TD Report: Is Nature The Largest “Company” On Earth?

(3BL Media/Justmeans) - Can we put a price on nature? If so, how? Over the past few years, diehard conservationists and bottom-line businesses believe you can do just that. They believe that putting a cost on nature is the best answer to global environmental decline because they believe that until now, old-style protection of nature has failed to stop the destruction of habitats and the dwindling of species. It has failed mainly because there has been not enough money and/or commercial interests in conservation.

TD Economics explores the benefits we receive from natural capital in its latest environmental economics report, "Valuing the World Around Us: an Introduction to Natural Capital." The report highlights that the advantages can be significant, citing two examples: first the urban forest in New York City provides nearly $150 million in annual benefits, including air quality, energy savings and wet-weather flow control. Secondly, the rivers and wetlands of British Columbia's Lower Fraser Valley provide more than half a billion dollars in benefits each year. To make these calculations, TD Economics has its own definition to capture the direct and indirect benefits arising from the current and future stock of natural resources.

The document explains that natural capital refers to the economic, environmental and social benefits provided by natural resources, and ecosystems. It can help us to consider the complete influences of our actions, by taking into account the effects we have on the environment, society and the world around us. By taking natural capital into account, governments, firms, and individuals can better recognise the true costs, benefits and return on investment of planned activities, helping improve the decision-making process.

Yet, the discussion of natural capital is not a conventional one. It has drawn criticism, and at times, that can be heated, as in the U.K. when the government’s plans to sell off national forests had to be abandoned in the face of fierce public opposition. Some think that deciding who has a legitimate right to sell ecosystems means picking winners and losers. In developing countries, indigenous communities may lack the documentation or the political clout to assert their ownership. Plus, these schemes could also risk creating perverse incentives; that’s if the system pays landowners to bank carbon, they may plant non-native species, or genetically ‘improved’ trees, to bank carbon faster. Or may discourage natural phenomena that happen to be good for biodiversity, but bad for people, including factors like fires, droughts, diseases or floods.

Many believe that there is no better way to save the world than through natural capital, which can be valued through various market and non-market pricing methods. By establishing a definition and valuation framework, it is possible for businesses, governments and individuals to incorporate natural capital considerations into economic and social decisions. By doing so, better choices can be made that more fully reflect all of the costs and benefits, and more accurate estimates on the return on investments. Natural capital has the potential to provide options that are not apparent when traditional thinking is used.

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