Friday, November 28, 2014

Nature, Inc.?

BERLIN – Today, few people retain any illusions that United Nations conventions like the Framework Convention on Climate Change and the Convention on Biological Diversity can avert global warming, the loss of biodiversity, and the depletion of arable soil and water. Likewise, the pursuit of hard caps for CO2 emissions and stricter environmental and social standards to reduce natural-resource consumption and protect workers seems to have fallen out of vogue, with crisis-stricken economies concerned that such regulations would impede investment and trade.

As old methods have lost credibility, some governments, economists, and international institutions like the UN Environment Program have adopted a new approach, based on the view that nature is an “ecosystem service” provider. In doing so, they have shifted the onus of addressing environmental risk onto the private sector and market-based mechanisms.

In this new paradigm, ecological preservation is a commercial matter, with the natural environment amounting to nothing more than a set of tradable goods and services. The upshot of this logic is that ecosystem services will no longer be provided for free. Indeed, according to Pavan Sukhdev, the lead author of The Economics of Ecosystems and Biodiversity study, which aims to highlight the economic impact of environmental degradation, “We use nature because it’s valuable, but we lose it because it’s free.”

To be sure, assigning value to ecosystem services goes beyond simply putting a price tag on them. In fact, this approach can help to shape environmental policies that more efficiently capture the benefits of biodiversity and ecosystems. Unlike GDP, some new accounting-system models include mechanisms for quantifying either the advantages of ecosystem services or the costs of their destruction, thereby creating a basis for political and economic action.

The danger lies in how easily the new paradigm could lead to the financialization of nature. Indeed, the process has already begun, with the UN’s REDD program using market and financial incentives to reduce greenhouse-gas emissions from deforestation and forest degradation.

Similarly, “habitat banking” enables developers to trade habitat or biodiversity credits – earned through measures to protect, restore, or enhance habitats or species – to compensate for development’s environmental costs. And carbon-trading schemes reduce the value of soil and forests to their carbon-storage capacity.

All of this implies private ownership of ecosystem services. But, in many countries, the remaining intact ecosystems are in areas populated by indigenous peoples, making conflict with – and within – the affected communities all but inevitable. Local people will demand to know who is to own the services and profit from the associated credits. And whoever that is will have to assume responsibility for fulfilling complex accounting and compliance requirements, while mitigating exclusion risks.

Moreover, the private sector’s willingness to finance, say, forest conservation depends on the various credits’ integration into global emissions-trading schemes – a highly unlikely outcome, judging by the state of international climate negotiations. As it stands, emissions trading works only as a way to redress the industrialized countries’ business-as-usual approach. Market-based instruments’ growing role in conservation will merely enable businesses to manipulate their environmental obligations, while making it easier for governments to neglect their responsibility to devise effective environmental policy.

For example, last year, Brazil’s powerful agribusiness lobby managed to push the government to approve a new forest code, which uses market-based instruments to give agricultural producers more leeway on conservation. As a result, landowners who clear more vegetation than is legally permitted can now return to compliance by purchasing offset credits through the Rio de Janeiro Green Exchange (Bolsa Verde) from those with more than the mandated minimum amount of forest cover.

Motivated by the new regime, those seeking to provide offset credits staged a land grab in areas where logging is not profitable – a market-based response that was accompanied by human-rights violations. Brazil’s experience highlights the dangers of weak environmental policy – namely, that it offers those with money the option of buying their way out, at the expense of more vulnerable citizens, particularly indigenous peoples and poor small-scale farmers.

The global economic crisis exposed the risks of relying exclusively on markets to regulate economic activity. Given that the consequences of a global environmental meltdown would be far more devastating, depending on market-based mechanisms to protect and enhance the natural environment is a recipe for disaster.

In order to avert such an outcome, people worldwide should reject the conception of nature as a service provider and call on policymakers to work actively to protect and restore habitats and biodiversity. Mechanisms for “offsetting” damaging activities must not be allowed to continue to distract from the real imperatives, like preventing deforestation and phasing out fossil fuels.

To this end, the financialization of nature using derivatives and other financial products must be forbidden. After all, while an intact rainforest’s current monetary value cannot match that of the natural and mineral resources that it contains, its importance for human survival exceeds these terms.

Furthermore, governments should phase out subsidies that damage the climate and biodiversity, such as cash incentives aimed at encouraging the clearing of forestland for “productive” activities like agriculture. Doing so would enable countries to meet their objectives for environment protection while saving fiscal resources.

None of this is to say that market-based mechanisms cannot contribute to environmental protection and restoration. They can (and they have), but only if they are part of a more comprehensive framework that accounts for the natural environment’s true – and unquantifiable – value.

Copyright: Project Syndicate/Global Economic Symposium, 2013.

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    1. CommentedP Jacob

      A new paradigm has formed on planet earth and we cannot find the new answers by moving around the same tired chess pieces on the same old, worn out chess board. The future is not contained in a classroom, a manual or a Ph.D. The answer is simple, so simple that this contemporary left-brained world seems to have a problem getting its head around it. ... Without Nature We Do Not Exist. Period. Healthy, Balanced Ecosystems means Healthy, Balanced Human Beings. All Life is Sacred and Each Species Has A Specific Symbiotic Purpose in the Greater Biosphere, which even our greatest minds do not yet fully understand.
      We have reached an apex of commodifying all life and have lost touch with the essential values and natural processes of life. We want to force feed everything or re-engineer life to suit our own purses and purposes ...more, bigger, faster...forgetting that the natural world has Her own incredible and amazing needs for maintaining life on this planet. With our oceans severely depleted due to corporate overfishing; our rivers and soils poisoned and polluted due to industrial ag and manufacturing; our forests and all life within them fast disappearing; our food being bio-engineered requiring lashings of pesticides terminating ecosystems and beneficial insect life (and possibly our own); rampant landgrabbing for purely financial gain racing across the planet at the expense of both crucial biodiversity and healthy human social life; and the lust for profit and control at all costs, we humans have put ourselves on a trajectory for extinction.... for without Nature We Do Not Exist. The economic disparity between human beings is growing disproportionately and cannot sustain. Eco-Economics means returning to respect and dignity for all life, reducing consumption of our natural supportive resources and ceasing from this madness of empowering biotechnology and technology for the purpose of justifying and maintaining the rapid extinction of life for more profits furthering the downward spiral we are caught in. A culture separated from Nature cannot survive. In the natural process, it takes nine months to have a baby and 100 years to grow a 100 year oak tree. A bee, a bird, a fish, are just as important in their own right as you and I, and we need to re-remember this elemental fact lest our forgetfulness terminates our own species. What we do to Nature We do To Ourselves. As She Goes, So Do We. And in the final analysis, we cannot drink oil or eat money. Reawakening to the wonder and awe of the beauty and magnificence that surrounds us, that we live amongst and that supports all life would be a a good first step to returning to true mindfulness and getting out of our limited myopic heads. "Why Are Powerful Technology Companies Turning to Nature to Inspire Their Leaders?"

    2. Portrait of Ingmar Schumacher

      CommentedIngmar Schumacher

      Thank you for these nice insights. An article with similar ideas has been written by Sian Sullivan on, entitled "Should nature have to prove its value?". A discussion on why nature gets more and more monetarized can be found here
      Overall I am missing the point that nowadays a price tends to get put on nature in order to efficiently internalize externalities. How is one supposed to be able to know the value of nature if one does not place a price on it?

    3. CommentedFrank O'Callaghan

      Large corporations can and do get laws written for their benefit. Sometimes these allow them to plunder resources. Other times they allow a monopoly on a resource. The privatization and taxation of water is an example of this. The infrastructure for water has been created by the public sector for the most part. The water source is ultimately rain and therefore the quintessential commons. Yet there is a global trend to make it scarce, expensive and private. We must conserve our natural resources but restricting them to those who can and will pay is not the correct path.