Deforestation in the Amazon, Brazil
Nature lovers might cringe at the term "ecosystem services" to describe, say, the view of a pristine beach or a stream teeming with trout. But a growing number of experts within the scientific and economic communities say that putting real economic value on components of nature will help protect the environment and promote biodiversity.
Far from cheapening nature, thinking in terms of "natural capital" can offer a way to assess the crucial but unmeasured benefit that humans derive from the nature. Ascertaining that value can then help decision makers bring environmental factors more explicitly into their planning.
Can biodiversity loss, then, be seen as a failure of the market? "Biodiversity is the living capital of the planet," says Pavan Sukhdev, a senior banker with Deutsche Bank and Special Adviser to the United Nations Environment Programme's (UNEP) Green Economy Initiative. Like any capital, he says, it has to be measured to be managed. "If you don't count half of your balance sheet, you're going to get your profit and loss ratio incorrect — and we have."
Sukhdev, who's also Study Leader for a UNEP initiative called The Economics of Ecosystems and Diversity (TEEB), says that currently "the economic value attached to nature is zero. Our metrics are geared toward consumption and production of man-made goods and services, and we tend to gloss over nature." This, he says, has led to "bad accounting" which, in turn, has contributed to rapid biodiversity loss.
There is clearly an irony in the notion that attaching a "price" to ecosystems can help people reconnect with nature and what it offers us. Yet appreciating nature from an economic perspective may put environmental concerns on the table in a way that governments and institutions can work with. "In speaking the language of economics, you can play a role in the policy process," says Edward B. Barbier, Professor of Economics at the University of Wyoming, who does research on the economics of natural resources. "Twenty-five years ago, people said, 'That's horrendous — you can't discuss nature that way!' Now they say, 'You're right. We've got to put a value on nature."
What kind of value are we talking about? According to research cited in the TEEB report, an annual investment of $45 billion to biodiversity conservation worldwide could safeguard about $5 trillion in ecosystem services — a benefit to cost ratio of 100 to 1.
For a site-specific example, in Southern Thailand converting mangroves into commercial shrimp farms yields financial returns of about $1,220 per hectare per year. However, this does not consider the rehabilitation costs of $9,318 per hectare necessary when the area has been "shrimped out" after five or ten years. Other economic benefits the mangroves provide include: collected wood and other forest products; cultivation for off-shore fisheries; and coastal protection against storms, a total of $12,392 per hectare over the course of nine years. If the developer were accountable for the mangrove depletion, would you still want to invest in that shrimp farm?
"The reason we're losing natural capital is because it's free," says Ed Barbier, noting that we often think of conservation in terms of its costs rather than its value, and regard manufactured goods in terms of value rather than their environmental costs. Says Barbier: "When we incorporate the services of ecosystems we may start to think: maybe the costs of maintaining [the integrity of] ecosystems aren't that high compared with the benefits. Maybe the gains we get out of converting nature into commodities are not so large in comparison. The point is that we don't see that tradeoff until we go out and measure that value."