As the world becomes more connected, economic growth can come at a steep price. Urban expansion and fossil fuel extraction often lead to deforestation, water contamination, and reduced wildlife populations. While nations profit from these activities, over time, the loss of nature can create significant financial burdens.
The economy relies heavily on natural resources. Consider the crucial roles of pollinators in agriculture or forests in maintaining water quality. A recent study suggests that over half of the global GDP depends on the environment. This interdependence is critical but often overlooked.
Research indicates that the natural services we rely on are declining due to degradation. To address this issue, a growing number of economists and ecologists are helping policymakers understand the economic importance of ecosystems. They aim to quantify what could be lost if we continue down our current path.
Stanford ecologist Lisa Mandle emphasizes, “If there were no nature, there would be no economy.” However, it’s only in recent years that experts have begun to track the financial contributions of natural resources through a method called “natural capital accounting.” A UN report from 2005 revealed that human activity has drastically diminished about two-thirds of the Earth’s ecosystem services, like freshwater supply and disease control. This alarming decline has spurred experts to focus on filling knowledge gaps regarding nature’s financial roles.
Mandle is a co-leader at the Natural Capital Alliance, which collaborates with various organizations to help countries assess their natural resources. A recent effort in Colombia evaluated the Upper Sinú Basin, uncovering that its ecosystems provide around $100 million in benefits related to hydropower and clean water—almost 2% of the region’s GDP.
Many decisions have undervalued nature, treating it as insignificant compared to other economic activities. Mandle argues that natural capital accounting is essential for showcasing the diverse ways that nature supports human well-being. As businesses get pressured to disclose their impacts on biodiversity, there’s a growing shift in investor interest toward environmentally responsible companies.
Large companies contribute significantly to biodiversity loss. However, they also possess the capacity to lead in the restoration of ecosystems. Columbia University has even introduced a master’s program aimed at equipping business leaders with the knowledge to make nature-friendly decisions.
In terms of financial contributions, ecosystems deliver staggering values. For instance, pollinators bring in about $800 billion annually to the global economy, with the U.S. alone accounting for $34 billion. A 2022 report noted that U.S. birdwatchers spent $107.6 billion, dwarfing NFL revenue for that year. Similarly, mangrove forests prevent over $65 billion in damages from storms and flooding each year.
Even individual species can generate immense economic benefits. The North Atlantic right whale alone contributed $2.3 billion to industries related to whale-watching in 2008. Such figures illustrate why conservation advocates emphasize protecting ecosystems and wildlife.
Despite its benefits, natural capital accounting faces challenges. These complexities arise from varied ecosystem services and the differing values communities place on them. The UN has a framework for tracking ecosystem services, but many measures are still developed case by case. Recently, markets have emerged to monetize nature-based solutions, such as carbon offsets. However, critics argue that this “financialization of nature” risks undermining its intrinsic worth. Casey Camp-Horinek, an elder of the Ponca Nation, emphasizes that assigning financial values to nature can be disrespectful.
Viorel Popescu from Columbia University expresses a similar conflict regarding financial assessments of ecosystems. He acknowledges the need for measurable values to foster discussions while recognizing the complexities involved. Mandle echoes this sentiment, stressing the importance of using both emotional and rational perspectives when considering nature’s value.
As environmental degradation and climate change continue to impact the global economy, the financial cost is now estimated in the trillions annually. Mandle points out that as human activities increase, the values from natural systems often only become apparent after they are lost. With rapid changes ahead, understanding these interconnected relationships is more urgent than ever.
Ultimately, nature’s decline holds financial implications for us all. From local economies to global markets, the need for sustainable practices in development is crucial. By recognizing the value of our natural world—both in dollars and intangible benefits—we can guide future decisions for better outcomes. For more details on nature and economy, check out reports from the UN Environment Programme.
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Climate Change,environmental accounting,GDP,natural capital,pollinators,Today’s Climate
