Monday, March 28, 2011

Ecosystems: Invaluable and worthless

(another extract from Garden Earth, the book)

In the middle of the 1990s, a study estimated the value of ecosystem services to some US$ 33 trillion, double the size of the world Gross Domestic Product, GDP (Hall and Klitgaard 2006). MEA doesn’t try to assign values to ecosystems and ecosystem services, but it shows with numerous examples that if we did calculate such values, many things we consider to the profitable today would not be profitable and vice versa. This is because profit is calculated by the entrepreneurs running a company and as long as they can use ecosystem services for free and as long as the degradation of the services are not paid for, this will not appear in any economic calculations. Some examples of estimated values of ecosystem services are:

- In Belize, mangrove and corral reefs produce fisheries, tourism and coastal protection for a value between 395 million and 559 million dollars annually, according to studies of World Resource Institute and World Wildlife Fund. This can be contrasted to the whole Gross Domestic Product of Belize of 1.3 billion dollars (WRI 2008)

- The value of biodiversity in New Zealand was estimated 1997 to 152 billion dollars, which can be compared to the GDP of 56 billion dollars. The valuation didn’t include theoretically potential services but only those that are known (OECD 2001).

- ‘Business as usual’ deforestation and land-use changes cause annual losses of natural capital valued at between EUR 1.3 trillion and EUR 3.1 trillion, a sum exceeding the total financial losses of Wall Street and London City during 2008, their worst year ever (Arborvitae 2010).

Let it be

In October 1999, the state of Orissa in India was battered by a super cyclone that killed almost 10,000 people and caused a massive loss of livestock and property. A researcher found that mangroves do provide important storm protection to people, livestock, and buildings. Had the mangrove forests been intact, more than 90% of the deaths due to the 1999 cyclone would have been avoided. A hectare of mangrove forest land stopped damage worth $43,000 in the district during the super cyclone. Of course, such severe storms do not occur every year. But even allowing for the fact that mangroves have no storm protection value during non-storm years, the long-term protection value of about $8,700. At the time, a hectare of cleared land was fetching $5,000. Thus, leaving mangroves as storm buffers generates more value to society than clearing them for development (Glover 2010).

How Mexican farmers get paid by American blue chips to bind carbon

To an increasing extent, systems are developed for payment of maintenance or new production of ecosystem services. Already 1996, Costa Rica introduced a system where land owners could get compensation for carbon sequestration, biodiversity, water regulation and aesthetic values. Year 2001, the payments in this program had reached 30 million dollars for a total of 280,000 hectares. Farmers in the EU and the USA are paid for all kinds of environmental services to protect landscapes, water sources, maintain or re-create biodiversity[1]. The USA pays 1.4 billion dollars annually for 13 million hectares (FAO 2007).

The possibly best know market for environmental services is the market for reduction of emissions of green house gases. There are two markets. One is government controlled and is regulated under the Kyoto Protocol, the other is a voluntary market for companies, organizations or individuals wanting to reduce their environmental footprint or making themselves “carbon neutral”. The Clean Development Mechanism under the Kyoto protocol, the EU system for emission rights and the voluntary so called “carbon[2] market” was worth some US$ 143 billion market in 2009, an increase of US$48 billion just three years earlier, so this is now one of the fastest growing markets in the world (World Bank 2010b). In Brazil’s first so called REDD (Reducing Emissions from Deforestation and forest Degradation) project each family in the Juma Sustainable Development Reserve in the Amazon, each family receives US$ 28 per month if the forest remains uncut (UNEP 2010b). Farmers in the Scoltel Té-project in Chiapas (Mexico) sell carbon sequestration, in the soil and in the vegetation, for 3.30 dollar per ton. Of this 60 percent goes directly to the farmers, representing an increase of their income with between 300 dollars and 1,800 dollars, big sums for households where the average income is about 1000 dollars (World Bank 2007).

The city of New York gets the majority of its water from an area stretching 200 km north and west of the city. The authorities came to the conclusion that is was more efficient to manage the catchment area for good water quality instead of investing in a purification plant. Such a plant would cost between 6 and 8 billion dollars. The implementation of a catchment management program cost 1.5 billion. It includes measures such as purchase of some critical lands; education, support to farmers for reducing use of chemical fertilizers and synthetic pesticides according to FAO, the United National Food and Agriculture Organization (FAO 2007). Insurance and shipping companies are financing the reforestation of the Panama Canal Zone to restore freshwater flows and avoid increased costs caused by canal closures (TEEB 2010).

Global extortion or fair compensation?

The United States Treasury and Brazil have signed an agreement converting $21m of Brazilian debt into a fund to protect three tropical ecosystems. Brazil will use the money for activities to conserve protected areas, improve natural resource management and develop sustainable livelihoods for communities that rely on forests. The agreement comes under the Tropical Forest Conservation Act (TFCA) of 1998, which to date has generated $239 million to protect tropical forests in Bangladesh, Belize, Botswana, Colombia, Costa Rica, El Salvador, Guatemala, Indonesia, Jamaica, Panama, Paraguay, Peru, and the Philippines (ISEAL 2010).

Taking the idea of getting paid for not using a resource to new levels, the President of Ecuador, Rafael Correa, has said that his government is prepared not to extract nearly a billion barrels of oil from Yasuní National Park, a part of the Amazon rainforest of extraordinary but fragile ecological and cultural richness. To do so, however, Ecuador will need to be compensated by the international community for its loss of oil revenue – to the tune of US$350 million per annum for the next 10 years. A conservative estimate is that exploiting the oil would bring in US$5.7 billion in present value terms, or 10% of Ecuador's GDP. With abatement[3] cost for carbon dioxide at US$14 to US$20 per ton, the cost to the world to abate these emissions will be between US$1.7 billion and US$2.4 billion for the extraction and burning, and US$909 million for deforestation, for a total between US$2.6 billion and US$3.7 billion (The Guardian 2009b).

Like with other new programs, especially when they involve money, there are potential problems and side effects, some of which are not seen initially. There are examples from India, where poor landless people have been harmed of community forest management plans, because the plans limit their access to resources to which they before had unrestricted access. Other examples when communal land has been appropriated by private owners who suddenly see a commercial interest in these environmental services. In Guyana, a private equity firm has bought the rights to 20 percent of the value of environmental services from a 370,000 hectare rainforest reserve anticipating that its carbon storage, water storage, biodiversity maintenance and rainfall regulation services will become a valuable asset in the future (Arborvitae 2010).

Should the have a price or are they invaluable?

We have seen how important ecosystems and the services they can supply are. Mostly we are not aware of the services that are provided by nature to our benefit. Their composed value is very high, notwithstanding many of them are of such a character and importance for our survival that their value simply can’t be calculated; such as supply of oxygen. We can’t even imagine how to organize the same service if the current ecosystems collapse. Ecosystem services can be more efficient, we influence them all the time. Agriculture is of course the most prominent example where we over millennia has increased the value (for us, that is), the yield, from a certain area. But the example also highlights the dangers of looking at only one ecosystem service, in this case the supply of food. It is exactly that narrow perspective that has led us to degeneration of the agriculture landscape, to erosion, to pollution in the same time as it has given us the possibility to tenfold population.

Surprisingly, there is not a very strong critique against the privatization that payment of ecosystem services actually entail, not even from normally anti-capitalist groups. On the contrary, many of them express sympathy and support programs for programs to pay farmers for ecosystem services. Probably they don’t realize that payment of ecosystem services from taxes represents a giant privatization and a transformation of nature resources and commons into commodities. As we discussed the total value of the ecosystem services probably exceed the total value of the current economy. And as more and more services are threatened, their prices will increase, fully in line with the principles of market economy. This also means that the GDP will increase and increase more, the more we deplete our resources, until they ultimately collapse.

[1] The link between the payments and the supplied service is rather weak, in particular in the EU. The levels of compensation are not calculated in any scientific or economic way, but are rather just the results of horse-trading between farmer organizations and the EU member states.

[2] The real ”carbon market” is of course the coal, gas and oil market and not the carbon dioxide green house gas emission reduction market

[3] Abatement and mitigation are used interchangeably to describe the processes by which greenhouse gases emissions can be reduced or compensated for by some other mechanism, such as carbon sequestration, carbon sinks. Adaptation refers to the process of adapting to climate change, i.e. not change it or do anything about it, but learn how to live with it.

No comments:

Post a Comment