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The challenge is that our business institutions evolved at a time when nature seemed limitless; the idea of endless natural bounty is embedded within our national identity. "In the past, natural resources were abundant," says Robert Costanza, Director of the Gund Institute for Ecological Economics at the University of Vermont. "We've used up all the frontier. Those days are gone. People are recognizing this, but our institutions haven't caught up." So markets continue to ignore natural capital as if it's of no economic consequence.
Right now, he explains, there is an expectation of free and open access to nature. However, its use affects everyone. For example, unless an area is specifically regulated, someone can clear-cut a hardwood forest in a developing nation for the timber. But losing that forest also means the loss of habitat for wildlife, other forest products for food and shelter, soil fertility plus numerous other functions, including climate regulation, which are not yet completely understood.
There have been other efforts to value ecosystem benefits, notably by British economist David Pearce, through his book Blueprint For a Green Economy, which was influential in the 1990s. (Professor Barbier was a coauthor.) What's different now is the urgency we get news of nature disappearing every day and new tools for measuring value, since research on ecosystems and valuation metrics have been evolving steadily over the last 20 years. Through programs like the Millennium Ecosystem Assessment, drawing on the work of more than 1,360 experts worldwide, the economic value of biodiversity which, alas, is often determined after its loss is becoming more apparent.
According to Costanza, we need different institutions for managing natural capital because of its "public good" aspects. For example, there are systems of payments for ecosystem services, such as compensating farmers who plant trees for carbon sequestration. These could be embedded in common asset trusts, set up to assign property rights to the community rather than private hands. Those who damage ecosystem services would be charged, while those whose land produces services could be paid. Economic incentives can encourage people to preserve natural assets. For example, in Costa Rica U.S. pharmaceutical companies are paying landowners to conserve their properties essentially maintaining a genetic laboratory in an area with great natural wealth. (About half of manufactured drugs derive from materials found in nature.) "Costa Rica has been a laboratory in strategies for making money while saving the environment," says Barbier.
While such economic arrangements hold great promise, Barbier warns that focusing on one "ecosystem service" as opposed to grappling with complex systems and interactions can distort value. He also notes that payments may not cover all the costs of preservation, particularly in the short term. But they may, for instance, pay for running conservation programs, or supplement the income of people who live in the area.
The renewed interest in valuing nature gives Barbier some optimism. "If through scientific and economic analysis we can show the benefits that the natural environment offers, and show that the economic value is not zero, this gives policy makers a vehicle for addressing our fragile ecosystems," he says.
Pavan Sukhdev observes, "The loss of forests worldwide amounts to somewhere between $2 trillion and $4.5 trillion a year. Losses in the U.S financial sector [in the economic downturn] were between $1 and 1.5 trillion. But the banks made the headlines."
And, one might add, got bailed out.