Newspaper: The Financial Express
Section: FE Reflect
Date: 17th Dec, 2010

Economics of biodiversity

Rajashree Sharma
Posted online: 2010-12-17 22:20:27+05:30

Almost all environmental and social issues have an economic component. Sustainable development is the key to balancing the needs of the ecosystem against man’s needs. So, green economy is becoming an increasingly popular concept, with policymakers, scientists, academics and economists increasingly convinced of the need to protect biodiversity to drive sustainable economic and social growth.

What distinguishes a green economy from prior economic regimes is the recognition that natural capital and nature’s services have a direct economic value. Environmental economists are working relentlessly to illustrate the real scope and potential of a green economy. This rapidly growing billion-dollar sector includes renewable energy sources, organic produce and products, green buildings, alternative fuel vehicles and more. Policymakers, business leaders and experts have realised that conserving ecosystems and biodiversity can be a strong foundation for a sustainable economy. Experts now opine that the resilience of the global economy itself is intricately linked to the state of the environment.

Governments meeting at the 10th Conference of the Parties to the Convention on Biological Diversity (CBD COP10) recently held at Nagoya (Japan) have approved a new strategic plan for biodiversity for the next ten years to reduce the current pressures on the planet’s biodiversity and take urgent action to save and restore nature. The Nagoya protocol on ‘access to genetic resources and the fair and equitable sharing of benefits arising from their utilisation’ addresses new and innovative ways to finance biodiversity and ecosystems and achieve a fuller integration of biodiversity and ecosystem values into economic policy. It also takes into account the important role of traditional knowledge.

Some interesting facts were provided by International Union for the Conservation of Nature (IUCN) regarding the economic value of living ecosystems. At present, 35% of the Earth’s surface is dedicated to agriculture and this may increase by 80% by 2030 to match rising demand. Meanwhile, ecotourism is declining because of biodiversity destruction. Hundreds of medicinal plant species, whose naturally occurring chemicals make up the basis of all prescription drugs, are threatened with extinction. On the upside, new ‘green markets’—for organic agriculture, for certified food and timber products, for example—are growing three times faster than average. Their global value has reached almost $60 billion. Plus, it is estimated that protected areas could produce benefits, goods and ecosystem services worth between $4,400-5,200 billion a year. But under business as usual scenarios, the overall costs of climate change may become equivalent to losing up to 20% of global GDP each year.

Among the documents relating to a green economy that were released in Nagoya during the conference, a notable one was The Little Biodiversity Finance Book aimed at national and international policymakers. This book highlights a multitude of policy options for biodiversity and ecosystem service finance and shows that through significant policy action, finance could reach up to $141 billion by 2020. However, to achieve this, there should be strong coordination across the biodiversity, climate change and development agendas.

Another important document relating to the economic value of biodiversity that came up during the conference was a study by The Economics of Ecosystems and Biodiversity (TEEB) programme, which is a part of United Nations Environment Programme (UNEP). Participant countries, including India, have taken steps to adopt the TEEB recommendations and announced plans for implementing the economic valuation of their natural capital and factor in the value of nature’s services in decision-making. India’s environment and forests minister commented that the TEEB study provides practical guidance for new economic approaches and committed to developing a framework for ‘green national accounts’ to be implemented by 2015.

The Nagoya conference is regarded as a platform where a new era of living in harmony was born and a new global alliance to protect life on earth was established. Historic decisions were taken to meet the unprecedented challenges of the continued loss of biodiversity intensified by climate change. The importance of linking discussions of the global economy with those of the natural world was assessed and the potentiality of policy-shifts and incorporating smart market mechanisms into national policy to safeguard the remaining biodiversity was discussed.

As the UN wants to halt biodiversity loss around the world by the year 2020, the need of the hour is to acknowledge the fact that nature is crucial to prosperity and development, to recognise the value of nature’s capital, nature’s contribution to human livelihoods, health, security, and culture, and adopt policy instruments and mechanisms accordingly. Otherwise, in a mega biodiverse country like India, if we go on taking benefits of nature for granted, we will risk reaching the brink of ruin.

—The author is partner, Corporate Law Group