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How to lose your licence to operate

You may think that McKinsey (the consultants) is an odd choice of adviser for governments trying to conserve their rainforests. And you’d be right. They may be good at economic analysis, but they seem to have got REDD+ and carbon around their necks.

Greenpeace have been looking at the activities of McKinsey in advising governments how to go about saving the forests. McKinsey applied standard economic thinking to create their ‘marginal abatement cost curves’ or MACCs. That sounds very impressive – and perhaps it would be,  if it weren’t for the fact that, according to Greenpeace, it is so dangerous.

The McKinsey method is proprietary. So despite the fact that it could affect the lives of millions, it is largely secret. Its problems are many, including:

  • flawed assumptions which favour big forestry at the expense of small farmers and the forests themselves and ignore social costs and implementation costs
  • an exclusive focus on economic consequences – not on carbon consequences or other environmental  consequences such as biodiversity loss
  • technical inadequacies of MACC method which cannot cope with real world issues like interactions between alternatives and cumulative effects.

The end result seems to be that it would be perfectly consistent with their advice to clear virgin rainforest in order to establish a palm oil plantation. That’s not economic thinking gone mad, it’s just plain old economic thinking. But of course there is more at stake  here than simply money.

All of which goes to show that you can’t solve deforestation with the same mindset that created it.

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