Biodiversity loss spells economic crisis

Economically, our destruction of nature could be even more self-defeating than climate change. However, preserving nature could yield huge financial rewards.
Trees are reflected on a raindrop on a leaf near the venue of the 10th Conference of the Parties to .../ Credits: Reuters

A costly free lunch

We are living through the greatest mass extinction of life in about 65 million years. We lose three species an hour to urbanization, deforestation, overfishing, climate change, and invasive species, reckons the United Nations.

It is shocking to think of a world without tigers or orang utans, but species loss is just the tip of the iceberg.

‘Biodiversity’ includes not just species but the genes that make species and the ecosystems that support them. Therefore biodiversity loss ranges from the eradication of ancient seed varieties to the destruction of coral reefs.

What’s gone unnoticed until recently is how expensive biodiversity loss can be, between 2 and 4.5 trillion dollars in 2008, according to a landmark UN report The Economics of Ecosystems and Biodiversity (TEEB).

That’s more than the 1.7 trillion dollars in economic costs that the Stern Review calculates will result from the same year’s planet-warming greenhouse gas emissions.

In other words: biodiversity loss will hit the global economy harder than climate change.

That’s because biodiversity provides us with vital ‘ecosystem services’ like fertile soil and freshwater.

Forests, for example, provide flood prevention and drought control services, as well as nutrients and freshwater for farming, fuel wood for cooking, fodder for cattle, construction materials and foods. Over a billion of the world's poorest people depend on these services, which are generally available free.

And therein lays the problem.

“The economic invisibility of nature’s flows into the economy is a significant contributor to the degradation of ecosystems and the loss of biodiversity,” writes Pavan Sukhdev, leader of the UN's Economics of Ecosystems and Biodiversity initiative, in the foreword to TEEB.

Markets simply don’t value nature’s bounty accordingly. The consequences can be catastrophic.

Protective measures

Decades of mangrove deforestation to make way for shrimp farms and other developments left victims of the Asian tsunami in 2004 defenseless. Short-term profits dictated that the mangroves must go; longer-term thinking that valued the mangroves' protective qualities would have saved lives.

When consultants PricewaterhouseCoopers (PwC) surveyed corporate attitudes to biodiversity loss, they found that only 27 percent of 1100 global CEOs said they were concerned or extremely concerned.

“Corporates need to start thinking about ecosystems as an extension of their asset base, part of their plant and machinery, and appreciating the value they deliver,” commented Jon Williams, partner, sustainability and climate change, PwC.

Clearly not many people have noticed that 60 percent of the planet’s ecosystem services have been degraded in the last 50 years.

Nor is anyone doing much about it. "We failed miserably," said Jean-Christophe Vie of The International Union for Conservation of Nature in early 2010, referring to the globally agreed target of slowing the rate of plant and animal extinction by 2010.

However, in the autumn the international community tried again at the UN Convention on Biodiversity in Nagoya, Japan. Delegates agreed to at least halve the rate of loss of natural habitats by 2020 and to create protected conservation zones in 17 percent of all land areas (currently 13 percent) and 10 percent of all marine areas (currently 1 percent).

In line with this the European Commission has adopted a new strategy to halt biodiversity loss and restore 15 percent of degraded ecosystems in the EU by 2020.

Among its main targets are more sustainable agriculture and forestry and better management of fish stocks. However, as with the Nagoya document, the plan is more a collection of targets and guidelines than a firm commitment with specific measures. Those will have to come later.

As the EC plan recognizes, we’re not just talking about losing exotic wild animals and plants. The farm down the road is also threatened.

Where are the bees?

Consider the strange deaths of honey bee colonies around the world. Insecticides, parasites, and pollution have been blamed, but whatever the causes the consequences can be devastating.

Pollination is worth about 153 billion Euros annually, representing 9.5 percent of global agricultural output for human food, according to TEEB. In 2007, the collapse of bee colonies cost agriculture in the United States 15 billion dollars.

Soil erosion, accidentally introduced pests, and overfishing cost the global economy hundreds of billions of dollars every year. And if coral reefs were to disappear, 152 billion dollars of annual revenues would go with them.

There are huge economic opportunities in biodiversity conservation. Dynamite fishing may net short-term profits but in the long run if you kill the coral reef the fish (and the tourists) will disappear.

Meanwhile the certified organic food market, which protects biodiversity and ecosystem services, has mushroomed to over 40 billion dollars annually worldwide.

The obvious answer to biodiversity loss is to properly value ecosystem services and species: to pay our debt to nature by paying people to protect it.

The REDD (Reducing Emissions from Deforestation and Forest Degradation) initiative would operate along these lines by paying forest nations not to cut down their trees. In the United States, investors can get banking credits for protecting wetlands and there are other new schemes for biodiversity credits in the pipeline.

Now the challenge is to persuade businesses, politicians, and the public that nothing in nature comes for free.

Find more information in the ALLIANZ KNOWLEDGE DATABASE!

Delve into our world of knowledge. The Open Knowledge Database offers you insights in the knowledge, skills and experience Allianz has accumulated in over 120 years of business.

Write a Comment

Comments (2)

arribadas: 06.07.2011, 15:58

I have been looking for funding to work a Biodiversity park in pacific Costarica .Please notify me for other people interested in developing the Biomarine Station, we are already working with universities around the world www.arribadas.com

arribadas: 06.07.2011, 15:57

I have been looking for funding to work a Biodiversity park in pacific Costarica .Please notify me for other people interested in developing the Biomarine Station, we are already working with universities around the world www.arribadas.com

Search for related articles