Wednesday, July 1, 2015

Can Economic Principles Save the Planet?

If compared to the world’s top 10 economies, the ocean would rank as the seventh largest, with an annual value of goods and services of $2.5 trillion according to a new World Wildlife Fund (WWF) report. The analysis, Reviving the Ocean Economy: The Case for Action brings into focus the economic value our oceans represent for this planet, as the future of humanity depends on their healthy living conditions. While figures in the report are a vast underestimation, the economic assets at risk accurately portray the losses we will incur should we continue on the current destructive trajectory.

The report, produced in association with The Global Change Institute at the University of Queensland and The Boston Consulting Group (BCG), combines scientific evidence of environmental degradation with an economic case for urgent conservation action. Using an innovative economic analysis, the ocean’s value is quantified based on assessments of goods and services ranging from fisheries to coastal storm protection, resulting in an overall asset value and an annual dividend output (comparable to a GDP).

The Natural Capital Project is a partnership combining research innovation at Stanford University and the University of Minnesota with the global reach of conservation science and policy at The Nature Conservancy and the World Wildlife Fund. The project group works with leaders around the world to test and demonstrate how accounting for nature's benefits can support more sustainable investment and policy decisions. 

The project has developed practical, science-based approaches and software tools that quantify, map, and value services provided by nature. Accounting for ecosystem services reveals the diverse benefits provided by nature, clarifies trade-offs between alternative development scenarios, and helps people make more informed decisions about how to use lands and waters.

Since their founding in 2006, they have applied their approaches and tools in more than 20 major projects worldwide—guiding investments in water security in Latin America, in coastal protection in the Gulf of Mexico, in food security and economic diversification in Belize, and in community development in Canada and Hawai`i.

In another effort, researchers at Arizona State University are working to calculate the dollar value of nature in an effort to promote sustainability. In a study published recently in the Journal of the Association of Environmental and Resource Economists, researchers from Arizona State University (ASU) and Yale University have developed an interdisciplinary equation to estimate the current monetary value of natural resources such as fish stocks, groundwater or forests in the U.S. In assigning monetary value, to natural capital, this approach will have widespread implications for policymakers and various stakeholders, and will advocate for the creation of asset markets for natural capital.

“It is often said that nature is capital, but this has largely been a metaphor thus far; former measurement methods have lacked necessary inputs from experts from various disciplines, resulting in vast gaps of information,” said Joshua Abbott, associate professor at ASU’s School of Sustainability coauthored the study with Eli Fenichel, assistant professor at the Yale School of Forestry and Environmental Studies.

One example would be the reef fish in the Gulf of Mexico. During their research, Abbott and Fenichel found that the value of preserving live reef fish was more than $3 a pound in 2004, a price that jumped to almost $9 in 2007 after policymakers implemented management reforms that gave fisherman an incentive to conserve fish stocks. Fishermen were assigned individual tradeable quotas or shares of the fish stock, which created a market for the fish as a capital asset.

The Gulf’s reef fish contributed more than $256 million to U.S. national wealth in 2004—and three times that after management reforms. “We know from experience in the corporate world that changes in management practices can enhance the overall value of a company’s assets; it is no different with natural capital—our management of it can either enhance or detract from its value,” said Abbott.

It's safe to say that what goes unmeasured often doesn't get valued. Treating fish in the water as a capital asset encouraged fishermen to preserve the natural resource, which enhanced sustainable fishing practices that led to higher returns. Imagine if this same principle was applied to all of our natural resources?  Let's hope that this principle becomes more widespread and has a positive impact on increasing sustainability practices around the world.

Until next time...become the change you imagine.

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