Thursday 11 February 2021

The Economics of Biodiversity


On 2nd February 2021 a major review was produced by Sir Partha Dasgupta, Professor of Economics and Cambridge University – “The Economics of Biodiversity”.


This is an expertly articulated 600-pagetome which does what it says on the tin – it looks at the economics of biodiversity, but it does so in a quite fundamental way.  Fortunately, there is also an abridged version (100 pages) and much shorter summary of headline messages.


Most media reports about this Review lead with the idea that it is “putting a price on nature”.  This has been picked up by both those promoting the concept and those opposing it, but as far as I can see this is a severe miss-representation of the Review.  Putting a price on nature implies reducing nature to tradable assets – putting a financial number against species and habitats so we can trade them for something else if something else has greater value for us.  This is the model of seeing nature as fitting within, and being subordinate to, the economy.  This is the opposite of what the Review actually says.  The Review develops the economics of biodiversity “on the understanding that we – and our economies – are ‘embedded’ within Nature, not external to it”.  So, the economy fits within the environment, not the other way around.


The leading message from the Review is therefore that we depend entirely on nature; it is our most important asset, but our demands far exceed the capacity of nature to supply the goods and services we rely on.  We should all know the problem – we “mine” what we want from nature with little respect for the repercussions.  The result is climate and ecological collapse. 


The Review concludes that we must change the way we think, act and measure success.  And this is perhaps its most important message.  At present societies measure their success by measuring GDP (Gross Domestic Product).  But this is just a measure of all financial activity and bears little relationship to the wealth of society.  Whether producing something, causing pollution, driving ill health, or clearing up the mess afterwards, this is all added together and counted as positive using GDP as a measure.  Instead, the Review says that we should develop a new metric – one of “inclusive wealth”.  This metric would measure wealth in terms of 3 capitals – produced capital (machines, buildings, stuff etc), human capital (knowledge, health, skills etc), and natural capital (plants, animals, soil water etc).  So, we measure our “wealth” in terms assets, not in terms of the speed of money turnover.


We have been thinking this way in Sussex for over a decade and the Sussex Local Nature Partnership, with over 25 member organizations, is based on exactly this premise.  Take a look at the Sussex Natural CapitalInvestment Strategy to read more about how this works at a local scale.


Currently, nature is considered to have zero value, so any extraction or development does not pay the price of the natural capital it is destroying.  This is skewed accounting that is inevitably to the unfair advantage of destructive industries.  In future, however, not only must decision-making consider that nature has a huge value, but it will also need to recognise that this value is often non-tradable.  Nature has value as an entire working system, however its components (species, habits, spoils, cycles etc) cannot be priced and traded away.  The concept is good but let us now see whether, in practice, the value of nature turns into price, the price then is reduced and the untradable is traded in order to carry on with business as usual.


The sceptic in me realises that this is not new, however.  The UK National Ecosystem Assessment back in 2011 came to very similar conclusions.  International reviews such as “the Economics of Ecosystems and Biodiversity” and the “Millennium Ecosystem Assessment” also said similar things up to 2 decades ago.  Our leisurely approach to the gathering ecological crisis has meant that we have wasted decades while the need for action has become ever more vital.  And it is not as though there has been no warning.  Why should this Review succeed while others lie gathering dust on the shelf?


Hopefully, however, there are differences.  First the climate and ecological crises have become impossible to ignore.  Skewed accounting can no longer hide the huge losses to humanity from the destruction of nature.  But perhaps most significant is that not only was this report written by a leading professor of economics (not ecology) but that it was contracted by The Treasury (not DEFRA).  Maybe we are now recognising that the ecological crisis is not only affecting humanity, it is affecting the economy – now we might take it seriously!  It’s a shame that it is money that talks, not human well-being.

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