Putting a price on life

Should we try to calculate the cost to humanity of future losses of biodiversity? The EU believes we should… but scientists, torn between the desire to mobilise support and a concern for rigour, are not so sure.

L’eau, un des écosystèmes vitaux pour  l’humanité. Ici le lac d’Amance, dans le Parc naturel régional de la Forêt d'Orient (Aube, FR). © Jean-Marie  Bossennec/Inra Water, one of the ecosystems vital for humanity. The photo shows Lake Amance, in the Forêt d'Orient regional nature park (Aube, France). © Jean-Marie Bossennec/Inra

The scene is an American parliamentary committee meeting to discuss global warming. One Department of Trade representative is denigrating any serious risk to the economy from global warming by pointing out that agriculture and forestry account for only 3% of the US gross national product. Suddenly a cynic retorts loudly: “What does this genius think we’re going to eat?” This anecdote told by famous American entomologist, Paul R. Ehrlich from Stanford University, is emblematic of the conflict between economists and environmental scientists. While economists accuse environmental scientists of living in a moral bubble cut off from the real world, the latter accuse economists of knowing the price of everything but the value of nothing, as the saying goes. This is a debate that has just been revived by an EU decision to commission a ‘Stern Review’ on biodiversity, in other words, an assessment of the economic impact of biodiversity loss, along the lines of the Stern Review on the economics of climate change and the costs of non-action.

US$33 trillion?

The first large-scale attempt to connect the economic and environmental worlds was fairly recent. In May 1997, an article appeared in the journal Nature that paradoxically would prove to be both disputed… and seminal. The article, entitled The value of the world's ecosystem services and natural capital, was by a group of scientists headed by Robert Costanza, from the University of Maryland. In it the authors endeavour to assess the value of the services that the world’s ecosystems render to human beings. Such services range from regulating the climate, to providing food, to cultural services. The authors’ conclusion? They calculate that the biosphere provides us with services worth some US$33 trillion per year, that is to say, nearly double the world’s GDP! Although the authors claim that it should be seen only as a general guide, the figure is mind-blowing.

Their article has triggered a heated debate. While economists deride the $33-trillion estimate as lacking in rigour and grossly overestimated, many environmentalists feel that, on the contrary, it underestimates the value of nature. In the journal Ecological Economics, Michael Toman describes the figure as a “serious underestimate of infinity”! Even environmentalists are divided amongst themselves. On the one hand there are those who believe that society must be addressed in a language it can understand, even if the language of costs and benefits is not the one dearest to the hearts of environmentalists. On the other hand, a more rigorist environmentalist faction are convinced that we should not allow ourselves to be dragged into economics because it is impossible to express the value of a species or ecosystem in monetary terms, still less the biosphere, which is of course infinite.

Replacement cost

As a result, when the Millennium Ecosystem Assessment project – a huge worldwide census of ecosystem services and of the extent to which ecosystems have been damaged by humans – was set up in 2000, no monetary estimate accompanied the authors’ painstaking work. The authors confined themselves to providing a remarkable and exhaustive summary of what ecosystems do for humanity… without hazarding a single figure.

However, the need remained for instruments to measure the usefulness of natural environments and of biodiversity. German researcher, Sheila Wertz-Kannounikoff, who works for the French Institute for Sustainable Relations and International Development (Institut du Développement Durable et des Relations Internationales – IDDRI), in Bangkok, Thailand, says: “Costanza put his finger on the problem when he said that many ecosystem services to humans are not included in prices, in the market – and so are denied. However, there are many methodological problems with such costing, so now we are very cautious. Although we still seek to put a value on the services rendered by nature, nowadays we use more appropriate tools, such as determining the replacement cost. In other words, how much would it cost to replace a service that an ecosystem provides free of charge?”

A classical example of the replacement cost approach is that of the Catskill Mountains close to New York, which supply the city with its water. When water quality in the Catskills deteriorated, the city estimated the cost of building a water purification station at $8 billion. In the end, it decided to rehabilitate the natural environment – for one-tenth of the price – and restored the water quality. This is a perfect example of costing an ecosystem service. Skeila Wertz-Kannounikoff adds: “Beware, we are not saying that these figures represent the value of the ecosystem, but they do serve as indicators for decision-makers.”

At European level, the concern for rationalising nature conservation has given rise to the RUBICODE project (Rationalising Biodiversity Conservation in Dynamic Ecosystems), one of the purposes of which will be to provide reliable indicators and decision-making tools. RUBICODE takes an eminently local approach, focusing on individual ecosystems rather than on the entire biosphere.

Let’s talk money…

In 2007, global warming was included in the debate. This was because in 2007 global warming managed to impose itself as a worldwide issue – whereas biodiversity is still struggling to rise above the status of a marginal issue. Two events appear to have contributed to the global warming success story. First was the publication in October 2006 of a review by Lord Stern, former Chief Economist of the World Bank, which assessed the potential damage of climate change as 20 % of world GDP, that is to say the equivalent of two world wars and the 1929 economic depression rolled into one. Second was the latest report by the Group of Intergovernmental Panel on Climate Change (IPCC), which is now acknowledged by all world governments. The IPCC report is packed with figures, scenarios and economic estimates of every kind which were duly supplied to alert decision-makers to the need to take action.

Suddenly there was strong pressure on ecosystem and biodiversity conservationists to start “talking economics” too. Hence the idea of a ‘Stern Review’ on biodiversity, which was endorsed by the group of eight leading industrialised countries plus five major newly industrialising countries (China, India, Brazil, Mexico and South Africa) at the G8+5 meeting in Potsdam in 2007. The idea now only needs to be embodied by the independent and prestigious figurehead himself.

However, some economists are sceptical. Clive Spash, from Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO), vigorously challenged his colleagues at a forum of biologists: “The initial response I have is why do you want to do this? […] Do ecologists just want some big numbers to impress their friends? This seems to be the pragmatist game, but it has little to do with science or economics.” Spash, who advocates a multicriteria approach that includes local participation and regulations, in which monetary considerations would not be paramount, says: “We’ve already had a bunch of meaningless numbers on valuing ecosystems and all they achieved was to put progress on getting better decision tools into the policy arena back 10 years.” One thing is certain: biodiversity is continuing its inexorable decline unmoved by all this controversy…

Yves Sciama


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Ecosystem services

In 2000, the Millennium Ecosystem Assessment (MA) set out to catalogue the services that ecosystems render to humanity. It divided the services into three categories. The value of services are fairly easy to express in monetary terms. They include hunting, fishing, agriculture and livestock, water supply, genetic resources and a variety of chemicals. More complex to evaluate are the so-called regulatory services: carbon sequestration, atmospheric regulation, air quality, water supply, erosion, nutrient supply, regulation of crop pests and diseases, etc. The third category of services rendered are cultural: the aesthetic, artistic, educational, spiritual and religious and recreational value of ecosystems, including leisure activities.

So, in order to assess the value of a forest, for instance, you need to take into account the cost not only of the timber it produces, but also the carbon it sequestrates, the clean water it generates by filtration, the soil it retains, the rare or valuable animals it shelters (particularly crop pollinators)… and even the money it saves by preventing nervous depression in stressed citydwellers! A forest is a real headache to assess.


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