In this photo taken on Wednesday, May 13,
2012, Kashmiri Muslims fish on the shore of Nageen Lake on the outskirts
of Srinagar, India. Traditional measures of economic progress like GDP
are being criticized as inadequate for ignoring such downsides as
pollution or diminishing resources from fresh water to fossil fuels.
There is increased urgency to arguments for a more balanced and accurate
reckoning of the costs, particularly as fast-developing nations such as
India and China jostle with rich nations for access to those limited
resources and insist on their right to pollute on a path toward economic
development. (AP Photo/ Dar Yasin)
What is a sip of clean water worth?
Is there economic value in the shade of a tree? And how much would you
pay for a breath of fresh air?
Putting
a price on a natural bounty long taken for granted as free may sound
impossible, even ridiculous. But after three decades on the fringes of
serious policymaking, the idea is gaining traction, from the vividly
clear waters of the Maldives to the sober, suited reaches of the World
Bank.
As traditional measures of
economic progress like GDP are criticized for ignoring downsides
including pollution or diminishment of resources such as fresh water or
fossil fuels, there has been an increased urgency to arguments for a
more balanced and accurate reckoning of costs. That is particularly so
as fast-developing nations such as India and China jostle with rich
nations for access to those resources and insist on their own right to
pollute on a path toward growth.
Proponents
of so-called "green accounting" — who will gather in Rio de Janeiro
this week for the Rio Earth Summit — hope that putting dollar values on
resources will slam the brakes on unfettered development. A mentality of
growth at any cost is already blamed for disasters like the chronic
floods that hit deforested Haiti or the raging sand storms that have
swept regions of China, worsening desertification.
Environmental
economists argue that redefining nature in stark monetary terms would
offer better information for making economic and development decisions.
That, they say, would make governments and corporations less likely to
jeopardize future stocks of natural assets or environmental systems that
mostly unseen make the planet habitable, from forests filtering water
to the frogs keeping swarming insects in check.
If
the value of an asset like a machine is reduced as it wears out,
proponents say, the same accounting principle should apply to a
dwindling natural resource.
"Environmental
arguments come from the heart. But in today's world based on economics
it's hard for arguments of the heart to win," said Pavan Sukhdev, a
former banker now leading an ongoing project that was proposed by the
Group of Eight industrialized nations to study monetary values for the
environment.
That study, started
in 2007, has estimated the world economy suffers roughly $2.5 trillion
to $4 trillion in losses every year due to environmental degradation.
That's up to 7 per cent of global GDP.
"We need to understand what we're losing in order to save it," Sukhdev said. "You cannot manage what you do not measure."
Using the same accounting principles, some countries are already changing policy.
The
Maldives recently banned fishing grey reef sharks after working out
that each was worth $3,300 a year in tourism revenue, versus $32 paid
per catch. Ugandans spared a Kampala wetland from agricultural
development after calculating it would cost $2 million a year to run a
sewage treatment facility — the same job the swamp does for free.
But
environmental accounting still faces many detractors and obstacles.
Among them is resistance from governments who might lack the resources
and expertise to publish a "greened" set of national accounts alongside
those measuring economic growth. Particularly in the developing world,
many still struggle to produce even traditional statistics that are
timely and credible.
And even
practitioners are riven by debates on how to put a price on a vast range
of natural resources and systems that encapsulate everything from
pollination by bees to the erosion prevented by mangroves in an estuary.
The single largest difficulty is that markets, which are the easiest
way to value goods and services, don't exist for ecosystems.
"Since
many things don't formally have a market price, how do you value them?
Almost all the debate and discussion really hinges around valuation
issues, and that is where it can get flakey," said India's former chief
statistician Pronab Sen.
At one
extreme, said Sen, are people who say natural resources should get a
zero value since we don't know how to value them. Others argue that the
values for such resources should be infinite, meaning they can't be
touched since no one has an infinite amount of money.
Opposition
is also expected from parts of the corporate world, since green
accounting could make doing business or buying products more expensive.
A
forest once valued by what its trees fetch on the timber exchange might
instead be valued according to the carbon dioxide it absorbs, the
animals it supports, the water it filters and the firewood it provides.
Or it could be revalued with future generations in mind. That might lead
to higher felling fees, pricey replanting requirements or more
expensive wood. Some might rethink the economic benefit of cutting it
down. Science would become a more important factor in economic
decision-making.
Some
businesses, however, are embracing the idea to appeal to consumers
demanding more accountability. Supermarkets like Britain's Tesco now
offer carbon footprints on packaging alongside calorie counts.
At a national level, green accounting is already being embraced by some governments, even if still in piecemeal fashion.
India
in April announced plans for green national accounts by 2015 though
it's unclear if the country's chaotic bureaucracy can reach that target.
Australia will soon begin taxing carbon dioxide emissions, which Costa
Rica has been doing for a decade to fund forest preservation.
Late
last century, a team of U.S., Dutch and Argentine researchers put a $33
trillion value a year on natural resources such as water, wood and
fossil fuels and "services" such as a forest's absorption of carbon
dioxide. The estimate is more than double the value of the U.S. economy,
the world's largest. While admitting difficulties and uncertainties in
their methods and calculations, the team's report said the $33 trillion
figure was conservative.
Carbon
credits, perhaps the best known example of giving a value to an
environmental good, also illustrate the difficulties. Experts thought
the pricing of carbon credits might have been straightforward, since
emissions are easily measured and every CO2 unit is the same.
But the
carbon market wobbled wildly for years over estimates ranging from $5 to
$500 per unit.
Other resources
open worlds of debate. Water — frozen, liquid or gas, it's found just
about everywhere from vast oceans or tropical mist to mountain glaciers
and underground aquifers. It's used for drinking, bathing, growing
plants, processing sewage, powering hydroelectric plants, driving
weather systems and more. So not all water is created equal.
But
should one lake be worth more than another? Does it matter if people
depend on it, or if it supports schools of tasty fish? Should it even
matter what it's used for now? Or is it more important to consider if it
can be replenished?
Some argue
such questions make it clear that subjecting the natural world to free
market ideology is immoral and counterproductive.
"The
result would be the further privatization of essential elements of our
planet to which we all share rights and have responsibilities," writes
Hannah Griffiths from the World Development Movement, a UK-based
anti-poverty campaigning organization, in a recent essay for the
Guardian.
Still some experts in the field say the world is on track to having comprehensive green accounts within 10 to 15 years.
A
crucial advance has been the United Nations' quiet adoption in April of
a framework of agreed concepts and definitions for green accounting
that can be applied in any country. It took two decades to develop but
stops short of valuing complex ecosystems.
"The accounting is not pie in the sky anymore," said economist Peter Bartelmus, who led the original U.N. effort.
The
World Bank, meanwhile, is backing projects in Botswana, Colombia, Costa
Rica, Madagascar and the Philippines that are looking for ways for
national accounts to include the value of natural resources.
"Doing something is better than doing nothing. We shouldn't even aim for perfection, either," said Sen, the former statistician.
"It
is much more important to come up with a methodology that people find
intuitively acceptable rather than looking for hard commercial truths.
If at a gut level people find it fair, then I think we can run with the
idea."
