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Socio-economic aspects of conservation


Universidad Autónoma de Barcelona, UAB, and Universidad Autónoma de Madrid, UAM


Universidad Autónoma de Madrid, UAM

The socio-economic costs of biodiversity loss

Conventional financial accounting fails to capture the economic and social costs associated with the loss of biodiversity. This highlights the need to reform traditional indicators of economic progress.

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The disappearance of species is a phenomenon inherent in the evolutionary process. At least five times over geological history there have been episodes of mass disappearance of species known as the “mass extinctions”, which have been caused by phenomena such as meteors or ice ages. For example, in the last great extinction, which occurred 65 million years ago, about 75% of all species on the planet HIGHLIGHTSKey terms in the economics of ecosystemsProfile: Erik Gómez-Baggethun and Berta Martín-López
disappeared at a stroke. However, during the periods of tens of millions of years that generally separate these episodes, species extinction has occurred as a gradual phenomenon which has tended to be offset by higher rates of emergence of new species. For example, the fossil record put the average rates of extinction of marine species between 0.1 and 1 extinctions per million species per year and it has been estimated that extinctions of mammals also lie within a similar range. 

This pattern of extinctions has changed abruptly over the last two centuries. Since the start of the industrial revolution technological developments have enabled humans’ ability to modify the Earth’s surface to reach such a scale we have altered some of the major biophysical processes that determine the functioning of the Earth as a system, leading to the process that is sometimes referred to as global change. The scientific community argues that we now live in an era in which the nature of the internal causes underlying global change is qualitatively different from anything in the past.

Our era, which some scientists refer to as the Anthropocene, is characterised by the fact that for the first time humans have begun to compete with geological forces in terms of their ability to move matter and modify the basic processes of planetary operation. Global In the last great extinction, which occurred 65 million years ago, about 75% of all species on the planet disappeared at a strokechange is being accelerated by human action, and the major drivers of this process, including changes in land use, changes in biogeochemical cycles, climate change, overexploitation of resources and the expansion of invasive species, are having drastic impacts on ecosystems and biodiversity.

The scientific community believes that extinction rates in the Anthropocene are 100 to 1,000 times higher than those in pre-industrial times. Thus, the rate of species extinction now exceeds the rate of 100 extinctions per million known species and it is estimated that, unless decisive action is taken to curb species loss, it could increase tenfold over the course of the century.

The International Union for Conservation of Nature (IUCN) estimates that 12% of bird species, 23% of mammals, 32% of amphibians and 25% of coniferous plants are currently endangered. The anomaly of this situation with respect to extinction rates recorded in pre-industrial times has led some scientists to refer to the current phenomenon of biodiversity loss as the sixth great extinction, the first ever man-made event of this kind.

In order to address the problem of biodiversity loss, the United Nations Conference on Environment and Development, held in Rio de Janeiro in 1992, promoted a Convention on Biological Diversity (CBD), which came into force a year after its ratification by 193 countries. Additionally, in 2002, these countries agreed to reduce rates of biodiversity loss by 2010, which was declared the International Year of Biodiversity by the UN. Eight years later, not only has the rate of loss failed to slow, but it has actually accelerated.

From 18 to 29 October the 10th Conference of the Parties to the CBD is due to be held in Nagoya (Japan). This will aim to set new targets for slowing biodiversity loss and assess the effectiveness of the policies and strategies adopted so far.

The socio-economic costs of biodiversity loss
For decades there has been intense debate about the ethical and ecological implications of biodiversity loss, but, until recently, not much has been said outside specialist circles about the economic implications. When it comes to economics, we tend to think in terms of monetary flows or financial assets that ostensibly have little or no relation to biodiversity. However, we now know that the economy and society are highly dependent on ecosystems and the biodiversity that they contain. Ecosystems are not only the source of raw materials and energy the ‘economic metabolism’ requires to produce goods and services; they also provide the sinks needed to absorb and process the pollution and waste generated by society. Furthermore, biodiversity plays a fundamental role in human welfare through the generation of so-called ecosystem services (see glossary).

Ecosystem services are the direct or indirect contributions ecosystems make to human welfare. These services include supplying tangible goods like food and firewood, regulation services (benefits obtained indirectly from ecological processes such as pest control, soil formation and water purification) and cultural services (intangible benefits such as its value for ecotourism, for environmental education or simply its aesthetic value).

The benefits of certain services such as the supply of raw materials, energy or food are obvious and, therefore, their recognition tends not to be questioned. However, the perceived benefits brought by most cultural and environmental regulation services that are not traded on markets or considered  by the accounting system is more subtle, and therefore the importance of these services tends to be overlooked in decision making. Consequently, the fact that regulation services are invisible in the socio-economic system means that current We now know that the economy and society are highly dependent on ecosystems and the biodiversity that they containmanagement policies tend to favour supply services at the expense of other services, encouraging the conversion of multifunctional natural ecosystems to industrial uses focused on maximising the output of one or just a handful of services. However, where all the ecosystem services affected by a project are properly identified and assessed, the economic data in favour of transforming ecosystems to industrial uses are sometimes turned on their heads. For example, a well-known study in the mangroves of southern Thailand compared the costs and benefits associated with the conservation of mangroves compared to those resulting from conversion to shrimp farms. If only services supplying the market were considered, the figures showed it was more beneficial economically to clear the mangroves for other uses. However, once the analysis of benefits included those derived from environmental regulation services, such as protecting the coast against extreme weather events, the results were reversed. The greater benefits resulting from mangrove conservation were even more apparent when the subsidies shrimp producers received were discounted or the costs of the pollution and damage caused by shrimp production were factored in (Figure 1).

One area in which this is reflected very clearly is that of macroeconomic accounting systems. As mentioned above, conventional economic analysis limits its study to those services that are exchanged in the market and therefore have a direct monetary value, which is reflected in their prices. Thus, the traditional indicators of economic progress such as GDP are limited to calculating benefits from goods and services that are traded on markets (which is mainly limited to the supply of goods and services) and costs such as depreciation of capital goods (for example, wear and tear of machinery and infrastructure).

However, the economic benefits these ecosystem services provide (unless they are traded on markets) and the costs associated with the deterioration of the ecosystems on which these services depend, i.e. the costs associated with the depreciation of natural capital (see glossary), are left out of the calculation.

This highlights the fact that conventional accounting systems and indicators of prosperity give an erroneous measure in an era in which ecosystems and the services they generate are suffering acute deterioration and becoming increasingly scarce. This was highlighted by the Millennium Ecosystem Assessment sponsored by the United Nations, whose report concludes that over the past 50 years two-thirds of ecosystem services evaluated worldwide have deteriorated.

Fortunately, thanks to the efforts made in recent decades to develop approaches such as ecological and environmental economics, we now have the conceptual and methodological tools to identify and quantify ecosystem services in both biophysical and monetary terms (Figure 2). Also, the first steps are being taken towards the future incorporation of ecosystem services and natural capital in national accounting systems.

The TEEB Initiative: The Economics of Ecosystems and Biodiversity
As the International Year of Biodiversity (2010) approached, in which the current rate of biodiversity loss was supposed to be cut, it became evident that we were not on track to achieve the target. This fact stimulated a discussion on the need to make calls to political action using approaches with greater impact on decision making circles. In 2005, the Stern Review on the Economics of Climate Change concluded that it would take an investment of 1% of global GDP to mitigate the effects of climate change, but that failure to make this investment could expose the world to a risk of a recession that could reach 20% of global GDP.

The political impact of the report raised expectations about the persuasiveness of monetary figures as a tool with which to communicate the need to take decisive political action. It is against this backdrop that The Economics of Ecosystems and Biodiversity (TEEB) project emerged, on the initiative of the G-8 +5 summit in Potsdam in 2007.

Emulating the approach of the “Stern Report,” the TEEB project aims to call for international political action by estimating the economic value of biodiversity and economic costs of not acting on its loss. Although final results of the TEEB will be presented at the Conference of the Parties in Nagoya, preliminary reports already suggest some illuminating figures. According to estimates, ecosystems and biodiversity have an economic value that is between 10 and 100 times greater than the costs associated with conservation.

Cumulative welfare losses could amount to 7% of annual consumption in 2050. This figure is also a conservative estimate because it excludes, for example, all marine biodiversity, deserts, the Arctic and the Antarctic.

It also excludes some important ecosystem services such as disease regulation or pollination, and others, such as erosion control, are barely represented.

In short, the report notes the importance of biodiversity and ecosystems for socio-economic systems and the economic costs associated with their loss and underlines the fact that conventional economic indicators are unable to reflect them.

Dangers of the ‘economistic’ trend in conservation
Four decades after the birth of modern conservationism, ecosystems and biodiversity continue to deteriorate. This has led many conservationists to the conclusion that the traditional arguments that appealed to the intrinsic value of species as The traditional indicators of economic progress left costs associated with the depreciation of natural capital out of the calculationcentral to conservation have failed in their ultimate goal of reversing biodiversity loss. Thus, for the sake of political persuasiveness, monetary figures are increasingly being adopted as one of the key elements of the new discourse on conservation.

However, the controversy is growing as some elements of the ecosystem services and monetary valuation approach are being assimilated into the economic logic that they initially sought to transform. Whereas some people are attempting to highlight the many ways in which human societies depend on ecosystems and biodiversity, others have seen a justification for creating and/or expanding markets associated with the structure and functioning of ecosystems.

Also, despite efforts to put monetary valuations in context as an additional tool in a multidimensional valuation system (Figure 2), money is gradually being imposed as a hegemonic language in ecosystem valuation and the arguments that appeal to the logic of profit are gaining ground over ethical arguments appealing to the intrinsic value of biodiversity.

The ‘economism’ that permeates new conservationist discourse has been justified by the need to influence decision making in the short term. Could this strategy backfire in the long run? Although it is perhaps too early to say, there is no doubt that the consequences are uncertain. 

Ethical systems change slowly and are relatively stable but the market is highly volatile. If the idea that conservation is justified because it is cost-effective spreads, what will happen tomorrow if in a new economic environment conservation ceases to be profitable even when all ecosystem services have been properly valued? Will conservationism then have to deconstruct the discourse which has provided its rationale?

These uncertainties need to be taken into account to avoid conservation strategies that might be counterproductive in the future. However, there is one issue on which there is ever greater consensus in the science of sustainability, for decades, our economic system has grown at the expense of the biodiversity and ecosystems upon which it is based.

The growth figures during that period attesting to the positive progress of the global economy conceal the ecological and social costs that the analytical and accounting tools of classical economics have not been able to record or adjust for. This underscores the obsolescence of traditional welfare indicators and, therefore, the need for their radical reform.

Key terms in the economics of ecosystems

Variability of living organisms, including terrestrial, marine and other aquatic ecosystems. Biodiversity includes diversity at gene, species and ecosystem levels.

Natural Capital
Economic conceptualisation of ecosystems as stocks able to generate flows of ecosystem services on a sustained basis over time. The concept has precedents in the way land is conceived of as a factor of production in classical economics.

Ecosystem functions
From an anthropocentric perspective, these are all the ecosystem components and processes capable of generating ecosystem services benefiting human welfare.

Ecosystem services
Direct or indirect contributions of ecosystems to the welfare of society. The concept of “ecosystem goods and services” is equivalent to that of “ecosystem services”, but includes both tangible and intangible contributions.

Profile: Erik Gómez-Baggethun and Berta Martín-López

Erik Gómez-Baggethun
Has a PhD in Ecology and the Environment and is a researcher at the Institute of Environmental Science and Technology at the Autonomous University of Barcelona and a Fellow of the Laboratory of Socio-ecosystems of the Department of Ecology at the Autonomous University of Madrid. He has devoted the bulk of his research to developing tools and methods for the analysis of ecosystem services and assessing the costs associated with their deterioration, an area that has led to a number of scientific publications. He has worked as a scientific consultant for international bodies such as the European Environment Agency and participated in several international projects on ecosystem services. He was on the team of ‘The Economics of Ecosystems and Biodiversity’ (TEEB) project.

Berta Martín-López
Has a PhD in Ecology and the Environment, and is a lecturer in the Department of Ecology at the Autonomous University of Madrid and a researcher in the Socio-ecosystems Laboratory in the same department. Her work has focused on the economic valuation of ecosystem services in different parts of Spain, and she has published papers on the topic in major conservation journals. She is also a scientific advisor to the European Environment Agency on various projects for economic valuation of biodiversity and part of the team that formed the second phase of the ‘The Economics of Ecosystems and Biodiversity’(TEEB) project. Finally, as a result of these investigations, her current research focuses on analysing the main conservation strategies in Spain.

Published in No. 03

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