The Price of Life: A Look at the Economics of Ecosystems and Biodiversity

EarthzineBiodiversity, Economy, Ecosystems Theme, Original, Themed Articles

TEEB LogoWhat is the value of a bird? Of a flower? Of the pleasure they provide? Of an insect’s role in an ecosystem? These are questions local and global communities struggle with constantly, and with each month that passes, destruction of natural areas and their inhabitants makes finding answers to these questions more urgent. Across the world, people are searching for answers. Many of these people are coming to the same conclusion: there are no perfect solutions. Yet the lack of a single, perfect solution does not mean that a number of imperfect steps cannot lead us in the direction of global human prosperity 1.

One of the impediments facing sustainable ecological development is distrust among the parties involved. Scientists and environmental advocates have long resisted the idea of placing financial tags on ecosystems or species, fearing that pricing something as complicated as biodiversity or the beauty of nature would diminish its importance. For certain cultures, pricing the natural world is not just unsavory, it is inconceivable because they perceive the land as something that cannot be owned. On the other side of the matter, governments and businesses may associate environmental assessment with burdensome costs to themselves. Yet the parties involved commonly share the same goal of improving quality of life for human beings. Even fear of increased profits foregone is not necessarily motivated by greed. A nation may wish to increase its profits so that it can provide better facilities for its citizens. Environmental advocates also wish to see people being provided with life necessities and comforts. Differing opinions on how human happiness can be achieved creates dissent and competition, hindering progress in creating a balance between economic and environmental needs.

In order for scientists, citizens, NGOs, and governments to start working together, they will need to find a shared language. As the language of the market system, economic valuation can offer common communication that creates a bridge between different fields of work. For true environmental health to be supported, ethical matters will need to be considered as well, but the global market system is one of the primary drivers of environmental destruction, and, as a widely recognized value system, currency can create a common means of communication among nations as well as among different decision-making parties. If this is the case, ecological valuation can become a tool for environmental protection rather than a threat to it. Such is the belief of an international committee, founders of TEEB.

In 2010, a multi-national team of researchers released a synthesis of observations from The Economics and Ecosystems of Biodiversity, or TEEB. This synthesis outlines the study’s approach to environmental valuation, conclusions from the study’s previous work, and recommendations for how decision makers can use TEEB as an informative tool. TEEB’s study is an outgrowth of a 2007 G8+5 2 summit, and its purpose is to ‰ÛÏshow how economic concepts and tools can help equip society with the means to incorporate the values of nature into decision-making at all levels,‰Û and thereby create a conversation between the science of biodiversity and policies of governments and businesses (3, TEEB 2010).

This goal, the writers acknowledge, will be difficult to achieve. In order for economic valuation of ecosystems and diversity to be effective, a shift in global understanding of their purpose must occur. The report states: ‰ÛÏIdeally, TEEB will act as a catalyst to help accelerate the development of a new economy: one in which the values of natural capital, and the ecosystem services which this capital supplies, are fully reflected in the mainstream of public and private decision making‰Û (3, TEEB 2010). Several motivators drive the need to mainstream environmentally sustainable practices.

Aerial view of Watsonville, CA and the agricultural areas surrounding the town Public Domain US Army Corps of Engineers Digital Visual Library.One reason is the maintenance of biodiversity. Abundance and variety of species are crucial to sustaining diversity of ecosystems. How biodiversity influences response to stressors or recovery from disaster is not yet fully understood, but it is generally believed that greater biodiversity leads to greater resilience of an ecosystem (Thompson et al, 2009.) Additionally, the significance of many species is not yet understood. Lacking a system of incentives, the current market system tends to value ecosystems purely on either the ‰ÛÏreal-estate‰Û value of their square acreage or on the potential profit of a single commodity, i.e. wood in a forest. Therefore, traditional valuation may only take into account a single service among many that an ecosystem provides and altogether neglect that importance of its native inhabitants. TEEB hopes to help include biodiversity in market conversations through information sharing. The Convention on Biological Diversity, another international organization, is currently working to create targets for and indicators of healthful biodiversity. TEEB aims to help distribute that information to better provide decision makers with clear data about biodiversity.

Another motivator for ecologically wise decision-making is preservation of services that ecosystems as a whole provide to local communities. For example, a forest may provide potential revenue as a supplier of capital in that the wood could be harvested and sold. But the forest may also be benefiting the local community in less visible ways. The presence of vegetation provides ‰ÛÏclimate control‰Û helping to cool the surrounding areas, the trees’ root systems help hold the soil in place to prevent erosion and maintain water quality, and the variety of plants and animals that live in a forest ecosystem may provide food or other useful services to local inhabitants. The value of the wood is only a fraction of the value of the forest, and recognizing the services that forests provide as an intact ecosystem can help people living in the area and the government to better understand the implications of harvesting the forest solely for wood. Placing an economic value on these services helps put their purpose into a context that brings businesses and the market system into the discussion using their own language.

A third reason for a system of ecologic valuation is to reduce and prevent poverty. For a non-local business, an ecosystem and its components may only have economic value in one sense. They reap the benefits of developing or exploiting an ecosystem without having to incur the costs—loss of ecosystem services—that follow. Poorer households, especially those outside of urban development, are most likely to be negatively impacted by destruction of natural services because poorer households are most likely to be directly dependent on local natural services. The TEEB synthesis says that ‰ÛÏecosystem services and other non-market goods account for between 47% and 89% of [the total source of livelihood] for rural and forest-dwelling poor households‰Û (15, TEEB 15). What this translates into is that when the natural services of an area are degraded, those who are least economically equipped to seek resources elsewhere are deprived of the main source of their livelihood. Creating values for these natural services would help to protect them from development or provide a measure of repercussion that could be used for business consideration when outlining the potential costs of a project.

Governments themselves also may benefit from more substantive ecologic valuation. Although undeveloped areas such as forests or wetlands come readily to mind when considering how ecological valuation could contribute to ecosystem stewardship, TEEB’s synthesis can be applied to city development, planning, and management. The synthesis reminds its readers, ‰ÛÏThe fast-moving, mechanized lifestyle of today’s urban cities presents an illusion of distance and disconnect from the natural world. Yet every activity in our towns and cities depends in some way on Earth’s ecosystems and their functions and imposes pressures upon them‰Û (18).

Image of wetland restoration takingThis is part of why TEEB’s website offers reports aimed to guide individuals as well as governments and businesses. Awareness of connections to the environment can help city dwellers and officials alike to consider ways in which they can better sustain and use the ecosystems upon which they rely. Green areas in large cities can have impacts on quality of life and wildlife. Leaving areas near rivers undeveloped, for example, can help to keep water cleaner and diminish damage during flooding. When an area is considered for development, cities could benefit by contemplating the value of the services that area provides.

Finally, a more accurate assessment of ecosystem biodiversity value could benefit businesses as well. TEEB’s synthesis outlines at length why current approaches are potentially unreliable, ineffective, or costly. By understanding the broader spectrum of costs encompassing a project, businesses can better plan for potential clean-up costs and have a more complete picture of the potential liabilities of their project.

Even while advocating ecological valuation, TEEB acknowledges the difficulty in determining those values. Humans have a limited understanding of how natural systems function, and the idea of placing a value on services provided by nature is relatively new. How to appropriately audit services like the prevention of erosion or benefits from a rare species of fish presents a type of assessment that is still being defined. Valuation is a complex and disputed process. However, as the synthesis states, ‰ÛÏeven approximate estimates of the value of ecosystem services can help lead to better resource management and policy, especially where the alternative assumption is that nature has zero (or infinite) value‰Û (13, TEEB ). The last part of that statement is key. Economic valuation of nature does not fully address the roots of humanity’s often destructive relationship with the Earth. In order to create truly sustainable relationships with natural resources, we may need to reconsider the way we acknowledge importance and the underlying beliefs that shape our systems. In the meantime, an economic shift in perception of natural sources can help to preserve those sources while more complex shifts in perception occur.

TEEB’s vision is to help create ‰ÛÏa society that recognizes, measures, manages and economically rewards responsible stewardship of its natural capital.‰Û By listening to the needs and interests of others, each of us, no matter our background, can help to shape the conversation about finance so that valuation becomes an effective tool for sustainable market growth. Fine examples already exist of how ecological valuation has led to successful projects, but the environmental concerns facing us are so large in scale that to address them collaboration and rewards for responsible behavior need to become the global market standard, not the applauded exception. TEEB’s synthesis offers a starting point for those discussions.

TEEB (2010) The Economics of Ecosystems and Biodiversity: Mainstreaming the Economics of Nature: A Synthesis of the approach, conclusions and recommendations of TEEB.

Thompson, I., Mackey, B., McNulty, S., Mosseler, A. (2009). Forest Resilience, Biodiversity, and Climate Change. A synthesis of the biodiversity/resilience/stability relationship in forest ecosystems. Secretariat of the Convention on Biological Diversity, Montreal. Technical Series no. 43, 67 pages.

1 Even determining what ‰ÛÏglobal human prosperity‰Û means differs among cultures and individuals. Here, it is intended to mean meeting the basic physical needs of all peoples: food, water, shelter, and healthful ecosystems.

2 G8+5 includes officials from Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, the United States, Brazil, China, India, Mexico, and South Africa.