A United Nations initiative is making massive calculations in an attempt to put a price on nature services such as soils, forest or fresh water in a drive to convince policymakers to implement the 'polluter pays' principle to protect nature, said Pavan Sukhdev, who leads the initiative.
Pavan Sukhdev is study leader for the Economics of Ecosystems and Biodiversity (TEEB) initiative hosted by the United Nations Environment Programme (UNEP). He is also project leader for UNEP's Green Economy Initiative.
He was speaking to Outi Alapekkala.
Is the aim of TEEB to put a price tag on nature?
Not really – actually that is a cruel oversimplification of what we are doing. It is not like we are putting nature in the supermarket next to milk and bread.
What we are trying to do is to demonstrate and capture the value nature delivers to society. Right now you get a lot free and as a result society destroys nature. Unfortunately our current economic systems are not geared to defending or preserving anything that does not carry economic value. We are all the time making trade-offs, like getting rid of land or forest upstream, not realising that the cost downstream may be potentially €11 billion in flood damage.
The point is that losing that value will cause a loss to the economy. And because it is an economic loss, policymakers will be focused on that and make changes happen. The whole point is that you don't have to wait for some loss to happen before you connect the causes of the loss. And the causes of that loss are lack of recognition of the economic value ecosystem services deliver to humanity.
How are you going to make this value visible?
To make the value visible we have to calculate the cost of alternatives. In other terms if you don't have clean air, fresh water or bee-based pollination for example – how much do you need to spend on alternatives? If you don't have nutrients and fresh water flowing from forests into farmers' fields naturally, what is the economic cost of alternatives, such as nitrogen, phosphorus or potassium-based fertilisers or purpose-built irrigation systems?
We are going through massive calculations to establish these values.
We have national flows which have a certain economic impact and provide inputs into agriculture, enjoyment of nature and ecotourism. What if we had none of this and had to find alternatives – what would they cost?
How are you going to make it possible to pay for loss of nature?
First, sometimes just by recognising that there is value, good policymakers and good leaders supported by people can make policy changes. The Natura 2000 network, for example, is not the consequence of massive losses suffered, but the result of recognition that you need to preserve biodiversity, forests and fresh water. So there is general recognition of the value of nature and that recognition of value has lead to policy action: Natura 2000.
But sometimes you need to demonstrate the value. Demonstrating value is very efficient and sometimes leads to policy action. Sometimes you need to capture it and reward the benefits of conservation and ecosystem services, like carbon markets. The change in behaviour of companies that is being sought is basically a way of recognising that public bad can be converted into private bad by forcing laws to change and then you capture the value of that through the market.
TEEB advocates the principles of 'polluter pays' and 'full cost recovery'. Who will pay? What kind of fees, charges, taxes and compensation schemes are you planning?
Lots of things can be imagined. Let me give you an example from Costa Rica, which is a small and relatively poor country that has gotten richer over the last 20 years by good land management and good nature conservation. Costa Rica introduced 15 years ago a scheme called PES, payment for environmental services. It applied a 3% tax on private transportation – a kind of pollution tax – and the money from that pollution tax was put to rewarding, paying farmers to not cut down forests on their land.
So you take money from people driving private cars and give it to farmers – is this fair?
It is a brilliant idea and completely fair, because people who are driving cars are causing pollution. They are emitting carbon dioxide, which is a negative externality and a cost to society, so they should pay for the cost to society.
So it is all about internalising the external cost of nature destruction and redirecting the money to reward positive externalities and nature conservation?
Yes. Farmers who keep forest on their land are creating benefits for society – whereas people who drive private vehicles while public transport exists are creating a cost to society. The people who create the cost should pay and those who create the benefit should be rewarded.
If farmers cut their forest, it is in view of converting it into cattle farms. The value from cattle farming in Latin America is $50 per hectare per year. So the government gives the farmers $50 per hectare per year to keep the forest intact. As a result, you get biodiversity conservation, carbon storage, soil management and improved soil quality thanks to forests. Nutrients flow from forest to soil, freshwater is absorbed by forests and recycled and released gradually during the year, improving the water cycle. Land productivity improves, agricultural yields increase, farmers get richer – not only the rich ones but also the poor ones because they get better nutrients and water.
The net result of all this is that Costa Rica today has a GDP per capita four times higher than when they began to apply PES 15 years ago. The scheme has created such an increase in agricultural yield and productivity that in fact the poor have got richer – what is exactly what you want. That is what development is. In a poor country, biodiversity policy and development policy are one.
If the idea is to make the polluter pay, be it in services or products, the price of everything will increase. Can the poor still afford nature services?
Poor people are being deprived of nature services. For example, some 1.2 billion people worldwide depend on forest for their food, livelihood and freshwater supply. With Indian NGOs we calculated the percentage of ecosystem services as a percentage of GDP. In India it turned out to be between 7 and 10%. But when we looked who those benefits flow to – flood prevention and drought control exercised by forest or nutrients and fresh water flowing from the forests to the ground, rivers, fields – all of these benefits actually helped the poor and poor farmers, whose crops might drown or dry without forests and who would need to buy fertilisers and hay if their cows could not graze in forest.
Lack of nature first and most importantly affects the poor. In India, if you look at ecosystem services divided by GDP and ecosystem services divided by the GDP of the poor – the answer is not 7-10%, but 60%. That is how important ecosystem services are for the poor and this is not just a few people. I'm talking about 480 million people, which is some 44% of the India's 1.1 billion people.
When the pressures of business and society destroy nature, a few people may make private profits, but mostly you are depriving the poor of their wealth.
So who will pay for damaging and the restoration of nature?
First, the question we need to ask is: who benefited from its destruction? Clearly, the poor did not benefit, so there must have been some private profiteer who destroyed the forest for timber and benefited form it, or a property developer who converted the forest.
And they should pay?
Yes, of course. You should pay if you are destroying nature and causing loss to the poor. As a human being the right thing to do is to pay for that.
Firstly, it should be done through the right pricing. Secondly, through taxes, and thirdly, through rules, because at some point you cannot keep on doing that because at the end of the day you cannot pay for the loss of a life.
If the lives of 480 million people are affected by this – there is no price for life. So, justice and equity need to be involved in that. Therefore, rules need to be put in place which conserve enough nature so that the poor who need it today are not deprived of it. This is the whole point we are making.