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Ecosystem Economy

Can you put a price on nature?

$5.75 per mangrove and $2.45 per honey bee may sound peculiar as tradeable commodities but as the environment becomes more battered we are realising the real economic value ecosystems supply.

The CSIRO currently estimates the total annual value delivered by ecosystems in Australia to be about $1327 billion. According to a report released by the United Nations Environmental Program Financial Initiative (UNEPFI), human impact on the environment will reduce global GDP by 20 per cent.

This suggests that when considering natural ecosystems it is important to think of them not only as providing ‘services' essential to human survival, but also as an integral part of our economic prosperity. Collectively, these services maintain our planet in a life-supporting state. However, humankind has already cleared half of the world's natural habitats. Often, environmental destruction occurs from the pursuit of profit, but this degradation also has a serious cost to the economy. Failed ecosystems would spell severe environmental and economic disaster.

Ecosystems under threat

We engage directly with some life-supporting eco systems, such as those associated with our food chain on land or sea. Of others we are less aware, such as daily decomposition of leaf litter, mangrove swamps that provide natural fish hatcheries or dung beetles that regularly ‘clean up' after our cows.

However, many of these treasured and interrelated ecosystems are under threat. Between 1990 and 2000 more than a third of global mangrove forests were lost; this together with the loss of other coastal defences has reduced our protection against natural hazards such as hurricanes and tsunamis.

Water resources are especially endangered. In addition to being essential to survival, water is indispensable to critical industries such as agriculture. In some regions, 5 to 20 per cent of freshwater use currently exceeds sustainable supply and 15 to 35 per cent of irrigation sources are unsustainable.

Overfishing of shellfish and top-predators, as well as coastal pollution have led to the near collapse of most coastal eco-systems surrounding Australia and North America. Studies have shown an increase in the occurrences of red-tides, cloudier coastal waters and ‘low-oxygen' waters that do not support life, and an increase in some deadly micro-organisms.

The concern about ecosystems is mankind's dependence on them; take the bee out of farming, for example, and you'll lose not only honey, but also pollination, leaving nothing to harvest, and subsequently nothing to eat.

Factoring ‘eco' in economy

Impacts of such magnitude have become a great global concern and nations are taking notice. Environmental ministers of the G8 countries along with environmental ministers from newly industrialising countries agreed on the ‘Potsdam Initiative' in March 2007, to estimate the economic costs of global loss of biodiversity.

Companies are also recognising the need to preserve ecosystems and are developing their own sector policies and initiatives to take action. The ANZ bank has initiated a Forests and Biodiversity Policy, acting as a reference point for future ANZ decision-making on any transaction that has the potential to significantly impact forest and biodiversity values. Meanwhile, Citigroup, recognising that illegal logging is an increasing threat to forest ecosystems worldwide, has worked with external experts and NGO partners to develop a workshop series for bankers and portfolio managers involved in the forestry sector.

There is arguably nothing on earth greater in ‘value' than our ecosystems, and it is within our power to protect and nurture these life giving mechanisms. The eco clock is ticking fast; does the future look sustainable?

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