Proceedings

This research endorses the idea from Tol (2009) that climate change, more
comprehensive, more complex and more uncertain than any other environmental
issue, is the origin of all externalities. The research hypothesis is:
With climate change, sustainability may be achieved through a qualitative-correlative
approach, characteristic to complexity science.
To support the research hypothesis and to create a real image of the knowledge limits,
the first section of the paper presents representative models developed thus far for
recognition and analysis of externalities in the context of severe global climate
change. The second section presents the qualitative-correlative modeling in terms of
global climate change events. Qualitative analysis can be balanced by classical
quantitative analysis methods incorporated into the accounting models, in order to
establish the extent of information flow, with directions determined by commutative
circuits and diagrams. The resulting reference scheme represents the sustainability
model in the context of global climate change.
1. THE ANALYSIS OF CLIMATE CHANGE EXTERNALITIES
The manufacture and consummation have effects that ascribe costs and benefits to
third parties, without affecting the prices of goods or services; these are externalities.
The externality arises when the manufacturing cost of a good or the benefits
associated with its consumption are allocated to someone other than the manufacturer
or the consumer, respectively. Environmental externalities represent the negative
(cost) or positive (benefit) impacts of manufacturing and consumption on the
environment, which are not recognized, but affect consumer satisfaction and entity
value, avoiding the market mechanisms.
Neoclassical economics failed to provide a consensus regarding solutions to remedy
external effects. Pigou (1920) finds that taxes and regulations can spontaneously
correct the prices of ecosystem-generated services. Coase (1960) believes that a
market response generated during the development process leads to a spontaneous
reaction, associated with externalities. In Coase’s approach, the monetary
measurement is the result of demand and supply of environmental services,
constituting an active economic factor. Costanza et al. (1997) support the necessity of
a financial measurement of services created by the natural environment, as well as the
measurement of collateral damages created by affecting these environmental services.
They believe that in the case of externalities, any evaluation is better than no
evaluation at all.
Externalities causing damages to the environment and community generate costs that
appear, for example, when a company releases a pollutant into the natural
environment without an economic transaction taking place (Antheaume, 2003). An
entity involved in the monetary measurement of costs for goods and services may take
into account clean air and unpolluted water, or raw materials, but it does not take into
account the multiple effects of its economic activity on biodiversity. Therefore, an
inadequate understanding of environmental mechanisms prevents a correct financial
assessment of environmental impacts and of the way they subsequently affect the
economic environment and health.
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