ECONOMIC IMPLICATIONS OF THE MA
69. The MA made it clear that there are likely to
be substantial economic benefits from better management of ecosystem
services. However it recognised that these benefits may not be
readily assessed in economic terms as they are not market-based.
As most ecosystem management decisions are influenced heavily
by those ecosystem services entering into markets, the non-market
benefits are often lost or degraded.[53]
RSPB also highlighted the potential value of non-market benefits
of ecosystem services:
The Poverty and Environment Partnership (PEP), which
DFID supports, has shown that the returns on environmental investments
are multifaceted and extremely significant. For example, investment
in soil conservation greatly enhances sustainable agricultural
practices, especially in dry-land regions. A 15-year programme
to combat land degradation, costed at between £9 billion
and £21 billion, is estimated to yield benefits 1.5 to 3.3
times higher in terms of avoided agricultural production losses
alone (Martin-Hurtado, 2002). Further benefits have also been
shown - improved food security, education, environment and access
to finance. A specific challenge for the international community
is to assist developing countries to integrate environmental and
ecosystem issues into their national development plans such as
Poverty Reduction Strategies.[54]
70. The major economic value of such non-market ecosystem
services was made clear by the Stern Review. This established
that the economic cost of failure to protect the climate ecosystem
service from greenhouse gas pollution far outweighs the cost of
effective management of the ecosystem service through reducing
greenhouse gas emissions:
Using the results from formal economic models, the
Review estimates that if we don't act, the overall costs and risks
of climate change will be equivalent to losing at least 5% of
global GDP per year, now and forever. If a wider range of risks
and impacts is taken into account, the estimates of damage could
rise to 20% of GDP or more.
In contrast, the costs of action—reducing greenhouse
gas emissions to avoid the worst impacts of climate change—can
be limited to around 1% of global GDP each year.[55]
71. The Stern Review also highlighted the significant
importance of the non-market benefits of forest ecosystems, which
currently contain more carbon than the atmosphere and also have
the capacity to remove carbon from it. The Review also stressed
other benefits of forest ecosystems such as for biodiversity and
flood protection, and called for 'urgent' action to preserve the
world's remaining forests.[56]
72. The MA found that capturing these non-market
benefits using economic incentives can improve ecosystem management
decisions. However the MA noted that there has been little research
in this area. The Stern Review called for such economic incentives
including international compensation schemes to be developed to
cover the opportunity costs incurred by those who keep forests
(i.e. the money they would have made by deforestation), as well
as the development of international carbon markets.
73. Witnesses to this inquiry referred specifically
to the importance of valuation of ecosystem services. The Royal
Society told us that adoption of MA processes in some countries
"had been slow because of difficulties in identifying the
economic value of ecosystems", and that "significant
further work is required to identify appropriate valuation methodologies
and to improve collaboration between economists and ecologists".[57]
Steve Bass from IIED felt that the MA provides an excellent framework
for action but that it has "not yet been described in ways
that make the rest of the world pay attention".[58]
He stated that if the findings are as significant as they seem
to be, the MA needs to be better presented in economic terms.[59]
74. Given the importance of the valuation of ecosystem
services, we are heartened to see that DEFRA has included as part
of the Natural Environment Policy (NEP) research programme, work
"focused on the valuation of ecosystem services and the development
of tools and methodologies to make use of these valuations".[60]
We also welcome that the Comprehensive Spending Review 2007 (CSR)
has recognised as an economic challenge:
… increasing pressures on our natural resources
and global climate from rapid economic and population growth in
the developing world and sustained demand for fossil fuels in
advanced economies.[61]
75. Given the existence of evidence demonstrating
the substantial economic benefits of sustainable ecosystem service
management we are gladdened to see that DEFRA is investing in
research to quantify and take advantage of this. As the lack of
empirical evidence of this value has made it difficult to motivate
some quarters to engage with the MA, this research could have
international consequences for its uptake. It is imperative that
DEFRA's efforts in this field are adequately funded and lead to
tools which will enable decision makers across Government to appreciate
and account for these non-market benefits.
76. Appropriate valuation of ecosystem services will
help to demonstrate the importance to prosperity of our natural
assets. Nevertheless, some environmentalists and economists have
concluded that, for environmental and social issues to be truly
reconciled with economic pressures, different econometrics of
wealth to those currently used, such as Gross Domestic Product
(GDP), must be adopted. This is because current measures ignore
the depletion of resources and damage to the environment. Indeed,
the MA itself highlighted this issue. Some have also argued that
a focus on economic growth in decision making "can give greater
weight to short-term economic cost considerations over long term
social and environmental sustainability".[62]
During a workshop on the MA held by the Global Biodiversity Sub-Committee
(GBSC), a group considering the response section of the MA considered
it "essential that the current debate on growth was moved
beyond received economic views and onto a more appropriately sophisticated
level, that recognised the value of natural assets and the costs
of their misuse appropriately".[63]
An example of a more sophisticated indicator is 'genuine saving'
which was used by the World Bank in a recent report. This measure
"provides a much broader indicator of natural resources,
environmental quality, and human capital, in addition to the traditional
measure of changes in produced assets provided by net saving".[64]
77. Proponents of alternative measures of wealth
often point out that increases in GDP do not necessarily lead
to improvements in human well-being and, due in part to the potential
negative environmental impacts, may actually lead to a decline
in well-being. Research commissioned by DEFRA described the complex
nature of the factors influencing individual well-being, leading
the authors to conclude, for example, that income offers "an
incomplete picture of individual well-being".[65]
Attempts have been made to create indicators that reconcile economic
growth with environmental sustainability and measures of happiness.
The New Economics Foundation (NEF), for example, has proposed
the Measure of Domestic Progress (MDP) which incorporates additional
factors such as the costs of crime and the breakdown of families.[66]
The Sustainable Development Commission has called for the Government
to introduce such an indicator, to be considered "alongside
GDP by 2008".[67]
The SDC stated:
We see a society and a Government whose primary objective
is still the achievement of economic growth as conventionally
understood and measured, with as much social justice and environmental
protection as can be reconciled with that central goal. We envisage
a society whose primary goal should be the wellbeing of society
itself and of the planetary resources and environment that sustains
us all, with economic objectives shaped to support that central
goal rather than the other way around.[68]
78. We asked the Minister whether the Government
was considering the use of a different measure of economic growth
that accounts better for natural resources and their finite nature:
[I think this] is exactly the flipside, if you like,
of what I said about moving to a metric and trying to get a proper
system of valuation. Only if we do that, only if we can actually
begin to quantify the value of ecosystem services and the cost
of their degradation, are we going to be in a position then to
start talking in the way that you have of measuring economic growth
in this way.[69]
79. He said that this is a "very attractive
vision" but "first of all we have to [have a] basic
agreement on a valuation system".[70]
He stressed that they have renewed research efforts in this area.
We consider that the logical conclusion of research to value
ecosystem services and to identify those factors that actually
improve human well-being, will be the development of an econometric
that measures growth in a way that recognises environmental limits
and more accurately describes human well-being. Growth is, after
all, not an end in itself. The Government must introduce an indicator
of economic growth which incorporates the principles of sustainability
and well-being as early as possible.
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