Posts Tagged ‘payment for ecosystem services’

More on monetising nature

Last week I blogged about how, despite all its drawbacks, monetising nature has a lot to be said for it in its ability to tap into the global system of values. As luck would have it I was not the only person pondering these questions that day; David Bent was also struggling with the challenges of lack of clarity over sustainability issues, but his dilemma was that of a consumer unsure as to which was the most “sustainable” carpet to buy.

David’s challenge was to determine which was the most sustainable carpet, what forms of sustainability were good value for money versus which primarily worked by appealing to middle class faddishness, and that the complexity in this field was such that the salesperson struggled to explain the differences and thus to make a well-informed recommendation. When confronted with these multiple interacting and complex variables on top of the standard set of consumer choices, such as colour, pile, look, pattern of the carpet, it is not surprising that even an expert can quickly become bewildered.

However, if each of these different variables could be priced then the problem would be rapidly reduced to the standard choice of which products do you like most (in a subjective sense) versus their respective prices. For instance if carbon were taxed or otherwise priced, those manufacturers who sought to reduce their carbon footprint would benefit from lower prices compared to their competitors. They need not directly reduce their carbon footprint, however, they might find it cheaper to buy offsets off the shelf, e.g. from forest protection. Water and biodiversity can be similarly priced and thus incorporated into our economic decision making. Yes having the wrong price can be harmful, but it is easier to adjust a price once you’ve agreed the principle, than it is to agree it in the first place as has been highlighted by the entrenched opposition to global climate change negotiations.

I think part of the problem is that many environmentalists hope or assume that biodiversity and landscape conservation can all be marketed like ecotourism. While some tourists will always opt for the simple pleasures of the Costa del Sol or the bright lights of the nearest shopping paradise, there is a very substantial market of tourists who want to go somewhere different, that feels a bit special, makes them feel a bit special, and is away from the beaten track. The hotels that appeal to such tourists are all unique in their own particular way, little of which boils down to price, although accessibility can have a big impact on the price at which services can be delivered in remote wild locations. Ultimately, such tourists are choosing a place, with all its attendant charms and flaws: more than anything else, it is an emotional choice.

A shopper in need of a carpet, however, is in a totally different position. They have no access to the sort of  detailed information about the sources of the products they are comparing or glossy photographs of the landscapes, and even if they did would unlikely to be motivated enough to want to peruse it all in detail. Instead they want a mechanism that makes their life easy. This doesn’t have to be entirely monetary, e.g. the energy efficiency star ratings system is rarely translated into the dollar cost to run the device concerned over its expected life span, but internalising such costs as carbon emitted or biodiversity lost into the product price, is the only guaranteed way to ensure the consumer pays attention (or pays the price for not).

Will monetising nature lead to distortions in how certain landscapes are managed? Without doubt. Will it be a shame if some unique characteristics are lost as a result? Yes. But if those unique characteristics are not sufficiently well appreciated to merit more stringent protection then that is s decision that society has collectively made. Moreover such distorted landscape management will almost certainly be better than converting the whole place to mechanised agricultural production.

At the end of the day the choice for society is very simple: pay for it, one way or another, or lose it.

Monetising nature

“Finally, conversion of complex landscapes into numerical and monetised metrics instrumentalises peoples and non-human natures so that these conform to a homogenising system in which money is the mediator of all value. This can displace local eco-cultural knowledge, practices and values which may be more benign for biodiversity, thereby reducing options for transferring maximum socio-ecological diversity to our descendants.”

That is Sian Sullivan on writing on Financialisation, Biodiversity Conservation and Equity: Some Currents and Concerns (emphasis in the original).

It is both an important point and also rather stating the obvious. (Important, because in our enthusiasm we are apt to forget the obvious rather too often.) However, I think such analyses sometimes miss the point in failing to fully consider the counterfactual.

We cannot put anywhere as much of nature as we would like into protected areas, and even where we can someone needs to pay for their running costs. So how can we incentivise management of other parts of the world to promote conservation and environmental issues? More to the point how can we do so efficiently and cost-effectively?

Monetisation is often not simple – just ask any REDD project proponent – but once completed you are tapped into the only globally understood system for valuation of products and services and for trade of said values.

The environmental movement is not sufficiently resourced to undertake entirely bespoke conservation in every place of interest. Monetisation may be a crude tool, but it is brutally efficient, in both positive and negative senses. It may also be the only tool available to deliver wider scale conservation.

Hat tip: Just Conservation

TEEB: point & counter-point

Two recent opinion pieces for and against The Economics of Ecosystems and Biodiversity (TEEB).

Jennifer Morris of Conservation International is in favour:

I would describe it as the Rosetta Stone for natural capital —the key to understanding the benefits and services that biodiversity and ecosystems provide to people. TEEB is a tool that finally has enabled the environmental and the financial communities to start speaking the same language about how to value nature— an increasingly important issue that stands to affect every person on this planet.

CI see a huge benefit in the proper valuation of natural capital, and incorporation into business plans and accounts. In particular, they want to take environmental concerns out of the CSR and HSE departments, and into the heart of a business’s DNA, as overseen by the CEO and CFO. I agree. This kind of shift in how we assess the viability of business propositions cannot come soon enough.

Pavan Sukhdev, the father of TEEB, and now a board member of CI, has called for the cessation of “profit maximization at the cost of everything else”, but that is precisely what Frederick Kaufman, writing in Nature, fears will happen all over again with water:

Some environmentalists argue that putting a price on fresh water may be our best bet to save the planet’s supply. The more it costs, the less we will waste. In fact, the financialization of precious resources underlies the Economics of Ecosystems and Biodiversity (TEEB)

Lots of experts predict serious fresh water shortages in coming decades, and even some water wars. (Which, arguably, the Darfur conflict is.) Certainly Kaufman’s not short of a bit of doom-mongery. But rather than seeing economic valuation as the solution, he sees that heaping more misery upon us water users:

Investors of all stripes adore the apocalyptic vibe. Within the interstices of violence and chaos there will be money to be made. These days, the biggest profits do not come from buying or selling actual things (such as houses or wheat or cars), but from the manipulation of ethereal concepts like risk and collateralized debt. Wealth flows from financial instruments that are one step away from reality.

Making money come out of the tap means that fresh water must be given a price anywhere it is traded — a global price that can be arbitraged across the continents. Those in Mumbai or midtown Manhattan who understand the increasing value of water in the world economy will speculate on this undervalued ‘asset’, and their investments will drive up the cost everywhere. A water calamity in China or India — and the food inflation, political instability and humanitarian crisis that will surely follow — will reverberate in price spikes from London to Sydney. This is how bankers will profit.

The reverberations of a global water futures market can hardly be imagined. This much is clear: a water betting game will leave crops thirsting and push the global price of food far beyond the peaks of the past five years.

For what it’s worth, Kaufman does not object to the valuation process, just the commoditisation of a vital part of nature into just another asset class, complete with assorted derivatives, that will attract speculators chasing the latest opportunity for out-sized returns with little interest in its underlying nature. The Economist has repeatedly pooh-poohed the impact of speculators on global food prices (citing fundamental mismatches between supply and demand), and economists in general will point out that where shortages are anticipated in future, derivative markets are an excellent way of attracting the necessary investment today to offset that. The problem is the volatility, but that’s hardly unique to water. Not sure yet where I stand on this one.

Hat Tip: Alex Evans @ Global Dashboard

Whatever happened to ICDPs?

Back when I started this blog, two of my earliest posts (parts 1 and 2) concerned my criticisms of Integrated Conservation & Development Projects (ICDPs). The name got rather a bad reputation so one doesn’t hear too much about them these days, with thankfully the focus now much more on approaches such as REDD, community wildlife management and community beach management units in fisheries, that explicitly link community benefits directly with the natural resources being conserved. However, they have not gone away entirely, and any time in a community-based conservation project you hear the term (Alternative) Income Generating Activity, you should be on alert to a displacement activity covering up deep flaws in project design. That is not to say IGAs are always inappropriate, but they do need to be properly justified.

Whatever the terminology, this approach to conservation appears to be alive and kicking in the Lower Mekong Basin, and has recently been critiqued in a new book Evidence-based Conservation: Lessons from the Lower Mekong, which in turn was summarised on CIFOR’s excellent blog. Some of their conclusions echo my own previous criticisms (my comments in brackets):

  • Define clear and plausible goals and objectives from the outset. “Too many project documents … do not really articulate the overall long term goals that they seek to achieve.” (A problem that can arise when project planning starts with the premise ‘something must be done’, rather than here is ‘something that can work and should be done’.)
  • Market-based mechanisms may help marry conservation and development. For long-term conservation projects, funding is crucial. (Yes, so don’t design everything around donor funding.)

Others are more generally applicable:

  • Monitoring systems are a source for learning and change, so use them. (No kidding!)
  • Fully understand the policy context. (Ditto.)

But there are two conclusions with which I find it harder to agree:

  • Provide alternative income generating activities. “Solutions must … always be context specific … understanding and negotiating trade-offs between conservation and development is fundamental in ensuring optimal outcomes for both.” (I totally agree with the quote, but fail to see how that leads to the headline conclusion.)
  • Invest more in education, awareness and capacity building. “Scaling up such capacity-building to the national level remains one of the biggest challenges for conservation worldwide.” (I’m not against such investment in theory, but too many conservation projects invest too much in such things, and not enough in their core design. And sometimes small projects may be best off staying small, see previous posts of mine here and here.)

The bottom line: “Many ICDPs have excessively ambitious goals and they inevitably make mistakes, so it is really important to make sure that we learn from those mistakes,” says Terry Sunderland,  one of the book’s editors. Word! (And not just for ICDPs.) Maybe the best lesson we can learn from this exercise would be to consign the whole ICDP concept to the dustbin?

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