The pitfalls of putting a price on nature: What's next for natural capital?

The pitfalls of putting a price on nature: What's next for natural capital?

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Is it better to put an imperfect price on nature or continue not to factor in the economic value of the environment?

The United Kingdom is the latest locale to take a closer look at how putting a price on nature might figure into government policy.

In September, the government pledged to produce a 25-year environment plan to lay out how the U.K. can best ensure a "healthy natural economy." Soon after the announcement, environment secretary Liz Truss argued that Britain's forests, soil and rivers should be valued as "national assets" in the same way man-made infrastructure is, suggesting they were worth at least $2.1 trillion to the country.

But the idea of putting a price on the so-called ecosystem services provided by nature has been controversial from the start.

Many have pointed out the potential pitfalls of commodifying nature, with campaigner and journalist George Monbiot at the forefront of warnings that allowing natural assets to be exchanged for cash undermines their intrinsic value and turns the natural world into "a subsidiary of the corporate economy."

Recent reports have suggested the promised 25-year plan could be one of the latest policy moves to be affected by Brexit with a delay expected until next year. However, that has not stopped a new collaborative research project getting under way to investigate the pros and cons of putting a value on aspects of the natural world.

The 18-month project is a joint venture between Anglia Ruskin University and the University of East Anglia with funding from the Arts and Humanities Research Council (AHRC), and will examine and debate the natural capital of the East of England, with a specific focus on the Fenland area of Cambridgeshire.

It also plans to create a new network by bringing together a range of voices from across academia, business, civil society and government in a bid to understand the implications of looking at the world through this dollar-shaped prism.

Speaking to BusinessGreen, Aled Jones, director of Anglia Ruskin's Global Sustainability Institute, said the project aims to explore the issues in a more holistic way than has previously been the case.

"The main object is to try to widen the discussion around value on ecosystems, so to bring voices across a wider range of disciplines and sectors to really understand the limits of putting a price on things, what are the consequences of putting prices on things, where it works and where it potentially doesn't work," he said.

One possible pitfall, for example, is whether putting a monetary value on biodiversity inherently implies it can be divisible into smaller parts, as commodities such as coal could be. How do you put a value on an asset where its true value is apparent only when it is part of a coherent whole?

Pricing one natural asset also can imply it is substitutable for another thing of the same price elsewhere. Meanwhile, different types of stakeholders also may view the real price of a natural asset very differently, while others may not consider any kind of price can be put on the value of nature due to its inherent worth or emotional value. The more you look at the fledgling academic field, the more complicated it gets.

On the other hand, however, continuing the recent policy drive in the U.K. and other countries to apply some form of natural capital thinking, and put a clear value on natural assets, could help ensure the natural world is better incorporated into mainstream economic policy. Is it better to put an imperfect price on nature, or continue with economic models that currently regard the natural world and the services it provides as valueless?

"Essentially, the question we'll be trying to answer is this: If we say that nature is priceless, do we end up in effect treating it as valueless?" said Jones in a statement announcing the launch of the new research project. "Or is being unwilling to price nature the best protection we have against it being packaged up, owned, bought, sold or used up?"

Meanwhile, with Brexit having brought yet more uncertainty to myriad environmental policies, the researchers argue that it is an important time to widen the discussion around the potential impacts of the government valuing nature and ensure policy is not developed using only one narrow way of modelling the value of natural capital.

As such, Jones wants to involve businesses in the network to help them share their own experiences of putting a price on natural and conventional assets. Growing numbers of businesses seek to incorporate ecosystem services and natural assets into their decision-making processes, while others are putting a shadow price on carbon emissions and other environmental impacts. Plenty of case studies are available on which the new research team can draw. 

The network and its outcomes also could help businesses to juggle the costs and liabilities associated with the ecosystem services they rely on, helping to better manage potential risks such as who is legally responsible for ensuring the use of a natural system does not lead to its deterioration or collapse.

"It would be great to have very focal business engagement in this to articulate actually what they want out of ecosystems, what they want out of biodiversity, what problems they're trying to solve by either encouraging prices on ecosystems or not encouraging prices on ecosystems," Jones said.

Exactly what will happen with the still-embryonic trend towards pricing nature remains to be seen — although it is likely the new network will spark some fiery debates on the topic. Jones said he personally expects a mixed picture to eventually emerge where prices are applied to natural assets only where appropriate.

However, if the government does continue its push towards a natural capital accounting approach, it is crucial to have a variety of voices, including businesses and NGOs, at the table to ensure any value attached to natural assets is both practical and effective in the real world.

After all, the U.K.'s forests, soils and rivers may be worth trillions to the economy, but were they one day to be destroyed, we would quickly discover that no amount of capital investment will bring them back.

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