3.1.5 Ecologically embedded markets
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section 1.2.3 Impact of the fossil fuel energy pulse, which explains the role of fossil fuels in accelerating economic and population growth
Section 1.2.4 Matter in the economy, which explains the role of material extraction in our economies and the impact of that extraction and waste on ecosystems.
Section 1.2.5 Ecosystems: Interactions, energy and the importance of biodiversity, which explains the role of energy, biotic interactions, and biodiversity in an ecosystem
Section 1.2.6 Biogeochemical cycles, which explains how the water and carbon cycles support all life on Earth.
Section 1.2.7 Planetary boundaries, which explains the nine ecological systems that regulate conditions on Earth and their limits, six of which we are exceeding.
Section 3.1.1 The market as a system, which describes market parts and their relationships, and the connection between the household and the rest of the economy.
Section S.1 Systems thinking, which explains what a system is and why systems thinking is useful. (coming soon)
Section S.x Feedback loops and tipping points, which explains the roles of reinforcing and balancing feedback loops in amplifying or dampening change. (coming soon)
Learning objectives:
explain how markets are embedded in ecological systems through business’s use of energy and material resources and their impact on ecological systems in the context of planetary boundaries
The Amazon Rainforest, spanning multiple countries in northern South America, covers about 6.7 million square kilometres—twice the size of India. Known as the "lungs of the Earth," it plays a key role in the oxygen, carbon, and water biogeochemical cycles (Section 1.2.5). Evaporation from the forest affects global climate patterns. The Amazon is also home to around 10% of the world’s plant and animal species, many of which are endemic, found nowhere else.
However, business activities significantly harm the Amazon Rainforest. Agricultural, mining and logging companies clear vast areas of the forest to use its resources to make products to sell to consumers/households. This deforestation destroys habitats, displacing countless species. Fewer trees means that less carbon dioxide (CO2) is absorbed from the atmosphere, increasing greenhouse gases and global warming. Deforestation also disrupts the Amazon’s water cycles, affecting global weather patterns.Â
The destruction of rainforests like the Amazon also impacts indigenous communities. According to WWF, over 47 million people live in the Amazon basin, including 2.2 million from indigenous communities, relying on the Amazon for their survival and livelihoods.
The destruction of the Amazon and other rainforests in Africa and Asia for short-term business profit is not just a local issue, it has far-reaching effects on the planet's climate, water cycle, and biodiversity. These ecosystems are essential for all life on Earth, driving climate and weather patterns around the world.
Recognising our dependence on ecosystems for energy and materials can lead to more regenerative economic practices, helping to ensure that we meet real human needs within the means of the planet.
How are businesses and markets dependent on ecosystems?
The economy is all the human-made systems we use to transfer and transform energy and matter to meet human needs (and wants). Markets are part of a larger provisioning system that converts biophysical inputs into (hopefully) good social outcomes as seen in Figure 9 and discussed in Section 1.3.5.
Figure 49 Provisioning systems link Earth’s resources and systems, or biophysical inputs, with social outcomes
(Credit: Adapted from O'Neill et al. (2018))
Businesses in markets need energy
Energy is essential for all life on Earth (Figure 10). Businesses use energy to power machines that produce the goods and services we rely on each day. Certain types of businesses use significantly more energy than others because of what and how they produce:
Figure 10. The embedded economy: energy in, heat out
(Credit: Kate Raworth and Marcia Mihotich, CC-BY-SA 4.0)
manufacturing sector: require vast amounts of energy to transform raw materials into finished products like cement, chemicals and steel (Figure 11);
transportation sector: businesses like airlines, shipping companies, and logistics firms that rely on (mainly) fossil fuels to move goods and people around the world (Figure 12);
technology sector: technology consumes vast amounts of energy, though it is less visible than in manufacturing and transportation. Data centres, facilities that store and process enormous amounts of information, need continuous power for servers and cooling systems (Figure 13). In particular, artificial intelligence (AI) uses huge amounts of energy. Many people are worried about how AI development will impact our ability to meet other energy needs or to lower carbon dioxide (CO2) emissions.Â
Figure 12. Transportation requires fuels (mainly fossil fuels now) to move goods and people around the world
(Credit: Julian Herzog, CC BY 4.0)
Renewable energy sources, like solar and wind, regenerate or flow, and are more sustainable than limited nonrenewable energy sources like fossil fuels (Section 1.2.2). Renewable energy production, especially for electricity, is growing rapidly (Figure 14). However, as of 2024, fossil fuels still supply about 80% of global energy.Â
Reducing this percentage is challenging because the size of our economies and energy demand are growing rapidly. Increased efficiency lowers production costs, which lead businesses to produce even more products. As a result, renewable energy is often being added to our economies in addition to fossil fuels rather than replacing them (Figure 15). This counterintuitive situation, where improved efficiency results in more production, energy and material use, is called Jevons paradox (Section 1.2.3).
Figure 14. Share of electricity production from renewable energy, world
(Note: you can add countries to this line graph and switch to the interactive map to make comparison easier)
(Credit: Our World in Data)
Businesses in markets need matter
Matter, anything that has mass and occupies space, is another component for business activity in markets. Businesses use raw materials like minerals, water, and biomass (Figure 16). These materials are extracted, transformed, and used to produce products to meet human needs and wants.Â
Figure 16. The embedded economy, with matter inflows and waste matter outflows
(Credit: Kate Raworth and Marcia Mihotich)
For example, trees are cut to produce furniture, and metals are mined for steel, electronics and many other goods (Figure 17). Water is another vital material resource used in many activities. Farming and drinks production is an obvious use, but there is a lot of embedded water in everything we use. Did you know that making a T-shirt requires 2,500 litres of water?
Figure 17. The metals mined from Earth in 2021
(Credit: Visual Capitalist)
How do markets impact ecosystems?
Using energy and matter to meet human needs and wants in market activities harms ecosystems in a number of ways. Understanding these impacts can help both consumers and businesses make more sustainable choices and advocate for better business practices.Â
The information below uses the planetary boundaries model (Figure 18, Section 1.2.7) to organise the ecological impacts of business activity.
Figure 18. Planetary boundaries model
(Credit: Stockholm Resilience Centre CC BY-NC-ND 3.0)
Climate change
Climate change is one of the most significant impacts of business activity in markets. Businesses burn fossil fuels for energy to extract raw materials, and produce, transport, and sell their products to consumers/households. Burning fossil fuels disrupts the carbon cycle by releasing COâ‚‚ and methane, trapping heat in the atmosphere which leads to more frequent and extreme weather events and disruptions to the water cycle.
Novel entities
(chemical pollution)
Chemical, manufacturing and other industries release massive amounts of chemicals into ecosystems. Many chemicals remain in ecosystems and human bodies for a very long time. These 'forever chemicals’ can cause irreversible damage to the way ecosystems function.
Stratospheric ozone depletion
Human-made chemical emissions in the atmosphere have damaged the ozone layer, which protects all life on Earth from harmful UV radiation. These emissions are mainly from chemicals used in refrigerators and air conditioners, fire extinguishers and aerosol propellants. The Montreal Protocol, a global agreement, has limited these damaging emissions.
Atmospheric aerosol loading
(air pollution)
Humans emit microparticles or aerosols, like soot from burning waste, into the atmosphere through industrial production and transportation. These particles are often toxic to plants and animals, including humans, and affect cloud formation and rainfall patterns, disrupting ecosystems.
Ocean acidification
Ocean acidification is caused by the absorption of carbon dioxide (CO2), forming carbonic acid that damages the exoskeletons of some animals and threatens corals and the habitats they provide for fish and other marine organisms. Business activities that increase COâ‚‚ emissions directly contribute to this problem, threatening marine ecosystems.
Biogeochemical flows
(phosphorus and nitrogen)
Biogeochemical flows involve the cycles of elements like nitrogen and phosphorus. These elements are crucial for plant growth, but human activities have disrupted their natural cycles. Using synthetic fertilisers in agriculture adds excess nitrogen and phosphorus to soils and water. This creates algal blooms, depleting oxygen in the water and causing dead zones in oceans and lakes.
Freshwater change
Using excessive surface water (blue water) and groundwater (green water) for agriculture, industry and households depletes water stocks and flow. This interferes with the water cycle which supports the transfer and transformation of energy and matter in ecosystems.
Land-use change
Humans convert land, such as forest and wetlands, for agriculture, material extraction for manufacturing and the built environment for human settlement and transportation. This use of land depletes soil carbon, destroys ecosystems and harms the land’s ability to cycle water, nitrogen and phosphorus.
Biosphere integrity (biodiversity)
Biodiversity is critical for ecosystem function and resilience. According to the World Wide Fund for Nature (WWF), we have lost about 69% of Earth’s species since 1970 due to agriculture, material extraction, urbanisation, pollution, and climate change. Overconsumption and overproduction in markets is the main driver of biodiversity loss.
Understanding the deep connection between market activities and ecological systems is crucial for designing regenerative economic systems. By recognising how our production and consumption activities impact Earth’s systems, we can make better choices about what and how much energy and materials we need to survive and thrive, and advocate for businesses and state policies to create and maintain the conditions for life.
Activity 3.1.5
Concept: Systems
Skills: Thinking skills (transfer, critical thinking)
Time: Varies, depending on option
Type: Individual, pairs, group?
Option 1 - Annotating diagrams
Time: 30-40 minutes
In this section you learned about the impacts of business activities on ecosystems. These systems are discussed in greater detail in Section 1.2.5 and Section 1.2.6, but even with just this section, you should be able to identify some impacts on two biogeochemical cycles: the water cycle (Figure 19) and the carbon cycle (Figure 20) - click on the arrow below to reveal them.
Sketch one (or both) cycles on a piece of paper (boxes for stocks, arrows for flows) and then annotate further with how business activity disrupts these systems. You may want to use a pencil so that you can edit your diagrams as you go. OR
Copy and paste the relevant illustration(s) into a digital document and annotate it from there.
You may want to work alone to test your understanding, or work with a partner to support each other’s understanding.
Water Cycle - click to reveal image
Carbon cycle - click to reveal image
Option 2: Discussion
Time: 20 minutes
When discussing the impact of business activities on ecosystems, business owners might argue that they are just responding to consumer/household demand and that the burden is on consumers/households to change their behaviour if we want to lessen the impact on ecosystems.
Considering what you have learned in this subtopic, and others you may have studied, what do you think of this argument?Â
How do both businesses and consumers bear responsibility to reduce the environmental impact of producing goods and services?
Take some time to consider your ideas, and then discuss these questions with a partner, small group or as a whole class.
Option 3: Reflection on use of AI
Time: 30 minutes
Many individuals and businesses are using artificial intelligence tools to support them with their work, maybe also you? If you are using these tools:
Make a list of what you are using AI tools to do
For each use, assign a number to it on a scale of 1-5, where 1 = very beneficial to human/ecological wellbeing and 5 = not at all beneficial to human/ecological wellbeing
Consider the results and compare with one or more other students if you can.
Given the high levels of energy needed to run these tools, to what extent are your AI activities a good use of resources? Write or audio record a reflection, or discuss with others in your class.
Note: this activity can be expanded into a larger project to research and raise awareness of the use of AI in the school community, potentially sparking a discussion on appropriate use of the tools that go beyond the usual discussions about academic honesty.
Option 4. Exploring global deforestation with an interactive map
Time: 20-25 minutes
This section started by looking at the impact of business activities on the Amazon Rainforest. The Amazon is not the only forest experiencing deforestation. There are other large rainforests in Africa and Asia that are under threat, as well as temperate forests and boreal forests.
The website Global Forest Watch has a beautiful, rich and saddening interactive global map where you can see areas of the world that are losing and gaining forest.
Where in the world are we losing forests?
Where in the world are we gaining forests?
What is the situation where you live?
Ideas for longer activities and projects are listed in Subtopic 3.5 Taking action
Checking for understanding
Further exploration
Water Footprint Calculator - Educational resources on water use which includes information about embedded water to show how much water is used to make the goods and services we buy. Footprint calculators help people see the impact of their choices. Note: resource use in our economy involves both producers and consumers. When producers make unnecessary goods and use advertising to encourage people to buy things they don’t need, consumer-focused footprint calculators can distract from the real issue. Difficulty level: easyÂ
Marcel Gomes, 2024 Goldman Environmental Prize, Brazil - A 5 minute video about Marcel Gomes, who led an international campaign linking beef from JBS, the world’s largest meatpacking company, to illegal deforestation in Brazil’s threatened ecosystems. Using evidence from his investigation, Marcel and his partners pressured global retailers to stop selling illegally sourced meat. In December 2021, six major European supermarket chains in Belgium, France, the Netherlands, and the UK indefinitely halted the sale of JBS meat products. Difficulty level: easy
AI's Energy Demands Are Out of Control. Welcome to the Internet's Hyper-Consumption Era - Wired Magazine article about the increase in energy and water demand from use of artificial intelligence. Difficulty level: medium
Per- and Polyfluoroalkyl Substances (PFASs) - United Nations Environment Programme website on PFAS substances and their ecological impacts. Difficulty level: high (mainly because of technical terminology for chemicals)
Earth for All - A book that explores a number of scenarios for our collective future on the planet. The book uses research from new computer models about the impact of different actions and policies on human and ecological wellbeing. The scientist-authors present five big impact changes we can make to meet the needs all within planetary limits in a single generation. Difficulty level: medium
Planetary Boundaries - [ECO]NOMICS Part 3 - In this video, from the Institute for New Economic Thinking Lectures on [ECO]nomics, Professor Juliet Schor explains planetary boundaries and why we need to live within them. She counters arguments often put forward by mainstream economics that there is a tradeoff between protecting the environment and our ability to consume goods and services. Difficulty level: medium
Sources
Daly, H., Farley, J. (2011). Ecological Economics (2nd ed.). Washington, D.C.: Island Press.
EcoRise. (2022, July 6). Home. Water Footprint Calculator. https://watercalculator.org/Â
Met Office (n.d.). Carbon cycle. https://www.metoffice.gov.uk/weather/climate/climate-explained/carbon-cycle
NASA (n.d.). Classroom Activity: Modelling the Water BudgetJet Propulsion Laboratory, California Institute of Technology. https://www.jpl.nasa.gov/edu/teach/activity/modeling-the-water-budget/.
Raworth, K. (2017). Doughnut economics: seven ways to think like a 21st century economist. London: Penguin Random House
Richardson, K. et al. (2023). Earth beyond six of nine planetary boundaries. Science Advances, 9(37). DOI:10.1126/sciadv.adh2458
WWF. (n.d.). The 2022 Living Planet Report. https://livingplanet.panda.org/en-US/#:~:text=The%20Living%20Planet%20Report%202022,are%20to%20reverse%20nature%20loss
WWF. (n.d.). Here are our top facts about the Amazon. https://www.wwf.org.uk/learn/fascinating-facts/amazon#:~:text=1.,the%20side%20of%20the%20UK!
Terminology
biogeochemical cycle: Earth system cycles that move essential elements like water, carbon and nitrogen between living and nonliving parts of ecosystems
evaporation: the transformation of a substance like water from a liquid into a gas
climate: the weather conditions that are normal for an area over a long period
species: a group of organisms with similar characteristics, where the individuals are capable of interbreeding
endemic: an organism that is native and restricted to a certain place
consumer: someone who buys and uses resources and products ot meet needs
household: a system where people living together care for each other and do domestic work, often termed the 'core economy'
deforestation: removing a wide area of trees, often for farming, mining, or urbanisation
habitat: the natural home or environment of an animal, plant, or other organism
carbon dioxide (CO2): gas produced by burning carbon or organic compounds and through respiration, naturally present in the atmosphere and absorbed by plants in photosynthesis
greenhouse gas: gases in Earth's atmosphere trap the Sun's heat, warming the planet
global warming: the rise in the average temperature of Earth's air and oceans (due to human activities)
water cycle: the stocks and flows of all water on Earth
indigenous community: the original settlers of an area (pre-invasion/colonialism) who have retained their culture apart from colonisers
profit: total revenue minus total cost
biodiversity: the variety of living organisms on Earth
ecosystem: the interaction of groups of organisms with each other and their physical environment
energy: the ability to do work or cause change
regenerate: the process of restoring and revitalising something
economy: all the human-made systems that transfer and transform energy and matter to meet human needs and wants
transfer: to move something from one place to another
transform: a change in the state, energy or chemical nature of something
matter: anything that takes up space and has mass
market: a system where people buy and sell goods and services for a price.
provisioning system: systems that manage the levels of energy and matter used to meet specific human needs
biophysical input: Earth's biogeochemical cycles and natural resources
raw material: a basic material that is used to produce goods
fossil fuel: a non renewable energy source including coal, oil, and natural gas, formed over millions of years in the Earth's crust from decomposed plants and animals
artificial intelligence (AI): computer systems able to perform tasks normally requiring human intelligence
carbon dioxide (CO2): gas produced by burning carbon or organic compounds and through respiration, naturally present in the atmosphere and absorbed by plants in photosynthesis
renewable energy: energy from sources that are continuously available or regenerate quickly
nonrenewable energy: energy from sources that cannot be regenerated in a human timescale, such as coal, natural gas and oil
Jevons paradox: a situation where efficiency gains in an input are counteracted by increased consumption and production, resulting in even greater use of the input
biomass: organic matter
embedded water: the water hidden in goods, services and processes
ecosystem: the interaction of groups of organisms with each other and their physical environment
sustainable: meeting human needs within planetary limits
planetary boundaries: the limits of Earth systems to absorb the impact of human activity and continue to function
climate change: a change in the temperature and precipitation patterns in an area, in recent times due to human economic activities
carbon cycle: the movement of carbon between Earth's atmosphere, hydrosphere, biosphere, and lithosphere
methane: a colourless, odourless flammable gas; natural gas
forever chemical: a toxic substance that persists and accumulates in the environment
UV radiation: invisible rays that are part of the energy that comes from the sun; can damage living organisms
aerosol propellant: a compressed gas that dispenses the contents of a container when the pressure is released
Montreal Protocol: an international agreement that protects the ozone layer by reducing ozone-depleting substances
aerosol: small solid particles or liquid droplets suspended in air
ocean acidification: a reduction in the pH of the ocean over time, caused primarily by absorption of carbon dioxide
carbon dioxide (CO2): gas produced by burning carbon or organic compounds and through respiration, naturally present in the atmosphere and absorbed by plants in photosynthesis
carbonic acid: an acid formed when carbon dioxide dissolves in water
exoskeleton: a rigid external covering for the body in some animals
habitat: the natural home or environment of an animal, plant, or other organism
fertiliser: a chemical or natural substance added to soil or land to increase its fertility
nitrogen: an element that occurs as a gas which makes up 78 percent of the atmosphere and that forms a part of all living tissues
phosphorus: an important element for living organisms as a component of adenosine triphosphate (ATP) which is the primary energy source for organisms' cells
algal bloom: a rapid increase in the population of algae in freshwater or marine water systems
dead zone: a reduced level of oxygen in the water
surface water: water that collects on the surface of the ground, like lakes and rivers
groundwater: water that collects underground in soil or in rock crevices and pores
stock: an accumulation of something, such as energy, matter, information, or money
flow: movement of something such as energy, matter, information or money between stocks
water cycle: the stocks and flows of all water on Earth
wetland: a distinct ecosystem flooded or saturated by water, either permanently or seasonally
extraction: taking something away from somewhere else, especially using effort or force
built environment: human-made structures or conditions in an area
pollution: the presence of a substance that has harmful effects on the environment
overconsumption: buying and using more products and resources than you need