Sustainability : Putting a price on ecosystems

The World Bank has launched new programme that aims to put value on country’s ecosystems in the same way country measures its national income and product accounts, or GNP and GDP.
Janet Ranganathan, an expert at the World Resources Institute (WRI), says countries need to start measuring the value of nature and the benefits and challenges of setting up these so-called national ecosystem service accounts.

What are ecosystem services?
Ecosystem services are the benefits that nature provides to people. Food, fresh water, timber and cotton for clothes are some of the most familiar and visible services. But there are other types of unseen services that we often take for granted, for example the ability of forests to sequester carbon and mitigate climate change and the way in which wetlands filter and purify water.

What are national ecosystem service accounts and why are they needed?
Conventional measurements of national economic performance, such as Gross Domestic Product and Standard National Accounts, do poor job of tracking stocks and flows of ecosystems and their services. country can cut down its forests, drain its wetlands and pollute its water sources and none of this shows up in the national accounting system. There is therefore little incentive for better management of precious natural resources. By giving these assets value and including them in the national accounts, the hope is that what gets measured will get managed. Current macroeconomic decisions largely fail to account for natural assets, leading to decisions that degrade ecosystems. These new accounts will also raise awareness about the value of country’s natural assets and increase public support for decisions that are better for people
and nature.

What is the connection between ecosystem services and economic development?
Economic development and ecosystem services are intertwined. We can’t really deal with one without dealing with the other. Unfortunately, the current mindset of society is to put economic development and nature in separate boxes, overseen by separate government agencies and separate academic disciplines. We think that protecting the environment is an impediment to development. We view it as cost. Thinking about the environment in terms of ecosystem services can transform that mindset and help us see and value the environment as series of assets or benefits that development in fact depends upon. By including ecosystems as assets alongside capital, labour and other commonly measured units in national accounts, governments will hopefully spur economic growth while sustaining or even growing natural assets.

What are some of the challenges of creating national ecosystem service accounts?
Architects of green accounts must grapple with three measurement challenges: how to define standardised units, how to measure physical quantities and how to assign values. None of these tasks are easy. If the accounts are to be integrated into existing national income accounts, then double counting must be avoided. The chosen measurement units must also be quantifiable at the national level. Finally, the physical measurements must be converted into financial values. The pros and cons of various valuation approaches will need to be carefully weighed to avoid risking the credibility of the entire effort.

Are any countries already doing this?
A number of efforts are under way to create national indicators of ecosystem health. The UK is conducting National Ecosystem Assessment of the country’s natural environment in terms of the benefits it provides to society. The results of this could be integrated into national accounts. Emerging indicators like the Genuine Progress Indicator combine measures of the value of natural, economic and social capital. The European Commission, United Nations and others are exploring ways to define complementary indicators for GDP that address sustainable development.

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