The Importance of Placing a Monetary Value on Services Provided By Nature
Did you know that environmental degradation is currently posing serious challenges for human health and security? A recent World Health Organization article states that 12.6 million deaths are occurring each year due to poor environmental conditions. Yes that’s right. About one in four deaths globally can be attributed to the environmental harms. Environmental problems such as climate change, air and water pollution, species extinction, deforestation translate into challenges such as water scarcity, food scarcity, infectious disease, population displacement and natural disasters. A significant cause of these environmental problems is humanity’s over-consumption of resources. An important objective to maintain human health and wellbeing is thus to try to reduce the impact of resource consumption while at the same time maintaining the way of life we are used to.
This can be encouraged by placing a monetary value on services provided by nature. These are collectively known as ecosystem services and consist of 4 types: 1) provisioning services which consist of material and energy outputs from ecosystems and includes food, water, medicines and other resources used for human consumption, 2) regulating services which include maintaining air, water and soil quality, 3) Habitat or supporting services which includes what habitats have to ensure species survival as well as genetic diversity to support future growth and development and, 4) cultural services which include tourism and spiritual sites. Placing a monetary value on nature’s services can be done by accounting for harm done by taking away (e.g. extracting resources from nature for human consumption) and also by releasing toxins into nature (i.e. pollution).
First it is essential that any harm or potential harm by taking away from nature is monetarily accounted for. For instance, consider forestry. The price of wood products should include factors such as a tree’s capacity to absorb carbon dioxide and prevent soil erosion. Cutting down a forest will reduce these services provided by nature and including an estimate of these services in the price of wood would help provide funds for conservation and research into environmentally friendly options. Prices of products might increase in the short term but an incentive will be provided to industries and consumers to switch to greener alternatives that do not harm the environment.
As a real-life example consider species habitat loss compensation currently practiced in the USA. Entities that harm at risk species due to habitat loss can purchase credits from conservation banks. These banks exist to restore habitats similar to ones initially impaired or destroyed. The habitats restored must be in close geographic proximity to habitats initially destroyed in order to ensure that similar habitats are maintained and not lost.
As another example consider water funds in South America that maintain forest zones in sensitive upstream watershed area’s to help ensure that high quality drinking water reaches end users downstream. Forests perform filtering of water to assist with water quality. These funds are provided by consumers of water to upstream farmers and rural settlers to ensure protection of upstream forest environments. Funds have also been used for reforestation activities. Closer to home we have the case of New York City where watershed protection costing $2 billion to protect the city’s drinking water supply eliminated the need to build a $10 billion water treatment facility.
The second part of placing a monetary value on nature’s services consists of pricing pollutants that humans dump into our natural environment. Pollutants include climate change emissions such as CO2 and methane, farm pollutants such as pesticides and manure, air pollutants from industrial emissions such as particular matter, etc.
Consider two Canadian examples of pollutant pricing to fight climate change. The first is a carbon tax which is a fixed price on each tonne of carbon dioxide emissions with no fixed upper limit of the amount of emissions released into the atmosphere. The best example of a carbon tax in Canada can be found in British Columbia. The price of a tonne of carbon dioxide in BC went from $10 in 2008 – when the tax was introduced – to $40 in 2019. Recent 2015 research showed between 5% and 15% reduced emissions with negligible economic impact.
An alternative strategy is cap and trade which sets a fixed upper limit of emissions with no fixed price and allows purchases of emissions credits from governments and others who do not require them through auctions. A cap and trade system has been adopted by the Western Climate Initiative (WCI) – started in 2007 – that currently consists of Quebec and California (Ontario left the initiative in 2018) as part of a carbon market for capping emissions and trading carbon credits. Quebec recently passed the $3 billion (CDN) mark in revenues raised from auctioning credits while industrial emissions declined by 3.7% since 2013 in spite of economic growth.
Valuing ecological service providers such as forests, soil and species would encourage sustainable resource use, agricultural tactics that reduce erosion, land use for agriculture which encourages biodiversity, etc. Carbon pricing must just be a stepping stone to greater emphasis in our economy placed on the services that nature provides.
This approach of placing a money value on nature has its problems as critics have noted. Finding an accurate value of these services could be very challenging. For example how do we determine the dollar amount for the spiritual importance of a forest or a waterfall or a dollar amount for the genetic diversity of species in the Amazon rainforest. Furthermore a correct determination of the value of nature is sometimes something that can only be known in the future – for example the potential for future medicines that can be extracted from rainforests. Nature’s services also are valued differently depending on the worldview of the person doing the valuation. Also some say that putting a price on nature devalues nature which instead should be seen as priceless. In addition, it is not certain that the money paid will be put to good use to benefit long term nature conservation efforts. That is will it adequately compensate for the initial harm done to nature. In certain cases for the protection of nature there might need to be a threshold beyond which pollution or extractive activities need to be banned outright either temporarily or permanently and not subject to sales. An example of this is the moratorium imposed by the Government of Canada in 1992 on fishing Atlantic cod due to unsustainable fishing practices in prior decades. Finally, the approach needs to account for those in low income categories who need greater support when it comes to purchasing products that have an added charge to account for nature’s services.
In spite of these problems placing a monetary value on nature appears to be a good start to rectify mistakes made by unsustainable consumption and allows for easier comparing of options between ecological and economic objectives.
Societies in the past have collapsed due to over-exploitation of their natural environment. Jared Diamond illustrates this in his well-known book Collapse where he describes multiple cases of how deforestation and soil erosion reduced the ability of local populations to grow food and secure needed raw materials resulting in ruin. To avoid a collapse, we must learn from our past mistakes and properly value nature for a sustainable future.
