Study Adds Up Economic Benefits of Conservation

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The authors list numerous ways that people benefit for free from natural ecosystems—"aesthetically and culturally; via the provision of ecological services such as climate regulation, soil formation, and nutrient cycling; and from the direct harvest of wild species for food, fuel, fibers, and pharmaceuticals." Based on past studies that estimate how much people would pay for these benefits if they weren't free, Costanza's team calculated that the environment provides people with $38 trillion per year in services.

The study then compared the economic gain from farming, logging, and other forms of development with the loss of non-marketed services like soil formation, flood protection, and carbon dioxide conversion, and the compromise of low-impact activities like tourism and the sustainable harvesting of plants and animals. The biomes lost about half their value after development took place, according to the combined results of the studies.

That net loss translates to about $250 billion a year, given current rates of global development of wild areas. Some economists have questioned the techniques that the authors used to assign a dollar value to environmental services, but the authors say that they used conservative estimates. They also say that the magnitude of the benefit they calculated is so enormous that their conclusion is accurate even if the numbers are off a little.

The authors performed several statistical analyses to reach the 100 to 1 ROI figure.

To establish the $45 billion annual cost of building and maintaining an adequate global reserve of wild nature, which they define as 15 percent of the terrestrial biosphere and 30 percent of the marine biosphere, the authors extrapolated from current studies, including their own earlier research. To preserve land areas, $20 billion to 28 billion per year is needed, said the authors, while $23 billion per year is needed for the seas.

To reach the $4.4 trillion to $5.2 trillion annual return figure, the authors modified previous researchers' estimates of the gross value of 17 ecosystems across 16 biomes. For the current study, they used the net benefit of conversion—the value of the intact system minus the value of the developed system. While the reasoning sounds abstract, the financial analysis is all too real, Costanza said.

"In many cases, we're talking about replacing services that ecosystems provide, flood protection, for instance, or repairing damage once ecosystems have been compromised. It takes real money to do that."

There are also lost opportunity costs, such as the loss of potential pharmaceutical products if rain forests are razed, and quality of life issues, which can also be assigned a monetary value.

According to Costanza, the current system of cost accounting is plainly out of whack. Harmful development policies go unchecked largely because of a lack of information: Values aren't assigned to natural goods and services so markets are by definition distorted. In addition, private developers don't produce social benefits—or pay social costs.

"A compensatory system is clearly needed," said Costanza. "Corporations need to know the true cost of doing business. If we assign a system of compensatory levies, for instance, individuals will make different, more environmentally and socially beneficial decisions."

Further muddying the water is a welter of perverse subsidies, widely in use around the globe, that promote ecologically damaging behaviors that don't make sense economically. For example, many governments subsidize logging by building logging roads and selling logging rights to public lands at well below market value.

"By reallocating the funds that are supporting perverse subsidies," says Costanza, "we can easily pay the annual costs of preserving the global reserve network."

Instead of subsidizing activities like logging and cattle ranching, Costanza's team suggests that money should be used to preserve wild lands, which would yield a higher benefit to society in the form of a clean environment. This type of action would be necessary to fill in the gap produced because the market doesn't place a value on these public goods.

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