18 Jun How pricing nature will encourage biodiversity incentives
US President Biden refers to climate change as ‘the existential crisis of our time’ and has implemented several steps to follow from this statement. This includes the return of the US to the Paris Agreement, implementing plans to reduce fossil fuel subsidies and announcing bold goals to cut greenhouse gas emissions.
Climate change, however, isn’t the only environmental threat that requires attention. Scientists from across the world agree that biodiversity loss is an equally critical area, some argue that this should be the priority focus. Unlike the measures to tackle climate change, which are based on clear, measurable targets associated with emissions, there is no accepted metric for protecting our biodiversity.
What is Natural Capital?
Natural capital can be defined as our world’s natural assets, the soil, air, water, forests, rocks and minerals, as well as all the living things within these habitats. Conservationists predict that these resources provide over $125 trillion to the global economy every year.
We depend on nature’s contribution for our survival but societies fail to formally appreciate the economic value of nature and its importance. This oversight results in people acting inconsiderately and consequently resulting in the depletion of the natural environment.
A recent study of the economics of biodiversity by the UK Government and economic Sir Parth Dasgupta at Cambridge University warned that human development was rising at a ‘devastating cost to our nature’ and predicted that it would take 1.6 Earth’s to meet our current standard of living. The study calls on our world to respect nature and treat it like an asset that is part of our financial statements and national accounts.
The Capitals Coalition, a global group of 380 businesses and initiatives is attempting to transform our approach. The organisation aims to encourage over half of global businesses, financial institutions and governments to integrate natural capital within their strategies and decision making plans by 2030.
Placing value on our ecosystems
Our existing accounting techniques tend to ignore the importance and contribution of our ecosystems and service to the economy and our social well-being, jobs and livelihoods. As a result, societies invest much more in areas that exploit our natural assets rather than preserving them.
Based on the current model, short-term economic gains tend to win over longer-term ecological benefits. A recent study by Paulson Research Institute estimated that global investments that have a direct impact on nature exceed the conservation efforts by $600 billion to $800 every year.
Natural Capital accounting would involve businesses and governments measuring how human activity impacts nature, similar to the way we assess the depreciation of buildings or other infrastructure. Measured in this manner, nature becomes a financial asset and the associated damage becomes a liability. This technique provides incentives to conserve natural resources and focuses on restoring areas that have been depleted.
At the beginning of this year, the United Nations launched a statistical framework to standardise ecosystem accounting. These guidelines will support countries monitor changes in ecosystems and provide leaders with a standard baseline to compare their stocks and flows when determining policy decisions. Around 90 countries have already adopted this system of Environmental-Economic Accounting and generated baseline metrics known as national capital accounts.
The value of our nature
Putting a value on our natural assets is no different from our governments assessing the positive impacts of new infrastructure. People are aware that natural resources are valuable and the pandemic has made it quite clear how closely connected human health is with the overall health of our planet.
This year represent the start of the U.N. Decade on Ecosystem Restoration which intends to eliminate and reverse the degradation of our ecosystems. According to studies, less than 3% of the world’s lands remain ecologically intact with healthy and undisturbed habitats.
After a halt to the progress in environmental accounting, the US Geological Survey and other associated agencies are urging the U.S. to adopt national capital accounts via the UN framework. The UK created public environmental accounts and set up a Natural Capital Committee back in 2012 to support corporations develop natural capital accounts. These accounts continue today, capturing data on the size and value of habitats and ecosystems.
Implementing metrics to monitor the benefits we receive from ecosystems would emphasise how human activities impact nature and show what investment is needed to put a halt to our current destructive trends. Conservation experts will be in a stronger position to protect our planet if they have a reputable balance sheet to support their case.