Imagine a world where, in each locality, a person (or group of people) maintain healthy trees, so that the air around the locality remains breathable. This “service” that the trees are providing — fresh oxygen — has become so rare that it is being treated like a commodity. Every month, you have to transfer some money to these tree managers as payment for the oxygen their trees release into the air. If you do not transfer this money, there is a risk that these tree managers find more value for themselves in selling off the trees as timber and selling the land for real estate.
Is putting a price on nature the only way to conserve it? Or are we crossing a moral line by “commodifying” nature?
Payment for Ecosystem Services
The concept of Payment for Ecosystem Services (PES) was developed based on the reasoning that environmental degradation is a case of market failure. There is a widespread belief that nature conservation for its intrinsic value has been unsuccessful. There is no financial incentive to leave the environment as is. Therefore, by assigning an economic value to nature and the natural processes that keep life going, there is a financial incentive to protect them. This economic cost is factored into business ledgers that currently treat nature as a free service. This would, thus, make them use natural resources more judiciously. Intangible ecosystem services like climate regulation, water purification, and oxygen release, are given due importance as a result, and the people who own/protect the lands where pristine ecosystems exist now have a financial incentive to keep the ecosystem as is, instead of exploiting them for economic improvement.
PES is seen as a leading solution to preventing environmental degradation, as it creates a “business case” to conserve nature. There are several examples of successful PES models being implemented all over the world.
While adoption for PES has increased, an ethical debate has grown in the sidelines. Is it okay to monetize nature? Or are we crossing a moral line by “commodifying” nature? Today, we explore both sides of this dilemma.
The arguments against pricing nature and payments for ecosystem services
PES has its roots in ideas that originated in the 1970s and 80s. The phrase “nature capital” was first used by German statistician and economist E.F. Schumacher to describe nature in his 1973 book “Small Is Beautiful: A Study Of Economics As If People Mattered” (source). Robert Costanza and his colleagues were the first to put a number on the value provided by “ecosystem services” — natural process that regulate climate, water, temperature, soil nutrients and multitude of other aspects of natural cycles. This value amounted to USD 33 trillion annually (source).
Costanza goes on to say that their valuation of ecosystem services is probably an underestimation. There lies the first problem, say critics of this method of nature conservation. Nature, unlike a supply chain, is highly interconnected. The interrelationships are extremely hard to track and quantify. Therefore, “realistic” valuations of nature are impossible, and are likely to run into figures so high that it will naturally be discounted from any economic evaluation, which was the purpose for such valuations.
On the other hand, critics continue, if we try to simplify calculations and make ecosystem valuation realistic, we risk underestimating and undermining the role of nature in our economy. Introducing room to discount and account for different aspects of nature in our valuation also makes it very easy for vested interests to fudge numbers to suit their needs.
The critics go on to say that while the initial intention to price nature and describe it in an economic frame of reference was to make people see value in these processes, others have now used these concepts to make a case to see nature as something fungible. This idea has already gained traction with “marketplaces for nature”. But nature is not fungible. A company cannot convert a grassland into a mine by paying to protect a grassland in another location, or protecting a mangrove forest. The habitats of a wolf cannot be destroyed with the promise that the habitats of bears in another place is being protected.
If a forest improves water quality for a city downstream and a PES is established to protect the forest, who gets the money that the city pays? Trading nature and natural processes requires boundaries to be drawn and ownership staked, because there needs to be a clear seller(s) who receives the money from transactions. Is the government the owner of the forest? Are the people living in the forest the owners of the forest? Indigenous communities face the biggest threat from such conversations. They live in and around ecosystems that hold the largest value from the perspective of ecosystem services. However, many of these communities are unlikely to have the legal and political backing to assert their ownership. There is a human rights and indigenous rights issue that makes implementing such systems very murky, detractors declare.
By pricing nature, we are trying to solve a problem with the very tools that caused the problem — capitalism, free market, privatization. This transfers power to corporations and further moves away from democracy and social justice.
There is a spiritual argument from critics as well. The practice of viewing nature in economic terms has changed our vocabulary. Nature is now “natural capital”; natural processes are now “ecosystem services”. This change has slowly but surely altered our relationship with nature. A relationship that was built on coexistence has now turned into a sort of “master-servant” relationship where nature exists to serve our society and economy. Critics argue that in the process, we are stripping nature of its wonder. Something that inspires suddenly turns into something that just…is. Turning nature into goods and services is akin to losing a part of our soul.
The arguments in favor of pricing nature and paying for ecosystem services
The primary argument of the supporters of pricing nature is the initial intention with which it was conceptualized. Making the economic or business case for nature to stay as is has more resonance for decision-makers and strengthens the hand of people which to protect nature. People understand money.
Supporters commonly site examples like this to make their case…
Protecting nature for its intrinsic value thus far has provided mixed results, as in most cases, the benefits are intangible.
Consider a village on the fringes of a large city. As the city expands, the real estate value of the village and its natural surroundings skyrockets. Should the villagers stick to their current situation and let their natural surroundings remain untouched? What do they get for this? What could they get by selling the land? Possibly a big house, a fast car, moving up the social ladder, finding a new life in the big city? It is likely that the benefits of their natural surroundings are taken for granted and hold no extra incentives for them. The latter option, thus, might immediately be more attractive.
But by pricing nature, the villagers could make a better comparison. A PES program here could pay the villagers to continue living as is. There is additional financial value for them to do what they have always done. They could get the things they wanted — a bigger house or a greater social role — without uprooting their lives.
It is not that we are replacing economic value for intrinsic value, but that we are adding an economic dimension to the intrinsic value for stakeholders who understand that language better.
After all, Tony Juniper argues, it is not environmentalists who devalue nature but economists. Not putting a price on nature in a world that increasingly thinks in economic terms risks inadvertently conceding that nature does not have economic value. This undermines conservation efforts. Advocates of pricing nature believe that since corporations and the free market have caused the problem, it is best to reorient incentives in a language these actors understand, so the problem is curtained at source.
The practice, supporters argue, are obviously not without fault. A market-based solution cannot be applied to every conservation proposal and government/policy oversight is a must. Implementing the concept must come with checks and balances that are being developed as we speak. And constructive criticisms from the opposing camp are helping to refine this method. But, they continue, the world is not a place where we can do without such a narrative.
Priya was having a coffee with a colleague after a meeting. At the coffee table, a magazine had a front page spread on urban green spaces conversation. Looking at it, the colleague remarked about these “tree-huggers are spoiling the economy to breathe clean air”.
Moral appeals in such situations just won’t work, supporters say. A price tag on nature (crass as it may sound to some) is a tool that must be leveraged.
What’s your opinion on this debate? Comment below!
Thanks for this – very clearly expressed, interesting and thought-provoking. My immediate reaction is that perhaps context-based both/and scenarios can be developed rather than a generalized either/or position?
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I’m glad you liked it!
You’re right. This form of nature conservation is now here to stay, but decisions must be taken on a case-by-case basis, carefully looking at the local context. It’s one of the challenges of PES; scaling them is difficult because the same PES mechanism that worked in one place will likely not work in another.
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