CC BY-SA 3.0 Jialiang Gao

On a Shopping Spree – How Much’s the Nature?

‘This is where we make most of our planets, you see’, Arthur Dent, protagonist of the Sci-Fi classic Hitchhiker’s Guide to the Galaxy, is welcomed to a planet factory, moving through massive chunks of whole worlds being built. Fiction aside, what would it take to build such a world? The occasional ocean, a couple of cows and fish, many mountains, a few fluffy clouds on top, a bunch of bushes and trees with apples and pears, et voilà. A quick run to the mall should do.
At the latest in front of the checkout you might wonder how much your shopping spree will be. Let’s see: 5 billion liters of oceans, 2 million tons of trees, 10.000 cows, and 67 cubic kilometers of clouds? Hard to sum up, isn’t it? Well, if we want to compare different forms of capital, apples and pears so to say, we obviously require a common measurement standard. That’s why they came up with money, no need to reinvent the wheel. So how much would the ocean be, or the forest? Easy as that, just look up the price for the ocean’s fish or the forest’s timber. But timber is not all a forest embraces. It provides many other benefits to society: The mere pleasure of wandering about it, the carbon it stores or the oxygen it produces. Unfortunately oxygen does not have a price nor a market – it is an externality.

 

 

A child playing in the floodwaters that hit area of Padang Tiji, Pidie Aceh district, Aceh province, Indonesia.

A child playing in the floodwaters that hit area of Padang Tiji, Pidie Aceh district, Aceh province, Indonesia.

 

Chocolate Externalities

To get a better grasp of this economic lingo, just imagine living next to a chocolate factory. Every morning you weak up to the divine smell of chocolate, nonetheless you surely won’t pay the factory for this joy. On the flipside of this positive externality, the factory can also produce negative ones, for instance poisoning a river with its chocolate sludge. For this, society will have to pay, not the factory, since pollution is not traded on a market and therefore doesn’t have a price. No price means no cost for the company and no incentive for its manager to reduce the pollution of the river. Likewise, most environmental goods, and externalities do not have a market.
The creation of an artificial market is the only solution to generate a price, which can then guide decision makers. For decision makers in climate change this is already being done. After hearing the simple message of the renowned Stern Review ‘damages from global warming are way more expensive than its prevention’, formerly priceless CO2 is now traded on the stock markets, at least in some parts of the world, like the EU. For carbon this is fairly easy. One ton costs a few dollars. But how much is the wide array of values of ecosystem services and biodiversity?

Sufficient Reason to Value

The answer is more than € 1 trillion – close to the combined GDP of all ASEAN countries. And this is just one year’s worth of biodiversity loss, as Dr. Luke Brander, a lead author of the study on ‘The Economics of Ecosystem Services and Biodiversity’ (TEEB) explained. You see, externalities sum up. Only after identifying these, they can be demonstrated and captured. On its way to do so the TEEB initiative is hosted by the United Nations Environment Program and supported by the European Commission and many countries. Germany’s development cooperation GIZ, for instance, has been a global player in TEEB from the start and translates it to a regional level now. And what better region than Southeast Asia, where externalities -not from chocolate factories but from deforestation, overfishing and pollution – threaten a third of worldwide coral reefs and mangrove forests among other unique ecosystems. These sustain the livelihoods for over 500 million people – sufficient reason for GIZ and the ASEAN Centre for Biodiversity (ACB) to support the valuing of the services of the region’s biodiverse ecosystems.

Worth a Journey through Southeast Asia

Many of these can be found in the 33 ASEAN Heritage Parks (AHP), which where the focus of the 4th AHP Conference, October 1st -4th 2013 in Tagatay, Philippines. During the conference Mr. Norman Ramirez of ACB introduced the ASEAN TEEB study, showing specific case studies in Southeast Asia’s key ecosystems. On a brief journey along them, and other regional studies, the listeners were taken to learn what came to light.

Departure in Thailand: If you ask Thai shrimp farmers how much they can make of a coastal strip, they will readily tell you that 9 years worth of timber harvest from mangroves merely generates US$ 500 per hectare, while a shrimp farm in its place will bring in US$ 10.000. A clear business case for cutting the mangroves. Wait a minute, what about externalities? Factoring in positive externalities, like storm protection from mangroves, and negative ones of the shrimp farm, like restoration costs, it looks quite differently: Mangroves create benefits of 12.000 US$ per hectare while shrimp farms even cost society, namely 10.000 US$ per hectare. This is no news to Thailand, guided for the past three decades by its King Bhumibol Adulyadej’s philosophy of Sufficiency Economy. This Economy is very similar to The Economics of Ecosystem Services and Biodiversity in its attempt of happiness development, balancing economic activities with their negative externalities. As Thais would say TEEB is ‘Old whisky in a new bottle’, Ms. Piyathip Eawpanich, GIZ Co-Director of the ECO-BEST Project remarked. Still, the project, aiming to enhance and communicate the TEEB idea in Thailand has no easy task in selling to the variety of park rangers, economists and people this ‘new bottle’ of the valuation of ecosystem services.

Moving on to the Mekong region, such services even include Elephant Draught Power, narrated Dr. Lucy Emerton, Chief Economist of the Environment Management Group, Sri Lanka. Since elephants are commonly used to transport timber from the forest, they are a so called provisioning service of the ecosystem, and sure enough economically valuable. Together with supporting services like seed dispersal, cultural services like ecotourism and regulation services like crop pollination, the Mekong’s biodiversity adds US$ 7.3 billion to the region’s economy per year. Emerton’s study impressively shows that every dollar spent on conservation leverages US$ 40 of payback. This is confirmed by studies in Indonesia’s AHP Leuser Forest or Vietnam’s Hon Mun Marine Protected Area, which make it very clear: Short term gains of unsustainable resource exploitation are always dwarfed by long term losses. In 2050 lost mangroves could cost US$ 2 billion, loss of reef related fisheries even US$ 5.6 billion to the region – a year.

It Pays

That conservation pays off, Vietnam indeed realized, where the ASEAN trip ended. The country successfully internalized externalities of deforestation by introducing PES. Yet a new acronym? What is behind it then? ‘Payment for Ecosystem Services’ essentially means getting paid to do nothing, said Emerton. Her college Pham Hong Luong of VNFOREST agreed and explained how this scheme works: Every landowner gets paid US$ 20 per hectare of forest if they don’t clear cut the trees, hence avoid externalities. A small, but fruitful incentive that resulted in significant national forest cover increases. That such incentive can work on a much bigger scale shows a glance to the North. Since 1999, the Chinese government has invested more than $100 billion in PES after realizing that environmental damage detracted three to ten percent from the country’s GDP. Identifying, demonstrating and capturing these externalities, China is now on track for its goal of restoring 40 million hectares of forest – an area bigger than Japan – by 2020, via paying 120 million farmers to plant trees. The country has clearly understood the message of TEEB: At the dentist or with climate change, prevention and conservation pay off.

This holds good globally: A study, recently published in the journal Science estimates the costs of the maintenance and establishment of conservation areas to effectively protect the world’s biodiversity: $ 80 billion a year. Sounds enormous? Only at a first glance. It is less than 20 % of global spending on soft drinks, and only a tiny fraction of the value of these ecosystems.
The value of valuation becomes clear: Non-valuation automatically means the attribution of zero value to goods – be it chocolate sludge, elephant draught power or oxygen from a tree. If you don’t value it, you won’t save it.
Or rather, ‘if you don’t love it, you won’t save it’ as Noralinda binti Haji Ibrahim, Senior Forestry Officer in Brunei Darussalam concluded the TEEB session of the AHP conference, pointing to the critique of the monetization of nature. Beyond doubt, TEEB is an important tool, but biodiversity needs clear thresholds, given that it cannot be simply substituted. As the saying goes: ‘When the last tree is cut down, the last fish eaten and the last stream poisoned, you will realize that you cannot eat money.’ Mind you, manufacturing a new planet remains Science Fiction and nature is clearly not a shopping mall.

First Published, 12 Oct 2013, Written by Philipp Gassner / Special to the BusinessMirror