Natural resources are sometimes viewed as free inputs that any company can use to supply a product. The monetary value of a natural asset is judged by firms solely on the idea of the price of exploitation. Natural resources are subsequently often viewed as infinite: it is just not clear how overexploitation can destroy the encompassing ecosystems.
Many firms today wish to avoid environmental damage, but they lack the motivation to achieve this. There may be very little empirical evidence between corporate social performance (CSP) and company financial performance (CFP).Researchers also found that while the economic advantages of a clean environment and a stable climate accrue to everyone, the negative costs of pollution and emissions – climate change or other ecological damage – haven’t affected individual firms.
Companies subsequently have little incentive to take positive motion. This may explain why many don’t achieve this within the face of the present environmental crisis: environmental protection measures are sometimes expensive and, then again, their advantages aren’t at all times easy to quantify.
To avoid a tragedy for the general public, we’d like to develop a proper method to value natural assets based on their role of their ecosystems and their medium and long-term utility. By including the value an organization imposes on nature within the valuation, we create an economic incentive for the corporate to seek out more responsible production methods.
Pricing for ecosystem services
Pricing nature involves assigning a monetary value to a selected environmental service. For example, researchers have tried to quantify the price of clearing coastal areas where trees prevent flooding and other environmental hazards. Others have examined the dollar value of the advantages the pangolin brings to its ecosystem in an effort to combat wildlife trafficking. In this manner, researchers have tried to place a price on each product that firms extract from nature, giving them financial justification for a more positive stance.
Edward B. Barbier investigated how economic models may be redesigned to take into consideration the contribution of nature to human prosperity and survivalHe wanted to incorporate an evaluation framework that comes with the prices of regulating, providing and supporting services that nature provides us.
Economists, ecologists and other scientists have made significant progress on this area lately, using environmental valuation methods to evaluate the contribution of key ecosystem services to well-being.
But all these efforts suffer from a scarcity of knowledge. This is one among the the explanation why the UK Department for Environment, Food and Rural Affairs (DEFRA) is Ecosystem Services Assessment Database (ESVD) which collects material on the valuation of natural assets. This project provides more insight into the models used and enables higher understanding and further evaluation.
Ecosystem services as a function of environmental services (biome), in US dollars per hectare per yr
Among the initial findings of those studies are that waste treatment, tourism and protection from extreme weather events are nature’s most useful contributions to human life, measured in US dollar terms.
At the very least, this could create incentives for higher protection of our marine and wetlands, which play an important role in our wastewater treatment systems and are price greater than $150,000 per hectare per yr on this context.
Of course, ecosystem services aren’t necessarily comparable: waste treatment and protection from environmental hazards are regulatory services, while tourism is a cultural service. Their pricing methods subsequently differ considerably.
But what in regards to the ecosystem services which might be related to climate change? How does nature protect us from global warming and the way would we price these services?
Climate change and ecosystem protection
Climate change is the results of the mix of two primary elements. The Earth’s natural warming process is driven by greenhouse gases, which block among the sun’s radiation from leaving the atmosphere, keeping the temperature warm enough to support life. The difference between the radiation that is still within the atmosphere and that which is released is known as Radiative propulsion.
Carbon recovery by country, in US dollars
| Austria | 79,000 US dollars | Nepal | 3.1 billion US dollars |
| Brazil | 3.75 billion US dollars | Paraguay | 45.8 million US dollars |
| China | 1.17 million US dollars | South Africa | 7 million US dollars |
| Costa Rica | 0 | Thailand | 704 million US dollars |
| Kenya | 2.1 million US dollars | Great Britain | 8.91 billion US dollars |
| India | $2.45 million | United States | 6.35 billion US dollars |
| Italy | 4.43 million US dollars |
Source: ESVD data
Human activities are increasing the concentration of greenhouse gases within the atmosphere. At a certain point, an excessive amount of radiation is captured, which increases the radiation effect and exacerbates climate change.
Carbon dioxide contributes to this radiative effect. Therefore, ecosystems that may get well carbon are crucial for mitigating climate change. For example, in accordance with an assessment method based on carbon emissions, the Brazilian Amazon rainforest represents about 16% of the full value of ecosystem services involved in carbon recovery.
Brazil: Most necessary ecosystem services
Protect the rainforest, fight climate change
Rainforest conservation means protecting the tropical forest or reproducing it identically. Randomly planting trees without biomimicry is just not enough to make sure ecosystem longevity and is subsequently not sufficient to copy the rainforest’s strengths in carbon recovery.
The Amazon rainforest is home to unique biomes which might be threatened by industrial agriculture and wildlife trade. What these activities remove and destroy is just not easily replaced or reproduced. And carbon recovery is just one among the ecosystem services the rainforest provides.
This lesson is crucial. While we must strive to calculate the costs of natural assets and incorporate them into our business valuations, we must do not forget that there is no such thing as a technique to price the irreplaceable or properly value that without which humanity couldn’t survive.
Companies consider natural resources as infinite. They aren’t. But the value of nature actually is.
Ophélia Miralles is Alliance Manager at Renteda non-governmental organization (NGO) that works to preserve biodiversity and combat wildlife trafficking in Brazil.
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Photo credit: ©Getty Images / luoman
