GEF

Unit 7  |  The Economics of Sustainability 154 Recall that ecosystem services are natural resources and processes that make human life possible and provide for our health and wellbeing. They include air and water purification, flood control, food production, waste decomposition, pollina- tion, and climate regulation; as well as the provision of fertile soils, building materials, clothing fibers, medicines, and recre- ation. At present, ecosystem services are not well accounted for in economic markets. Forests provide a wide range of ecosystem services, such as climate regulation , flood control, water purification, soil sta- bilization, and wildlife habitat. Traditionally, forest resources had value only for timber, overlooking the important ecosystem services of the forests. If a price were set for the value of a tree as an absorber of greenhouse gases and provider of other services, it is far more likely that forests would be properly protected. 7.6  True Cost Accounting One useful tool for evaluating the sustainability of various activi- ties is true cost accounting. True cost accounting requires collecting information about the environmental and social costs of economic transactions. When the information is made public, consumers and producers can factor into their decisions. Growing corn in the U.S. is an example where true cost account- ing is informative. Large-scale corn production is heavily subsidized by the government. A government subsidy is when the government pays money to farmers and agribusinesses to supplement their income. From 1995 until 2014, the U.S. corn industry received an estimated $94 billion in government subsi- dies. In 2014 alone, subsidies totaled nearly $3 billion. Due to this subsidy, the price of corn is artificially low, encouraging produc- tion and consumption above levels that supply and demand would dictate in a free market without subsidies. REGULATION Control. Also, a rule of law issued by an authoritative agency of the government. TRUE COST ACCOUNTING A method of accounting that considers costs and benefits in terms of environmen- tal, economic, and social impacts, rather than just direct monetary costs. SUBSIDY Money granted by the government to assist an industry or business so that the price of a commodity or service may remain low or competitive.