Contribution to GTI Roundtable "Monetizing Nature"
Barbara Unmüßig has a compelling vision and articulates it well. Her central premise—that the economic lens reducing all values to a common denominator of money carries important risks—is well taken. I agree that there are limits to substitution between different forms of capital, and there is a clear need to have a precautionary principle in place to protect nature. The issue is in its application and the trade-off between economic activity that benefits society and conservation, and in particular where to draw the boundaries between development and conservation in ecologically valuable areas, a domain which calls for much more thinking and research.
UNEP would have some reservations about the argument that valuing itself is wrong or that markets should be ignored in the context of making a case for conservation and environmental protection. Markets, while imperfect in terms of asymmetry of information, purchasing power etc., have until now treated the environment as a limitless (and therefore unpriced) good in our economy. Reflecting on the importance of nature—giving it a role and weight in economic performance—may help to balance and restore its rightful place at the center of well-being, which is the ultimate purpose of the economy.
Indeed, if we examine the issue in more depth, “pricing” and “valuing” are the same only for market-traded private goods. For public goods, as there are (by definition) no markets, it is important to provide a value in order to prioritize the environment in international negotiations, in national and local public policies, and in business performance calculation and reporting, just to name a few examples. In the case of the latter, the non-reporting of negative externalities is a primary reason why they are allowed to persist to the detriment of public value, at the risk of transgressing planetary boundaries.
Taking this logic further, conventional measurements, of both macro- and microeconomic performance, viz, GDP and corporate profit respectively, are substantially wrong because externalities are not accounted for, and they will continue to be wrong until the valuing of economic activities also includes their impacts, and the assessment of profits also value the negative externalities of business. In short, you cannot manage what you do not measure.
The concerns Barbara Unmüßig raises with the use of biodiversity offsets are indeed important, given, as she argues, that biodiversity and ecosystem values are site specific and culturally defined. I agree that this is a legitimate concern, as there is a strong moral hazard involved in purchasing offsets, and the “no net loss” position implies de facto strong substitutability. This in fact, demonstrates the reason why we need an ecosystem services approach with valuation appropriately applied.
So, for instance, if the economics of ecosystems and biodiversity (TEEB) approach is applied to offsetting, then there should be no net loss in cultural ecosystem services such as “spiritual experience and sense of space” and “aesthetic appreciation and inspiration for culture, art and design.” An offset would not be permissible if for instance local communities have a “lexical preference” for a sacred grove.
To conclude, Barbara Unmüßig is indeed an influential voice, and she is right to alert us to the perils of blind and inappropriate valuation, but by criticizing altogether the use of environmental valuation, we may influence negatively our common goal of enhancing sustainability.