Tuesday, July 13, 2010

Paying for nature: putting a price on 'ecosystem services'

July 13, 2010
Source: MongaBay News

Ever since humans entered the stage, nature has been providing us with a wide-variety of essential and 'free' services: food production, pollination, soil health, water filtration, and carbon sequestration to name a few. Experts have come to call these 'ecosystem services'. Such services, although vital for an inhabitable planet, have largely gone undervalued in the industrial age, at least officially. Yet as environmental crises pile one on another across the world, a growing number of scientists, economists, environmentalists, and policy-makers are beginning to consider putting a monetary value on 'ecosystem services'.

"An important reason for the alarming rate of environmental destruction across the world is that the true value of ecosystems is largely invisible to markets. When we raze forests or build on wetlands, the loss of the essential services they provide […] does not show up on any balance sheet," writes Ricardo Bayon and Michael Jenkins in a new opinion piece in Nature which briefly outlines a number of ways how pricing ecosystem services might work and how some nations have already begun incorporating such costs.

Bayon, co-founder of EKO Asset Management Partners, and Jenkins, president of Forest Trends, point to the Amazon rainforest as an example of how putting ecosystem services into the market would optimally work to conserve, rather than despoil, the world's ecosystems.

"Imagine, for example, that the Brazilian government introduces regulation that imposes a value on the environmental services of a rainforest. The regulation would make it more expensive to destroy the rainforest, thereby increasing the production costs of whatever replaces it, for example, soya beans or cattle. As these costs would be passed on to the consumer, this would push people and companies to find ways of producing without destroying the ecosystem. At the same time, it would make it more profitable to protect the rainforest, thus creating a market for conservation."

The authors explore a number of ways in which a price may be put on ecosystem services, including adding a surcharge on those who consume a resource to pay for preservation, or encouraging private corporations to pay for the preservation of the resources they exploit, for example drink companies paying to conserve the watersheds on which their products depend.

"On one level, private and voluntary payment and trading schemes are more effective than government surcharges. This is because those who benefit are the ones paying, and those who pay for the use of resources are more likely to use them efficiently. However, private initiatives are generally small-scale," the authors write.

They argue that to really change the way companies and people value nature's free gifts, it will be necessary to install "national or global environmental markets that are driven by governmental regulation". The essay points to the global carbon market, as well as the US's national mitigation scheme on preserving wetlands.

"Under this system, a business wishing to carry out development that will damage a wetland of national importance is granted a permit only if it agrees to compensate for the damage by restoring or enhancing a wetland of similar function and value in the same watershed. Instead of taking on the restoration itself, the business can purchase 'mitigation credits' from an organization that has already done the work," the authors write.

The nascent Office of Environmental Markets has been established in the US to coordinate ecosystem services and their emerging markets.

In the end, the authors argue, creating a sustainable world may be as simple as putting a market value on nature.



CITATION: Ricardo Bayon and Michael Jenkins. The Business of Biodiversity. Nature. Volume 466. July 8th, 2010.



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