In the wake of declining political will for environmental protection, many in the environmental community are advocating for the monetization of nature. Some argue that monetization, by revealing the economic contribution of nature and its services, can heighten public awareness and bolster conservation efforts. Others go beyond such broad conceptual calculations and seek to establish tradable prices for ecosystem services, claiming that markets can achieve what politics has not. However, such an approach collapses nature’s complex functions into a set of commodities stripped from their social, cultural, and ecological context and can pose a threat to the poor and indigenous communities who depend on the land for their livelihood. Although the path from valuation to commodification is not inevitable, it is indeed a slippery slope. Avoiding this pitfall requires a reaffirmation of the precautionary principle and a commitment to democratic decision-making and social justice as the foundations of a sound environmental policy for the twenty-first century.
The Promises and Perils of Ecological Economism | Where There Is No Will, Can There Be a Way? | Not Seeing the Forest for the Trees (Nor the People in the Forest) | Back to First Principles | Endnotes
The Promises and Perils of Ecological Economism
Do nature’s services need a monetary value? Over the past decade, members of
the environmental community have been increasingly saying “yes,” arguing that
conservation policy must have an economic motive to get sufficient attention
from policymakers and the public. Among the proponents of this new ecological
economism, one can find two distinct approaches.
One approach seeks to monetize the value of nature simply in order to reveal
its immense economic contribution to society. Its champions point out that the
significant value created by nature and its diverse services to humanity often goes
unnoticed. Quantifying its full extent, they claim, would help to generate the political
will to prevent the further destruction of nature and to facilitate its rehabilitation.
The best way to reveal nature’s value, they conclude, is to present it in the terms
policymakers understand best: money.
A second group of thinkers is taking such economism even further. They argue that
monetization is only meaningful and effective if there are markets to set prices for the
ecosystem services in question. Markets for such commodified ecosystem services,
they argue, can protect conservation policy from the vagaries of political will. Roll
back bureaucratic red tape, and let the market work its magic to save nature.
The line between valuation and commodification, although clear in theory, becomes
blurred in practice. To be sure, valuation alone does not inevitably entail the risks to
the preservation of nature intrinsic to commodification. Nevertheless, it changes how
we see and relate to nature and can inadvertently pave the way for the privatization
of ecosystem services that the advocates of valuation often oppose. We must,
therefore, approach the issue of monetizing nature with grave caution and not allow
it to weaken the precautionary principle, nor the principle of democracy itself, both of
which we need for scientifically sound and socially just environmental policy.
Where There Is No Will, Can There Be a Way?
Among nature conservationists, a deep-seated frustration prevails. Although the
loss of biological diversity and the degradation of ecosystems are proceeding at
an unprecedented scale, nature conservation remains politically unpopular. The
implementation of the political directives and multilateral commitments from the
Convention on Biological Diversity has been halting at best. The biodiversity targets
of the Millennium Development Goals (MDGs) have been spectacularly missed.
Funds are lacking for maintaining old, let alone establishing new, protected areas.
The political will to prioritize the conservation of nature over resource extraction or
infrastructure development is itself rapidly becoming an endangered species.
As a result, conservationists have sought a new strategy and have settled on
monetization. Although the concept of valuing ecosystem services goes back to the
1970s and has appeared in conservation debates ever since, it has gained renewed
attention over the past decade. In 2001, Kofi Annan commissioned the Millennium
Ecosystem Assessment on behalf of the United Nations to reveal the unnoticed
contributions of nature to human well-being.1
Although the report, released four years later, produced
no noticeable political shift in support for environmental protection, it sparked an
interest in incorporating economic incentives into environmental policy. The year
2005 marked the launch of the EU’s Emission Trading Scheme (ETS), which applied
market principles to climate change mitigation. The United Nations Framework
Convention on Climate Change (UNFCC) also began to develop a scheme known as
REDD+ (Reducing emissions from deforestation and forest degradation), which some
policymakers have sought to turn into a carbon offset market. In 2008, the TEEB study
(The Economics of Ecosystems and Biodiversity), commissioned by the G8 member
states, took the economistic approach of the Millennium Ecosystem Assessment
a step further with its policy recommendations. The report sought to bring the
economic value of nature into the calculation of national economic accounts and
advocated for the incorporation of biodiversity offsets into domestic and international
Environmentalists, business leaders, and policymakers have all sought to make
environmental protection an economic rather than just a political issue. The
introduction of “no net loss” policies, which allow economic development to proceed
as long as the net acreage of a specific type of ecosystem is maintained, have
effected a paradigm shift in environmental policymaking. However, offsetting ignores
how unique and interconnected biodiversity is, and it overlooks the importance of
nature for local communities and the ways they suffer when their ecosystems are
damaged. Land-use policies based on whether a company can pay for an offset, and
not on what local communities and humanity need to survive, undermine basic rights
and democratic principles.
Not Seeing the Forest for the Trees (Nor the People in the Forest)
As advocates of nature valuation point out, national economic accounts such as
GDP remain blind to the services of nature. Such accounts likewise fail to distinguish
between constructive and destructive economic activity with respect to human
and ecological well-being. The razing of a forest contributes to the GDP whereas
its protection, by leaving it untouched, will not. Revealing the full value of nature to
the economy, advocates argue, would not only encourage stronger policy, but also
support public mobilization against environmentally destructive policies and for
environmentally restorative ones.
A number of improvements on national accounting systems have thus been
proposed. The Genuine Progress Indicator, which has attracted the attention of
policymakers across the United States and European Union, subtracts the costs of
ozone depletion, pollution impacts, and loss of farmlands and wetlands from the
total GDP.3 The World Bank
has begun a new initiative called Wealth Accounting and
Valuation of Ecosystem Services (WAVES) to expand the reach and applicability
of such revised economic accounting systems.
Needless to say, a deeper understanding and greater awareness of the relationship
of society to nature is always welcome, but the rigor and usefulness of GDP-level
information remains questionable. In order to convert the information about nature’s
services into a form appropriate for national accounting, analysts must aggregate the
data from all existing ecosystems and allocate their increased or decreased value to
each nation-state. Moreover, determining an economic value for ecosystem services
requires first describing all the services provided by a particular ecosystem—a
Delineating an individual ecosystem from the complex fabric of nature poses
numerous significant challenges. For example, the provision of oxygen for humans
and animals to breathe is an ecosystem service of global scale. But how do we value
the contribution of individual sub-systems like a single forest to this global service?
We could all still breathe if one forest is cut down, but not if all forests were cut
down. At a local scale, quantifying the value of a tree is problematic because even
a single tree provides many services. Its roots provide benefits to the soil, its leaves
provide oxygen, and its trunk could provide lumber or paper for industry. If valuing an
identifiable part of an ecosystem like a tree is difficult, valuing a regional ecosystem,
such as a grassland that nourishes wild animals and stores carbon in the soil, is even
more methodologically intractable.
Beyond the daunting technical difficulties, embarking upon the path of valuation also
changes the way we see and understand nature. In order to determine the value of an
ecosystem for policy purposes, such as conducting a cost-benefit analysis for a new
development project, we need to take into account all aspects of the ecosystem. But
the value of the whole ecosystem to society is more than the sum of its monetized
parts: reducing its value to mere monetary terms, even if it were technically practical,
strips away its cultural and spiritual value. A bad policy decision can be fixed, but the
holistic functions of nature cannot so easily be replaced.
Interacting with ecosystems as economic entities and disaggregating them into
various “services” thus puts us on the path toward viewing such services as mere
commodities. Through disaggregation, each service can be rendered into a discrete
monetizable “package” so that it can have its own market and its own price. Such an
approach tilts policymaking in favor of the interests of the economically powerful.
The least powerful actors—often local communities, indigenous peoples, women,
small-scale farmers, etc.—get pushed to the margins, their voices ignored.
Offsetting schemes have increasingly entered the complex spheres of forest and
habitat preservation. For example, with the backing of the country’s agribusiness
lobby, Brazil recently launched the Rio de Janeiro Green Exchange (Bolsa Verde), which
allows individual and corporate landowners to buy their way out of previous legal
obligation to maintain a certain proportion of their land in near-pristine condition.
The degradation of land in one area of Brazil can proceed apace with little concern,
as payments for offset certificates—the conservation of an “equivalent” piece of land
elsewhere in the country—simply become the cost of doing business. There are even
reports of purely speculative certificate purchases where corporations buy up remote
Amazonian land in order to sell forest conservation certificates to conserve land and
forests that would never have been disrupted anyway.4
Such tradable certificates raise serious questions about the imbalance of power
between market actors. Many ecosystems that are still reasonably intact are home
to poor and indigenous communities. Under a trading scheme, a large corporation
could purchase such land for an offset, expelling those who have depended on it
for their livelihoods for centuries. Furthermore, such traditional communities have
a very different concept of property than Western capitalism. No single
person “owns” the land when resources are treated as a commons; however, the
establishment of a market for tradable certificates depends on the principle of
private property, a threat to the commons governance often found in indigenous communities. The
risk of abuse when forest offset certificates are applied in the context of communal
ownership are thus immense, especially since these communities lack the political,
legal, and economic power enjoyed by the prospective buyer.
Back to First Principles
In order to prevent monetization from slipping into commodification, we must revisit
one of the hallowed principles of environmental policy: the precautionary principle. It
states that when an action or policy could pose a substantial risk to the environment,
a very high burden of justification should fall on those seeking to take such an action.
Like the classical mantra of medical ethics, the precautionary principle insists upon
first doing no harm.
The precautionary principle illuminates the clear difference between a payment for
preservation and a license to destroy. For example, policymakers sometimes seek to
prioritize biodiversity preservation over agricultural or infrastructural development in a
certain area, where this lack of development might come at a lost opportunity cost to
the farmers or other owners of the land. Thus, to compensate them for the forgone
economic opportunity, the state provides a direct payment to the land owners,
essentially a payment for the “ecosystem service” maintained. Such conservation
payments are, in fact, central to US and EU agricultural policy. No new commodity
or market is created: the public (as opposed to the private) sector is the only actor to
provide the compensation, and the policy aims to maintain nature in its current state.
Such payments for ecosystem preservation are quite distinct, conceptually and
practically, from the implementation of market-based environmental trading
schemes. Under a trading scheme, investors need not forgo economic development;
rather, they can compensate society for the resultant destruction by paying for the
preservation of an “equivalent” piece of land elsewhere. From the perspective of the
developer, this new piece of land takes the form of a certificate for an ecosystem
service, but it is detached from its physical reality.
Monetization can also be appropriate in the application of the “polluter pays
principle,” a key part of international environmental law. According to this principle, in
the event of unavoidable environmental damage (such as an environmental disaster),
the responsible entity must provide appropriate compensation for the value of the
damage. As the damage has already been done, the demand for repayment can
serve as a deterrent, raising the economic stakes of future disasters. The focus is
no longer on estimating the value of the ecosystems themselves, but on the cost
of the necessary repair. As the repairs proceed, the cost estimate can be adjusted
appropriately, making the need to estimate the value of nature in the abstract
Consider, for example, the Deepwater Horizon oil spill from 2010. When the drilling
platform exploded, an estimated 800 million liters of oil flowed into the sea over
many weeks, in one of the worst environmental disasters of its kind. The resulting
damage to the flora and fauna of the Gulf region, as well as to the surrounding
fishing industry, was immense. Through 2012, British Petroleum (BP), the owner, was
required by law to reimburse public and private entities a total of $43 billion for the
consequential damages. The damage done to the Gulf of Mexico, however, was
largely irreversible: no amount of money can completely undo the damage. The
counsel of the precautionary principle remains paramount: the drilling should have
never started in the first place.
Over the past several decades, we have seen not only increasing environmental
degradation, but also the erosion of the concepts of the public good and collective
responsibility to preserve nature. In embracing the monetary valuation of nature as
a strategy for mobilizing support for environmental conservation, environmentalists
are resigning themselves to a political status quo that can only comprehend value
in terms of money and markets. By viewing ecosystems and their services through a
pecuniary lens, monetization profoundly changes our relationship with nature, and,
if taken to the point of commodification, can subject the fragility of nature’s balance
to the destructive logic and volatility of markets. Even though the trend toward the
privatization of public goods has been pervasive over the past decades, we should
not acquiesce so easily in allowing the privatization of the most basic public good of
all—nature itself. We must meet the grave environmental challenges of the twentyfirst
century with boldness and prudence, using the precautionary principle, along
with the principles of fairness and democracy, to set boundaries that human action
must not transgress.
1. For a recent review of such efforts, see Robert Costanza et al., “Changes in the Global Value of Ecosystem Services,” Global Environmental Change 26 (2014): 152-158; Millennium Ecosystem Assessment, Ecosystems and Human Well-Being: Synthesis (Washington, DC: Island Press, 2005).
2. Naturkapital Deutschland—TEEB DE, Der Wert der Natur für Wirtschaft und Gesellschaft—Eine Einführung (Bonn: Federal Agency for Nature Conservation, 2012), 15, available at http://www.bfn.de/fileadmin/MDB/documents/themen/oekonomie/teeb_de_einfuehurung_1seitig.pdf.
3. See, for example, the FRESH (Forwarding Regional Environmental Sustainable Hierarchies) project in the EU
(http://freshproject.eu/index.php) as well as recent efforts in Maryland (http://www.dnr.maryland.gov/mdgpi/) and
Vermont (http://vtgpi.org/about.html) in the United States.
4. Jutta Kill, Trade in Ecosystem Services: When ‘Payment for Environmental Services’ Delivers a Permit to Destroy (Montevideo, Uruguay: World Rainforest Movement, 2014), available at http://www.wrm.org.uy/html/wp-content/uploads/2014/04/Trade-in-Ecosystem-Services.pdf.
ABOUT THE AUTHOR|
Barbara Unmüßig is the president of the Heinrich Boell Foundation. She is responsible for the international work of the foundation with thirty offices abroad. Her work focuses on issues of globalization; international climate, resource, and agricultural policy; gender policy; and the promotion of democracy. She previously served as the spokesperson of the Forum on Environment and Development and the executive chairperson of World Economy, Ecology, & Development (WEED).