An emerging area of economics aims to put a price on nature as a way of justifying preserving it in societies dominated by the wisdom of markets. A mountain stream, for example, provides many economic benefits beyond people who own property near it or drink water from it. The same is said of bees that pollinate our food, wetlands that cleans water, and trees that drink up carbon dioxide. If nature were a corporation it would be a large cap stock. Putting a precise tag on something long seen as free is a conceptual leap. However many large companies are starting to realize the extent to which their profits rely on well-operating ecosystems. An economist and sustainability professional discussed ecosystem services and the economic value of the natural world.
Larry Goulder, Professor of Environmental and Resource Economics, Stanford University
Tony Juniper, Associate Professor, University of Cambridge Programme for Sustainability Leadership; Special Advisor to The Prince of Wales International Sustainability Unit
Tony Juniper’s new book, What Has Nature Ever Done For Us? How Money Really Does Grow on Trees, summarizes the elements of nature that are beneficial to humanity, from soil that stores carbon to wetlands that reduce the impacts of coastal natural disasters. He began the conversation by pointing out the need to restructure the international economy, since “the bit of the economy that we’re measuring is based on the plundering of this other part of the economy that’s worth twice as much,” he said. He referred to the impacts of pollution as externalities that are not being paid for, and economist Larry Goulder agreed.
“We have to take these extra costs into account,” Goulder said.
The panelists agreed that corporations currently think too narrowly about nature’s costs and benefits by focusing on the large monetary burdens of using cleaner technology.
“The environmental benefits are worth more to us as a society than these extra costs...finding ways to do it is difficult,” Goulder said.
Because their primary objective is making money, companies may see a risk in investing in methods that may be greener, but not as productive. However, some companies are showing interest in shifting to less pollutive methods, a change that will cause disagreements between industrial groups resulting in winners and losers, according to Juniper.
“There’s also things governments can be doing to help these companies maintain supply chains,” he said.
One element of development and industrialization that shows the disadvantage of destroying nature is seen in the increased costs of weather-related damages, Goulder said. In 1980, the cost of dealing with weather-related issues was about $3 billion, and today, it is at least $20 billion, he said.
The panelists agreed that the world needs to change the way nature is valued, from individual behaviors to governmental policies.
“If you engage customers in using less power, they’re going to be spending less money,” Juniper said.
Juniper comparing the extreme damages caused by Hurricane Katrina that were amplified by degraded wetlands to the lesser effects of Hurricane Rita, which was also a Category 5, but was buffered by wetlands before hitting the mainland. Keeping wetlands intact is “a kind of insurance policy,” he said.
Goulder compared the hurricanes with a local example, the Napa River, where the controversial restored wetlands are like a “natural sponge” for the river’s overflow.
In terms of political policy, Juniper said there is probably more being done in Europe than the US, but added, “what’s going on in Europe is not brilliant, either.”
Politicians realize that climate change, for better or worse, is not a decisive issue – support for cap and trade seems to have declined, but many states are taking significant action, Goulder said. Obama’s reference to the climate problem in his State of the Union address was encouraging, he said.
"There are some bright spots but we have a long way to go," Goulder said.
Solutions need to come from policies that give market advantage to progressive corporations and eliminate environmentally destructive short-term plans, Juniper said.
“It's about incorporating all costs of society when they [corporations] produce,” Goulder said.
- Danielle Torrent
Photos by: Sonya Abrams
Commonwealth Club of California
July 25, 2013