18 Oct 2012

What’s Wrong with Putting a Price on Nature?

The concept of pricing ecosystem services and allowing them to be bought and sold has gained wide acceptance among conservationists in recent years. But does this approach merely obscure nature’s true value and put the natural world at even greater risk?
By richard conniff

Ecosystem services is not exactly a phrase to stir the human imagination. But over the past few years, it has managed to dazzle both diehard conservationists and bottom-line business types as the best answer to global environmental decline.

For proponents, the logic is straightforward: Old-style protection of nature for its own sake has badly failed to stop the destruction of habitats and the dwindling of species. It has failed largely because philosophical and scientific arguments rarely trump profits and the promise of jobs. And conservationists can’t usually put enough money on the table to meet commercial interests on their own terms. Pointing out the marketplace value of ecosystem services was initially just a way to remind people what was being lost in the process — benefits like flood control, water filtration, carbon sequestration, and species habitat. Then it dawned on someone that, by making it possible for people to buy and sell these services, we could save the world and turn a profit at the same time.

But the rising tide of enthusiasm for PES (or payment for ecosystem services) is now also eliciting alarm and criticism. The rhetoric is at times heated, particularly in Britain, where a government plan to sell off national forests had to be abandoned in the face of fierce public opposition. (The
Skeptics say they’re making constructive criticisms of what they see as blind faith in new financial markets.
government’s own expert panel also found that it had “greatly undervalued” what it was proposing to sell.) Writing recently in The Guardian, columnist and land rights activist George Monbiot denounced PES schemes as “another transfer of power to corporations and the very rich.” Also writing in The Guardian, Tony Juniper, a conservationist and corporate consultant, replied in effect that Monbiot and other critics should shut up, on the grounds that campaigning against payment for ecosystem services “could inadvertently strengthen the hand of those who believe nature has little or no value, moral, economic or otherwise.”

Not all critics reject the PES idea outright. Some say they’re merely making constructive criticisms of what they see as blind faith in new financial markets, and in global initiatives like the United Nations’ REDD mechanism (for Reducing Emissions from Deforestation and Forest Degradation in Developing Countries).

The first mistake, says Kent H. Redford, an environmental consultant, is to assume that old-style conservation methods have failed. “They’ve worked in certain circumstances, in certain ways, for certain things.” They’re the reason, for instance, that state-sponsored protected areas now cover 25 percent of the land in Costa Rica, 27 percent in the United States (at the federal level alone), 30 percent in Tanzania and Guatemala, and 50 percent in Belize.

Writing in Conservation Biology, Redford and co-author William M. Adams catalogued some of the ways PES transactions can go wrong, beginning with the whole question of price. Traditional conservationists sought to protect forests and other landscapes primarily for their intrinsic value, says Redford. But those values are likely to carry less weight when even conservationists think first in economic terms. Many ecosystem services are also likely to be hard to price — for instance, the arguably beneficial effects on climate and agriculture (minus the deleterious impacts on health) when atmospheric dust from the African Sahel drifts across the Atlantic. And even if you can put a price on an ecosystem service, Redford and Adams argue, figuring out who has a legitimate right to sell it means picking winners and losers. In developing countries, indigenous communities may lack the documentation or the political clout to assert their ownership.

Payment schemes also risk creating perverse incentives, Redford and Adams warn. If the system pays landowners to bank carbon, they may plant non-native species, or genetically “improved” trees, to bank carbon faster. Or they may discourage natural phenomena that happen to be good for biodiversity, but bad for people, including such ecosystem disservices as
Making the economic case for ecosystem services often ‘has more resonance’ with decision makers, one researcher says.
fire, drought, disease, or flood. Finally, Redford and Adams point out, the effects of climate change, “always the joker in the pack,” could toss carefully constructed economic schemes — and natural habitats — into disarray.

Stuart H. M. Butchart, a researcher at BirdLife International, replies that embracing the ecosystem services idea doesn’t necessarily mean abandoning the argument that species and habitats have intrinsic value. But making the economic case often “has more resonance” for decision-makers.

A study published last week in Science, co-authored by Butchart, also suggests why the PES idea now seems so urgent. To determine what it would cost to meet current targets set for the year 2020 under the international Convention on Biological Diversity, the study looked at the cost of protecting and down-listing threatened bird species. Then it extrapolated that preventing further loss of species across all plant and animal groups would cost $78 billion a year. That’s an order of magnitude above current conservation spending — but the study noted that it was only between 1 and 4 percent of the value of the ecosystem services being lost through habitat destruction every year.

PES proponents can also point to early success stories: Vittel-Nestlé Waters recognized a few years ago that its aquifer in northern France was being polluted by nitrate fertilizers and pesticides from nearby farms. It devised a scheme to pay farmers to change their methods and deliver the ecosystem service of unpolluted water. Beijing undertook a similar scheme in the catchment around one of its reservoirs, ahead of the 2008 Olympics. (It had previously tried anti-growth regulations and resettlements.)

But there isn’t always a wealthy corporation or a big city nearby willing to pick up the tab (for Vittel, $31.4 million over the first seven years), and other transactions are more complex. Norway, for instance, pledged $1 billion each to Brazil and Indonesia for forest preservation efforts under the REDD mechanism, partly to compensate for failing to meet its own greenhouse gas emissions targets. But the Norwegian government recently felt compelled to issue a public warning to both countries against backsliding on their forest preservation commitments.

Monbiot adds that making nature fungible, so one asset can be substituted for another, guarantees that they will be: “If a quarry company wants to destroy a rare meadow, for example, it can buy absolution by paying
Critics are uncomfortable with viewing nature ‘as a service provider fit to be incorporated into the global capital markets.’
someone to create another somewhere else.” When governments and PES proponents talk about employing marketplace solutions instead of traditional regulatory approaches, he says, “what they are really talking about is shrinking democracy, shrinking public involvement in decision making, shrinking transparency and accountability. By handing it over to the market you are in effect handing it over to corporations and the very rich,” and to “a very plutocratic” decision-making process.

Pavan Sukhdev, a former international banker who has pioneered efforts to highlight the economic importance of biodiversity, says none of these criticisms is especially new. He has raised many of them himself and says the marketplace is working to address them. “It’s useful to hear criticisms, but the critics must remember one basic fact. It wasn’t Christopher Columbus who discovered America, it was the Native Indians who lived there. So critics should not think that they have invented knowledge. They should be a little more humble in their attitude. And understand that the people on the ground are professionals who have been working on this and thinking about this for quite some time.”

But no amount of financial tweaking or social engineering is likely to allay the deeper discomfort voiced by many PES critics with the whole idea of nature, in the words of one recent paper, “as a service provider fit to be incorporated into the global capital markets.” Or the notion, expressed by Jean-Christophe Vié, of the International Union for Conservation of Nature, that nature is “the largest company on Earth.” When you view nature in economic terms, as a provider in a sort of “master-servant” relationship, they suggest, you make a fundamental change not just in the world around us, but in ourselves.


How Do You Place A
Monetary Value on Nature?

Pavan Sukhdev Putting a Price on Nature
Indian banker Pavan Sukhdev has been grappling with the question of how to place a monetary value on nature. In an e360 interview, he discusses the ways natural ecosystems benefit people and why policymakers and businesses must rethink how they assess environmental costs and benefits.
Sian Sullivan, a University of London anthropologist, warns that past revolutions in capital investment, like the enclosure of common lands in eighteenth-century Britain, and the industrial revolution of the nineteenth century, resulted in “the shattering of peoples’ relationships with landscapes” and the conversion of rural folk into factory workers and service-providers for capital. In the ecosystem services movement, Sullivan warns, we are seeing “a major new wave of capture and enclosure of Nature by capital.” And it will come, she says, at the cost of profound cultural and psychological upheaval.

It may be, as some argue, that we have no better way to save the world. But the danger in the process is that we may lose our souls.


Richard Conniff, a 2012 Alicia Patterson Journalism Fellow, is a National Magazine Award-winning writer whose articles have appeared in Time, Smithsonian, The Atlantic, National Geographic, and other publications. He has been a frequent commentator on NPR’s Marketplace and a guest columnist for the New York Times. He is the author of several books, including The Species Seekers: Heroes, Fools, and the Mad Pursuit of Life on Earth. In previous articles for Yale Environment 360, he has written about the decline of wildlife in Africa and about Namibia’s community-based wildlife management system.

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The biggest obstacle to monetizing ecological functions is the inability to make them into discreet units for pricing. Ecological systems cannot be dissembled into discreet entities for pricing purposes. Thus, money is a poor surrogate for the value of these services.

Posted by Dave on 18 Oct 2012

PES is an attractive idea, with some good examples (for example from the Andes and China). However, in the poorest countries, it faces complex challengs: who, exactly, will receive the payments given that land is often held by small farmers whose own water and land tenure are not secure? How will we prevent elite capture of the benefits? Since the payments per unit of land or water tend to be very low, the benefits accruing to small farmers is too small to be significant incentives for them. We need more innovative thinking about this side, for example pilot testing community-owned trusts to manage the payee-payer interface and invest the proceeds in public goods for the communities.

Posted by Doug Merrey on 18 Oct 2012

Well said Pavan Sukhdev... "So critics should not think that they have invented knowledge. They should be a little more humble in their attitude. And understand that the people on the ground are professionals who have been working on this and thinking about this for quite some time.” - Well said....

We (natural resource economists) have been working on this for a long time (over 50+ years). PES is not simply "privatization" of the commons. It is but one tool in the tool box. Monbiot's critique smacks of the lack of understanding of the socio-economics behind this thinking.

Posted by Peter Edwards on 18 Oct 2012

If at all there is Democracy and Socialism it is in nature only. Nature's water, air, sunlight, wind are all available to every one. As Mahatma Gandhi put it, THERE IS ENOUGH FOR ANY BODY'S NEED BUT NOT FOR ANYBODY'S GREED. Should we price it at all?

Dr. A. Jagadeesh Nellore (AP), India

Posted by Dr.A.Jagadeesh on 18 Oct 2012

Nothing wrong with the arguments presented, but the loss of Nature around the world, which has escalated during the last century, is commonly linked to economic health differences among populations in those places. In addition, a major problem has been effectively communicating with large segments of the various public in any of those places why we, or they should care. Ecological services may be one reason, but that likely has greater meaning for those who are relatively affluent, not someone looking for their next meal. Even when attempting to communicate our interest in this area, until recently we have failed to disclose the most important reason for ensuring the continued survival of wild species we simply LOVE them - maybe the strongest argument of all.

Posted by R.A. Lautenschlager on 18 Oct 2012

Assets are valued based on future cash flow streams. It is very difficult to estimate such cash flows for a publicly owned asset, such as the British forest because it has multiple uses. Perhaps some thought only of the trees as lumber. Apparently, citizens had something else in mind that represented a much higher use and therefore much greater value - they simply like having the forest as a next door neighbor. There is no value for that to enter into a financial statement and indeed there is no such statement for a public forest. It is much easier to put a monetary figure on liability in the case of fouling the environment and in the case of corporations, it is clear where that liability should be recorded. A more expansive requirement to report environmental liability is perhaps a good intermediate step to put a value on nature.

Posted by Debra Fiakas on 18 Oct 2012

Beware the economist who, like Peter Edwards, says the privatization (and that is what it is) and enclosure of the public commons is only "one tool in the toolbox."

When the opportunity to get a free, permanent share of a public good for free, or for cheap, all other management schemes fall by the wayside. The "free marketeers" will steal the control of those public goods and never give them back. They will trade them, bargain for them and sell them, broken into pieces and then, in the name of efficiency, buy them at bankruptcy prices to aggregate back into corporate structures and control.

Profit and gain from the theft of other's goods is the name and the game of the Privateers. It always has been and always will be. Beware of the governments who grant the letters of marque to the Privateers.

Posted by Dave Allison on 18 Oct 2012

It is all about discount rates. How can one reconcile the eternal services provided by the ocean or forest with the discount rates required by private financial markets on human time scales (not those of the Nation or society itself).

One cannot. It is impossible. So the service is undervalued and the wrong trade for society will be made in many cases. Particularly if they are used as biodiversity offsets.

That said it is a useful exercise.

Posted by Carbon Virgin on 18 Oct 2012

For some of us, the shameless rush to cash in on nature's bounty is reminiscent of the money changers in the temple.

Amory Lovins, a man who has thought long and hard about the plight of the planet and the role of markets once said, "Markets are meant to be greedy, not fair. Efficient, not sufficient. They're very good at short-term allocation of scarce resources, but that's all they're good at. They were never meant to tell you how much is enough or how to fulfill the higher purpose of a human being."

And here may lie the greatest tragedy. The temples are not for sale.

Posted by Tim Hogan on 18 Oct 2012

Yes, let's put a stiff price on the Ogallala (sp) aquifer and on those Texas forests that Trans Canada is ripping through to build the Keystone XL pipeline.

Posted by Trevor Burrowes on 18 Oct 2012

PES, or 'marketization of nature' (MON), is probably the worst idea of this century. National parks and other protected areas are the absolute opposite of this concept and are the best inspiration for the move away from private ownership and corporate greed.

Posted by Geoff Mosley on 19 Oct 2012

The main problem is not the concept of PES. PES is just a refinement of the buying and selling of natural capital that has gone on for all of human history. The problem is neoliberal global capitalism where once a price is put on something, the price is the only thing that truly matters. It is simple to tell where the loyalties of PES advocates lie: if they are not simultaneously advocating for fundamental changes to the world economy, they are only interested in the P, not the ES.

Posted by Ellis on 19 Oct 2012

"PES, or 'marketization of nature' (MON), is probably the worst idea of this century. National parks and other protected areas are the absolute opposite of this concept and are the best inspiration for the move away from private ownership and corporate greed."

Couldn't agree more, although I'd temporarily close the parks to tourists and use them as educational centers. Let the parks go wild and not be zoos of wilderness. Get kids out in the open to learn from parks and park rangers. Start paying down the deficit without having old and sick people dying on the streets...

Posted by Trevor Burrowes on 20 Oct 2012

PES are just one aspect of natural capital valuation. A natural capital valuation scheme must address the "tragedy of the commons". "Symbiotic Demand" is one such neo-economic concept that functions as the antithesis of the tragedy of the commons as has been demonstrated several times and illustrated briefly at:

Posted by Tim Gieseke on 20 Oct 2012

This article deals with important issues, but it has an unfortunate hand in lumping together economic valuation with PES. In principle, valuation is no prerequisite for PES. PES may well just be a pragmatic compensation buyers and sellers agree on to influence land uses of joint interest. In developing countries, for instance, many PES deals are now being done between upstream and downstream communities, e.g. peasants and cities. It seems nebulous with what right people thousands of miles away can call this "the worst idea of the century" -- especially since it even seems to be working, by making both sides better off...

Posted by Sven Wunder on 21 Oct 2012

Couldn't agree more with S. Wunder. The article does not go further than global market-based mechanisms (which can indeed be more harmful than beneficial for the ecosystems), tightly linked with liberal economic theories and easily considered as "the worst idea of the century". It does not mention at all community based small-scaled PES that are being - often successfully - developed in many countries. Unfortunately, it also narrows the PES as a monetary transaction which is a very incomplete definition of the mechanism while many projects are experimenting in-kind payments in goods and even in labor, not based on market prices but on pragmatic compensations resulting of discussions between communities, private companies, etc., for a common interest.

"Investing" in the ecosystems is probably crucial to complement existing nature protection tools, but then the whole point is about keeping the benefits of these investments at the local level, and not give it for sale to greedy marketeers...

Posted by S. Charré on 22 Oct 2012

I agree with the statement here that the 'market' eventually is a form of authoritarian capture and control of natural resources by corporations and the rich leaving the rest of the human race deprived of the bounty of unspoiled nature, and enslaved as workers for them. It is already happening. Who owns the wind, water, and sunshine? Where does it end - this monetizing everything?

Posted by Marilou Montemayor on 22 Oct 2012

The irregularity in the distribution of ecosystem services is obvious. Moreover, total nonuniformity in the provision of services to ecosystem is also obvious. In other words, a total deficit of ecosystem services, and also deficit of services to ecosystem, creates the opportunity for trade (exchange) operations to cover these deficits.

At the same time, in terms of economy, a price is the amount of money in exchange for which the seller is ready to transfer (sell), and the buyer agrees to receive (buy) a unit of goods (services). In fact, the price is the exchange coefficient of a specific product (service) for money. The ratio within goods’ exchange is determining goods’ value. Therefore, the price is the value expressed in money or monetary value of goods’ (services’) units. However, in the relationship people/ecosystem, it is meaningless to speak of any agreement or disagreement of ecosystems for any amount of money received in exchange for services (services of ecosystems or to ecosystems).

This is the paradox of the impossibility of commodity-money relations in the framework of the people/ecosystem relationships. Therefore, attempts of “unilateral” determination of the value of ecosystem services and/or services to ecosystem, are voluntaristic and manipulative by nature.

The resolution of this paradox is to assess the value of the two types of services (i.e. ecosystem services and services to ecosystems) only in their interdependence. Each service should not be assessed separately, but the ratio of the intensity services’ to ecosystem production to the intensity of ecosystem services’ consumption.

Posted by Taras Bebeshko on 23 Oct 2012

Ecosystem pricing has a value and logic but only up to a point...

Pricing ecosystems should not be a precursor to sustainable behaviour but an adjunct.

Of course, being able to price adequately such that it is possible to come to mutual agreement through commonly understood metrics is vital to collective and collaborative assessment and action.

However, without wider changes to the way that economics and markets function then price identified through natural capital accounting and other such approaches will still not reflect the value of ecosystems as the basis of all human activity in the first place.

Just to add to the references to Guardian articles, in my recent blog posting I compare pricing ecosystem pricing to weigh a fat dog - you dont need to know exactly how fat it is in order to know what to do about it:

Posted by Joss Tantram on 24 Oct 2012

I do not want to commodify nature so that we can say "oh if you give me x dollars you can destroy this". I want to recognize the value of ecosystems so we can say "hey you can't do that because this has a way bigger value than you giving me x dollars. What this gives US cannot be replace by dollars"

Posted by Leslie Adams on 31 Oct 2012

I fear that bringing nature into the commodity mix is a dangerous direction to go in. Humans are nature as well, and, from a philosophical perspective, we are essentially pricing out the value of our existence.

Also, I would argue that describing fire, disease, floods and droughts as disservices to nature is not accurate.

Posted by L. Haist on 03 Nov 2012

Apparently we can put a price on natural resources that are being exploited on a large scale, like mining or forest concessions. We can also monetize environmental impact assessments - calculating compensation for environmental degradation by large scale infrastructural projects. We can put a price on people taking care of our sick and dying.

Are we now getting hypocrytical on rewarding communities for better care of their and our environment? There are very good examples of such schemes for GHG sequestration with social and biodiversity benefits (plan vivo, gold standard, ccbs), and as indicated also for PES in water and biodiversity. Let's allow the good examples to survive the bad ones?

Posted by Peter paap on 08 Nov 2012

Hi Richard,

Thanks for an interesting article. In Wales, UK, in a week's time, the government will be starting consultation on a White Paper for the forthcoming Sustainable Development Bill. It will make SD a Duty for all public sector organisations our small country, and will give the Chief Executives of those organisations not only something else to think about, but a potential way of resolving some of the complex challenges facing governments worldwide.

Ecosystem Services approaches will be central to the Bill and to Natural Resources Wales, the new organisation mandated with care over nature, rivers, biodiversity and coasts. I agree with many of the comments above about the need for caution, and my biggest fear is that if we put not value on it, we may think that nature is worth nothing.

Posted by Andy Middleton on 21 Nov 2012

Putting price on the nature or its services is not a wrong thing on conventional thinking. It has been already practiced such as on land, a part of nature which provides many services to support lives of living beings. Putting price of other non-market service gives economic value for the non-marketed resources or services and motivates users and managers for appropriation. Putting price on the non-market goods and services is a deliberated institution change. Principally deliberated institutional change should increase benefit to society, and protect further marginalization of the groups who are already in disadvantaged position. If the deliberated institutional change hampers livelihoods means and future opportunities of the disadvantaged people it is an unethical practice. Putting price can also endanger some environmental services in some conditions. I am not discussing the issue in this posting but I am demonstrating evidences that putting pricing on nature can be wrong in some communities.

Institutional change for resource management is a complex process and socially risky thing. Livelihoods of many people in developing countries are based on natural resources. Sociopolitical situation are also complex, weak and unpredictable in the countries. It is very difficult to protect livelihoods means and future opportunities of the disadvantaged people while putting price in such vulnerable and unpredictable sociopolitical conditions. There are enough proofs that international experts or agencies (e.g. bilateral agencies, multilateral and (I)NGOs) involved to support in the institution development have worked in favour of their own people and funding countries, and hampered livelihoods means and future opportunities of the disadvantaged people for long term. In the 1970-2000s, for example, international aid agencies (the World Bank, ADB and various ODAs) advised and funded Nepal government to change pasturelands of poor communities into pine forest for environment conservation and meeting basic needs of poor people. The land use policy has further marginalized poor communities but now the land has been impossible to be re-used for fodder production and poverty alleviation because of growing legal and social complexities. It can be strongly argued that the hidden interests of the advising and funding countries were to lock the pasturelands of the communities to offset their carbon emission and create future markets for their agricultural products. Another example is expansion of protected areas from seven percent in 1997 to twenty percent in 2011 by following technical advices of IUCN, mostly in poor and disadvantaged communities. The land uses have been impossible to change for community benefit though local people have lost their traditional property rights and farming businesses, and displaced from centuries old living place. The protected area management legal policy has hindered construction development work and other economic activities in the areas. At the beginning of implementation of the both programmes, they agencies had assured local communities that the programmes would help conservation of local natural resources and benefit the whole communities.

Most of deep environmentalists believe that communities in developing countries have inefficiently managed their land resources. Putting price would increase resource use efficiency which would benefit environment as well as communities. Experimenting Reduced Emission from Deforestation and Forest Degradation(REDD) is an example of putting price on service of nature to enhance resource efficiency and address problem created by developed countries and luxurious societies. By marketing nature of carbon service the REDD policy requires bearing carbon liability, hampers local economic development and exacerbates social exclusion. The issues are little communicated to the communities though environmental agencies claim that they implement the programme by following rule of informed consent. The environmentalists have been taking advantages of powerlessness of communities and corrupt bureaucracy institutions (in government and NGOs), and doing experimentation on livelihood means of many poor people. They have used poor communities and exploited them in the name of poverty alleviation. This is an unethical practice and abusing of poor communities.

Personally I am not in favour of putting price on the non-market goods and services of nature unless there are no alternative effective institutions to stop critically threatening of environment. It also requires well proven hedging institutions to protect livelihoods means and future opportunities of the disadvantaged people.

Posted by B.Dhakal on 23 Nov 2012



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