An economist and an ecologist walk into a bar. The economist buys a round of drinks, and asks the ecologist: “So, how do you feel about monetizing nature?”
This is where the story usually ends.
Why you ask?
It’s because many ecologists simply refuse to enter into the discussion. And it’s not because we think that it can’t be done – it’s because the thought of putting a price tag on nature gives us the heebie-jeebies. The reason for this it that economists have traditionally relied on something known as the “benefit transfer” approach, whereby ecosystem goods and service benefits are derived from published studies, and then transferred to calculate economic values associated with similar land cover types. This might work okay for comparing ecosystems that are similar, but the approach falls short when geography and ecological characteristics are not properly considered (e.g. applying values from studies conducted in Europe to ecosystems in Canada). Improper use of the benefit transfer approach has resulted in widely variable (and arguably indefensible) estimates of ecosystem goods and service values, which has been one of the primary critiques of natural capital assessment as a scientific approach. Sigh…
I recently had the good fortune to attend the Natural Capital Lab’s Innovation Forum in Toronto. Towards the conclusion of the two-day workshop one of my colleagues, an economist, asked me the question, to which I responded: “I have no problem monetizing nature” but added, “as long as it is done correctly”.
There, I said it. No lightning strikes or earthquakes…and the Earth is still spinning on its axis at approximately 1,670 km/hr ((http://image.gsfc.nasa.gov/poetry/ask/a10840.html)). Skeptics might say that I gave this answer as I was surrounded by a crowd of potential drink-buying economists, but as an ecologist, I do believe that we can apply economic values to nature, given the right conditions. So now, the question begs: what are the right conditions for doing so using a natural capital an ecosystem service assessment (NCESA)?
- Employing a hybrid approach that calculates the economic values provided by ecosystem services at both the global and local scales ((Along with Ecological and Socio-cultural, Economic is one of the three interrelated categories of values that can be associated with natural capital. See previous blog for more information (http://naturalcapitallab.com/not-everything-that-counts-can-be-counted-mainstreaming-natural-capital/))). At the global scale, ecosystem services provide indirect, intangible benefits that contribute to the well-being of the global environment, but are less pronounced – and maybe even invisible – at the local level. This is where the applicability of benefit transfer is greatest. An example of this would be carbon sequestration by peatlands in the James Bay lowlands. Using the benefit transfer approach, it can be calculated that the annual value of carbon sequestration services provided by this 7.2 million hectare, globally significant ecosystem is in the order of USD$2.6 billion ((Costanza et al. 1997. The value of the world’s ecosystem services and natural capital. Nature 387, 253–260.)).
- The benefit transfer approach can also serve as a screening tool to scope for detailed assessments at the local scale. Ecosystem goods and services provide direct and tangible benefits that support local economic livelihoods, and are most evident at the sub-watershed level. When conducting these site-specific assessments, it is critical that we carefully select what is being valued, and focus exclusively on benefits that can be measured and have meaning to the beneficiaries. Local scale assessments represent real money for the people involved. For example, studies conducted in the Mushkegowuk Region of northern Ontario calculated that food production from locally-harvested resources (i.e., waterfowl, fish, furbearers, large game, small game, fuelwood and berries) by Aboriginal people contributed an amount equal to approximately 36% of the average household cash income. When cash income and contributions from traditional resources were added together, and the amounts adjusted for inflation, the total average annual household income in the Mushkegowuk Region was estimated to be approximately CAD $57,152, of which 26% was provided through traditional resource consumption ((Berkes, Fikret, et al. 1994. “Wildlife harvesting and sustainable regional native economy in the Hudson and James Bay Lowland, Ontario.” Arctic (1994): 350-360.)). This amount represents real money, in the bank accounts and on the dinner tables of real people, so we can see why it is so important that calculating the economic values of natural capital be accurate and meaningful. It also illustrates why relying solely on the benefit transfer approach is perilous, as the site-level assessment calculated the value of one ecological service (food production) provided by specific ecosystem types functioning in a defined geographic region for a specific beneficiary group. Of course, it also has to be related to the actual ecosystems providing the goods and services on the ground.
- Ensure the use of appropriate materials as background and scoping resources. There are some very good examples of relevant materials out there ((See Estimating Ecosystem Services in Southern Ontario (OMNR/Austin Troy, A. and K. Bagstad, 2009), or Counting Canada’s Natural Capital: Assessing the Real Value of Canada’s Boreal Ecosystems (Canadian Boreal Initiative and The Pembina Institute/Anielski, M., and S. Wilson. 2005).)), but more research in Canada and Ontario is needed in order to fill this gap. To whoever embarks on conducting such assessments, I strongly suggest that an ecologist is enlisted to advise as to the appropriateness of the materials being used.
We have to remember, however, that the economic values associated with this level of assessment are not real money, but are illustrations of the relative importance of services to the global environment rather than the actual monetary worth of the services or the land cover types providing them.
As you can see, conducting a comprehensive NCESA is quite an undertaking, as all potential ecosystem goods and services have to be assessed, and the appropriate survey methods employed to calculate accurate values for each of them. Part of the puzzle requires identifying which ecosystem services should be monetized and, on this subject, I wholeheartedly agree with my more radical ecologist brothers and sisters that we can’t assign an economic value to some things, like endangered species or biodiversity. All of the money in the world can’t bring back the Dodo, the Great Auk or dinosaurs, and it would be impossible to put a price on the last Polar Bear or Woodland Caribou, so this discussion won’t even go there. We will, however, examine the ecological values associated with natural capital in my next blog.
In the meantime, if any economists want to come along for the next chapter in this story, I promise that I’ll be the one buying drinks…Cheers!
More information is available on Vince’s LinkedIn page
You can also follow Vince on Twitter @VinceDeschamps
Vince can be reached by email at: email@example.com