$125
trillion is no small chunk of change. You could, without a doubt, buy
a lot of stuff with that in your pocket. In fact, it's more than the
world's gross domestic product (GDP), or the value of all the goods
and services produced in the global economy each year - everything
from cars to haircuts to World Cup tickets. But according to a
recent study led by Bob Costanza, $125 trillion is also the
dollar equivalent of what all the work the world's ecosystems do for
us - things that aren't normally counted in GDP, like the flood
damage a coastal wetland prevents. The $33 trillion mark and other
figures like it vary widely while provoking much controversy...and
are increasingly taken by world political and business leaders as
self-evident, touted as the next big thing in conservation.
$125
trillion is a best guesstimate. It's a follow-up to Costanza's
landmark
1997 paper in which he and colleagues suggested the number might
be more like $33 trillion. At the time, other
researchers had reviewed existing valuation studies, finding that
overall an acre of wetlands might be valued anywhere between six
cents and over $22,000! Other commentators noted that looking at just
one particular ecological function (say, flood prevention), the
values researchers came up with could differ by two orders of
magnitude from site to site. For many
critics, these numbers imply the reduction of nature to something
to be bought and sold, which is particularly problematic if they're
going to fluctuate so wildly. For others, no matter the range of
values, they just aren't helpful - they're all a "serious
underestimate of infinity" because we simply can't do
without many of things nature does for us, like provide breathable
air. Still, for a growing number of conservationists and
decision-makers, putting some number - often a dollar value - on
ecosystems is exactly what's needed to save it, to show policy makers
and businesses the economic importance of nature, in hopes of
preventing its destruction and encouraging its conservation.
So
where do these numbers come from?
It's
appealing to write-off statements like, "the value of an acre of
wetland is six cents," as simply the work of ivory tower
intellectuals busily justifying their own existence. After all, the
scholars who published the most recent study are all affiliated with
an academic institution. It's also easy to get the sense that these
numbers come from no place in particular. That's the feeling you get
reading histories of the ecosystem service concept (see here
and here).
These papers do important work revealing that the valuation of nature
just didn't come along in 1997 with Costanza et al.'s first estimate
of the value of the world's ecosystems. But beyond having a history,
behind Costanza et al.'s new number and the “modelling
sausage” that spit it out is a body of literature, a set of
theories, and communities of scholars called environmental and
ecological economics. And this community and its history is grounded
in place. Valuing nature didn't just appear from out of nowhere.
Environmental, and its younger, upstart cousin, ecological, economics
and the basis for valuing nature come out of a long-standing
engagement with wetlands, especially coastal marshes, and
particularly as they faced development pressure, often from the
oil/gas industry. When ecologist Eugene Odum and economist Len
Shabman sparred
in the 1970s over how exactly conceptually and empirically to get at
nature's value, their material was Gulf Coast marshes. Today, in a
post-Hurricanes Katrina and Sandy world, when we hear prominent
arguments for restoring or conserving ecosystem services because of
their value, it's coastal places like Mobile Bay, AL that are paraded
out as examples of where coastal restoration "show
strong returns on dollars invested." It's
the US Gulf Coast that has defined nature's valuation as we know it
today
- its methodology and policy advocacy - and will continue to shape it
in the wake of the 2010 Deepwater Horizon oil spill.
The
Gulf Coast oil and gas industry's payments to oystermen for access to
lay pipelines across harvesting grounds mark economists',
conservationists', and others' earliest struggles with valuing
nature's goods and services beyond the confines of established
markets. The Gulf's hydrocarbon industry grew significantly following
World War II in order to meet growing demand from suburban consumers,
as Jason Theriot details in his great
new book about the twin histories of the industry and wetland
loss and protection in the Gulf. But, of course, companies like
Tennessee Gas needed to get their products to market - mainly on the
rapidly urbanizing east coast - from wells in the middle of
Louisiana's marshes. To do so, they laid hundreds of miles of
pipelines in canals carved through wetlands. These areas, however,
were often the same spots where oystermen had traditionally
harvested. At the time, in the 1950s, the ecological consequences of
the kinds of hydrological disruptions caused by canals were already
to some extent understood by fishermen and scientists alike: the
catch would likely be diminished from any nearby canals. In part
because many working in the hydrocarbon industry were local oyster
experts themselves and in part because of the influence the fisheries
community had historically exerted on state regulators, oil and gas
companies went out of their way to provide compensation for direct
damages from pipelines. What the industry paid was simply what the
expected catch would have fetched on the open market. In paying
oystermen for losses to their harvest, oil and gas companies were
acknowledging:the broader effects of their activities, but still had
some market signal to guide them; they were not trying to compensate
for things without market prices like water quality that
environmental economics pioneers like Dales were first proposing at
the time. The industry's payments were ad hoc and not meant to be a
systematic assessment of all of the what we would now call ecosystem
services a wetland provided. Still, conservationists seemed to be at
least considering for the first time about what values the market
wouldn't capture. For instance, the chief of the Oyster Division of
Louisiana's Wildlife and Fisheries Commission was particularly
concerned that compensation would not account for long-term,
large-scale effects:
“we
feel that the long range effects resulting in permanent ecological
changes are by far the most serious and the most difficult to assess
damages for.
Direct effects are largely a matter of obtaining ROW [right of way]
and making adjustments for damages at the time of construction. The
area involved is comparatively small and involves only the path of
the canal and the immediate vicinity on each side. Ecological and
hydrographic changes may be permanent and may affect extensive areas
ten miles or more on either side of the canal.” (58)
Into
the 60s and 70s, conservationists at Louisiana's state environmental
agencies and at Louisiana State University (LSU) continued calling
for a more formal recognition of the importance of wetlands, as part
of a growing movement nationwide to daylight corporate and government
decision-making that had impacts on the environment. As the story
goes, in1969, the massive
oil spill offshore of Santa Barbara, CA inspired Congress to pass
the National Environmental Policy Act (NEPA), which required all
federal agencies to undertake a formal review of the costs and
benefits of any action with a major effect on the environment. NEPA,
however, did not require agencies to monetize these costs and
benefits in order to evaluate projects. Ultimately, with executive
orders from Reagan and successive administrations requiring more
cost benefit analysis (CBA), monetization became the default. Already
by the 70s, the Army Corps of Engineers had been conducting CBAs of
its projects. As Tennessee Gas looked to the dock price of oysters to
account for some of the broader effects of its pipeline canals, the
corps might determine whether or not to build a dam based on the cost
to fisheries weighed against the benefits, measurable in dollar
terms, arising from new recreation opportunities.
CBAs
accounted for only so much of what conservationists thought was
important about coastal habitats. ←
This if anything is the
constant refrain throughout the history of nature's valuation, from
both advocates and critics: what are we counting? CBA
might assess how a levee project would cost in damages made to
fisheries, but at the time there were few techniques for accounting
for the loss of storm surge protection that came from impounding
wetlands. Easily the landmark piece decrying the limits of CBA was
James Gosselink, Eugene Odum, and R.M. Pope's 1974 paper, “The
Value of the Tidal Marsh”. It was a short white paper written
for the LSU Center for Wetland Resources, but nonetheless recieved
remarkable national attention from wetland conservationists as they
made their case in the 70s for increasing resource protection.
Gosselink et al.'s aims were to counterbalance development pressure
on coastal ecosystems by expanding what ought to be counted as
monetary cost from development. For instance, they valued the waste
assimilation capacity of wetlands by looking at what it might cost
regions to fully treat their sewage if all wetlands imply vanished
and were replaced with wastewater plants. This “replacement cost”
was not a market price, but was an existing signal (and it's measures
like these that led to some of the most famous examples of
institutional payments for ecosystem services, namely New
York City's payment to farmers in the city's watershed to
conserve natural habitat, which has reduced the region's water
treatment costs.) The group, in the end, described wetland value in
terms of $/acre/yr, but how they got their was through the concept of
"emergy.” Emergy is a neologism for the amount of solar energy
embodied in an ecological good or service. This could be converted
into monetary terms by comparing the caloric requirements for service
production in a wetland to the price to burn calories in things like
oil that do have a market price. It may sound a little convoluted
today, but the idea still has some traction. What's important about
the emergy argument is that it proposes that nature's value is
intrinsic; value arises from ecological transfrormations of energy,
rather than supply and demand. Not surprisingly, this upset many
economists, some of whom thought the idea went against some of the
fundamental tenets of their discipline, in which value is
fundamentally relative, dependent on the vagaries of supply and
demand, and ultimately, how much rational subjects desired certain
things. This is precisely what Gosselink et al. were skeptical of: if
we believe neoclassical economics, nature has no value because it has
no market price. But of course nature has value and so it must reside
somewhere
in nature. As one research team later put
it, “The point that must be stressed is that the economic value
of ecosystems is connected to their physical, chemical, and
biological role in the overall
system,
whether
the public fully recognizes that role or not.”
(emphasis in original) Politically, this perspective translated into
an argument to not leave wetland protection to the whims of the
market, but for better government planning. That would be something
at least Gosselink would be more involved with in the next decade,
contributing to the consolidation of Louisiana's modern oil/wetland
regulatory regime while leading environmental reviews of projects
like the massive Louisiana Offshore Oil Port.
One
student of Howard
Odum – Eugene's brother and collaborator - was none other than Bob
Costanza, lead author of the 2014 paper valuing the world's ecosystem
services at $33 trillion. After graduating from the University of
Florida in the late 70s, he got a job at LSU. As
he recalls it, he was in part drawn there by the presence of
Herman Daly, whose work was moving in similar directions and had been
an inspiration, and who happened to show up at his job talk. LSU at
the time would have been a hub of activity focused on valuing nature,
through coastal marshes, with Gosselink, Costanza, and Daly all
pioneering in their own way and Eugene
Turner, another freshly-minted student of Odum, making headway on
understanding the ecological effects of oil and gas canals on the
coast. Throughout the 80s (and to some extent into today) Costanza
would publish on the ecological and economic facets of Louisianan and
Gulf wetlands. In one
paper in particular, 1989's “Valuation and Management of
Wetland Ecosystems,” he and his co-authors produced another
estimate of Louisiana's wetlands, a follow-up to Gosselink et al.
Like Gosselink et al., Costanza, Maxwell, and Farber conducted an
emergy analysis. But they also did something different: besides
counting calories or looking at the market rate of fish raised by
coastal estuaries, they actually hit the pavement (a boat ramp
parking lot, actually) and asked people what wetlands were worth to
them. The technique is known as contingent valuation. What they were
after was people's "revealed" preferences - the amount each
person spent on gas to get themselves to a wetland to fish could be
considered part of its value, as a provider of a recreational
service. The researchers were also interested in "stated"
preferences - what people say they would pay to protect a wetland. If
you're thinking that preferences sounds
a lot more in line with the
neoclassical economics approach than with the emergy perspective,
you'd be right. We might read Costanza et al.'s paper as a sort of
continental divide in the valuation of nature: the first half an
emergy analysis focused on elucidating the inherent values of nature,
a perspective that was prominent up until that point, the second half
all about new techniques to get after how much society desires
wetlands in practice, regardless of what nature has to say about it,
new and exciting methodolgies that were about to get their trial by
fire (see below). And this sort of split reflects where Costanza et
al. end up in the paper when it comes to policy recommendations: they
suggest that oil and gas companies provide bonds to cover the
mitigation of their impacts. The amount of the bond would be based on
the predicted extent and nature of the impacts, and depending on the
final ecological outcome, the company would get more or less of its
bond back. The researchers' argument here was not for better planning
to restrict where the oil and gas industry could work, but to modify
the industry's accounting practices, something that is all the rage
now, with TEEB and TNC
working hard at incorporating green accounting in business.
Here's
the thing about contingent valuation: it doesn't work. Economists
often expect people to behave rationally, but asking people how much
they would pay to protect pelicans has presented economists with a
number of persistently thorny issues. For
instance, when researchers ask people how much they would pay to
protect a nearby natural area from a hypothetical development
scenario, people regularly act strategically and give “protest”
answers. They'll say $0, insinuating that the park is priceless, or
offer some absurdly high price, all in the belief that there may be
an actual development project in the works and that their answers may
stop it. It also turns out that people don't value twice as much
wetland at twice the price. It was another “largest to date” oil
spill – the Exxon Valdez tanker leak in 1989 - that brought to a
head many of the methodological concerns surrounding the use of
contingent valuation (in theory and applied to real cases).
Economists and regulators alike asked
themselves, how do we figure out how much damage the tanker spill
has caused to wildlife? What about the value someone in Iowa places
on the mere existence of some species in Alaska? NOAA, in charge of
the clean-up, commissioned a study led by some of the top minds not
just in environmental economnics but economics writ large - Nobel
Prize winners like Kenneth Arrow - to see if contingent valuation was
a proper method to use. They found that it was, and the courts have
affirmed NOAA's prerogative to use it. But
rarely it has.
Instead,
NOAA has tended to employ good ole replacement cost. If it costs $100
million to buy all the construction equipment, fill, and plants to
replace a wetland degraded by a Chevron oil spill, then Chevron must
pay that amount. Like contingent valuation, the problem with
replacement cost, as practiced in NRDA compensation, is that it
doesn't work. The cost of replacing ecological structure doesn't
necessarily equal the cost of lost ecological functions. It's one
thing to put the right kinds and quantity of plants back in; it's
another to make sure that the ecosystem is providing the same kind of
flood mitigation service, for instance.
Doubts
about the object and goal of compensation are precisely what are
haunting economists yet again following the lastest “largest oil
spill to date,” the Deepwater Horizon spill. It inspired a
revisiting of the contingent valuation question with some authors
revising their position from 20 years ago post-Exxon Valdez. Diamond,
for instance, is
now even more critical of contingent valuation and more skeptical
that it could ever be of much use. Some number is not
better
than no number. Meanwhile, the spill has become a poster child for
ecosystem service valuation advocates. In the monumental TEEB
synthesis report, the section on “Applying the Approach”
begins with the lamentation that if only the value of wetland
services had been properly accounted for in business practice, BP
would have never let the spill happen.
What
is clear from the Deepwater Horizon fallout is that beyond whatever
BP ends up having to pay to compensate for affected wetlands, they're
going to have to pay separate fines into another fund to be used for
large-scale restoration of the coast, beyond specific places the
spill reached. This is a (bitter) windfall for conservationists; as
one put it -"This is a once in a lifetime opportunity" to
do something about Louisiana's land loss problem. BP money, at least
in Louisiana, will be funneled into the Master
Plan the state's CPRA has developed. The Master Plan lays out
restoration principles and priorities (e.g. let nature do the work -
harness the Mississippi River to deliver sediments to open water to
build new land) and describes a suite of sites selected for
restoration. These sites were selected based on their cost
effectiveness, which in part has been a question of how many
ecosystem services restoration will bring - how much flood prevention
or how many alligators, for instance. The question here has is not so
much the cash value of these services; the authors of the Plan
explicitly note: "We didn't have the time this time around to
look at that." As the head of the CPRA noted, however, this kind
of analysis is in
the works for the next version of the Master Plan, coming in
2017. At the heart of the matter is the development and deployment of
economic valuation techniques for evaluating public spending.
Economists
are hard at work determining what kinds of restoration are most
worthwhile: how many acres will $X in sediment diversions bring in
over time compared to other methods of marsh creation? So far,
acreage - a fairly straightforward metric - has been the target,
which makes sense giving land loss is measured in acres, but expect
to see ecosystem services migrate into the accounting. The goal in
valuing the land building and protecting services provided by coastal
wetlands is to spend public money wisely in an era of austerity.
These metrics allow decision-makers to evaluate tradeoffs. Already in
the master plan, the increase in certain ecosystem services like
carbon sequestration were argued to outweigh and justify the decrease
in other services, like shrimp habitat. Again, these were not yet $
valued. This time around, it certainly won't be emergy used to derive
the value of these public goods. Instead, what we are seeing hints
at is a move toward marketizing services. Instead of developing $
metrics to inform planning or to build new public institutions (via
bonding a la Costanza), some important Louisiana decision-makers are
turning to potential carbon and nutrient markets to help value (and
pay for) wetland benefits. There's no need to do contingent valuation
of a wetland function like carbon sequestration that is traded in
California's cap and trade market at $10 a ton - that's the value
right there.
Where
does nature's value come from? In no small part, from those working
to understand and protect Gulf Coast marshes. The practice of
assigning the environment a dollar value continues to evolve and does
so as practitioners – regulators, economists, scientists - engage
with these ecosystems, providing certain opportunities and obstacles.
Indeed, an ongoing question within the field is the role of
environmental science and the extent to which ecologists can provide
the kind of information about nature economists want and need to do
valuation. The complexity of ecological functions - their
nonlinearity, dynamsism, etc. - has long been acknowledged as a
stumbling block, from Westman's prescient 1977 Science
article
to the Millenium Ecosystem Assessment to even the most ostensibly
gung ho supporters of valuation, TEEB. These difficulties do not mean
that the champions of the valuation of nature feel defeated. Just
consider how Costanza felt in 1997, "….although ecosystem
valuation is certainly difficult and fraught with uncertainties, one
choice we do not have is whether or not to do it". Besides
environmental economics' struggle with its existential dependence on
externally produced knowledge, its practitioners struggle with
understanding their own conditions for knowing nature's value.
There's still much question about whether contingent valuation will
work. We've seen a few here: people don't always act rationally, and
they also reject the survey techniques researchers employ to come up
with their numbers. This is setting aside what is perhaps the
trickiest question, that of benefits
transfer, or the practice of taking the monetary values for
ecosystems in one part of the world and using them in a different
part of the world. After all, as one scholar put
it, "An acre of coastal salt marsh seaward of New Orleans is
many times more valuable …than an acre of abandoned farm pasture in
Nebraska” and it's being able to say how much more valuable and how
locally specific to get that troubles many researchers. Finally, what
kind of policy angle environmental economists ought to take is still
open to debate (the riff between so-called environmental and
ecological economists itself is a part of that). Is nature open for
business and up for sale? Or is the goal simply better planning and
perhaps $ numbers aren't needed? You can expect those questions to be
asked if not resolved in any good paper today. Yet, as one group of
historians of the ecosystem services paradigm notes,
these uncertainties are not
the
growing
pains we might expect from an emerging research perspective. As is
clear when we look at the history of coastal marsh protection in the
Gulf Coast, nature's valuers have had at least 40 years experience to
figure things out. Instead, what lingering questions and simmering
debates reflect are genuine obstacles to a rightly controversial
practice.
In
attempting to answer these questions and close these debates, how
economists, regulators, and scientists go about valuing nature will
evolve. This of course is happening globally. One only has to follow
the Natural Capital Project around the world, from Colombia to
British Colombia, to get a sense of the importance of these places to
how the vision of nature as capital is being articulated and
materialized. But Louisiana and the rest of the Gulf Coast will
undoubetedly continue to be a sort of lab for experimenting on the
policy, science, and economics behind the valuation of nature - the
place where many of the important conversations ongoing about the
future of conservation in the face of climate change are worked out.
As a senior adviser to America's Wetland Foundation recently
put it,
“We can test it better than anyone.”
