Giving a monetary value to nature will give governments and businesses more reasons to protect it
President Joe Biden calls for climate change “the existential crisis of our time“and took steps to curb it that match those words. They understand return of the United States to the Paris Agreement; create a new position at the Climate Cabinet; present a plan of reduce fossil fuel subsidies; and announces ambitious goals to reduce US greenhouse gas emissions.
But climate change is not the only global environmental threat that demands attention. Scientists generally agree that loss of wildlife and natural environment is an equally urgent crisis. Some argue that biodiversity loss threatens to become the Earth’s problem sixth mass extinction. But unlike efforts to tackle climate change – which focus on clear and measurable goals to reduce greenhouse gas emissions – there is no globally accepted measure to save biodiversity.
As an expert in budget and public financesI know that governments and private companies pay a lot more attention to resources when they have a well-defined price. I believe that redesigning the concept of wealth in society to include ânatural capitalâ – the value that nature provides to humans – is a critical step in slowing and reversing the loss of valuable ecosystems.
What is natural capital?
Natural capital can be defined as the global stocks of natural assets – soil, air, water, grasslands, forests, wetlands, rocks and minerals – and all of its living things, from mammals and fish to plants and microbes. Conservation experts believe that these resources contribute more than $ 125 trillion to the global economy every year.
Humans depend on nature’s contributions for their survival. For example, forests absorb carbon and filter the water we drink. Wetlands and coral reefs mitigate flooding. Bees and other insects pollinate crops, allowing us to grow food.
But human societies do not formally recognize the economic value of these services. This oversight encourages people to recklessly exhaust the natural environment.
A recent review of the economics of biodiversity, commissioned by the UK government and led by Cambridge University economist Sir Parth Dasgupta, warns that human prosperity is increasing at a “devastating cost to natureAnd estimates that it would take 1.6 Earths to maintain the world’s current standard of living. The report calls on the world to treat nature as a reportable asset in financial statements and national accounts.
The Coalition of Capitals, a global consortium of 380 initiatives and companies, is trying to ‘change the math’. The organization seeks to persuade at least half of the world’s businesses, financial institutions and governments to integrate natural capital into their decision-making by 2030.
Current accounting methods used by businesses and governments largely ignore what ecosystems and their services contribute to the economy and social well-being, jobs and human livelihoods. As a result, modern societies spend far more on investments that deplete or exploit natural assets than they do to preserve them.
In the current model, the short-term economic gains generally outweigh the longer-term ecological benefits. For example, failure to maintain forests can trigger forest fires. And building houses on fragile coastal wetlands can erode soils and reduce fish stocks, destroying local communities.
A recent study by the Paulson Institute, a research institute founded by former US Secretary of the Treasury Henry Paulson, estimated that global investments that degrade nature exceed conservation efforts by $ 600 billion to $ 824 billion a year.
Natural capital accounting would force businesses and governments to calculate how human activity affects nature, just as they assess depreciation of buildings or machinery. Thus analyzed, nature is a financial asset, and its damage becomes a liability. This approach creates incentives to conserve natural resources and restore others that have been degraded or depleted.
Global recognition of this issue is growing. In March 2021, the United Nations updated a statistical framework for standardization of ecosystem accounting, which was first published in 2012. These guidelines help countries track changes in ecosystems and their services and provide policymakers with a baseline against which to compare their stocks and flows when making policy decisions. .
Some 90 countries have adopted this environmental economic accounting system and produces basic ânational capital accountsâ. They include members of the European Union, Australia, Canada, the United Kingdom and more than 40 developing countries. The United States plans to implement this approach, but has not yet done so.
Evaluate the value of nature
Placing values ââon natural assets is really no different from government assessments of the benefits of new roads, bridges and other infrastructure. People intuitively understand that natural resources are precious. And the COVID-19 pandemic has shown how closely linked human health is to the health of the planet.
In response to the biodiversity crisis, President Biden has aligned the United States with the world 30×30 campaign, a plan to protect at least 30% of the planet’s land and oceans by 2030. Numerous scientific studies have shown that achieving this goal conserve species, store carbon, prevent future pandemics and stimulate economic growth.
The year 2021 marks the beginning of the United Nations Decade for Ecosystem Restoration, which aims to prevent, stop and reverse the degradation of ecosystems around the world. Today, according to a recent study, less than 3% of the world’s land remains ecologically intact with healthy wildlife populations and intact habitat.
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The United States has lost decades of potential progress since Congress suspended burgeoning efforts of the Bureau of Economic Analysis to develop environmental accounting methods in 1995. Researchers from the US Geological Survey and other federal agencies are now urging the United States to adopt national capital accounts using the UN framework.
In contrast, the United Kingdom has created public environmental accounts and set up a Natural capital committee in 2012, led by its Ministry of Finance, to help companies develop natural capital accounts. Today the UK maintains these accounts, which capture data on the size, condition, quantity and value of habitats and ecosystem services. President Biden could empower the US Treasury Department to lead a similar initiative.
Taking metrics to measure and track the benefits people derive from wildlife and ecosystems would clarify how human activities affect nature and show how much investment is needed to reverse humanity’s current destructive trajectory. Conservationists will be in a much better position to protect our planet’s resources with a strong track record to back it up.