Do we need to choose between the environment and the economy? Natural capital thinking says that money really does grow on trees.

The crisis currently facing our planet in the way of climate change is not one simply for conservationists and ecologists. It is not a war between economy and science, nor is it a choice between the two.

Threats to the environment ARE threats to the economy, to its foundation. Without nature the economy simply ceases to exist.

When it comes to calculating the wealth of a nation, however, traditional methods not only fail to account for living nature but make it invisible.

For example, in 2017 Deloitte Access Economics took a survey-based approach to ‘understand precisely what the [Great Barrier] Reef contributes and, what we stand to lose without it’. The report calculated an economic, social and icon asset value of $56 billion claiming it supports 64,000 jobs and contributes $6.4 billion to the Australian economy annually.

There is no doubt that the Great Barrier Reef holds significant value for the global community but the efforts by Deloitte have been criticised for not including many of the non-market values or ‘ecosystem services’ that the reef provides.

The Millennium Ecosystem Assessment (MEA) highlighted the benefits humans derive from nature as recipients of ‘ecosystem services’. These benefits include supporting, provisioning, regulating, and cultural services, which sustain and fulfil human life.

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Figure 1. In 2005, a consortium of hundreds of scientists from over 70 nations, released the most extensive study of the links between human health and the world’s ecosystems, the Millennium Ecosystem Assessment (MEA). These ‘ecosystem services’ are organised into four broad categories. Graphic: Metro Vancouver

Some ecosystem services are obvious – healthy soil supports crop growth (thank you, microbes) and those same crops require pollination (thank you, insects). Others are easier to overlook – the carbon sequestered by plants, fungi and oceans (thank you, decomposition) and the protection of coastal areas offered by coral reefs, mangroves and wetlands during storms and flooding (thank you, natural barriers).

So how do you begin to account for the ‘value’ of ecosystem services?

Well, there is a vast number of scientists, environmentalists and economists attempting to do just that.

The notion of the environment as an ‘asset’ goes back to economist Adam Smith and his seminalThe Wealth of Nations published in 1776. More recently, the ‘natural capital’ paradigm shift has gained influence. Rather than the environment being invisible in economic terms, it recognises that all the goods and services we trade ultimately depend on natural resources and processes.

In other words, natural capital describes the entities that produce ecosystem services as an asset. For example, the tree (natural capital) produces oxygen (ecosystem service) and sequesters and stores carbon from the atmosphere (ecosystem services).

Proponents of natural capital will argue that it provides a common language with which to express matters of conservation that economists, policy-makers and CEO’s alike can understand and engage with.

Critics will argue that it places emphasis on the economic, rather than the ecological. That by definition, attributing ‘capital’ to nature describes capitalist growth that undermines conservation itself.

The Nature Conservancy (TNC) is the worlds largest non-government environmental organisation. Their mission is to ‘conserve the lands and waters on which all life depends’.

TNC’s chief scientist, Dr Hugh Possingham believes that although natural capital is a powerful quantification tool, it isn’t worth much on its own.

“Quantifying natural capital won’t get you anywhere, you need the mechanisms to act,” he said

“We’ve got great quantification of the decline of species, the decline of forests, the availability of water… it doesn’t do much,” he said.

TNC partnered with The Natural Capital Project (NatCap) more than a decade ago with the aim to ‘reveal, test, and scale ways of securing the well-being of both [people and nature]’.

“NatCap do all the science and we try to work out the tool and the mechanism to apply the knowledge we have in practice,”

The Nairobi Water Fund project is a fine example of how this approach can play out in practice.

The conversion of land for agricultural purposes in Kenya has increased the amount of soil and water runoff from the land which not only reduces productivity but sends sediment into rivers, choking water treatment and distribution facilities.

Dr Possingham says the principal of a water fund is quite simple.

“It’s cheaper to prevent problems at the water source than it is to address them downstream,” he says.

The Nairobi Water Fund is an investment that companies relying on water from these sources could hardly argue with. TNC calculated that a US $10 million investment in water fund-led conservation interventions would likely return US $21.5 million in economic benefits over a 30- year timeframe.

“We [TNC] went to forty-thousand odd farmers to show them how changing their agricultural practice could increase their yield and reduce the amount of sediment and pollutants going into the river,”

“So it’s a win-win. They [farmers] get money, the people get clean water and the water utility [who invested] is better off.”

In 2012, the United Nations adopted the System of Environmental-Economic Accounting (SEEA) as the international statistical standard for measuring national capital and relating it to economic accounts.

“Natural capital is a stock of all the things that are out there in the environment. The economic accounting side of it encompasses not just the stock but also the flow of services and benefits that it generates” says National accountant and SEEA lead author and editor Carl Obst.

Carl Obst is arguably the lead thinker in developing methods for accounting that integrate natural capital and ecosystem services.

He says there are four main areas of work in the SEEA – accounting for physical flows, transactions, natural resource accounting and environmental degradation.

“Physical flows (eg. water, energy, greenhouse gas emission, nutrient balance etc) come into this ‘input output’ notion of recording physical flows from the environment into the economy, and back out again,”

“Then there are transactions. There are a lot of transactions around the environment – taxes, subsidies, environmental protection expenditure etc. All of that information is currently in the measurement of GDP but it’s not identified separately,” Obst explains.

“Natural resource accounting has been around for a long, long time. Foresters do this by looking at a forest as essentially, its ability to provide timber. You can estimate how much income you’ll get at various points in the future and get a measure of depletion that will tell you whether you are using that resource sustainably,”

On these three things, everyone agreed so a decision was made and they became a standard. However, the one thing they failed to account for was environmental degradation, changes to the quality of the environment.

“One member of the SEEA team stumbled across the Millennium Ecosystem Assessment and thats where ecosystem accounting came from,”

“The idea is that you would take the existing science and bring it into an accounting format, it’s not an attempt to replace the existing science, it’s an attempt to bring it in.”

The ideal outcome for Obst would be an accounting system where ecosystem services like increased water quality and less carbon in the atmosphere were seen as return or ‘profit’.

Having spent decades campaigning for nature’s right to exist unto itself, environmentalist Tony Juniper knows firsthand that rhetoric steeped in beauty and ethics is overshadowed, powerless against the rhetoric of economic growth and development.

Writing for The Guardian in 2012, Juniper is not naive to the dangers that come with financial values being attached to natural systems but with regulations and safeguards in place, believes conservation outcomes can be secured.

He argued that the only alternative was to open a new discourse ‘on the field where future environmental battles will be won and lost – the field of economics’.

After all, he says, ‘it is not most environmentalists who have misunderstood the realities that come with ‘growth’ on a finite earth’.

Over the last decade, Juniper has found natural capital a powerful tool for intervening in political process and changing policy in favour of nature.

In her book Six Capitals, Jane Gleeson-White provides a stirring example which illustrates the interdependency of nature, society, and the economy.

To meet the growing demand for beef with the fast food industry boom of the 1970s, Costa Rica, one of the most ecologically rich nations on earth, practically denuded vast sections of forest to make way for cattle ranches. For the next ten years, they had the highest rate of deforestation in the world.

Tony Juniper worked closely with Carlos Manuel Rodriquez, Costa Rica’s former energy and environment minister, who was leading the charge against forest clearing. Together they worked to ‘generate information about the economic benefits of protecting nature’.

When Rodriquez approached the finance minster armed with economic valuations of the forests and with economists in tow ‘they were speaking the same language’.

Not only have huge natural areas been protected, but land has been restored. By 2010, Costa Rica had recovered more than 50 per cent forest cover and more than 92 per cent of their energy was coming from renewable sources.

In her essay for Griffith Review: 63 – Valuing country, author Jane Gleeson-White explores the connections between country, rights of nature and natural capital and the ways in which they speak to each other.

Gleeson-White quotes Bruce Pascoe from his novel Dark Emu in her essay:

‘The fate of the emu, people, and grain are locked in step because, for Aboriginal people, the economy and the spirit are inseparable.’

Pascoe is sharing what is centre to Aboriginal law – Earth is our mother and our responsibility is to protect her.

“There is no way that I can talk about land in Australia without framing it in a context of indigenous understandings of land, ” says Gleeson-White.

These understandings she describe as ‘much more rich and productive than our narrow Western definitions.

The first piece of legislation of its kind in Australia, the Yarra River Protection (Wilip-gin Birrarung murron) Act 2017 includes an indigenous understanding of ‘country’ and rights to nature thinking. It recognises the Mardoowarra (Fitzroy River) as a living entity with a right to exist in Western law, and the duty of its traditional owners to protect it.

“The relationship between the rights to nature legal movement and ideas of country is giving productive ways for indigenous people to express [in Western legal terms] their understanding of the natural world as a living being, indivisible into small bits of property”

When it comes to natural capital and ecosystem accounting, Gleeson-White is wary of how it can go wrong.

“Wherever money is invested, people investing that money want to see a return,”

“It’s somewhere in that dim nebulous process that it becomes a profit making enterprise and where I get very uncomfortable” she said.

However, where natural capital and rights to nature thinking are combined and legal standing is afforded to an entity, she is optimistic.

“If you conceive of the Yarra River as an entity in its own right then in accounting terms you can see it as equivalent to a corporation which has inputed exchanges with its environment and with humans,”

“You could then start to measure these transactions and how they change over time with the condition and health of the system.”

Writing for The Conversation Carl Obst quite succinctly says ‘The need to recognise our natural capital is highlighted by its ongoing loss – the reductions in forests, the depletion of fish stocks, the degradation of soil, the loss of biodiversity, more severe flooding and similar trends. The human and environmental cost of these losses are invisible if you only look at GDP, and so there is little political incentive to do anything.’

While the complexity of natural capital as a solution is clear, there is a clear need for a shift away from traditional methods of calculating wealth, and a move toward quantifying and conserving the role of the natural systems in our economy.

In her essay for Griffith Review: 63 – Valuing country, Gleeson-White poses a question that asks how our thinking about nature shapes our behaviour towards it.

“What power of caring could be unleashed if we all took the time to attend to the particularities of our places?”

Though action must be taken ‘around the tables of power’, a shift in consciousness must come from us all.

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