The main focus of this diary is on the challenge of putting a realistic price on ecosystem services, which TEEB represents the current cutting edge of. But simply pricing nature is not enoug without a larger sense of the larger purpose. which is why I'm spending time on this broader study. Fortunately, Science Daily does an excellent job conveying what's essential for my purposes. First a quick introduction:
New approaches are needed to help humanity deal with climate change and other global environmental threats that lie ahead in the 21st century, according to a group of 28 internationally renowned scientists.
The scientists propose that global biophysical boundaries, identified on the basis of the scientific understanding of the earth system, can define a "safe planetary operating space" that will allow humanity to continue to develop and thrive for generations to come. This new approach to sustainable development is conveyed in the current issue of the scientific journal Nature. The authors have made a first attempt to identify and quantify a set of nine planetary boundaries, including climate change, freshwater use, biological diversity, and aerosol loading.
Significantly, the commonly devalued discipline of history plays a very important role in this:
One important strand of the research behind this article is based in the global project known as IHOPE. The goal of the Integrated History and future Of People on Earth (IHOPE) project is to understand the interactions of the environmental and human process over the ten to hundred millennia to determine how human and biophysical changes have contributed to Earth system dynamics. The IHOPE working group is assembled at NCEAS today.
Also significant is the recognition that we are, in effect, entering a genuinely new geological era--one characterized by impacts of humanity on the planet:
"We are entering the Anthropocene, a new geological era in which our activities are threatening the earth's capacity to regulate itself," said co-author Will Steffen, professor at the Australian National University (ANU) and director of the ANU Climate Change Institute. "We are beginning to push the planet out of its current stable Holocene state, the warm period that began about 10,000 years ago and during which agriculture and complex societies, including our own, have developed and flourished. The expanding human enterprise could undermine the resilience of the Holocene state, which would otherwise continue for thousands of years into the future."
The planetary boundaries approach is not a replacement for anything else, but it is an invaluable addition:
Planetary boundaries is a way of thinking that will not replace politics, economics, or ethics, explained environmental historian Sverker Sörlin of the Stockholm Resilience Centre and the Royal Institute of Technology, Stockholm. "But it will help tell all of us where the dangerous limits are and therefore when it is ethically unfair to allow more emissions of dangerous substances, further reduction of biodiversity, or to continue the erosion of the resource base. It provides the ultimate guardrails that can help societies to take action politically, economically. Planetary boundaries should be seen both as signals of the need for caution and as an encouragement to innovation and new thinking of how to operate safely within these boundaries while at same time securing human well being for all."
Properly understood, the planetary boundaries approach should deeply inform the practice of pricing natural services that TEEB helps elucidate (see below). Pricing those services is not enough, as our recent experience precipitating the Great Recession should serve to remind us. We need a common framework of understanding that provide a way of knowing when price systems are out of whack--and the very foundation of that must include a strong understanding of what those price systems are for in the first place.
The planetary ecosystem equivalent of recent financial system meltdown would make the Great Recession look like a child's day at Disneyland:
Lead author Johan Rockström, director of the Stockholm Resilience Centre at Stockholm University, said: "The human pressure on the Earth System has reached a scale where abrupt global environmental change can no longer be excluded. To continue to live and operate safely, humanity has to stay away from critical 'hard-wired' thresholds in Earth's environment, and respect the nature of the planet's climatic, geophysical, atmospheric and ecological processes. Transgressing planetary boundaries may be devastating for humanity, but if we respect them we have a bright future for centuries ahead."
With all that in mind, we now turn to focus on the development of thinking about pricing the value of nature to humanity.
A Journey Of Discovery
The Economics of Ecosystems and Biodiversity (TEEB) is a global multi-disciplinary study aimed at advancing a framework that can be used by policymakers at all levels, from local to global, and that ordinary citizens can also use in order to have a meaningful voice in decisions that impact us all. It consists of a series of five reports-an interim report (issued last September), followed by four final reports targeting different audiences-national/international policymakers, local/regional policymakers, business, and citizens-that will be released in stages later this year.
University of Wyoming economist Edward Barbier serves on TEEB's advisory board. He first became interested in the inter-relationship of economics and the environment as a Yale undergraduate in the late 1970s, when he went to Indonesia to study economic development problems. "I found that Indonesia was a rich country in terms of resources," Barbier recalled. "And to try to understand what were the costs of degradation, watershed degradation, deforestation, conversion of mangroves to shrimp farms, I realized that these tradeoffs were incredibly complex, and involved loss of ecosystem functions that really were not analyzed by economist, but had been looked at to some degree by ecologist. And what became clear to me was that watershed degradation, for example, lead to soil erosion which meant that farmers farmers losing crop value, and also sedimentation of dams and reservoirs downstream, and so forth. Deforestation, of course meant that a lot of watershed protection was lost, and also loss of the benefits to local people, and then of course, the loss of the mangroves affected the fisheries of the local coastal communities."
Out of his undergraduate experience, Barbier developed an environmental concern, but he traces his formal focus back to his later work as a graduate student. When I first asked the origins of his interest in TEEB's approach, he said, "This goes back a long time to me, back to my work on my Phd in the mid 1980s, Early and mid-1980s. I was interested in complex environmental problems as a new type of economic problem that economics had to deal with and that would require cooperation between economics and ecology and other disciplines."
He went on to explain, "My dissertation was eventually published as a book called, in 1989, a revised version called Economics of Natural Resource Scarcity, Conventional and Alternative Use. And one of the things I did in that book was define ecological scarcity as a key economic problem, a new economic problem. And I referred to ecological scarcity as a situation where on the one hand economic development leads to benefits, but the tradeoff is the loss of ecological functions and services, and therefore the need to value the loss of these ecological functions and services was important to understanding how serious the tradeoffs are in development.
"I cited examples of tropical deforestation, so land degredation, climate change, wetland loss, and all that stuff."
Externalized Costs
Although he was well ahead of the curve, he was not the first, of course. Almost a century ago British economist Arthur Cecil Pigou pioneered the concept of externalized costs, such as the environmental, health and mortality costs associated with port pollution in the Los Angeles/Long Beach harbor area, and the wider goods movement industry, costs currently estimated at around $20 billion a year in California alone. Other examples abound. Just last year, a report from West Virginia University found that the externalized costs of coal mining in Appalachia, solely due to premature death vastly exceeded the $8 billion economic contribution of coal mining. In contrast, the costs ranged from $18.5 billion to $84.5 billion, with a point estimate of $50 billion.
"The environmental damages that are done by mountaintop mining, the destruction of streams, the destruction of forests that would sequester a lot of carbon and produce oxygen-they have tremendous economic value," said Michael Hendryx, lead author of the report. "We are just now--as you know--starting to get to the point where we are starting to put a price on carbon, with things like carbon taxes or cap and trade programs. And so we can place a monetary value on some of the things that natural ecosystems like trees do automatically"--but all that was beyond the scope of his study. "The costs that we estimated from mortality are really very conservative, as they don't include those tremendous environmental costs that are associated with the practice as well," he said.
Thus, the initial concept of externalized costs represents only the beginning of a series of steps in thinking, from recognizing externalized costs, to identifying the value of single ecosystem services, to valuing multiple ecosystem services in combination. In turn, this entire progression depends on one key insight, Barbier explained. "The first step, before you can do all that is to view the environment and particular complex integrated components like natural systems as a form of natural capital. By that, what you're saying is that natural environments and ecosystems provide a formal benefit to human beings, and to communities. And those formal benefits mean that those environments and ecosystems are a type of capital asset. They are a form of wealth, if you like. The difference is that unlike conventional economic assets, financial assets, they don't trade on markets. We don't have markets for ecosystems or for ecosystem services. So we treat them as freely available assets, and we don't give a value to the flow of benefits, we don't see the value unless we do the things that you just outlined. All those steps. But the first thing is to recognize that natural assets exist."
A Trajectory of Scientific Discoveries
TEEB also represents the third step in a series of scientific efforts. "There have been two [previous] major efforts," Barbie said. "One is the Millenium Assessment which was an attempt to assess the state of global ecosystems, and also highlight their loss, as well as what they do for us in terms of assisting human welfare. Of those three steps, the Millennium Assessment probably did the first two the best. And found out that there really weren't a lot of comprehensive studies to assess the global value, or the value across the globe of ecosystem benefits and that of bioidiversity, either."
Random Lengths previous wrote about the Millennium Assessment [April 6-13,2007] It analyzed ecosystem services in terms of four different service types: provisioning services such as food, water, timber, and fiber; regulating services that affect climate, floods, disease, wastes, and water quality; cultural services that provide recreational, aesthetic, and spiritual benefits; and supporting services such as soil formation, photosynthesis, and nutrient cycling.
Following that Barbie explained, "The second sort of initiative has been a kind of a less comprehensive initiative, but there has been a number of studies across economics and ecology increasingly focusing on ecosystems services as a key concept, and ecosystems services illustrating the fact of the variety of ecosystems in the world, and the natural capital feature. So those are the two major contributions that have occurred. One is a comprehensive actually study, the Millenium Assesment, the other is a growing number of studies by economists and ecologists, highlighting the value of ecosystem services. So what TEEB has tried to do is pull these two things together."
The global scope of TEEB can be intimidating, but one way to approach it is to look at more localized examples. Taking the example of port pollution, Barbier distinguished between fixed-point pollution sources, which could be more readily dealt with using Pigou's externalized cost framework. But with mobile sources, as in transport, or diffuse sources, such as in agriculture, policy implementation can be considerably more difficult. The practicalities of effective policymaking tend to drive the process, one result of which is that when we find that the pollution has very strong health effects, that's usually where we support the greater regulation."
But this approach is obviously incomplete, Barbie pointed out: "What's missing in all this is often trying to understand what's the cumulative impact of dumping all this pollution in the environment? And what are the impacts on the functioning of ecosystems and the services they provide? That's a much trickier thing to deal with in the case of multiple sources of mobile pollution, such as from transport." Thus, we can hope that TEEB's comprehensive approach will eventually provide a much broader and more detailed picture of all the costs associated with port pollution.
The Case of Fisheries--Shifting Understanding
Taking another historically important example for San Pedro and Wilmington, Barbier talked about the problem of fishery depletion. Tracing a series of shifts in attitude.
"In the case of fisheries, this again has been a long-term problem, where we have tended to overharvest fisheries without controlling access to the fisheries. And the response to finding our fisheries are being depleted rapidly is for us to encourage the investment of more capacity to go out and find more fish--better radar equipment, better boats, methods better nets, that kind of thing, better trawling methods. But all that does is to further increase the depletion and decline," Barbier explained.
"What we have now moved to is a new phase where we realize that there's two other things that might be happening. One might be the need to have some control over fishing effort, or the amount of fishing that we do, including some of the equipment that's used. And the second is recognizing the linkages between fisheries and the wider marine food web as well as key coastal areas that provide the nursery and breeding habitat for those fisheries in some cases." But this was only a way-station on the way to a larger shift.
"So, that's moving us toward this idea that we have to think about not just the fisheries' output, but what contributes to the fisheries, and what's allowing them to be biologically productive," Berbier continued. "How do we protect their ongoing production? So in a sense what were doing with fisheries is thinking in two ways. First of all, how do we control the harvesting side, so we don't over-harvest. And on the other hand, how can we protect the natural biological productivity of the fisheries. You don't want just the fish reproducing, but what are the key habitats and food webs that allow the fish to reproduce, and enhance the productivity."
This has further consequences, he explained. "hat's leading us in two directions. On the one hand we are thinking about tradeable quotas and management regimes to control harvesting, and on the other hand we're looking at protection of areas including use of marine preserves and protected areas, as well as protection of key coastal habitat, such as nursery grounds."
"And then the third phase is where were moving into now, saying, well if we look at marine systems in this way, how do we consider the other benefits to marine systems, the fact that if you protect coastal areas we also might enhance recreational values. If we protect marine areas, are there also some recreational benefits, for example of improving coral reef environments, and improving the number of, the diversity of fish might encourage dive tourism and all that stuff. So this is how our view of the situation has evolved in both areas.
Free Market Consistency
While TEEB is certain to provide significant impetus for the use of taxes or tradeable permits to help limit and pay for the destruction of ecosystem services, Barbie rejects the idea that this approach is contrary to the logic of free markets efficiently allocating economic goods.
"The problem is that when you don't include these costs, whether it's air pollution costs or the loss of ecosystem services from commercial development, that means that your markets aren't efficient. They're not making sure that the market outcome is going to be beneficial to all the participants. Okay? A huge number of people are being negatively affected, and the market's not taking into account that cost. It also means that whoever is benefiting from that activity is not paying the full cost. Society is bearing it."
Another consequence is that economic activities that don't harm the environment are disadvantaged, as are those that would protect or restore it. TEEB also aims to promote these kinds of economic activity. One of its forthcoming reports is specifically targeted to the business community.
Furthermore, many industries that destroy natural capital are also heavily subsidized--up to the tune of a trillion dollars annually or more. No one can defend that on free market principles. Phasing out such subsidies is an obvious way to sharply reduce environmentally destructive practices.
Critical Considerations--A 'Good Enough' Advance?
Kassie Siegal works for Center for Biological Diversity as director of the Climate, Air, and Energy Program. She's critical of the existing cost/benefit analysis approach to environmental regulation, but sees TEEB as a big step forward.
"It's a big deal because climate change is a big deal," Siegal said. "It's a big deal because climate change is a big deal. We need to get carbon dioxide back down below 350 ppm, or we're going to create a planet that we don't even recognize, because the changes will be so far-reaching. They're looking at valuing the damages from climate change. It's a very hot issue. More information is definitely better. For example what they say about coral reefs is something, I quote this a lot from this report. Accepting any stabilization target above 350 ppm CO2 means that society has made a decision to do without coral reefs. And that means to adapt to what it means to lose coral reefs, which is not only that biodiversity, about a third of all known marine species rely on coral reefs, but also it means losing several billion dollars worth of economic output and people's livelihoods."
The figure of "several billion dollars" is almost certainly far too low by a factor of 10, 100, or even more. We're only just beginning to understand how much human cost is at stake.
As a down-to-earth example, Siegal points to a lawsuit CBD brought when the Bush Adminstration tried to use a zero dollar value for carbon as an input into a complex cost/benefit calculation used to set vehicle emission standards. They were successful, and the rulemaking was redone.
"If your going to be doing a cost-benefit analysis, then you certainly should be not ignoring one whole side of the equation, which is what the government typically does," Siegal said. "And this [TEEB] is an attempt to address that." The need for TEEB is underscored by what happened next: The Obama Administration reissued the rule, using a figure of $22 per ton - roughly 25 percent of the $85 per ton figure developed in the Stern Report, the standard-setting British Government report on the economics of climate change.
"The good thing about something like the TEEB report is that the TEEB report helps show empirically why these models that they are using are simply wrong," said Siegal. "It's not that they may be the right, they may be wrong, you can show that they're wrong."
In the end, however, the report alone is not the answer. No amount of information or insight could be.
"We need a social movement to get the change we need," Siegal concluded. Fortunately, TEEB includes a web-based report/presentation directed to average citizens, to be released this summer. That can only help to educate, inform and motivate the kind of movement we need.
And, in the end, it brings us back to the ecosystem boundaries approach, and it's reminder of the need for a vision, and sense of what's at stake that no price system can properly convey. Ultimately, there is no substitute for vision, no substituted for justice, and no substitute for people committed to both. |
