The Economics of Ecosystems and Biodiversity

Advisory board members

• Achim Steiner, Executive Director, United Nations Environment Programme
• Ahmed Djoghlaf, Executive Secretary, Convention on Biological Diversity
• Nicholas Stern, IG Patel Professor of Economics and Government and Chairman of the London School of Economic's Grantham Research Institute on Climate Change and the Environment
• Julia Marton-Lefèvre, Director General, International Union for Conservation of Nature
• Herman Mulder, was Director-General and Head of Group Risk Management of ABN AMRO Bank, Amsterdam, Netherlands
• Peter May, President, International Society for Ecological Economics
• Ladislav Miko, Minister of Environment, Czech Republic
• Walter Reid, Director Conservation and Science Program, David and Lucile Packard Foundation
• Giles Atkinson, Reader in Environmental Policy, Department of Geography and Environment and Associate, Grantham Research Institute of Climate Change and Environment, London School of Economics
• Edward Barbier, Professor of Economics, Department of Economics and Finance, University of Wyoming
• Jacqueline McGlade, Executive Director, European Environment Agency
• Yolanda Kakabadse, President, World Wide Fund for Nature from January 2010
• Jochen Flasbarth, President, Federal Environment Agency, Germany
• Karl-Göran Mäler, Professor in Economics, Stockholm School of Economics and Director, Beijer International Institute of Ecological Economics
• Joan Martinez Alier, Professor, Department of Economics and Economic History, Universitat Autonoma de Barcelona

Phase I: key messages

The world has already lost much of its biodiversity. TEEB indicates that pressure on commodity and food prices shows the consequences of this loss to society. TEEB recommends that urgent remedial action is essential because species loss and ecosystem degradation are inextricably linked to human well-being. Economic growth and the conversion of natural ecosystems to agricultural production are forecast to continue, but TEEB feels that it is essential to ensure that such development takes proper account of the real value of natural ecosystems. This is central to both economic and environmental management.

The findings of TEEB (Interim Report) were largely in three areas—the economic size and welfare impact of losses of ecosystems and biodiversity, the strong links between biodiversity conservation and ecosystem health on the one hand and poverty elimination and the achievement of Millennium Development Goals on the other, and the ethical choices involved in selecting a social discount rate for discounting the benefits of ecosystems and biodiversity.

Main findings

• 11% of the natural areas remaining in 2000 could be lost, chiefly as a result of conversion for agriculture, the expansion of infrastructure, and climate change.
• Almost 40% of the land currently under low-impact forms of agriculture could be converted to intensive agricultural use, with further biodiversity losses.
• It is estimated that for an annual investment of US$45 billion into protected areas alone, the delivery of ecosystem services worth some US$5 trillion a year could be secured.

TEEB finds that sound ecosystem and biodiversity management, and the inclusion of natural capital in governmental and business accounting can start to redress inaction and reduce the cost of future losses.

Phase II

TEEB Phase II, currently underway, takes an economic approach that is spatially specific and builds on knowledge of how ecosystems function and deliver services. It examines how ecosystems and their associated services are likely to respond to particular policy actions. A fundamental focus of TEEB is on developing an economic yardstick that is more effective than GDP for assessing the performance of an economy. TEEB recommends that national accounting systems need to be more inclusive in order to measure the significant human welfare benefits that ecosystems and biodiversity provide. Such systems can help policy makers adopt the right measures and design appropriate financing mechanisms for conservation.

In Phase II TEEB aims to:

• Integrate ecological and economic knowledge to structure the evaluation of ecosystem services under different scenarios.
• Recommend appropriate valuation methodologies for different contexts.
• Examine the economic costs of biodiversity decline and the costs and benefits of actions to reduce these losses.
• Develop ‘toolkits’ for policy makers at international, regional and local levels to foster sustainable development and better conservation of ecosystems and biodiversity.
• Enable easy access to leading information and tools for improved biodiversity practice for the business community—from the perspective of managing risks, addressing opportunities, and measuring impacts.
• Raise public awareness of the individual’s impact on biodiversity and ecosystems, and areas where individual action can make a positive difference.

Climate issues update

TEEB's Climate Update stated that an agreement on funding for forests was a key priority for governments attending the 2009 United Nations Climate Change Conference in Copenhagen.

An estimated 5 gigatonnes or 15% of worldwide carbon dioxide emissions are absorbed or 'sequestrated' by forests every year, making them the "mitigation engine" of the natural world.

TEEB finds that investing in ecosystem-based measures such as financing Reducing Emissions from Deforestation and Forest Degradation (REDD) can thus assist in combating climate change and can also be a key anti-poverty and adaptation measure.

The Update also underlines a 'Coral Reef Emergency' that is already here as a result of the current build-up of greenhouse gases. Scientists contributing to the TEEB process indicate that irreversible damage to coral reefs can occur at atmospheric CO₂ concentrations of over 350 parts per million (ppm). This is linked with rising temperatures and ocean acidification. Concentrations are above this threshold and rising. It raises concerns that stabilizing CO₂ levels at 450 ppm, or some 16% above the current levels, may condemn this critical, multibillion-dollar ecosystem to extinction and take with it the livelihoods of 500 million people within a matter of decades.

Green economy initiative

The UNEP's green economy initiative is a project designed to communicate that the greening of economies is not a burden on growth but rather a new engine for growth, employment, and the reduction of persistent global poverty. The green economy report, published in February 2011, used economic analysis and modelling approaches to provide an in-depth assessment of identified economic sectors where "greening" might lead to prosperity and job creation (i.e. traditional economic growth). This promotes sectors regarded as necessary for a green economy such as: agriculture, buildings, cities, fishery, forests, industry, renewable energy, transport, tourism, waste management, and water as well as the enabling conditions in finance, domestic and international policy architecture.

Criticism

The approach to valuing ecosystems encapsulated by the TEEB project has been criticized and is open to the same problems as affect all mainstream economic value theories. More specifically the argument is that prices need to be corrected for market failure and simple adjustments can be made to correct the price system so resources will be allocated efficiently. The basis for this recalculation is human preferences for nature, ecosystems, bugs and plants. One critique concerns the irrelevance of human preferences for determining what is ecologically essential for the maintenance of life support systems. Human preferences may be a good guide to choosing ice cream flavors but not the mix of species or gases in the atmosphere necessary to sustain life.