The Economics of Ecosystems and Biodiversity. Solution or Tyranny?

30 10 2008

The Crisis.

In the last 300 years, the global forest area has shrunk by approximately 40%.

Since 1900, the world has lost about 50% of its wetlands.

Some 30% of coral reefs have been seriously damaged through fishing, pollution, disease and coral bleaching.

In the past two decades, 35% of mangroves have disappeared.

The anthropogenic rate of species extinction is estimated to be 1,000 times greater than earth’s background rate, with 30% of amphibians, 20% of mammals, 12% of birds and 4% of fishes all threatened.

And the initial phase of a new study called ‘The Economics of Ecosystems and Biodiversity’ (TEEB) (1) tells us that:

The well-being of every human population in the world is fundamentally and directly dependent on ecosystem services”


The Concept.

Ecosystem services are the benefits that nature provides to people, these can be food, clean water, assimilation of wastes, a pleasant view or the absorption of carbon dioxide. An understanding of the concept of ecosystem services is likely to be an essential part in any system that aims to prevent global ecological degradation. It sees the protection of species and natural systems as an imperative for human well-being. Something that is not always highlighted by environmentalists when battling for intrinsic causes. By their nature, it is often difficult for government’s to channel funds into projects when they cannot see the losses or immediate direct benefits for themselves or their people in monetary terms. TEEB further add that:

Natural resources, and the ecosystems that provide them, underpin our economic activity, our quality of life and our social cohesion. But the way we organise our economies does not give sufficient recognition to the dependent nature of this relationship – there are no economies without environments, but there are environments without economies”

Pavan Sukhdev, the leader of the TEEB project has said that in economic terms the losses, like those I stated at the start of this piece, dwarf those recently seen in the global economic collapse and are worth up to $5 trillion a year (2). After all if nature was not providing these services to us for free we would have to pay for the technology to recreate the functions they perform. From this it is entirely possible to deduce that the benefits we are now gaining from economic growth are being outweighed by the degradation of the biosphere. Inevitably making us poorer not richer.

It is likely that, similar to climate change, the impacts of biodiversity loss are going to be highly inequitable, effecting poorer people the hardest. Just imagine, we can walk or drive down the road to a supermarket and buy what we want to eat or drink but for the remote indigenous peoples their supermarket is the rainforest, reef or savannah and when it’s gone there is no immediate alternative.


The proposal.

It relies on the recognition of the economic value of the ecosystems and their constituent species that provide us with benefits (economists call it natural capital). It’s a market-based solution for conservation and accompanies many recent proposals that use markets to protect ecosystems. Implicit in all of them is that the environment can only be protected by selling it. These “solutions” often concentrate on forests due to their role in the carbon cycle and as biodiversity hotspots. TEEB say that:

Markets tend not to assign economic values to the largely public benefits of conservation, while assigning value to the private goods and services the production of which, may result in ecosystem damage”

This is called a ‘market failure’ and is the consequence of externalities. These result from individuals perusing their self-interest (e.g. profit from illegal logging) and in turn creating a situation that has negative consequences (e.g. deforestation) for society, in this case the world’s population. TEEB continue to present its economic case using the logic religiously followed by large financial institutions like the World Bank since Hardin’s, I would argue flawed, article ‘The Tragedy of the Commons’ (3). In which the allocation of individual property rights provide an incentive for a person not degrade a certain resource:

Many people in developing countries may have weak legal rights over the lands on which they live and work. This may become an incentive to “mine” these lands rather than to manage them sustainably.”

Yes, property rights are an effective means to equitably distribute resources and protect lands from becoming degraded. But, it depends on how and to who they are allocated. Even now in Brazil local governmental officials are more likely than not to be corrupt, favour wealthy land owners or even be wealthy businessmen themselves as in the case of Ivo Cassol (the Governor of Rondônia). Property rights that are connected to developed countries by direct payments for ecosystem services are likely to face problems related to the reliable verification of their biological worth without constant monitoring (not just from a satellite). Forest cover alone is not an indicator of ecosystem health.

One recent and obvious example of a wealthy western buying up a huge block of rainforest is that of Johan Eliasch (4), a businessmen nominated as the Prime Minister’s deforestation advisor, who unsurprisingly in his recent review, recommends that forests be included in the emerging carbon market. ‘Canopy Capital’ have persuaded ten wealthy philanthropists to buy the ecosystem services of Guyanna’s Iwokrama Forest Reserve. Conservation motivated land privatisation in Paraguay (5) offers us another example where organisations have acquired large tracts of forests, ancestral territories of Ache Guayakí and Ava Guaraní peoples, subverting their claims to the land. How just are these solutions for the people that live in these forests and do we know if they’ll work? Large payments and conservation are obviously more attractive than human rights and conservation and if allowed could lead to large-scale corporate governance of ecosystems and undermine established indigenous governance systems. Other alternatives include paying government’s to not cut down forests through carbon credit schemes, who could in turn pay loggers or farmers not to destroy them (that’s just crazy baby) and enforce the law. Another is to assign land rights to the indigenous who are directly dependent on the forests for their livelihoods, who if they had the desire could opt for markets to aid their development.


The right way to solve the ecological crisis?

According to Brazil’s National Institute for Space Research rates of deforestation this past August are triple those over the same period last year, this is despite much spending on sustainable management programmes. Other data tell us that 19 percent of unprotected forest areas in Brazil have been deforested and in federal national parks 2 percent. In indigenous territories, however, only 1.1 percent have been deforested. A study presented at the Rights, Forests and Climate Change Conference in Oslo last week used data from 325 sites in 12 countries showing that community ownership of forests is a highly viable means to keep carbon locked up and conserve biodiversity. The Rights and Resources Initiative (RRI) in a report looking at climate change and forest governance conclude with a poignant statement (5).

unless robust and proactive steps are taken to clarify and strengthen the property rights of rural and forest peoples, future climate change initiatives will benefit only a few, primarily wealthy elites and will reinforce existing social and economic disparities”

There is a growing discontent with the progress that these market fixes are making in policy circles. The RRI and Rainforest Foundation Norway have called for the formation of independent bodies to monitor and advise the UN Convention on Climate Change. This sounds like a good idea and it needs to be extended to other arenas of environmental policy making. We shall wait and see what results from the second phase of the TEEB report and whether the words “indigenous rights” are mentioned anywhere.

It is vitally important that in these efforts to preserve ecosystem functions and biodiversity, supposed solutions do not increase corporate control of natural resources and in turn marginalise people, exacerbate poverty, undermine human rights, entice conflict and possibly fail all together. It comes full circle to the notion of economic growth in developed countries, this graph shows the correlation between our demands on the earth’s biosphere and GDP (that stem from our government’s prioritisation of economic growth). If the goal is to get to the roots of the problem we know where to look – at home – at our unquestioned consumption of wood, soya, corn, cow, shrimp, fish, cocaine, oil, gold and the multitude of other “products” ready to melt away our desires and make profits. Only an economy that does not depend on the continued inputs of natural resources and their subsequent pollutive outputs will begin to withdraw the destructive hand of global capital.











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