24 May 2018

Which industries destroy more value?

Lots of people (including The Lorax) have opinions on this question, but this 2012 KPMG report has a nice visualization comparing annual earnings in an industry (EBITA) to that industry's environmental destruction ("negative externalities"):

Although I am not too surprised to see oil and gas producing a net benefit (on purely financial terms), I am surprised to see that food producers would be bankrupt if they had to pay for the environmental damage they their customers cause.

(Note that earnings are based on prices and costs, not value, which is surely a multiple of most industry's earnings.)

Bottom line: We should be paying far more for food (electricity, metals, mining, and so on) as a means of compensating for damage or as a result of shifting to more sustainable production methods.

2 comments:

nuevodada said...

The figure shows Growth in EBITDA vs growth in external environmental costs, 2002–2010. In terms of the analysis, this has a different implications

Eric Hough said...

Very surprised to see the environmental costs of both food and electricity exceed costs of oil and gas production.

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