Posted on 11-8-2002

Its $250 Billion A Year
Photo shows Zoologist Andrew Balmford

Seeing as the prevailing global consciousness is framed by money,
scientists have put the loss of natural habitat in the frame: its $250
billion/year.

The economic value of wild ecosystems far outweighs the value of converting
these areas to cropland, housing or other human uses. A study in today's
issue of the journal "Science" says habitat destruction costs the world the
equivalent of about $250 billion each year. The research team estimates
that a network of global nature reserves would ensure the delivery of goods
and services worth at least $400 trillion more each year than the goods and
services from their converted counterparts. This means the benefit to cost
ratio is more than 100 to one in favor of conservation - a "strikingly good
investment," the researchers wrote. "The economics are absolutely stark. We
thought that the numbers would favor conservation, but not by this much,"
said lead author Andrew Balmford of the University of Cambridge Zoology
Department.

Although habitat destruction continues unabated throughout the world,
mounting evidence suggests that this trend is a bad economic bargain. From
tropical forests to ocean reef systems, about half of an ecosystem's total
economic value is lost when that ecosystem is converted from its wild state
to human use, according to the "Science" study. Balmford and colleagues
compared the difference in the value of economic benefits provided by
relatively intact ecosystems and by converted versions of those ecosystems.
Although they reviewed more than 300 case studies of such conversion, they
only identified five examples that met their rigorous standards for
comparing benefits. "A single year's habitat conversion costs the human
enterprise, in net terms, on the order of $250 billion that year, and every
year into the future," the team concludes.

The economic value of an ecosystem can be measured in terms of the "goods
and services" - including climate regulation, water filtration, soil
formation, and sustainably harvested plants and animals - that the
ecosystem provides. Pricing these goods and services is difficult, since
they include items that are not bought and sold as part of a market driven,
conventional economy. Economists assign values to non-marketed services
using a range of techniques, from estimating the cost of replacing these
products to assessing how much individuals and nations would be willing to
pay for each ecosystem service. Balmford and his team analyzed the case of
a tropical forest in Cameroon converted to small scale agriculture and
commercial plantations, another of a mangrove system in Thailand converted
for shrimp farming, and another case of a Philippine coral reef dynamited
for fishing. In each case, the loss of ecosystem services such as storm and
flood protection, atmospheric carbon sinks, sustainable hunting, and
tourism outweighed the marketed benefits that came with conversion. The
total economic value of the intact ecosystems ranged from 14 percent to
almost 75 percent higher than the converted ecosystem values.

For example, the study cites a project in Canada, which converted
freshwater marshes into one of the country's most productive agricultural
areas. The study team calculated that the area would be worth about 60
percent more if the wetlands were maintained for the social benefits of
hunting, trapping and fishing. According to the Balmford model, the value
of sustainable management of a logging operation in a Malaysian tropical
forest for flood protection, carbon stocks and endangered species assets
was worth 14 percent more than the benefits of high intensity timber
harvesting. Despite these figures, the net benefit to the public of
conservation is generally ignored, compared to the short term, private
economic gains that often accompany conversion, the team wrote. "We've been
cooking the books for a long time by leaving out the worth of nature," said
Robert Costanza, an ecological economist at the University of Maryland and
an author of the "Science" study.

Costanza was one of the first scientists to draw attention to the concept
of estimating dollar values for natural habitat. He and a team of
researchers estimated in 1997 that the average global value of wild nature
was $33 trillion a year. But Constanza said even he was surprised by the
results of this new study. "We concluded that there is at least a 100 to
one global benefit cost ratio to maintaining wild nature instead of
developing it. None of us guessed it would be that high," Costanza said.
"Every year we continue to convert habitat, it's costing us $250 billion
over any profit that comes from development."

Lack of information about the economic worth of ecosystem services, the
failure of markets to capture and value these services, and tax incentives
and subsidies that encourage land conversion all contribute to continued
habitat destruction, wrote the "Science" authors. "We need to tackle all
three of these, and there's no reason not to tackle all three at once,"
said Balmford. "However, in terms of immediate bang for buck, directly
challenging subsidy schemes is a good way to improve both economic
efficiency and the environment."

Researchers and policy makers are exploring several different ways to bring
nature into the marketplace, Balmford said. Devices such as carbon taxes
and credits, premium prices for certified, eco-friendly products, and even
direct payments to the communities that live in globally significant
conservation areas are under consideration. The last proposal is somewhat
controversial, but it may provide a way to compensate those communities for
their reduced opportunities to exploit ecosystem resources, while
reflecting the major global benefits of conservation, Balmford explained.
"There's a growing feeling that if what you're really after is conservation
benefits, you may sometimes need to pay for that directly," Balmford notes.

The study estimates that by spending about $45 billion a year to conserve
natural habitat on land and in the oceans, the net return on the services
produced by nature would be between $400 and $520 trillion. About $6.5
billion is now spent to sustain natural areas around the globe. Half of
that is shelled out by the United States. "We have to keep track of our
natural capital. We've been liquidating it and not including the costs in
our calculations," Costanza said. "The environment and the economy are
tightly interdependent." The "Science" study highlights the need for
further data on the economic worth of wild nature, as there are few signs
that global ecosystem loss is slowing down.

On the eve of the World Summit on Sustainable Development in Johannesburg,
South Africa, natural systems are changing from their intact state at a
rate of 1.2 percent per year, or 11.4 percent in the decade since the last
sustainable development summit in Rio de Janeiro. "People are hearing a
message that nature is being eroded, but it takes a while to sink in, even
for me," Balmford said. "One third of the world's wild nature has been lost
since I was a child and first heard the word conservation - that's what
keeps me awake at night.