The first World Forum on Natural Capital was held in Edinburgh, Scotland last November. This comes at a time when there is increasing interest in the idea that we need to place a value on the services that nature provides us with for free if we are to prevent further environmental degradation. The conference attracted a wide variety of speakers from politics, academia, industry, and NGOs, who gathered to discuss ways of including natural services as part of a fuller accounting of human activities.
The idea behind assigning value to natural services and systems is in large part a response to criticism of conventional market economics. Viewed from a purely market perspective, the natural processes and elements of the Earth system, such as tree pollination, the supply of clean air and fresh water, and protection from the sun’s harmful UV radiation are regarded as externalities. Put another way, this means that our current economic paradigm views forests as commodities, which have more value when they are clearcut. The market system also generates financial incentives for us to catch as many fish as possible today, even if none are left for tomorrow, as well as providing a justification for companies to pollute the atmosphere and oceans in order to produce goods as cheaply as possible.
While the organizers of the Edinburgh conference acknowledge that natural systems are impossible to put a price on, there have nonetheless been a number of attempts to look at how much it would cost to duplicate these services (assuming it were possible). In 2006, the Stern Review, commissioned by the UK government, estimated that climate change is likely to cost the equivalent of five to six percent of GDP in coming years, possibly rising as high as twenty percent in the future. A 2013 report published by The Economics of Ecosystems and Biodiversity (TEEB) for Business Coalition went further. It estimated that avoiding greenhouse gas emissions from deforestation is equivalent to $3.7 trillion annually, that insect pollination is worth $190 billion annually, and that the current value of natural services dismissed as externalities amounts to $7.3 trillion annually. To put this in perspective the US bank bailout of 2008 was a paltry $700 billion.
However the idea of placing a value on nature and on natural services does not sit well with some in the environmental movement, who do not believe that natural processes should be treated as part of the market system. They point to the role of market forces as a key element in the destruction of natural systems. Their argument is that by bringing nature into the same accounting system as our commercial and industrial activities we are essentially treating it as a commodity, which can be bought and sold with impunity. And while placing a dollar value on nature will afford it some degree of protection, in the end the decision to proceed with environmentally destructive activities will come down to a simple cost comparison, effectively overriding our moral imperative to look after the planet.
Another consideration is how nature should be valued. For example, should a heavily used woodland adjacent to a city have the same value as a similar area of tropical rainforest, or a rugged coastline? There is also the issue of defining ecosystems and deciding what constitutes a natural area. For example is a city park considered to be natural? The whole concept of natural capital accounting is fraught with potential pitfalls, and it is likely that a viable system of natural capital accounting will be extremely complex and take many years to put in place.
Many opponents see the idea of natural capital accounting as being a substitute for true reform of our economic system; an attempt to prolong capitalism beyond its sell by date. They argue natural ecosystems and Earth systems are global commons, which belong equally to all Earth’s inhabitants, and that it is no more ethical to monetize such systems than it is to patent a specific gene, or a naturally occurring bacterium. What is clear is that supporters and opponents of the idea of natural capital are arguing from the standpoint of different economic paradigms. Many mainstream environmentalists see the incorporation of natural capital accounting as a way to stem resource depletion while still promoting economic growth. This viewpoint has predictably received widespread support from industry, with a number of major corporations from the financial, resource extraction, and agricultural sectors being prominently represented at the Edinburgh conference.
The debate over natural capital accounting is likely to continue and intensify over the next few years, as pressure from human activities increases on the environment. While many people find the idea of putting a value on nature distasteful, it could potentially have a powerful effect on how natural systems are viewed by both industry and by governments. From a longer term perspective, economic transition is inevitable, as resource use cannot continue to increase indefinitely within the limits imposed by the Earth. While opponents of natural capital accounting justifiably have reservations about the ethics of this approach, it may us help to preserve natural systems in the short term. In the longer term, true protection will come from a reappraisal of our relationship with the planet we inhabit.