Ecosystems Make Dollars and Sense for Business

New report tallies free services, cost benefits supplied by healthy wetlands and forests

Jul 13, 2010

When the Stern Review came out in 2006, suddenly climate change was not just an issue for environmentalists and scientists; everyone became aware of the economic risks and costs associated with global warming.

A report released Tuesday aims to bring the same dollars and cents perspective to biodiversity and ecosystems.

The report comes from The Economics of Ecosystems and Biodiversity (TEEB) initiative, a project of the U.N. Environment Programme. It details the costs to business arising from the loss of biodiversity, as well as the opportunities presented by the free-of-charge services that ecosystems provide.

Those services include everything from purifying drinking water and pollinating crops, to sequestering the carbon emissions linked to global climate change. Yet, for the past half century, people have been ramping up the rate at which they limit the planet's ability to perform these vital functions. The new report attributes this to "the economic invisibility of nature's flows into the economy."

The TEEB hopes to increase awareness among businesses and consumers of the ways in which their livelihoods – and bottom lines – are tied to the natural world.

For too long these services have been underappreciated and only noticed once they are no longer available, said Craig Hanson, director of the World Resources Institute's Mainstreaming Ecosystem Services Initiative. "Reports like TEEB, among other things, help raise the profile of ecosystem services [and] give us a wake-up call before it's too late," he told SolveClimate.

Efforts to highlight the economics of ecosystems seem to be growing. Just last month, representatives from 85 countries meeting in South Korea gave the green light to forming an organization that would try to bridge the gap between policymakers, science and environmental economics.

The Intergovernmental Science Policy Platform on Biodiversity and Ecosystem Services (IPBES) is expected to be modeled on the Intergovernmental Panel on Climate Change, which has played a similar role in the field of climate policy.

Placing a value on ecosystem services

"For every company, there is some subset of ecosystem services that their business depends on," said Hanson. A paper mill, for instance, depends on clean water, while a beachside hotel depends on reefs – not just to draw tourists, but to protect the building from the brunt of storms.

Drinking water is one of the most common examples of a service provided by ecosystems. Healthy wetlands and watersheds provide excellent filtration of vital water supplies. Once the watershed is degraded by development and pollution, however, so is its ability to serve as a filter and collector of drinking water.

While man-made technology can, to some extent, mimic nature's role, the cost to develop, implement and maintain such a system comes at a cost – in time, resources, environmental degradation and impacts on other eco-services.

Some companies have discovered it pays to invest in supporting the natural order.

When French mineral water bottler Vittel realized that large-scale agricultural operations were polluting its springs, the company gave farmers financial and technical aid to promote more eco-friendly growing techniques.

This is where projects like TEEB come in – to try and quantify the value of the ecosystem services that are being lost.

The report says timber harvests in China between 1950 and 1998 actually cost that developing nation as much as $12 billion in lost ecosystem services – far more than the sale of the timber brought in.

Hanson, of the World Resources Institute, spoke of the organization's work helping to calculate the economic value of some Caribbean coral reefs. WRI found the value of Belize's reefs was equivalent to 15 percent of the Belizean economy, he said.

"These reefs are not just something that's pretty to look at," Hanson said. "They are a pillar of the economy, so it's important for policymakers to know that."

Forests, reefs, wetlands – their worth goes beyond their intrinsic value, said Hanson; they are "natural capital."

The effort to place a monetary value on these services is most evident in the case of carbon sequestration, where plants and phytoplankton absorb carbon from the atmosphere – free of charge.

Offset programs, such as the U.N.'s REDD, or other programs that pay landowners to protect the forests on their property, recognize that those forests are worth more standing – in terms of taking carbon out of the atmosphere, providing habitat, preventing erosion, housing watersheds and increasing tourism -- than they are if they are sold as lumber or cleared for agriculture.

The U.S. Forest Service is actively "working to advance public awareness of ecosystem services."

Among the services the agency recognizes: 28 million acres of wild turkey habitat, 200,000 miles of fishable streams, 60 percent of the nation's downhill skiing, and, on average, 173 trillion gallons of drinking water annually. It also estimates U.S. forests currently sequester 10 percent of carbon dioxide emissions from fossil fuels.

And a June report from Earth Economics calculates the Mississippi Delta provides $13,000 per acre in ecosystem services each year. BP's Gulf oil spill has, and will continue, to decrease the availability of those services, but they also have already been impacted by the construction of levees, agricultural runoff and other human activities.

WRI and others are helping businesses determine how, when and why to evaluate their dependence on ecosystem services.

Oftentimes, though, companies don't need full evaluations, but simply need to be shown the connection between their bottom line and the degradation that may be occurring, said Hanson.

Reports like TEEB's can help companies "make that recognition" for the benefit of both their bottom lines and the environment, he said.

(Photo: Fred Technische)

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