Payment for ecosystem services
You can have one or the other, but not both.
You can have your pristine forests, rivers and clean air, or you can have lots of wealth, but not both. For those of us from developing countries, where our rich natural resources are our primary foreign exchange earners, this is gospel.
Believing this, at every climate change round table, we belabour the unfairness of having to hold ourselves to higher environmental standards than the developed world ever had to at similar stages in its own development trajectory.
But what if this is not true?
Our understanding of wealth and economic value is sticky, limited by past experience. Wealth is actually a mutable concept—a thing is valuable only because we think it so.
For an example of this, you need look no further than Snapchat. Do we really think that a technology platform that allows Kim Kardashian to hawk her latest line of hairsprays is more valuable than having clean air for our children to breathe?
We place a value on clean air only when we don’t have it. This is not unique to the environment: only when women moved into the paid workforce did we realize that there was economic value to the labour that they provided at home, because most substitutes for that labour cost money.
In 2015, choking under a toxic haze, Singaporeans criticized Indonesia for burning forests to clear land for oil palm plantations. In response, Indonesian Vice President Jusuf Kalla remarked, "For 11 months, they enjoyed nice air from Indonesia and they never thanked us.”
He was widely mocked in the Singaporean media for this comment, but did he have a point?
Why not think of the provision of clean air as a service?
Clean air knows no boundaries: if Indonesia foregoes the opportunity to earn vast amounts of foreign exchange by exporting palm oil so that the rest of us can have clean air to breathe, why shouldn’t they be compensated for it?
The idea that intact ecosystems provide a service to humanity has been gaining increasing currency in conservation circles in recent years. The Millennial Ecosystem Assessment, initiated by the United Nations in 2001, recognized three distinct types of ecosystem services: the provision of food, water, natural products and energy; the regulation of climate, forests, and water bodies; and finally, support services for healthy soil, ecosystems and agriculture.
And as with any other kind of service, if you use it, you pay for it.
Which begs the question, how much? How do you calculate the true economic value of a resource? This would require taking into account more than just the simple cost of the process of harvesting that resource and bringing it into market. You would also have to factor in the costs of all the negative externalities created by this process.
If the recent past has taught us anything, it’s that these externalities do not remain external forever. We all have to bear the price eventually. You may have thought environmental degradation in rural hinterlands was the price someone else would have to pay so you could keep buying cheap goods, but the next thing you know, there’s a wave of rural dwellers flocking to your city because of the environmental disaster your consumption habits have indirectly created back home.
In most societies, governments already charge citizens for the service of providing water, so it’s not a huge leap to ask them to pay a few cents extra so that watersheds may be sustainably managed – especially when one considers that, aside from ensuring water supply, well-managed watersheds are essential for hydropower generation.
(In Brazil, where hydropower supplies about 85 percent of the nation’s energy needs, a prolonged drought in 2000-01 reduced electricity supplies to the point that the government had to impose energy rationing on industries, thereby reducing economic growth to zero.){{1}}
One way, then, to estimate the economic value of watershed management is to calculate the lost revenues from a failure to generate enough hydropower to meet the nation’s needs. How much would it cost to build alternative power generating facilities from alternative sources? This cost would then be borne by the end-user/ consumer.
Another way is to let the market decide the value of conservation. This is the approach taken by the UN via its REDD+ (Reducing Emissions from Deforestation and Forest Degradation) framework. Under REDD+, the amount, in tons, by which carbon dioxide emissions are reduced when a country goes from a less to more conservation-oriented development strategy, can be monetized through conversion into carbon credits that are tradable on the free market. The carbon credits offset emissions from the buyer of the carbon credit, thus, in theory, ensuring that the level of emissions remains constant.
Understanding the economic value of conservation requires a longer time horizon, but given that we are taught the benefits of delayed gratification in other aspects of our lives (“study hard now so you can earn well later,” etc.), surely we can bring the same thinking to bear on this issue. Collectively, as a society, we’ve changed our minds about so many things in recent years, so why not this too?
Sources:
Timothy J. Killeen in The Cardamom Conundrum, 2012.
