The Economics of Ecosystems and Biodiversity
For National and International Policy Makers
United Nations Environment Programme | November 13, 2009
By Patrick ten Brink, Augustin Berghöfer, Christoph Schröter-Schlaack, Pavan Sukhdev, Alexandra Vakrou, Stephen White, and Heidi Wittmer
Part I: The global biodiversity crisis: challenges and opportunities for policy makers
Natural capital—our ecosystems, biodiversity, and natural resources—underpins economies, societies and individual wellbeing. The values of its myriad benefits are, however, often overlooked or poorly understood. They are rarely taken fully into account through economic signals in markets, or in day to day decisions by business and citizens, nor indeed reflected adequately in the accounts of society.
The steady loss of forests, soils, wetlands and coral reefs is closely tied to this economic invisibility. so too are the losses of species and of productive assets like fisheries, driven partly by ignoring values beyond the immediate and private. We are running down our natural capital stock without understanding the value of what we are losing. Missed opportunities to invest in this natural capital contribute to the biodiversity crisis that is becoming more evident and more pressing by the day. The degradation of soils, air, water and biological resources can negatively impact on public health, food security, consumer choice and business opportunities. The rural poor, most dependent on the natural resource base, are often hardest hit.
Under such circumstances, strong public policies are of the utmost importance. These policy solutions need tailoring to be socially equitable, ecologically effective, and economically efficient. solutions are already emerging from cooperation between economists and scientists—and being tested and refined around the world. They point to four urgent strategic priorities:
- to halt deforestation and forest degradation (i) as an integral part of climate change mitigation and adaptation focused on "green carbon" and (ii) to preserve the huge range of services and goods forests provide to local people and the wider community;
- to protect tropical coral reefs—and the associated livelihoods of half a billion people—through major efforts to avoid global temperature rise and ocean acidification;
- to save and restore global fisheries and related jobs, currently an underperforming asset in danger of collapse and generating $50 billion less per year than it could;
- to recognize the deep link between ecosystem degradation and the persistence of rural poverty and align policies across sectors with key Millennium development goals. Two related challenges lie ahead. The first is to understand the values of natural capital and integrate them into decision-making. The second is to respond—efficiently and equitably.
Part II: Measuring what we manage: information tools for decision-makers
Unlike economic and human capital, natural capital has no dedicated systems of measurement, monitoring and reporting. This is astonishing given its importance for jobs and mainstream economic sectors as well as its contribution to future economic development. For instance, we have only scratched the surface of what natural processes and genetic resources have to offer.
As part of good governance, decision-making affecting people and using public funds needs to be objective, balanced and transparent. Access to the right information at the right time is fundamental to coherent policy trade-offs. Better understanding and quantitative measurement of biodiversity and ecosystem values to support integrated policy assessments are a core part of the long-term solution.
The first key need is to improve and systematically use science-based indicators to measure impacts and progress and alert us to possible "tipping points" (sudden ecosystem collapse). Specific ecosystem service indicators are needed alongside existing biodiversity tools. Another key need is to extend national income accounts and other accounting systems to take the value of nature into account and monitor how natural assets depreciate or grow in value with appropriate investments. New approaches to macroeconomic measurement must cover the value of ecosystem services, especially to those who depend on them most—"the GDP of the Poor."
Part III: Available solutions: instruments for better stewardship of natural capital
TEEB's analysis highlights existing and emerging solutions suitable for wider replication.
Rewarding benefits through payments and markets: Payments for ecosystem services (PES schemes) can be local (e.g. water provisioning) up to global (e.g. REDD-Plus proposals for Reduced Emissions from Deforestation and Degradation, as well as afforestation, reforestation, and effective conservation—if designed and implemented properly). Product certification, green public procurement, standards, labelling and voluntary actions provide additional options for greening the supply chain and reducing impacts on natural capital.
Reforming environmentally harmful subsidies: Global subsidies amount to almost $1 trillion per year for agriculture, fisheries, energy, transport and other sectors combined. Up to a third of these are subsidies supporting the production and consumption of fossil fuels. Reforming subsidies that are inefficient, outdated or harmful makes double sense during a time of economic and ecological crisis.
Addressing losses through regulation and pricing: Many threats to biodiversity and ecosystem services can be tackled through robust regulatory frameworks that establish environmental standards and liability regimes. These are already tried and tested and can perform even better when linked to pricing and compensation mechanisms based on the "polluter pays" and "full cost recovery" principles—to alter the status quo which often leaves society to pay the price.
Adding value through protected areas: The global protected area network covers around 13.9 percent of the Earth's land surface, 5.9 percent of territorial seas and only 0.5 percent of the high seas: Nearly a sixth of the world's population depend on protected areas for a significant percentage of their livelihoods. increasing coverage and funding, including through payment for ecosystem services (PES) schemes, would leverage their potential to maintain biodiversity and expand the flow of ecosystem services for local, national and global benefit.
Investing in ecological infrastructure: This can provide cost-effective opportunities to meet policy objectives, e.g. increased resilience to climate change, reduced risk from natural hazards, improved food and water security as a contribution to poverty alleviation. Up-front investments in maintenance and conservation are almost always cheaper than trying to restore damaged ecosystems. Nevertheless, the social benefits that flow from restoration can be several times higher than the costs.
Part IV: The road ahead: responding to the value of nature
The need to move our economies onto a low-carbon path and the benefits of doing so are now widely acknowledged—yet the need to move towards a truly resource efficient economy, and the role of biodiversity and ecosystems in this transition, are still largely misunderstood or under-appreciated. Building momentum for the transition to a resource efficient economy calls for international cooperation, partnerships and communication. Every country is different and will need to tailor its responses to the national context. However, all may stand to gain—countries, businesses, people on the ground—by sharing ideas, experience and capacity. Policy champions can lead this process and use windows of opportunity to forge a new consensus to protect biodiversity and ecosystems and their flows of services. The TEEB studies and analysis hope to contribute to this new momentum.
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