The capitalist environmentalist and the price of nature

The bill for ignoring nature’s services may not be affordable if we don’t start paying now, says ‘total capitalist’ and environmentalist Pavan Sukhdev

‘THE BELIEF that private financial markets can solve all our problems is the witchcraft of our age.”

Those are not unusual sentiments to hear since the global financial turmoil began three years ago, yet it is still surprising to hear them from Pavan Sukhdev, a leading figure in the formulation of Deutsche Bank’s global markets strategy in Asia from the 1990s. But Sukhdev is full of surprises, all delivered in a quiet and mellifluously eloquent Indian-Oxford accent. He exudes both common sense and calm, despite the grim warning he is issuing about the consequences for humanity if we do not learn to value, and pay for, the goods and services provided by nature, such as fresh water and fertile soil.

The economics of nature has become his passion. He argues that our failure to acknowledge our debt to the environment is a blind spot that works against all our interests. He believes, too, that this blindness is especially damaging to the poor, who rely most directly on the free services that nature offers and who suffer most from their loss.

Sukhdev describes himself as a “total capitalist” and says that our problem is not that we have too much capitalism but that we have too little. The witchcraft of the markets has, he says, “made nature invisible”. By confusing capital with money, and by failing to recognise the value of natural capital, mainstream economics has created a deeply misleading picture of our world.

You think the holes left in our personal, national and global accounts by the antics of the banking system are frightening? Well, says Sukhdev, these are nothing compared with the hidden deficit that, if it remains unacknowledged, poses a threat not just to economic life as we know it but to the survival of our species. Each year, he believes, humanity squanders at least €1,400 billion on nature and its services – and perhaps more than twice that amount. That figure is rising steeply as our “ecological infrastructures” collapse and our population grows.

These numbers are mind-bending, and the gap between his two estimates indicates the difficulty of agreeing valuations, but they are not pulled out of a tree-hugger’s hat. For the past few years Sukhdev has been leading a global team of 500 top-ranking economists and ecologists in their efforts to put a price on those goods and services that can be traded, such as carbon capture and protection against erosion and flooding.

The Economics of Ecosystems and Biodiversity (Teeb) is a five-volume study partly funded by the United Nations Environment Programme. But it was also backed by the presumably harder-nosed German government, and the governments of several other industrialised nations. Its findings have been broadly endorsed by such august bastions of monetary rectitude as the Financial Times,which opined last year that the study was making "economic sense in costing the earth".

Sukhdev spoke to The Irish Timesthis week in Mérida, Mexico, just before he addressed an audience that might have been expected to be uneasy about putting price tags on fish and flowers. It is a sign of rapidly changing times that the Society for Ecological Restoration invited him to give the keynote address at its biennial international conference.

Ecological restoration is a rather low-profile strategy with high ambitions, seeking to return long-lost communities of appropriate plants and animals to degraded and impoverished ecosystems. It is increasingly used by governments, and even by corporations, to mitigate environmental damage caused by infrastructural and industrial development or intensive agriculture. But many of its best-known pioneers resisted any ideas that smacked of commodifying nature.

More recently, however, the notion of augmenting natural capital as a legitimate means of ecological restoration has gained traction, especially in developing countries. What exactly is natural capital, and if it is so important why have we only started to pay attention to it now?

“Natural capital,” says Sukhdev, “is simply the economic reflection of biodiversity and ecosystems, which are the living fabric of this planet. They provide a huge range of benefits to humans, whether it is fertile-soil formation or fresh-water provision; whether it is food, fuel and fibre; whether it is a clement climate that enables us to survive; whether it is the ability to go into forests and parks and enjoy ourselves; or whether it is the medicines that are so often derived from plants and animals.

“When we destroy biodiversity, we simply do not know the value of what we are tearing up.”

He thinks the reason, historically, that we have failed to value natural capital and its ecosystem services is that they used to be so abundant. Economics, he says, is always focused on scarcity.

Fish stocks, for example, seemed infinite in the past, while bigger and better fishing boats were relatively scarce and demanded investment. But now it is fish that are scarce, and ever scarcer, and we have vast overcapacity in fishing vessels. Yet short-term politics compels our governments to persist in offering “perverse incentives” to continue investing in fishing capacity. Annual global subsidies to the fishing industry now amount, he says, to a third of the value of the total annual catch. “So we are literally paying people to fish right down to the last tuna, when what we should be doing is investing in fishing stocks, not fishing boats.”

Sukhdev says again that it is the poor who suffer most in this, and most other, instances of overexploitation of natural capital. It is not only the livelihoods of fishery workers that collapse with fish stocks; it is also the health of the billions who depend on fish for protein.

The logical thing to do, he argues, would be to suspend all fishing where stocks are plummeting and subsidise the livelihoods of those who lose out in the short term. The ecologists he has worked with have told him that stocks often bounce back remarkably quickly, given a chance, so the subsidies could be withdrawn as soon as there were enough fish to exploit sustainably.

This seems an impeccably sensible argument, and the group’s research offers many similar examples. Why, then, is it so difficult to convince governments and businesses to build the costs and benefits of our exchanges with nature into economic balance sheets? Sukhdev thinks that the dominant economic philosophy “puts private wealth on a pedestal above public wealth” and therefore cannot see the value in nature. This is because we usually think of nature as a common good, accessible to all, until its services begin to disappear.

But attitudes are changing fast, he says. India is just the biggest of several countries that are already moving towards a “green GDP”, while the sports footwear company Puma has an initiative to use Teeb’s framework to measure its impact on the environment.

The voodoo of the markets may be starting to lose its hold on us.

See teebweb.org