Banking on Biodiversity, cont.

Market Crash

“There are quite a few situations where it makes sense economically to save biodiversity when ecosystem services are considered,” says DIVERSITAS’s Larigauderie. That suggestion is entangled with an idea known as the portfolio effect, which likens biodiversity to stocks. Diversify your holdings, and you’re less likely to get burned when the market dips. Invest in biodiversity richness, and ecosystem services— watershed protection, pollination nutrient flow and the like—are more apt to remain stable.

Despite its dark outlook, Global Biodiversity Outlook 3 offered a silver lining. It showed how investments in biodiversity and ecosystem services could save money. The planting of nearly 12,000 hectares of mangroves in Vietnam cost about $1 million but cut dike maintenance expenditures by over $7 million. And investments in a protected area in Venezuela averted sedimentation that risked slashing farm revenues by $3.5 million annually.

In some ways, the idea of assigning an economic value to nature is incredibly old. Plato spoke of the value of nature to human well-being, and researchers in the 1920s wrote about the role clean water in wetlands had on hunting and fishing. But these earlier attempts at understanding what biodiversity was worth ignored the interconnectedness of species and the variety of services an ecosystem could provide.

Leaving out that part of the equation can have dramatic effects on the overall calculation, says Stephen Polasky, an environmental economist in the University of Minnesota’s College of Food, Agricultural and Natural Resource Sciences and the brains behind InVEST. In one study, Polasky and his colleagues looked at a scenario that would have allowed agricultural expansion in Minnesota. Ignore ecosystem services such as the value of car­bon sequestration, and there’s a clear benefit to landowners to convert the land to agriculture. But when carbon sequestration is included, the option of agricultural expan­sion drops to the bottom of the list.

“Even without a precise estimate, so long as we have a reasonable range, we can see that it has to be included into decision making, where it otherwise had been assigned a value of zero and ignored,” Polasky says.

Polasky says that it’s the suite of values that comes from ecosystems and those that might be damaged when something changes the ecosystem in a fundamental way that must be considered. “But in order to do that we have to understand how the ecosystem functions, how we as humans muck with them and how that changes the ser­vices that are provided,” he says. “And that part, frankly, is pretty new.”

So, how do you put an economic value on biodiversity and ecosystems? It’s a difficult task, and one that can become quite technical. In many cases, the available information is rudimentary. But for some big-ticket services, such as carbon and water, the science and the economics are fairly good, says Polasky—“good enough to make policy choices.”

Valuations can build on scientific studies designed to understand ecosystems, what services they provide and how they do it. “The core task is to estimate the precise contribution of the ecosystem service to the production of the good,” says the CBD’s Lehmann.

One way of determining the value of ecosystem services is to quantify the impacts when ecosystems are altered or lost. For example, we can calculate the decrease in coffee yield if pol­lination by wild bees is reduced by 25 percent. Another method asks people how much they are willing to pay to keep a species or an ecosystem service safe, such as whales or the Siberian tiger. A variety of studies have placed the value of intact coastal ecosystems, such as mangroves or wetlands that provide watershed protection, in the range of $200 to $1,000 per hectare per year. And the benefit of bee pollination for coffee production has been estimated at $361 per hectare per year, so long as the producers lie within a kilometer of natural forests.

Costanza and his colleagues recently crunched the numbers brought on by the oil spill from last spring’s Deepwater Horizon explosion in the Gulf of Mexico. The spill directly and indi­rectly affected at least 20 categories of valuable ecosystem services, including the $2.5 billion Louisiana fishery, popular Gulf beaches and carbon sequestration by the coastal marshes and open water systems. They estimated that the loss in ecosystem services provided by the delta would amount to $1.2 billion to $23.5 billion per year, or $34 billion to $670 billion until the ecosystems recovered.

There are those who do not believe that biodiversity or ecosystem services can be boiled down to a dollar amount—or that they should. It’s the moral or ethical argument of conservation: Nature, they say, should be conserved for nature’s sake. Larigauderie points out that it need not be an either-or situation. “An ecosystems service approach shouldn’t replace all other approaches, but it is necessary and complementary with the goal of conservation,” she says.

Nor can a market-based mechanism conserve all biodiversity. “There will be losers,” says Larigauderie. “But ecosystem services puts biodiversity into an economic framework, and that is what the world needs now. It is a pragmatic way to save our ecosystems.”

Biodiversity Futures

Despite past failures, the mood among those who work to preserve the planet’s biodiversity and keep its ecosystems productive is encouraging. They have recognized shortcomings, are high-lighting other approaches—such as ecosystem services—and are putting words into action.

In October of this year, the 193 signatories to the CBD met in Nagoya, Japan, to hammer out a new agreement to safeguard the planet’s biodiversity. This time the strategy included integrating the value of biodiversity into national accounts—the balance sheets each country keeps. It also pushed for abolishing incentives that are harmful to biodiversity. The vision embraced by the 2010 convention is that by 2050, biodiversity will be valued, conserved, restored and widely used. Perhaps, with the new attention to the economic context of biodiversity and ecosystem protection, the vision at last will become reality.

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Hannah Hoag is a freelance journalist in Montreal. Her work has appeared in Nature, New Scientist, Discover, Wired, The Globe and Mail, The Toronto Star and elsewhere.

Decaying Matters

Jonathan Schilling

Does a single fungus make a difference? In northern boreal forests, which lack the profuse biodiversity of tropical climes, loss of just one species could send the carbon cycle spiraling. Read the article>>

What's the Buzz

What's the Buzz

One study of a coffee plantation found that bees living in nearby natural forests provided pollination services worth $60,000 per year.

Further Reading

The Natural Capital Project
Global Biodiversity Outlook 3
The Economics of Ecosystems and Biodiversity (TEEB)