Tag: Special Interest Law Policy

Ecosystem Marketplace’s briefing for the business community on water risk, published this month, provides the sector with nature-based solutions to their water challenges while citing companies that have already met with success using this approach. Preparations are underway for two upcoming Katoomba events-one in Brazil in March and the other in Peru in April.

This article was originally published in the Water Log newsletter. Click here to read the original.

30 January 2014 | Greetings! This month we published our latest piece of market intelligence, a briefing for business on managing water risk at the landscape level. Building on data from the State of Watershed Payments report and our inventory of projects, we benchmark companies employing “nature-based” solutions to their water challenges.

Business leaders from Coca-Cola to SABMiller to Sony are experimenting with natural infrastructure investments that address many of the operational risks at the top of their lists – including supply disruptions and emerging regulations – while saving money, increasing resilience to climate and natural disaster shocks, and improving relations with local communities. We also talk about what our ‘State of’ findings mean for business: whether anticipated new regulations, unseen risks, or new sites and sectors of opportunity.

In this month’s Water Log, we bring you an array of stories from around the world, including updates on benefit-sharing mechanisms in the Andes, forest investments in Europe, a new network for water quality trading in the US, and an opinion piece on the practical value of valuation exercises. As always, if you have a tip, a job announcement, or an issue you’d like to see featured in the Water Log, get in touch.

We’re also busy preparing for two Katoomba events this spring. Katoomba XIX: Scaling Up Sustainable Commodity Supply Chains takes place on March 19-20 in Iguazu Falls, Brazil. The next month, we’ll be in Lima, Peru for Katoomba XX: Climate, Forests, and Water: A Vision for Alignment in Tropical America on April 22-25. Stay tuned for updates and coverage in the lead-up to these meetings.
 

— The Ecosystem Marketplace Team

For questions or comments, please contact [email protected]

GENERAL The Threat Beyond The Factory Walls: What Businesses Are Missing About Water Risk The Elk River in the US state of West Virginia made headlines around the world when a small and preventable chemical spill there left more than a quarter-million people without clean water for over a week. Most water risk, however, is much less dramatic. Colombian beer-maker Bavaria Brewery, for example, realized the extent of the risk it faced when its water bills began increasing a few years back.   The cause, it turned out, was a gradual shift to cattle-ranching and farming on the high-altitude grasslands above Bogotí¡, known in Spanish as parí¡mos. In a chain of events familiar to water managers around the world, large quantities of sediment began washing downstream out of the degraded parí¡mos. In the city, the Aqueduct and Sewage Company of Bogotí¡ had to carry out additional treatment on the water before it met acceptable standards, and passed the costs of treatment on to water users like Bavaria – which is how a brewery suddenly became very interested in what was happening in the mountains.   Like Bavaria, companies all over the world face risks that come from beyond the fence line of their operations. But so far, few businesses are addressing – or even thinking about – water risk at a landscape level. A recent CDP survey of Global 500 firms found that two-thirds had targets for internal water management within their direct operations, but just four percent had set goals for managing water risk in their supply chain, and only three percent did so for risk at the watershed level. New research from Ecosystem Marketplace, however, suggests the private sector may be starting to pay attention. – Keep reading here. – Download our new briefing for business on watershed investments. The Value of Ecosystem Services Valuations Nothing focuses the capitalist mind like high worth. If natural ecosystems can be demonstrated to have high value in the goods and services they provide, then – or so the thought goes – governments whose responsibility it is to ensure they are protected will be compelled to meet their obligations, while the private sector will see real benefit in investing. Communities and property rights owners will be stronger stewards, acting as individuals and as societies in ways so as to avoid undermining the golden goose.   We have seen this work in practice, and only a fool would argue that stressing the value of nature is a waste of breath. But what roles does economic valuation play in this? Is economic analysis always necessary to achieve conservation or sustainable use? And do economic analyses always lead to the expected, desirable outcomes? Tundi Agardy, a marine conservation expert and the director of Forest Trends’ Marine Ecosystem Services Program, discusses her views on the benefits and dangers of ecosystem services valuations. – Read it here. Water Is A Top Three Global Risk, Says World Economic Forum Too much, too little, too dirty. For the third consecutive year, reckless use and abuse of water is seen by global authorities as having the potential to seriously disrupt social stability, upend business supply chains, imperil food and energy production, and generally make life miserable for billions of people, according to the World Economic Forum’s annual Global Risks report.   The various threats to the planet’s supply of fresh water rank third – behind debt crises in key economies, and persistent unemployment – on the list of convulsive planetary threats of greatest concern to more than 700 business, government, and nonprofit leaders who responded to the Geneva, Switzerland-based think tank’s annual survey. The security and quality of the world’s water, however, goes even deeper than its bronze-level citation. At least three of the top ten risks identified in the World Economic Forum’s survey are principally problems fundamentally involving water. Problems involving water are generally viewed as having effects confined to a specific community or region. But the authors of the Global Risks study argue that water shortages and bursts of surpluses caused by flooding are systemic risks that reach much further. – Get the full story. Maryland Marsh Plans To Rise Above The Rising Tides The tall pine that stands at the edge of the marsh looks permanent to the untrained eye, but when we step off the pavement and onto the forest floor, the ground sways like a mattress. We’re standing on what Erik Meyers calls terra infirma. “This is all history,” he says. “This is all going to be gone.”   Maryland’s Blackwater National Wildlife Refuge is disappearing due to sea level rise and is fast converting into open water. But non-profit The Conservation Fund in partnership with other organizations and federal agencies have crafted a plan to save the critical bird habitat with an adaptation strategy involving marsh migration upslope. – Read more at Watershed Connect. A New Strategy To Improve Water Quality One Targeted Watershed At A Time More than 15,000 streams, rivers, and lakes in the United States are too polluted with nutrient runoff to support wildlife, be enjoyed recreationally, or serve as a drinking water source. In the Mississippi River Basin (MRB), a region that encompasses about 41 percent of the continental United States, the majority of the local water quality pollution stems from farming activities involving fertilizer and livestock manure use. The MRB drains into the Gulf of Mexico, where the county’s largest “dead zone,” an oxygen-devoid region, forms every spring and wipes out aquatic life and fisheries.   Few programs have seen widespread success in tackling either local or the Gulf’s growing water quality problems, but an emerging initiative could present a way forward. The U.S. Department of Agriculture (USDA) launched the Mississippi River Basin Healthy Watersheds Initiative (MRBI) in 2009. New research from the World Resources Institute finds that with some specific improvements, the MRBI’s new approach could play a key role in improving the nation’s inland and coastal water quality. – Find out how. POLICY UPDATES Scaling up PES Projects in Europe’s Forests Clean air, fresh food, medicine and shelter are just a few of the services we get from forests. The United Nations recognized this recently with a report compiled by three agencies highlighting the benefits of paying forest owners for caring for these resources and services. The United Nations Environment Programme (UNEP), UN Economic Commission for Europe (UNECE), and the Food and Agriculture Organization (FAO) assembled the report with the intent that it serve as a tool for governments to create legislation supporting sustainable behavior in Europe’s forests. The report encourages a scaling-up of payments for ecosystem services (PES) projects. It notes PES are particularly effective in creating a system that sustains the service while also empowering local communities, by initiating opportunities or helping to maintain an income. Coca Cola’s bottling plant in Tagua, Portugal, for instance, pays local forest owners to maintain their forests. A healthy forest ensures a properly filtered supply of water for the plant. The report includes several best practice examples like this, but also stresses the importance of having sound policy in place in order for PES to function at its best. – Learn more at Eco-Business.com. Akron is the Next Ohio City to Go Green A third Ohioan city has become interested in green infrastructure. Akron, like Cleveland and Cincinnati, wants to reduce its sewer overflows by keeping excess runoff out of them. Green initiatives like permeable pavement, rain barrels, retention basins and green roofs can make that happen. At present Akron’s sewer overflows dump two billion gallons of waste into the Cuyahoga and Little Cuyahoga Rivers, and into the Ohio and Erie Canal. Akron currently has a consent decree to address stormwater pollution, which doesn’t include any natural infrastructure elements, pending in district court. The city now wants to withdraw part of the decree to include green initiatives, which city officials also feel will be less expensive. There is local support from environmentalists. But there’s also concern that a revised plan will take too long in providing a solution for the pollution problem. – Read more here. In Fiji, Reefs’ Future May Lie in the Forests A new study suggests that sustainably managing Fiji’s forests will have an unexpected benefit: protecting the country’s coral reefs. “Small adjustments to the proposed terrestrial protected areas can deliver large benefits to coral reefs,” Carissa Klein of the University of Queensland tells Mongabay. Even when only land-based conservation goals are pursued, benefits to the reefs were shown to increase by as much as ten percent. Fiji’s government has committed to protecting 20 percent of land area and 30 percent of inshore waters by 2020; the study’s results will inform the selection of protected areas in the future. – Keep reading at Mongabay. GLOBAL MARKETS Australia Reaches Into the Piggybank to Help Irrigators For the first time, the Australian government will sell off some of its water licenses to farmers, to help irrigators manage hot weather. Water allocations managed by the Commonwealth Environmental Environmental Holder are intended to guarantee enough instream flows to support the Murray-Darling River basin’s health, which has long been negatively affected by large withdrawals for agriculture and other uses. Barnaby Joyce, Minister of Agriculture under the newly-elected government, says the government will build up its holdings again once rainfall returns. The Greens party are sharply critical of the decision and the precedent it sets; other conservation groups says such trading won’t be harmful as long as environmental outcomes are monitored and transparent to the public. – The Guardian has coverage. A Push for Water Equality in the Andes With Benefit-Sharing Mechanisms CPFW-Andes (Challenge Program on Water and Food – a CGIAR initiative) is launching benefit-sharing mechanisms (BSM) among ten basins in Peru, Ecuador, Bolivia, and Colombia. Because there often is a disconnect between those who use water resources and those who care for them at their source, BSM attempts to right this problem by redistributing water rights equally for everyone in a watershed. It’s a flexible model related to payments for ecosystem services, although not market-driven. Instead, the mechanisms are developed through a consultative process that involves local communities. – Learn more about the model here. Water Quality Trading for Compliance: Unpacking Permit Language Typically, water quality trading in the US is driven by permit language that allows dischargers to trade to meet compliance. A new report from the Electric Power Research Institute (EPRI) examines eighteen case studies using National Pollutant Discharge Elimination System (NPDES) permits incorporating trading, with an eye to illuminating how water quality markets can help meet NPDES obligations. Interestingly, the authors find that in several cases permits acknowledging trading have not yet actually traded; in other cases credits were purchased but not ultimately used for permit obligations. – Download the report here. Reciprocity Drives Investments in Watershed Services in Bolivia A watershed investment scheme in Bolivia is not only having a positive impact on the global climate while preserving forests, but boosting the livelihoods of locals in the meantime. Via Reciprocal Water Arrangement (or ARA – Acuerdos Recí­procos por Agua – in Spanish), downstream water users pay upstream landowners to conserve forest lands. This, in turn, ensures a healthier supply of water flows downstream. They’re paid by way of in-kind compensation like beehives, fruit trees seedlings or barbed wire. Nigel Asquith of Fundacion Natura Bolivia, a partner organization in the project, explains it this way: “Every [US]$20 invested by donors in a local water fund has been matched locally with $30, which purchases a beehive to compensate for conservation of two hectares of water-sustaining forest for five years. Honey revenue per hectare of forest conserved is US$5 per year, so within five years the landowner has not only used the US$20 of donor funds to conserve two hectares of forests but has also sold US$50 worth of honey.” Since the first ARA was developed in Bolivia, 30 municipal governments and water cooperatives have joined the movement. “The ARA model does not focus on paying the opportunity cost for conservation, which can be very expensive, but on changing social norms,” said Maria Teresa Vargas, also of Fundacií³n Natura Bolivia. – Read more. What We’re Learning About the Restoration Economy A University of North Carolina (UNC) report assesses the ‘restoration economy,’ measuring the size of this sector, which includes conserving and restoring ecosystems and mitigation activities. Results found an active restoration scene in the US contributing growth and jobs, with the preliminary number for national direct economic spending at $10.6 million annually. Restoration economy assessments have largely been done on a small scale up until now, so its full value isn’t always captured. Linking jobs creation to the ‘green economy’ has also been difficult – partly because defining the green economy is complex as well. UNC is further conducting a nation-wide survey that should provide an exact figure on jobs directly created and sustained by the restoration economy. – Learn more at Forbes. Navigating the Red Tape to Deliver Instream Flows A new case study from the Property and Environment Research Center (PERC) looks at the success of the Scott River Water Trust – despite red tape and legal difficulties in California surrounding water transfers – and considers how the model might be deployed elsewhere to lessen California’s water woes. The trust leases small volumes of water from farmers along the Scott River; the water is left instream to help protect salmon and steelhead during times of low flows. – Read the case study here. New Study Adds Weight to “Natural Sponges” Theory of Forests A new study published in the Water Resources Research journal has provided further evidence supporting the ‘sponge effect’: essentially, forests absorb excess water from storms and reduce peak runoff, while releasing water during droughts. It also supported the argument that forests slow runoff relative to deforested areas. The report was based on results taken during 450 tropical storms in Panama’s forests. Because the report, which was completed by the Smithsonian Tropical Research Institute, found that forests release more water during the dry season, it underscores forests’ importance to year-round flows and downstream agriculture activities and, in Panama’s case, powering the Panama Canal. – Mongabay has coverage. Reflecting on Lessons from Water Quality Trading A new national network on water quality trading in the US will distill experiences from markets across the country to define best practices, principles for program design, and lessons learned from design choices. Coordinated by the Willamette Partnership and the World Resources Institute, dialogues between stakeholders will be captured in two documents, forthcoming next year: an ‘Options and Considerations’ document and a summary of principles and practices. The network plans to initially focus on point-nontpoint trades. – Learn more at Bloomberg BNA. Price Tag for Rim Fire could Top $700M The Rim fire that torched 257,135 acres of Stanislaus National Forest last summer and fall could cost as much as $736 million in ecosystem services lost in the first year post-fire alone, says an Earth Economics report. The report was completed for the San Francisco Public Utility Commission, which relies on the burned area for water supplies and hydropower. Other districts are monitoring the area, as well, watching for soil erosion and debris in their water supply. The fire killed all vegetation on 98,000 acres, not only releasing a huge amount of carbon into the atmosphere, but preventing capture of the gas on the land for decades to come. Aside from carbon storage, the report also cites watershed functions, aesthetic values and recreational services lost to the fire. Data for Earth Economics’ report was gathered in September before the end of the fire. They are considering the figures presented in the study as initial and conservative, as later damages are not included. – Learn more. – Download Earth Economics’ report (pdf). Natural Gas uses Less Water than Coal, Even With Fracking Researchers with the University of Texas say that natural gas as an energy source uses significantly less water than coal, even after the hydraulic fracturing process – known to require a lot of water – is taken into account. Natural gas-fired power plants can save up to 35 times more water than when coal is used, the report found. It also found that if all of Texas’ 423 power plants operated on coal, the energy industry would have consumed over 30 billion gallons more of water. Still, other studies have shown that fracking can contribute to water shortages where activities are intensely concentrated or located in water-scarce areas. – Read a press release. JOB OPENINGS   Program Officer, Water Pisces Foundation – San Francisco CA, USA Inspired by a vision of people and nature thriving together, the Pisces Foundation is dedicated to improving the environment for present and future generations. After hiring its first full-time staff in fall 2012, the foundation embarked upon a strategic planning process which has defined its vision, mission, and principles, as well as specific goals and outcomes for three areas of focus: environmental education, climate & energy, and water. To implement its new strategy, the foundation seeks a Program Officer to lead its water work. This position reports to the Executive Director and will play an important role in a dynamic, growing philanthropy. – Learn more here (pdf). Senior Communications Officer Global Water Partnership – Stockholm, Sweden Global Water Partnership (GWP), an intergovernmental organisation with its global secretariat in Stockholm, Sweden, is recruiting a Senior Communications Officer. Reporting to the Head of Communications, the incumbent is expected to bring strategic thinking and practical skills to developing and managing communications activities. – Learn more here. EVENTS Webinar: Ecosystem Services Harmonization in Theory and Practice The scientific community and policy makers recognize marine and coastal ecosystem services (MCES) as extremely important for human survival. Peer reviewed assessments to date, however, have used a variety of terms and classifications for ES which have caused confusion and misinterpretation of the results and hindered communication among involved parties. The European Commission’s Joint Research Centre research group has reviewed the scientific literature to assess the state of the art of existing MCES assessments, identify gaps and limitations, and propose ways forward. A wide variety of methodologies, terminologies, and ES classification systems were identified. Based on the existing approaches, the research group also identified the main research gaps, proposed an integrated ES classification system, and gave clear definitions of ES tailored to the marine environment. This webinar will demonstrate this work and will go beyond the scientific component by exploring potential practical implications. Evangelia Drakou of the EC’s Joint Research Centre will discuss the applicability of the integrated MCES classification system for systematically organizing MCES information and enabling interoperability among existing MCES online platforms. Webinar co-sponsored by Marine Ecosystem Services Partnership and OpenChannels.org. 5 February 2014. Online. – Register here. Webcast: The Legal Status of Environmental Credit Stacking Environmental credit markets have been established to offset impacts to wetlands, endangered species’ habitat, water quality, and the global climate system. Potential participants have explored the concept of credit stacking, whereby a conservation project can produce credits in multiple markets. The rules governing sales of these stacked credits are still in development and proper balance must be struck to protect the environment and the market participants. Royal C. Gardner, Stetson University College of Law, and EPRI’s Jessica Fox have written a comprehensive article entitled The Legal Status of Environmental Credit Stacking (Ecology Law Quarterly), providing background on environmental markets, credit stacking, and considerations for a credit stacking protocol. The authors offer six considerations to strike a balance between the public interest in environmental mitigation and the credit producers’ personal interest in financial return. 11 February 2014. Online. – Join the webcast via this link. Nexus 2014: Water, Climate, Food and Energy Conference The Water Institute at the University of North Carolina at Chapel Hill and collaborators will host the Nexus 2014: Water, Food, Climate and Energy Conference on March 5-8, 2014 to examine the thoughts and actions related to a nexus approach. The co-Directors of the Conference are Jamie Bartram, Director of The Water Institute, and Felix Dodds, Associate Fellow at the Tellus Institute, with support from an International Advisory Committee. The Conference will bring together scientists and practitioners working in government, civil society and business, and other stakeholders focusing on the questions of how and why the nexus approach is, and can be, used on international and local levels. 5-8 March 2014. Chapel Hill NC, USA. – Learn more here. Sustainable Water Management Conference Presenting solutions for balancing the benefits of conservation with the costs, managing infrastructure, developing robust supply models and watershed management plans, water reuse, resource management, green infrastructure and more. 30 March – 2 April 2014. Denver CO, USA. – Learn more here. 2014 Water Policy Conference An impressive slate of legislators and policymakers have joined the lineup for AMWA’s 2014 Water Policy Conference in April. Key members of Congress and Administration officials will share their insights on national developments that will affect the nation’s water utilities in months and years to come. Attendees will also have the opportunity to share their views with the speakers. 6-9 April 2014. Washington DC, USA. – Learn more here. Groundwater Summit 2014 This annual meeting will focus on “10 years of moving research to solutions.” Participants will have the opportunity to model, explore, characterize, bank, inject, extract, treat, and predict all subsurface needs with everything groundwater related. 4-7 May 2014. Denver CO, USA. – Learn more here. 2014 National Mitigation & Ecosystem Banking Conference The only national conference that brings together key players in this industry, and offers quality hands-on training and education sessions and important regulatory updates. Learn from & network with the 400+ attendees the conference draws, offering perspectives from bankers, regulators, and users. 6-9 May 2014. Denver CO, USA. – Learn more here. CONTRIBUTING TO ECOSYSTEM MARKETPLACE Ecosystem Marketplace is a project of Forest Trends a tax-exempt corporation under Section 501(c)(3).The non-profit evaluator Charity Navigator has given Forest Trends its highest rating (4 out of 4 stars) recognizing excellence in our financial management and organizational efficiency.

Additional resources

It’s a fact that human life relies on the natural world but figuring out how to measure this dependency is difficult. Tundi Agardy, a marine conservation expert and the director of Forest Trends’ Marine Ecosystem Services Program, discusses her views on the benefits and dangers of ecosystem services valuations.

22 January 2014 | Nothing focuses the capitalist mind like high worth. If natural ecosystems can be demonstrated to have high value in the goods and services they provide, then – or so the thought goes – governments whose responsibility it is to ensure they are protected will be compelled to meet their obligations, while the private sector will see real benefit in investing. At the same time, in reaction to regulatory disincentive (a logical extension of government acting on its responsibilities) or in reaction to financial incentive (a logical extension of capturing private sector interest), communities and property rights owners will be stronger stewards, acting as individuals and as societies in ways so as to avoid undermining the golden goose.

We have seen this work in practice, and only a fool would argue that stressing the value of nature is a waste of breath. But what roles does economic valuation play in this? Is economic analysis always necessary to achieve conservation or sustainable use? And do economic analyses always lead to the expected, desirable outcomes?

You will already guess that the answers to these questions, at least in my mind, are not simple. Perhaps they are to an economist (which I am not), but as a conservation practitioner I have been surprised far too many times to think we have this one figured out.

The Basic Idea

An ecosystem services perspective provides us a way of looking at the collective value of nature. Admittedly the term has been slow to gain traction in our everyday language, but the concept is getting better acceptance as people toy with ways to articulate it. We now hear phrases like ‘nature’s benefits,’ ‘natural capital,’ ‘human dependence on nature,’ as well as terms borrowed from economics like ‘intrinsic value.’

Though the idea of environmental services was introduced in the 1970s, it really didn’t get widespread international attention until the Millennium Ecosystem Assessment, published in 2005. Today a concerted international effort to understand ecosystem services and incorporate that understanding into decision-making (the IPBES-Intergovernmental Platform on Biodiversity and Ecosystem Services) is underway, but, honestly, we’re kidding ourselves if we think the world gets it. It is only in the telling of stories of loss (nature transformed, lost opportunities, costs of degradation) that the ecosystem services idea has real resonance.

How Much for this Ecosystem Service?

Loss is difficult to quantify. Loss goes beyond costs – it affects the human spirit, and society’s resilience. Nonetheless, we’ve seen how tragic catastrophic events periodically rekindle interest in what, exactly, nature does for us – and how imperative it is to protect these services for our well-being. Whether it is the Asian tsunami of 2004, Hurricane Katrina in 2005, or the more recent Hurricane Sandy (2012) and Typhoon Haiyan (2013), there are consistent expressions of ‘what if’ – “What if mangrove and reef off Aceh had been protected, would the loss of human life in the tsumani been less?” “What if we hadn’t messed with nature by removing oxbows, rechannelizing the Mississippi, stressing the coastal wetlands – would Katrina have caused so much damage?” “What if oyster reefs and salt marshes had been spared the ravages of development, would lower Manhattan and New Jersey shore communities been better protected from Sandy?”

Asking such hypotheticals won’t bring lost lives or property back, but it has spurred greater interest in understanding the roles of nature (ecosystem services) in minimizing risk.

So we have a sudden preponderance of studies quantifying the economic values of nature, including shoreline defense. The numbers can be huge, especially when derived from studies of loss of nature and how it affects wealthy communities or places where land value is extremely high. These data from localized studies are then extrapolated to other parts of the world, in a process known as “benefits transfer.” This has been done for hurricane damage and nature’s role in minimizing it, and also for other services with direct market value, such as support to fisheries and ecotourism.

In the coastal domain where I work, there are numbers one can grab from economic studies for any service one can think of, and with a few calculations and lots of caveats, one can present an estimate of the value of ecosystem services for any place in the world.

I have been guilty of this myself. But as is obvious, I am not comfortable with it. Value is not easily transferable – it is context specific. Not every society has a fisheries or ocean-going culture, so the potential value of fisheries offshore may never be captured. Is it fair to say that nature provides X amount of economic value in supporting fisheries when those fish will never be caught? Likewise with the more intangible values like aesthetic value – not all societies look similarly on nature. Is it fair to say something holds aesthetic value worth Y if the local communities don’t see it that way (literally)?

Since I am not an economist or social scientist, I don’t know how these sciences deal with such differences in perception, but I do believe that value is in the eye of the beholder.

Then there is the thorny problem of discounting. The value of something today is not carried forward into tomorrow – markets fluctuate, goods and services can become more rare (rendering them more valuable), substitutions can be found (rendering them less valuable), and the value in terms relative to the economy overall generally diminishes over time. Economists and planners have argued over what is a reasonable discounting rate, especially in settings where economic value drives environmental decision-making. And it is an important argument indeed – the loss of something with a discounting rate of 15% can be more easily rationalized than the loss of something that would have retained its value over time. Yet disappearing and compromised nature all around the world would suggest that these ecosystem services are indeed priceless, and we sacrifice them at our (and our grandchildren’s) peril.

So what role does economic valuation have in preventing this foolish destruction of nature at our own peril?

Positive Outcomes of ‘Good’ Valuation

Currently there are 934 marine ecosystem services valuations listed on the Marine Ecosystem Services Partnership (MESP) database, a virtual center of information based out of Duke University. The database links the economic value of ecosystems to their ecological value and then to the case study location. The library is constantly updated so the number of valuations listed is always growing.

But the fast growing number of valuation studies doesn’t necessarily mean the information is being put to good use, for management of natural systems or for society. There are good (helpful) studies, and then there are, well – less valuable ones. I risk revealing my true nature as an ecologist and not an economist when I speak to ‘good’ versus ‘not-so-good’ valuation. But bear with me.

Valuations, if done well and robustly, can influence policy at the local, regional, national, and international level in very positive ways. These include spurring planning and the development of policies to safeguard ecosystem services of value, determinations of risk, compensation for damage to natural capital, and a greater rationale for more holistic and effective ecosystem-based management, each discussed in detail below, in the context of the coastal systems.

Appraising the economic value of ecosystem services coming out of coastal and marine ecosystems has guided conservation planning in many parts of the world. For instance, protected areas are established in places with real or prospective value in supporting biodiversity (a non-market value) or in supporting ecotourism (a related market value).

The design of these protected areas in terms of boundaries and the way activities are managed can maximize economic rents or preserve economic values. And when coupled to innovative financing schemes that allow stewards of the resource to “sell” the services to those that benefit most from them (as in PES – Payments for Ecosystem Services, or what we would prefer to call INC – Investments in Natural Capital), crucial funds flows can be created for conservation and management.

In San Andres, Colombia, Forest Trends has worked with CORALINA to undertake economic studies of ecosystem services, focusing the attention of resort owners on the inherent value of sandy beaches for their business and promoting their investment in reef management specifically aimed at continued natural production and stabilization of those beaches.

Investing in Natural Capital

Calculating the economic value of nature can clearly attract investors, for both protection of nature and for restoration of nature (something that is inherently very expensive, and often beyond the budgets of government agencies charged with managing coastal and marine areas). But it has significance for financiers as well – determining values and appraising how well management protects those values can guide responsible investing, whether through trading firms or via development banks. And at the macroeconomic level, including ecosystem services values into national accounting can positively affect ratings, which in turn affects access to financial capital needed for sustainable development and further nature protection.

On the other end of the spectrum, determinations of economic value of services allows agencies to determine more precise compensation in the wake of damages, as occurs with ship groundings on reefs or oil spills. Having the baseline values determined avoids or reduces the guesswork and litigation that usually occurs following a catastrophic accident.

Injecting determinations of economic value into existing planning frameworks can also guide evaluation of trade-offs and steer decision-making toward greater rationality with longer time frames in mind.

In Belize, for instance, the Natural Capital project has applied Marine InVEST models to a host of scenarios for development, allowing the Coastal Zone Management Authority and Institute to assess the possible consequences of planning.

Similarly, economic values can find their way into Strategic Environmental Assessment (for example, Proecoserve.)

Working with our partners, we at Forest Trends are beginning to develop a comprehensive picture of nature’s benefits and how they flow to beneficiaries across the large and complex landscape/seascape of Marismas Nacionales, Mexico.

Examples abound at all levels of geographic scale and complexity, and many of these projects can rightfully claim that they have catalyzed the push toward more Ecosystem-based Management or EBM. And without EBM and its effective integration of watershed management, marine management, and land use management, our conservation investments are often wasted.

Economic valuation of nature’s services allows a more accurate appraisal of the awareness, attitudes, and motivations of the public. That, in and of itself, has immense value.

But – valuations can have unintended consequences.

Valuation Gone ‘Bad’

Putting a price tag on nature is unappealing to many, and can have unexpected negative consequences, catalyzing a backlash against even the very idea of ecosystem services. Fundamental to the backlash is the philosophical argument that nature has value in its own right, not only (and perhaps not primarily) in its support of human life and well-being.

But attaching economic value to nature does necessarily preclude a nature-centric (as opposed to human-centric) ideology. What is, in my mind, a more legitimate concern, is how the valuation information is used, and misused.

One pitfall can result from identifying a single service of high worth, and having all management attention and investment then focused on maximizing that commodity.

Take blue carbon, for example. As scientists have begun to quantify the amount of carbon sequestration being performed by coastal habitats like mangroves, salt marshes, and seagrass meadows, interest in capturing those values has led to methods for generating carbon credits (through VCS, possibly, or in the voluntary markets, or through REDD+ schemes).

Coastal managers and private landowners could be tempted to take steps to maximize carbon fixing, at the expense of other ecosystem services. Taken to its extreme conclusion, seagrass and salt marsh, along with beaches and salinas, might be converted to mangrove ‘plantations’ in order to generate, and sell, the maximum amount of blue carbon. These mangrove plantations could be maintained in isolation, without connection to other marine habitats or upstream watersheds, with no other production functions like shoreline stabilization, fish nurseries, water filtration, or biodiversity support, occurring.

Equality for All

At Forest Trends we’ve been trying to promote a much more holistic view of ecosystem services, even in cases where there is money to be made from commodifying a single service.

In the Abu Dhabi Blue Carbon Demonstration Project, we appraised all ecosystem services coming out of known Blue Carbon habitats (mangrove, seagrass, salt marsh, but also coastal sabkha and cyanobacterial mats), to stress the comprehensive value of functional natural habitats.

While we did estimate the potential collective value of these ecosystems for their services as part of blue carbon co-benefits, we cautioned against the maximization of any one service at the expense of the others. Other groups are looking at ‘bundled services’ too, undaunted by the complexities.

Nonetheless, the danger of having valuation lead to unsustainable and inequitable use remains. With human nature, the default trajectory is down the simplest path, especially one that may end in profit. And when part of the calculus for making decisions about access to space or resources, or in resolving conflicting uses, profitable activities often trump non-use values.

Flagging areas as particularly valuable in ecosystem services can lead to inequity, denial of access, privatization, and – in the worst case – land grabs. Short planning horizons and unrealistic discounting can bias all development decisions in the direction of ecosystem harm and ecosystem services loss, even when economic value for one or more services is found to be high.

Making a Difference

Will the valuation have a meaningful impact in terms of policy change for the ecosystem it is appraising? The question of influence is another large one when discussing valuation. And a report from the NGO WRI (World Resources Institute) found that coastal economic valuations over the Caribbean region helped raise awareness of the importance of coastal ecosystems but did little in influencing policy change. More than 200 such valuations that measure the monetary value of marine ecosystem goods and services exist on the Caribbean, according to WRI’s paper. But their study only identifies 13 that have had a positive influence on conservation or management based legislation.

The report identified that valuation led to the Belizean government banning bottom trawling and the creation of St. Maarten’s first national marine park.

Report authors collected research from existing literature on valuation and marine policy as well as from interviews from those involved-marine park managers, conservation advocates and economists. Their questions and data drew heavily from the creation of Bonaire National Marine Park, which is one of the best known cases of valuation impacting policy in the Caribbean.

One of the report authors, Richard Waite, notes that in the year since this paper was published, they have made adjustments to their results. They have discovered other influential valuations raising the number to 16.

No one officially tracks influence in a public way, Waite says, so there are probably a decent number of cases we don’t know about.

What’s more, policymakers weren’t a group interviewed for the paper. Speaking with them now, WRI found that policymakers largely want more valuation-a significant find for the future of such assessments.

The report also notes that the type of valuation plays a big role in delivering change on a large scale. Absolute accuracy from the valuation isn’t always critical depending on the context. Valuation should be conducted depending on the policy in question. Sometimes a ballpark figure is needed and other times-when related to taxes and fees-more precise data is required.

Outside of the actual data the valuation provides, governance and stakeholder engagement is a key factor that can’t be neglected if planning to catalyze change.

Is it Worth the Effort?

Even when such pitfalls are avoided, we might ask ourselves “Is it possible, or even desirable, to attach economic value to things like cultural or spiritual services? Do we ultimately undermine their value when we try to do this? Does putting a price tag on nature diminish our sense of wonder?”

With a utilitarian, capitalistic mindset, we may ignore the things that matter most to long term human well-being. And, paradoxically, we may become even less inclined to fight for nature and her services.

Economic valuation of nature’s services is part and parcel of better understanding and appreciating nature’s role in sustaining us – physically, mentally and spiritually. We can use economic valuation to improve our planning, our management, and to drive investment. However, it cannot be the lone driver for decision-making, and we must be aware of potential pitfalls, and consciously work to avoid them.

A Way Forward?

Perhaps the safest path is to adopt a broader view of what should be part and parcel of economic valuation. As recently described by Blake Ratner and Edward Allison in a policy review paper, economics is not just about wealth – healthy economies may have less to do with a wealthy generation, and more to do with reciprocity and cooperation to solidify rights and enhance resilience.

Nature’s role in providing the basis for social systems that maximize such resilience is obvious, — and priceless.

Tundi Agardy is the Director of Forest Trend’s Marine Ecosystem Services Program. She can be reached at [email protected].

Additional resources

While water risk was ranked third among the World Economic Forum’s Global Risk 2014 report, at least three of the study’s top 10 risks are directly related to water problems like pollution and scarcity prompting report authors to argue these risks reach further than originally thought and must be solved through public-private collaboration.

This article was originally published on the Circle of Blue website. Click here to read it in its original format.

20 January 2014 | Too much, too little, too dirty. For the third consecutive year, reckless use and abuse of water is seen by global authorities as having the potential to seriously disrupt social stability, upend business supply chains, imperil food and energy production, and generally make life miserable for billions of people, according to the World Economic Forum’s annual Global Risks report.

The various threats to the planet’s supply of fresh water rank third – behind debt crises in key economies, and persistent unemployment – on the list of convulsive planetary threats of greatest concern to more than 700 business, government, and nonprofit leaders who responded to the Geneva, Switzerland-based think tank’s annual survey. The latest Global Risks report, released today, is the ninth in a series that dates to 2006.

The various threats to the planet’s supply of fresh water rank third on the list of convulsive planetary threats of greatest concern.

The security and quality of the world’s water, however, goes even deeper than its bronze-level citation. At least three of the top ten risks identified in the World Economic Forum’s survey are principally problems fundamentally involving water:

1. The failure to avert or adapt to climate change.
2. Floods and droughts fostered by extreme weather events.
3. Water scarcity and pollution at the root of food contamination and supply crises.

The Global Risks report uses a broad analytical lens. Its 60 pages of spider web charts and bold colors serve to highlight the complexity and interconnections between risks and regions. The strands are so tightly woven that no government, business, or charity acting alone can solve them, said the report’s co-author Margareta Drzeniek-Hanouz, director and lead economist of the World Economic Forum’s Global Competitiveness and Benchmarking Network.

“The issues are so big that they cannot be resolved by the business sector or the political sector alone,” Drzeniek-Hanouz told Circle of Blue. She added: “The report’s overarching recommendation is for public-private collaboration.”

Produced and stored within well-defined basins, problems involving water are generally viewed as having effects confined to a specific community or region. But the authors of the Global Risks study argue that water shortages and bursts of surpluses caused by flooding are systemic risks that reach much further.

Resource depletion increases the pressure on political systems, cultures, and economies.

The report cites research, for example, showing that a terrible drought in Syria from 2006 to 2011 set the table for the country’s civil war. Crop failures in the countryside prompted farmers to move to cities where existing economic and social pressures boiled over. Conflict was not an inevitable outcome, the report’s authors said, but resource depletion increases the pressure on political systems, cultures, and economies.

In 2010, drought and poor harvests in Russia, a large grain producer, led to export restrictions. Higher prices rippled through commodity markets, increased costs for bread, and added a tailwind to the Arab Spring revolt. A year later flooding in Thailand snapped global supply chains and caused car and computer manufacturing to crater.

Smaller, local skirmishes over water also are becoming more frequent. Just this week, two people were killed in South Africa during a protest over water shortages. Though the root cause in this case was mismanagement of water, the importance of a reliable supply was tragically confirmed.

The Global Risks report also takes note of longer-term trends involving the security of the world’s fresh water reserves. Climate change is a slow-motion lurch toward atmospheric conditions that will fundamentally change life on Earth in the coming decades, the authors said. A warming world will likely increase the likelihood of both engulfing floods and chronic drought. It will lift the oceans and put a treasure chest of property at risk – assets with an insured value of more than $US 10 trillion on the U.S. Atlantic and Gulf Coasts alone.

Roughly 600 million people also live in areas less than 10 meters (32.8 feet) above sea level. Low-lying Bangladesh and the Mekong River delta – two of the most densely populated regions on the planet – are endangered. Pacific Island nations are already seeing their homelands eroded and, in preparation for the day their homes will need to be abandoned, are testing the legal bounds of asylum.

In the continental interiors, extreme weather often takes the form of devastating scarcity or overwhelming abundance of water. Droughts destroy crops, and floods demolish homes. If dry conditions endure, a host of repercussions follow. Forests become a tinderbox awaiting a spark. Rivers shrivel, cutting hydropower generation, reducing the amount of water to cool power plants, and putting countries with a poorly managed electrical grid at risk for blackouts, as happened in Venezuela in 2009 and 2010. Worst of all, the competition for scarce food and water supplies heats up – sometimes with world-changing results.

Shifts in the Global Winds

Since 2006, when the first Global Risks report was made public, much has changed. The early editions emphasized macroeconomic risks: oil price shocks, a collapse in asset prices, or a decelerating Chinese economy. Chronic diseases, both in the rich world and in developing countries, made the list as did infectious pandemics. Risks were ranked according to economic losses and number of deaths, which gave greater weight to those risks more easily measured in dollar terms. Environmental risks such as water supply, climate change, and natural disasters were considered “core” risks but were firmly in the second-tier.

In the latest report, macroeconomic threats still rank high. After all, anxiety about global debt tops the list. But water and climate change have pushed upward. The report still uses economic loss and deaths as guidelines, but they are not assessed as overtly. Perception matters more.

Respondents were asked to assess 31 pre-selected risks based on the risk’s likelihood and severity in the next decade. For the first time, respondents were instructed to select the five risks they thought most concerning. Women and people younger than 30 were more likely than men and people older than 30 to perceive environmental risks more seriously. More young people have been included in the survey in recent years – one possible explanation for water’s rise.

The report encourages its respondents to consider the long term. Yet the window for avoiding the gravest threats is closing as the atmosphere gets warmer. Recent research on water scarcity makes that clear.

An increase in global average temperatures by 2 degrees Celsius compared to today will increase the number of people living with absolute water scarcity by 40 percent, according to a study published in December from dozens of researchers in China, Europe, Japan, and the United States. Absolute scarcity is defined as less than 500 cubic meters per person per year within a country. The increase in those living with scarcity is in addition to what would be expected from population growth.

“Every degree matters now,” said Jacob Schewe, the report’s lead author, and a scientist at the Potsdam Institute for Climate Impact Research.

“The fundamental impact that climate change has on global water resources is becoming very clear now.”

“The fundamental impact that climate change has on global water resources is becoming very clear now,” Schewe added in an email to Circle of Blue. “We need reliable, quantitative knowledge about these impacts in order to support adaptation. But ultimately, there will be limits to what societies can adapt to, so climate change mitigation is crucial as the risk of water scarcity increases with rising temperatures.”

How to achieve that? The risk report asserts that a weakening U.S., a growing China, and a jumbled middle requires new forms of global decision-making if systemic risks such as climate change are to be addressed. In fact, respondents selected a failure in global governance as the risk most connected to all others.

The report’s recommendations in this regard are thin and generic-buzzwords about multi-stakeholder action and “agile and responsive multilateral governance.” However, the purpose of the report is to be “a platform for discussion,” said Drzeniek-Hanouz. Perhaps attendees at the forum’s annual winter meeting in Davos, Switzerland next week will ponder a stronger recipe.

Brett Walton is a Seattle-based reporter for Circle of Blue with interests in infrastructure, pricing, Pacific Northwest and the Southwest. He can be reached at [email protected].