Monday, October 25, 2010

Banking on 'nature'

Some of the best minds of our generation believe that we need to build a new economic model — one that incorporates the 'capital' of the natural world.

It's a terrestrial attempt to re-order our thinking both about nature and value.

Traditional economic models consider gross and quantifiable things such as money; it's the 'currency' of basic economics. But there's been a paradigm shift coming for years, as the big thinkers who think about these things try to incorporate 'instruments' that 'measure' the economic contribution of ecosystems.

The Economics of Ecosystems and Biodiversity (TEEB) — a UN-backed report released in Japan Oct. 20 — argues that preserving the Earth's biodiversity has a value that should be weighed in engineering, business planning and the whole sweep of economic activity. (See The Economics of Ecosystems and Biodiversity)

The web of life is inextricably intertwined. Bees, marshes, coral reefs, marine ecosystems all have real value, the report concludes. The valuations outlined in the report are staggering. And they are not entirely arbitrary, though there is — as one might expect in such a sea change in thinking — some statistical jiggery-pokery.

The value of the pollination performed by bees, for instance. In Switzerland, bee colonies ensured a yearly agricultural production worth about US $213 million by providing pollination, about five times value of the production of honey, the report states, citing statistical data from 2005.

Conserving forests rather than allowing their wholesale denudation is pegged as having a 'value' of US $3.7 trillion a year.

One can poke fun at the numbers. One can argue that the assumptions that gave rise to them are, in some cases, questionable. One can muse that, taken to extreme, we should also be talking about the value of the Milky Way Galaxy. (An interesting thought, philosophically, if outside of the sweep of the Earth-based model suggested in TEEB.)

Those waverings aside, there is a certain spirit in the intent of TEEB that amply warrants a closer look.

We take too many things for granted. We have accepted that the Earth's bounty is inexhaustible. Our rapacious appetites will always be quenched, we've assumed. But there are, we have come to understand, limits in what we can take without giving back.

Consider the case of Lake Winnipeg, the world's tenth largest freshwater lake by surface area. It's that big body of water smack in the middle of North America. It's become a nutrient-rich lake in a process known largely as cultural eutrophication — the three-dollar word for human-caused over-fertilization with the nutrients Nitrogen (N) and Phosphorous (P).

Core samples of the lake bottom indicate that this over-fertilization began to increase in the early-1960s, coinciding with the rise of agricultural application of fertilizers to promote crop growth and the expansion of cities in Lake Winnipeg's vast one-million-square-kilometre watershed.

By the early-70s another human-caused innovation appeared when the province's hydroelectric utility won a licence to regulate lake levels. That changed the natural pattern of outflows at the top end of the lake north into the Nelson River.

This change in the natural pattern also affected the marsh at the south end of the lake. Netley-Libau marsh has been literally losing ground ever since. A marsh that had once acted as a vigorous nutrient filter — removing N and P before they got into the lake — became hobbled as vegetation losses mounted.

Returning to the notion of natural capital. The marsh has both a natural value as a wetland but it also performs the salutary and valuable function of reducing nutrient loading. As well, the introduction of lake regulation has an effect on the natural rhythms of the lake. In the updated business modelling suggested in TEEB, that cost to the lake's 'natural capital' should have been calculated in a thorough cost-benefit analysis of the implications of lake regulation.

In another example we can consider the value farmers provide when they retain wetlands on their property. Past practice has been to drain the wetlands to put them into production. But the values that wetlands bring suggest a need to rethink that once-automatic business decision. Instead, in many cases, there is more value in keeping the on-farm wetlands intact. The other side of the coin is that farmers should be compensated for the value of the retained wetlands on their properties.

The TEEB model may appear complex, but it underscores the needed recognition that our traditional economics is anaemic and needs a fix.

The value of TEEB is that it serves as a recognition that our past way of doing things cannot continue. If we withdraw all our natural capital, we will have lost everything.

Google: Changes in the Emergent Plant
Community of Netley-Libau Marsh Between 1979 and 2001
If you cannot find the pdf contact me at I'd be happy to e-mail the 1.7 Mb report.

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