Ecosystem services: What is nature worth?Putting a price on nature will protect biodiversity better than traditional conservation, argues environmental economist Josh Bishop.
Allianz Knowledge: The economics of ecosystems and biodiversity sounds very abstract. What does it mean?
Josh Bishop: We are talking about what nature gives to the economy, because the economy has up to now taken nature for granted and to some extent ignored it. Nature is only partly visible in economic thinking and that is creating problems.
What sort of problems is our economic system creating?
One example is climate change. We have taken for granted that the atmosphere will absorb whatever we put into it but have discovered that there are limits.
We have discovered that the oceans are not an inexhaustible source of fish; take out the fish faster than they can reproduce and fish stocks collapse. You lose a source of animal protein that hundreds of millions of people rely on.
How much is this costing us?
The first TEEB report estimated that deforestation from now to 2050 would cost trillions of dollars in lost ‘ecosystem services’ like carbon, lost water supply, lost tourism opportunities, and lost timber and non-timber products.
World Bank data suggests that if we managed fisheries more sustainably they would be worth about 80 billion dollars more every year. And something like 10 percent of global agricultural output is dependent on pollination by bees and other insects.
By evaluating biodiversity economically will accountants end up deciding which species are most important, which species live or die?
Is it more important to conserve some species than others? That is a controversial question and difficult to answer because we don’t yet know the exact roles of each species in the ecosystem.
An economic approach does change the way we approach conservation and it does involve more attention to tradeoffs and more attention to human preferences.
We need ways of making it commercially profitable to conserve and restore ecosystems so they can compete with agriculture and other land uses. That’s a fact of life in the capitalist system we live in.
What is business doing? A PwC survey said that only 6 of the world’s top 100 companies reported actions to reduce their impacts on biodiversity.
If you look at business as a whole reporting on biodiversity is way, way behind reporting on climate change. But big companies can see the potential impacts on their reputations and stock market prices of something like the BP oil spill in the Gulf of Mexico.
Many do take serious action. A nickel mine in Madagascar voluntarily refrained from exploiting deposits underneath an area of significant biodiversity.
And agribusinesses recognize that unless they have healthy ecosystems their business models will collapse. Unilever has a plan that includes sustainable sourcing of all of their supplies.
Some say large-scale agribusinesses are killing off biodiversity by reducing the genetic variety of food.
We can correlate the increased intensification and size of farms with a decline in biodiversity. Small farms are more diverse and harbor more species.
But intensification and scale have helped reduce food prices and increase agricultural productivity. We shouldn’t indulge in romantic notions that we can go back to subsistence farming.
The TEEB reports highlight organic food. How beneficial is it to biodiversity?
Studies suggest organic farming is healthier for insects, birds and other wildlife. But other studies show that organic farming tends to yield less per hectare and so more land is required. There are tradeoffs.
Conservation grade farming, such as in the UK, is interesting. Farmers put 10 percent of their land aside for nature in return for a 10 percent premium on their products from the marketplace. So the farmers are no worse off and nature gets an extra 10 percent.
Some states in the U.S. have ‘conservation banks’ and ‘wetland banks’.
If a developer wants a permit for a housing development they have to show that the net impact on the natural habitat is positive by providing some sort of biodiversity compensation or offset.
They can do that by buying land—such as wetland areas—and restoring it. Wetland banking is a 2 billion-dollar-a-year market. Australia has a small market for native vegetation and there are similar proposals in Europe.
The Business and Biodiversity Offset program (BBOP) is developing an independent verification process so companies can do this on a voluntary basis credibly. So like carbon markets, there will be regulated and voluntary schemes.
A lot of people are skeptical about voluntary arrangements. What can governments and lawmakers do to push business in the right direction?
The starting point is reforming government subsidies that are damaging the environment, such as subsidies for fisheries, agriculture and fossil fuels.
Then there are positive incentives such as Payments for Ecosystem Services (PES). China has the largest PES scheme in the world, the 40 billion dollar ‘sloping land conversion program’.
The government paid farmers to restore vegetation on their lands and build wind breaks in order to reduce soil erosion from water and wind.
Where are other positive examples of conservation improving economic life?
Some U.S. fisheries have recovered after they instituted harsh regulations that said if fish stocks were dwindling people had to stop fishing. The Philippines created a marine reserve offshore which led to the recovery of fish stocks.
In southern Africa effective sharing of the benefits of tourism has led to improvements in wildlife numbers. Communities start to see the advantages of wildlife. That’s also what the Reduced Emissions from Deforestation and Degradation (REDD) scheme is about.
The trick is to give people an economic stake in the productivity and sustainability of the resource.