Put a value on nature Pavan Sukhdev
I’m here to talk to you about the
economic invisibility of nature the bad
news is that mother nature’s back office
isn’t quite working yet so those
invoices don’t get issued but we need to
do something about this problem I began
my life as as a markets professional and
continued to take an interest but most
of my recent effort has been looking at
the value of what comes to human beings
from nature and which doesn’t get priced
by markets a project called teeb was
started in 2007 and it was launched by a
group of environment ministers of the g8
+5 and their basic inspiration was a
stern review of Lord Stern they asked
himself the question if economics could
make such a convincing case for early
action on climate change well why can’t
the same be done for conservation so I
found an equivalent case be made for
nature and the answer is yeah it can but
it’s not that straightforward
biodiversity the living fabric of this
planet is not a gas it exists in many
layers ecosystem species and genes
across many scales international
national local community and doing for
nature what Lord Stern and esteemed it
for climate is not that easy and yet we
began we began the project with an
interim report which quickly pulled
together a lot of information that had
been collected on the subject by many
many researchers and amongst our
compiled the results was the startling
revelation that in fact we were losing
natural capital the benefits that flow
from nature to us we were losing it at
an extraordinary rate in fact of the
order of two to four trillion dollars
worth of natural capital this came out
in 2008 which was of course around the
time that the banking crisis had shown
that we had lost financial capital of
the order of two and a half trillion
dollars so this was comparable in size
to that kind of loss we then have gone
on since to present for international
community for Gov
for local governments and for businesses
and for people for you and me
a whole slew of reports which were
presented at the UN last year which
addressed the economic invisibility of
nature and describe what can be done to
solve it what is this about a picture
that you’re familiar with the Amazon
rainforest
it’s a massive store of carbon it’s an
amazing store of biodiversity but what
people don’t really know is this also
it’s a rain factory because the
northeastern trade winds as they go over
the Amazonas effectively gather in the
water vapor something like 20 billion
tons per day of water vapor is sucked up
by the northeastern trade winds and
eventually precipitates in the form of
rain across the la plata basin this
rainfall cycle this rainfall factory
effectively feeds an agricultural
economy of the order of two hundred and
forty billion dollars worth in Latin
America but the question arises ok so
how much do we require Paraguay
Argentina and indeed the state of mato
grosso in Brazil pay for that
vital input to that economy to the state
of Amazonas which produces that rainfall
and the answer is zilch
exactly zero that’s the economic
invisibility of nature that can’t keep
going on because economic incentives and
disincentives are very powerful
economics has become the currency of
policy and unless we address this
invisibility we are going to get the
results that we are seeing which is a
gradual degradation and loss of this
valuable natural asset it’s not just
about the Amazonas or indeed about
rainforest no matter what level you look
at whether it’s at the ecosystem level
or at the species level or the genetic
level we see the same problem again and
again so rainfall cycle and water
regulation by rainforest at an ecosystem
level at the species level it’s been
estimated that insect based pollination
bees pollinating fruit and so on is
something like 190 billion dollars worth
that’s something like an 8% of the total
agriculture output globally completely
passes below the radar screen when did a
bee actually ever give you an invoice or
for that matter if you look at the
genetic level
60% of medicines were prospective were
found first as
in a rainforest or a reef once again
most of that doesn’t get paid and that
brings me to another aspect of this
which is to whom should this get paid
that genetic material probably belonged
if it could belong to anyone to a local
community of poor people who parted with
the knowledge that helped the
researchers to find the molecule which
then became the medicine they were the
ones that didn’t get paid and if you
look at the species level you saw about
fish today the depletion of ocean
fisheries is so significant that
effectively it is affecting the ability
of the poor the artisanal fisher folk
and those who fish for their own
livelihoods to feed their families
something like a billion people depend
on fish the quantity of fish in the
oceans a billion people depend on fish
for their main source for animal protein
and at this rate at which we are losing
fish it is a human problem of enormous
dimensions a health problem of a kind
that we haven’t seen before and finally
at the ecosystem level whether it’s
flood prevention or drought control
provided by the forests or whether it is
the ability of poor farmers to go out
and gather leaf litter for their cattle
and goats or whether it’s the ability of
their wives to go in and collect fuel
wood from the forest it is actually the
poor would depend most on these
ecosystem services we did estimates in
our in our study that for countries like
Brazil India and Indonesia
even though ecosystem services these
benefits that flow from nature’s to
humanity for free they’re not very big
in percentage terms of GDP two four
eight ten fifteen percent but in these
countries if we measure how much they’re
worth to the poor the answers are more
like forty five percent seventy five
percent ninety percent that’s the
difference because these are important
benefits for the poor and you can’t
really have a proper model for
development if at the same time you are
destroying or allowing the degradation
of the very asset the most important
asset which is your development asset
that is ecological infrastructure how
bad can things get well here’s a picture
of something called the mean species
abundance it’s basically a measure of
how many tigers toad sticks or whatever
on average of biomass of various species
around the green represents the
percentage if you dark green it’s like
80
to 100% if it’s yellow it’s 40 to 60%
and these are percentages versus the
original state so to speak the
pre-industrial area 1750 now I’m going
to show you how business-as-usual
will affect this and just watch the
change in colors in India China Europe
sub-saharan Africa as we move on and
consume global biomass at a rate which
is actually not going to be able to
sustain us see that again the only
places that remain green and that’s not
good news is in fact places like the
Gobi Desert
like the tundra and like Sahara or that
doesn’t help because there were very few
species and volume of biomass there in
the first place this is the challenge
the reason this is happening boils down
in my mind to one basic problem which is
our inability to perceive the difference
between public benefits and private
profits we tend to constantly ignore
public wealth simply because it is in
the common wealth it’s it’s common Goods
and here’s an example from Thailand
where we found that because the value of
a mangrove is not that much it’s about
600 olives over the life of nine years
that this has been measured compared to
its value as a shrimp farm which is some
more like nine thousand six hundred
dollars there has been a gradual trend
to deplete the mangroves and convert
them to shrimp farms but of course if
you look at what exactly those profits
are almost 8,000 of those dollars are in
fact subsidies so you compare the two
sides of the coin and you find that it’s
more like twelve hundred versus six
hundred that’s not that hot but on the
other hand if you start measuring how
much would it actually cost to restore
the land of this shrimp farm back to
productive use once salt deposition and
chemical deposition has actually had its
effects their answer is more like twelve
thousand dollars of cost and if you see
the benefits of the mangrove in terms of
the storm protection and cyclone
protection that you get and in terms of
the fisheries the nurse fish in
nurseries that provide fish for the poor
that answer is more like eleven thousand
dollars so now look at the different
lens if you look at the lens of public
wealth as against the lens of private
profits you get a completely different
answer which is clearly conservation
makes more sense and not destruction
so is this just a story from south
tallinn sorry this is a global story and
here’s what the same calculation looks
like which was done recently and well I
see recency over the last ten years by a
group called true cost and they
calculated for the top 3000 corporations
what are the externalities in other
words what are the costs of doing
business as usual this is not a legal
stuff this is basically business as
usual which causes climate changing
emissions which have an economic cost
it causes pollutants being issued which
have an economic cost health cost and so
on use of fresh water
if you drill water to make coke near in
the village farm that’s not illegal but
yes it costs the community can we stop
this and how I think the first point to
make is that we need to recognize
natural capital basically the stuff of
life is natural capital and we need to
recognize that and build that into our
systems when we measure GDP as a measure
of economic performance at the national
level we don’t include our biggest asset
at the country level when we measure
corporate performances we don’t include
our impacts on nature and on what our
business cost society that has to stop
in fact this was what really inspired my
interest in this space I began a project
way back called the green accounting
project that was in the in early 2000
when India was going gung-ho about GDP
growth as the means forward looking at
China with its stellar growths of eight
nine ten percent and wondering why can’t
we do the same and a few friends of mine
and I decided this doesn’t make sense
this is gonna create more costs to
society and more losses so we decided to
do a massive set of calculations and
started producing green accounts for
India and it’s States that’s how my
interest began and went to the team
project calculating this at the national
level is one thing and it has begun and
the World Bank has acknowledged this and
they’ve started a project called waves
wealth accounting and valuation of
ecosystem services but calculating this
at the next level that means at the SEC
that the business sector level is
important and actually we’ve done this
with the tea project we’ve done this for
a very difficult case which was for
deforestation in China this is important
because in China in 1997 the Yellow
River actually went dry for nine months
causing severe loss of agricultural
output and pain and loss to society just
a year later the Yangtze flooded causing
something like 5500 deaths so clearly
there was a problem with deforestation
it was associated largely with the
construction
industry and the Chinese government
responded sensibly and placed a ban on
felling but retrospective on 40 years
shows that if we had accounted for these
costs the costs of loss of topsoil the
costs of loss of waterways the lost
productivity the loss to local
communities as a result of all these
factors desertification and so on those
costs are almost twice as much as the
market price of timber so in fact the
price of timber in the Beijing
marketplace ought to have been three
times what it was had it reflected the
true pain and the cost to the society
within China of course after the event
one can be wise the way to do this is to
do it on a company basis to take
leadership forward and to do it for as
many important sectors which have a cost
and to disclose these answers someone
wants to ask me who is better or worse
is it Unilever as a TNG when it comes to
their impact on rainforests in Indonesia
and I couldn’t answer because neither of
these companies good that they are and
professionals or they are do not
calculate or disclose their
externalities but if we look at
companies like kuma Yorkin sites there
Cioran chairman once challenged me at a
function saying that he’s going to
implement my project before I finish it
well I think we kind of did it at the
same time but he’s done it he’s
basically worked out the cost to Puma
Puma has 2.7 billion dollars of turnover
300 million dollars of profits 200
million dollars after-tax 94 million
dollars of externalities cost to
business now that’s not a happy
situation for them but they have the
confidence and the courage to come
forward and say here’s what we are
measuring we are measuring it because we
know that you cannot manage what you do
not measure that’s an example I think
for us to look at and for us to draw
comfort from if more companies did this
and if more sectors engage this has
sectors
you could have analysts business
analysts and you could have people like
us and consumers and NGOs actually look
and compare the social performance of
companies today we can’t yet do that but
I think the path is laid out this can be
done and I’m delighted that the
Institute of Chartered Accountants in
the UK has already set up a coalition to
do this an international coalition the
other favorite if you like solution for
me is the creation of green carbon
markets and by the way these are my
favourites externalities calculation and
green carbon markets teeb has more than
doesn’t separate groups of solutions
including protected area evaluation and
payments for ecosystem services and eco
certification and you name it but these
are the favorites what’s green carbon
today what we have is basically a brown
carbon market place it’s about energy
emissions the European Union ETS is the
main market place it’s not doing too
well we’ve over issued a bit like
inflation you over issue currency you
get what you see a declining prices but
that’s all about energy and industry but
what we are missing out is also some
other emissions like black carbon that
is soot what we are also missing is blue
carbon which by the way is the largest
store of carbon more than 55% thankfully
the flux in other words the flow of
emissions from the ocean to the
atmosphere and vice-versa is more or
less balanced in fact what’s being
absorbed is something like 25% of our
emissions which then leads to
acidification or lower alkalinity in
oceans more of that in a minute
and finally there’s deforestation and
there’s emission of methane from
agriculture green carbon which is the de
Forest station and agricultural
emissions and blue carbon together
comprise 25 percent of our emissions we
have the means already in our hands
through a structure through a mechanism
called red plus a scheme for the reduced
emissions from deforestation and forest
degradation and already no way has
contributed a billion dollars each
towards Indonesia and Brazil to
implement this Red Cross scheme so we
actually have some movement forward but
the thing is to do a lot more of that
will this solve the problem will
economic solve everything
well I’m afraid not there is an area
that is the oceans coral reefs as you
can see they cut across the entire globe
all the way from Micronesia across
Indonesia Malaysia India Madagascar and
to the rest of the Caribbean these red
dots these red areas basically provide
the food and livelihood for more than
half a billion people so that’s almost
an eighth of society and the sad thing
is that as these color reefs are lost
and scientists tell us that any level of
carbon dioxide in the atmosphere above
350 parts per million is too dangerous
for the survival of these reefs we are
not only risking the extinction of the
entire coral species the warm water
corals we’re not only risking
fourth of all fish species which are in
the oceans but we are risking the very
lives and livelihoods of more than 500
million people who live in the
developing world in poor countries so in
selecting targets of 450 parts per
million and selecting 2 degrees at the
climate negotiations what we have done
is we’ve made an ethical choice we’ve
actually kind of made an ethical choice
in society to not have coral reefs well
what I would say to you in parting is
that we may have done that let’s think
about it and what it means but please
let’s not do more of that because mother
nature only has that much in ecological
infrastructure and that much natural
capital I don’t think we can afford too
much of such ethical choices thank you