
Money makes the world go round.
But there are some things in life that money just can’t buy.
EI: Nature is priceless, because you can’t put a price on nature.
And while that’s true, it’s also a little sticky. Because it’s so hard to put a price on nature, we often don’t value it at all. We make a lot of decisions about what makes sense according to business and GDP and economic growth, but we forget that big huge thing that makes it all possible.
So what happens when we try to put a dollar value on something priceless?
MS: I don’t know any other investments where you get $27 out of a $1 you put in there.
Welcome to In Our Nature, a podcast by the ECOBARI Collaborative that uncovers what we need to do to protect ecosystems, so that they can protect us. I’m your host, Isha, and in this series, we explore our deep connections with the natural world, and how restoring nature can help us adapt to climate change. ECOBARI is a shared initiative of nine founding partners, and is convened by the Watershed Organisation Trust.
Our fourth episode goes right to the heart of the problem. The driving force behind the loss of our ecosystems are the things that make money – like industry, agriculture, and so on. Of course, these things are really important – but the fact is we’re not taking into account the value of what nature provides us, and that’s why we’re constantly choosing other things.
MS: Very often we take what nature provides us as granted.
That’s Mark Schauer, who works with GIZ, Germany’s agency for international development. He’s a forester by training and manages the Secretariat for an initiative called Economics of Land Degradation, or ELD, which has been around since 2011.
EI: The moment you are showing the value of natural resources, the moment you are showing the contribution of restoration, that’s what will make a difference. I think in terms of decision making, for decision makers, it is really important. But also for the other communities, it’s a way of creating awareness, actually.
And that’s Ephrem Imanirareba, a natural resource economist who works with IUCN, or the International Union for Conservation of Nature. He’s also ELD’s Ambassador to Rwanda, which involves spreading awareness about ELD’s work in the research and policy community in his country.
Ephrem talks about why economic valuation is important – because it helps decision makers and communities better realise the trade-offs they are making.
EI: What I want to see all this research coming up with, I would say, is the conservation business case. The moment you are showing to decision makers that the cost of inaction is really high, we will be waking up the decision makers towards taking appropriate actions.
He mentions the cost of inaction, which can be seen pretty clearly through ELD’s studies in Africa, which show that the benefits from preventing land from degrading or desertifying are 7 times higher than the cost of doing so.
MS: Investing into nature based solutions, which help to improve your preparedness for drought incidents. There are numbers which show that for every dollar or rupee you might invest there, there’ll be 27 dollars or rupees in return, on the economic benefit that the society derives from this. I don’t know any other investments where you get $27 out of a $1 you put in there, so I think it’s quite worthwhile.
These numbers are pretty incredible, but can they really have an impact on the way we make decisions? And before we get into that, where did this whole idea of putting a price on nature come from?
The story starts with a man named Robert Costanza, back in 1997.
MS: Robert Costanza, who was the first who came out with a number on economic valuation. [38:47] It’s trillions, literally, that human society derives from ecosystems every year.
The number, if you’re curious, was averagely $33 trillion dollars per year. For context, the study also estimated that global gross national product, or the value of all goods and services provided by the whole world, was around $18 trillion per year.
And this was followed by another seminal report in the 2000s, by Nicholas Stern in the UK.
MS: Lord Stern set up a report which showed that it’s worth investing into measures combating or mitigating the damage that derives from climate change. So it’s worth investing early because it’s cheaper than the damage that will be created through climate change, pretty much the core message there. So this was the first time that this was proven or brought forward by an economic study by a pretty regular economist.
So this idea starts to emerge that we’re a lot better off investing in protecting nature than trying to recover from damages and irreversible losses. And it’s not always about climate change or environmental damage – sometimes, it’s just the more cost-effective option.
MS: You need to, sometimes need to invest in larger scale, nature based solutions, as New York City did a while ago in this famous Catskill Mountains example.
New York City is famous for having some of the best tap water in the world, which comes unfiltered from the Catskill Mountains. Over the last 25 years, the city has protected its water quality at source, by buying land to preserve the local ecosystem, working with farmers to prevent agricultural pollution, ensuring that all septic systems in that area are in peak condition, and more. This means that rather than building a $10 billion dollar facility in the city that has annual operating costs of $100 million dollars, they invest in watershed protection for just $1 billion dollars over the course of an entire decade. And their water quality tests always meet their rigorous standards. Incredible!
Having that math available makes it a lot easier for decision-makers to take these kinds of calls. Mark talks about his experiences in Jordan and Georgia.
MS: In Jordan, on traditional range land management systems, which is called Hema, which was re-established after our study on 120,000 hectares I think. So there was a concrete outcome that came out of our study there in that range. [32:41] In Georgia, our results led to a new legal framework on treating your fields. [41:49] When we explained to decision makers in Georgia, for example, how important it is that they don’t just burn all the residue on the field, but there is a lot that can be done with it and that there is an actual dollar value to it, they understood.
And it’s not just policymakers – businesses have a lot to do with this as well.
MS: There is a business case there. So now we’re also trying to bring in the private sector, because all these funding needs that we have and necessary restoration of ecosystems and the services there for society. It cannot all be carried by public funding only, so we need to bring in everybody and make it worth their while.
Mark gives the example of how healthy ecosystems can make some businesses more efficient – for example, hydropower.
MS: This can also be done in close cooperation or through green investment. For example, if we put money into watershed management, this will benefit green energy, water energy that is connected with that watershed. [19:16] Regreening the watersheds to reduce sedimentation and extend the lifetime of your turbines, stuff like that will be implemented in the future in Rwanda.
But also, if we want our businesses to do well, we need our basics in order.
MS: It’s also saving them or preserving enabling them to maintain their business model there. When we see we’re working, for example, with the Mulloon Institute in Australia, they are following an approach called rehydrating the landscape. This approach allows farmers, everybody in the primary sector active there, to maintain their businesses there, otherwise, they’ll be so heavily affected by the increasing number of droughts hitting them there. I mean, their business will just literally dry up.
Okay, so the short version is yes, you can make a pretty compelling economic case for why we need to protect nature. But to be able to make that case, you need a solid set of calculations.
EI: Assigning dollar value to some of the ecosystem services is really complicated, and differ from one location to another. But also it depend on different factors, include the location, the cultural values, the socio-economic factors, all those things.
Different people value different things within an ecosystem, and the calculations have to be based on what’s important to the locals.
MS: There’s no silver bullet for economic valuation which can be then be compared, say, hills in Rwanda to a landscape in Germany, where I’m sitting here, because here in Germany, people would value, for example, a recreational value, much higher than as in Rwanda, where people are just struggling for their daily living, of course. So they’d be more interested, or they put a higher value into, say, the protection from erosion or something like this, right? So different aspects need to be considered according to the needs and the conditions that we are looking at on the ground there.
This means that calculations have to be context-specific, based on the perspectives of the local people. And for that, you need to understand those perspectives first.
MS: So you start with a consultation of your local stakeholders. What are the needs? What is available there?
Once you have the priorities of your stakeholders, there’s a lot of different ways to go about estimating the value of ecosystem services.
EI: There are several methodologies, for instance, like willingness to pay or maybe avoid the cost.
Willingness to pay includes studies that estimate how much people would be okay to pay for services that are typically free, which can be anything from flood control to aesthetic value. As for avoiding the cost, Ephrem gives the example of traditional medicine.
EI: In the past, our parents used to have to cure themselves using traditional medicines. Nowadays, we are having tablets because of money. If someone is getting the flu, someone is getting something really simple, the amount of money we are spending on different tablets, when you compute them, those are the value of those traditional medicine that are not there anymore because they are becoming endangered species because of climate change, because of different factors.
So if you could use medicines that grow for free in your local ecosystem rather than buying medicines from the store, you could count that as an avoided cost.
EI: Let’s say hedonic pricing, for instance, which is another methodology we are using to associate ecosystem services that are directly linked to infrastructure. If you are going to rent a house with a garden comparing to the house with paved ground, the price will be different.
Property value is typically higher when there’s nature around, and that’s another factor to account for.
EI: When you look at the travel cost method, for instance, I’ll give an example of Rwanda as a country where I have more experience. So tourism is most important revenue, income generating activity. People are traveling across the world just to come to Rwanda, to visit mountain gorillas, at higher cost, very expensive. That itself shows how much people are attributing to mountain gorillas as a flagship species of the country. When you look at how much people staying in the city are traveling towards coastal areas, towards the lakeside. Instead of just having parties or enjoying around in the city, they are just spending a lot of money just traveling towards coastal areas. Those are the values of that ocean.
And tourism is another revenue generating activity that’s often linked with nature.
EI: There are also other methodologies that we are using to estimate the value of direct benefits, like market price. Those are the provisioning services, because we know the cost of water. We know how much timber could cost.
there’s the actual cost of things that come from nature, which you can sell, like wood or pharmaceutical products. Those are called provisioning services in ecologist lingo.
There are a whole lot more methodologies as well, but this should give you a gist. Although, Ephrem says, most of these only account for direct values, things that we’ve already sort of quantified.
EI: Indirect values, they are very difficult to quantify. And they are very important. If you say soil formation. For instance, how can you associate a dollar value to soil formation? How can you associate dollar value to some of the factors, pollination, for instance?
Indirect values are usually different kinds of ecosystem functions – like water purification, pollination, and temperature regulation. We can’t live without them, but they’re also really, really hard to put a price to. That means most of our calculations don’t actually account for the full value of nature.
EI: Whatever we are doing, we are trying to associate economic value to ecosystem services. But we are not really estimating the real value of nature. [41:46] You can’t have the real economic value of ecosystem services. It is always beyond what we can estimate.
Like he said right at the start, nature is priceless.
EI: But even if you are calculating for provisioning services, you still get positive figures, because restoration, or maybe conserving natural resources is not expensive compared to the benefits.
So even without any of those indirect values, we’re still getting strongly positive economic benefits in terms of protecting nature. Think about what it would be if we even came close to the full picture.
So far, we haven’t talked about one of the most important stakeholders in projects that work on protecting and restoring nature – and that’s local communities.
EI: One of the things I’m seeing for the community, that they may be incentivised. First of all is giving them capacity building, include creating awareness among the communities, because it is really important to use the local situation, what is happening on the ground, life experiences, just to create awareness.
Natural resources have a lot of value for local communities, who are usually dependent on them for their livelihoods – so bringing them into the dialogue about protecting nature is crucial. But Ephrem says it’s also important to keep their needs in mind when designing restoration projects.
EI: You also have to align this with existing problems, what are the society problems? What are the challenges on ground, if they have malnutrition, providing fruit seedlings will be very important. The desires of the community, if it’s a community that is a certain percentage depending on firewood, fast growing trees are most preferred. If you are doing agroforestry, trees that are desired in the same area that are not having this high competition to to crops are most, most desired.
This helps build their buy-in and willingness to be a part of these efforts. Also, he says, think about different ways to enhance their incomes.
EI: Some of the projects are having other packages, like creating farmer groups for saving activities, maybe training them on how they can, probably from the established forest, they can have beehives. They can produce honey, or all those associated initiatives. How they can do some post harvest practices, how they can store their productions. Those are the packages that have to be aligned with ongoing restoration initiatives, but rather helping farmers to move from one step to another towards personal developments.
At the end of the day, it’s local communities who live and make a living from the ecosystems they’re a part of. So efforts to preserve nature need to keep them in mind.
Once you’ve got the all right people in the room, a solid plan, and compelling findings from the research, there’s only one thing left to figure out: communication.
MS: I once told my colleagues there that we need to create messages so my mother can understand what I do every day in the office. You know, it has to be brought down to that level sometimes right? Because not everybody is an expert. There’s so many laymen, even on decision making level there, who do not understand rightly what the impact is and the size of the benefits, the sheer size of these benefits we derive from natural ecosystems and their services to society.
And that’s the most important thing, the reason that ELD is doing what it’s doing.
MS: We are not producing our scientific results trying to make them as robust as possible, but they need to be suitable for actual decision making there, so we do not want to sit in our little scientific or research ivory tower there, but go out there and facilitate investments, actual decision making there.
Going forward, Mark and Ephrem both think that there are ways that ecosystem valuation needs to evolve.
MS: Something that is really upcoming and could use some more attention, is natural capital accounting. So how can we get the value of ecosystems more deeply merged into state financing there, it would be better acknowledged in that context, and also, you know, has effect on all decisions that are being taken there, if the environment the services provide is seen as a natural capital, as an asset that we deal with that could certainly be something that we should all look more into.
EI: We also need to think about how we can stretch our minds towards those complicated ecosystem services. Because with technology, with artificial intelligence, so many things evolving, we need to go beyond provisioning services and do as much as possible.
So there is a need to think deeper about how to put a price to those indirect values, and start including the wealth of our natural capital into our national and state budgets, so that they are a part of every decision we make.
But, as always, there’s also the need to do a little bit of soul searching.
MS: There’s a guy, his name is Aldo Leopold, and he said, we abuse land because we see it as a commodity belonging to us, but when we see land as a community to which we belong, we men begin to use it with love and respect. So you know, we have to establish an understanding that land provides for us, but we have to take care of it.
Thanks for listening to In Our Nature! If you like this episode, please share it far and wide to help us get the word out there. We’re super grateful for your support and your attention.
ECOBARI stands for Ecosystem-based Adaptation for Resilient Incomes. Our collaborative aims to spotlight and enable solutions that build climate resilience and sustainable livelihoods by restoring, protecting, and enhancing nature. It’s a shared initiative of nine founding partners with diverse areas of expertise, including rural development, action research, sustainable finance, nature conservation, and policy engagement. To learn more about ECOBARI, visit our website at www.ecobari.org
Speakers
- Mark Schauer (GIZ), Coordinator of ELD Secretariat
- Ephrem Imanirareba (IUCN), ELD Ambassador for Rwanda
- Isha Chawla, Anchor, ECOBARI
Sources
Acharya, R.P., Maraseni, T.N. & Cockfield, G. (2021). Estimating the willingness to pay for regulating and cultural ecosystem services from forested Siwalik landscapes: perspectives of disaggregated users. Annals of Forest Science 78, 5. https://doi.org/10.1007/s13595-021-01046-3
Costanza, R., d’Arge, R., de Groot, R. et al. (1997). The value of the world’s ecosystem services and natural capital. Nature 387, 253–260. https://doi.org/10.1038/387253a0
ELD Initiative & UNEP (2015). The Economics of Land Degradation in Africa: Benefits of Action Outweigh the Costs. ELD Initiative.
Economics of Land Degradation Initiative. ELD Ambassadors. ELD Initiative.
Grantham Research Institute on Climate Change and Environment (2023). What is the Stern Review? The London School of Economics.
Office of the Mayor, New York City (2017). High Quality NYC Tap Water Receives New Filtration Waiver. The Official Website of the City of New York.
Credits
Produced by Isha Chawla
Original score by Anurag Baruah
Sound effects from Freesound.org
Music from Epidemic Sound and Empathy 1 by Chinmaya Dunster (11:50)
Listen to the series here