seek to maximize their own utility in the time before the collapse. Like the choice of discount rate applied in standard economics to estimate future costs and benefits, the marginal utility of placing a block on the top will be higher in the immediate short term than doing so in the future since the risk of collapse will be higher with less expendable blocks to choose and increasing load-bearing to replace them. Moreover, when accounting for future losses resulting from the destruction of the environment, the use of a discount rate assumes that future populations will be richer and thus their enhanced utility from their wealth will presumably compensate for the fact that they have little water to drink, clean air to breathe, or lack other natural resources for which no substitutes exist.

Only the single hand of self-interest can play this game. The market and social norms that characterize our relationships with others and which represent either a slick business deal handshake or a warm heartfelt pat on the back, respectively, are clearly in favor of the former in this cutthroat tower construction. As the law of gravity ultimately constrains the extent to which an ever increasing imbalance can be sustained in a growing tower, so too does the application of the second law of thermodynamics within a closed system underline the increasing and irreversible disorder (entropy) created by rupturing complex artifacts of biological evolution to lower quality energy forms.

The result of offsetting is to kindle a narrative of simultaneous conservation and development or of “no net loss” of biodiversity or carbon emissions, just as there is no net loss of blocks on the Jenga tower. Biodiversity is difficult to measure and is not perfectly interchangeable due to the type of ecological structure being reproduced elsewhere, the spatial location of this reproduction and the temporal non-linearities of species loss. Although we replace like block for block, the rules of the game demand that we continue to remove blocks from the base of our tower in order to expand its height. Whether we are given the time to contemplate the choicest block to remove and replace to the top of the tower is immaterial given that a block must be removed. Similarly, a growing economy (whether deemed “sustainable” or “green”) will unavoidably degrade ecological structure. The replacement of lost biodiversity from development is assumed to be “rectified” by specifications that certain “critical” species (or critical blocks) are never exchanged or that offsetting metrics be considered which trade-up the habitat lost (i.e. place two blocks up the Jenga tower for every one block removed at the base). However, no concern for the many generations of evolution and patterns of co-evolution between species is made in this calculus. Such a shortsighted rationale makes little sense when multiple gains of replacement in a different space cannot compensate for the fundamental losses at the base of the tower.

Not taken into consideration are the cumulative effects of removing a finite set of blocks that stabilize the tower. Removing a block and failing to ensure an equivalent replacement of balance may not lead by itself to the demise of the structure. In other words, certain blocks are more redundant than others. However, subsequent removals that continue to fail in securing the newly established center of balance imposed from the previous block replacements will snowball rapidly to tower collapse. Similarly, nonlinear threshold effects which cause a system to shift from one ecological state to another are associated with the cumulative displacement of species whose ecological niches intertwine within functional groups causing catastrophic disruption should one or a few of these species be removed. Meanwhile, as the relentless motion of playing the game results in the removal of blocks that possess increasingly pertinent structural positions, biodiversity offsetting policies fail to question the possibility that the rules of the game are flawed (i.e. removing blocks from the base to increase the height of the tower is not structurally sound).

Building a New Structure

Ultimately biodiversity, carbon and other offsetting endeavors are merely manifestations of a narrative underpinned by perfect substitution of distinct and value-laden “currencies.” Can we actually claim that the financial value of two kilometers of newly built roads can substitute for the loss of five northern spotted owls? Alternatively, is it accurate to say that the expansion of smart phone app sales combined with increasing protection of private forestland makes Japan one of the most sustainable countries on earth . . . unlike the Democratic Republic of Congo, which mines and exports rare earth minerals for computers and smart phones, yet fails to invest in social media or specialize in carbon credits? The absurdity of substitution defining sustainability or “no net loss” rhetoric simply masks the power of established interests to pursue perpetual capital accumulation at the expense of the environment. By eroding the complex web of life, by extirpating species and pouring greenhouse gas emissions to disrupt global climate regulation, we are turning the earth into a Jenga tower. In substituting one block for another as a self-serving means to trump the competitor, the more rounds we play, the more we begin to realize that what we continue to build on the top cannot substitute for the loss of the foundation.

The question then emerges, why do we play such a fatalistic game? If playing a game is what characterizes the task of our lives, why are we precluded from deciding which game we would prefer to play? With the same configuration of Jenga blocks, a game with a different set of rules could be envisioned which expands the base of the tower to ensure a more a stable structure which narrows off as it gets taller, forming a sort of pyramid. Indeed, pyramids are among the most stable edifices characteristic of human civilization. Furthermore, there is a limit to how tall they can grow depending on the number of blocks that form their foundation. Likewise, given the non-substitutable characteristic of a finite resource base, regulatory caps or limitations on development could be established in recognizing the essential role of biodiversity and ecosystem structure for ensuring resiliency against the impacts of human development and other external shocks. After ensuring that natural resources are prioritized so that ecosystem functions are not severed, remaining resources can then be appropriated to fairly and equitably ensure human well-being is achieved. The challenge lies in assembling new rules which depart from competition between two players, each seeking to finagle the other with a precarious move, and instead create a system in which the goal of winning becomes a moral imperative to ensure no player loses.

Footnotes

1. Solow, R. 1974. The Economics of Resources or the Resources of Economics. Am Econ Rev. 64, 1-14.

2. Here “sustainable” refers to “weak sustainability” in which society is sustainable so long as overall per capita utility aggregated from the production of any capital form is stable or non-declining. Thus any one form of capital can be depleted as long as total overall capital is maintained or increased.

Neumeyer, E. 2007. Weak Versus Strong Sustainability: Exploring the Limits of Two Opposing Paradigms. First Edition. Edward Elgar Publishing, Cheltenham. 296 pp.