A radical initiative in the US is providing New Yorkers with untreated, butclean drinking water, while rare woodpeckers are commanding prices of $100,000 a pair. Placing a market value on natural resources is saving billions in conservation costs, and forcing individuals to take their environmental responsibilities seriously, writes Patrick Smyth.
The view from Tir na nÓg's top pasture is of the green rolling hills of the Catskills, rich woods, grass fields, blue skies of puffy clouds, lambing sheep, and Dan Flaherty's red barn. At the bottom of the hill through the trees runs a narrow pure stream, little more than a brook.
- Journey's end.
Flaherty, three generations from Galway, and his wife Helen, work this 80-acre upstate New York farm they have called Tir na nÓg, raising sheep, pigs, goats, hens and rare-breed turkeys. In addition, they are enthusiastic supporters of a revolutionary project which may have a profound effect on the shape of the beautiful local environment and also on the future of nature conservation itself. In an unusual, and initially uncomfortable alliance, farmers and environmentalists are making the preservation of nature pay for itself, while quenching the almost unquenchable thirst of the Big Apple.
What is happening in the Catskills is described in a new book by scientist Gretchen Daily and journalist Katherine Ellison which explores a "new economics of the environment", a series of disparate but related attempts to unlock the real, but hidden, economic power of nature itself. If a cash value can be attributed to a watershed (the land between watercourses), a wetland, or the biodiversity of a rain forest, perhaps, the argument goes, trade can save the environment.
Although the theory is controversial - and sometimes seen as a licence to pollute - a growing number of scientists, environmentalists, business people, and even big "polluting" corporations, see these mechanisms as tools to unleash market forces in defence of the environment. Some of the schemes described by Daily and Ellison, from the Catskills to Costa Rica and Australia, illustrate dramatically what may be possible.
It is remarkable that 90 per cent of the water for the nine millon citizens of New York, 100 miles away, flows unfiltered and untreated from the Flahertys' stream and others in the Catskill and Delaware watersheds by river, aquaduct and tunnel, down 6,000 miles of conduits and pipes to the taps of the city.
The city's water authorities add chlorine as disinfectant and fluoride and has put in a physical barrier to check the flow of dead fish. But that's it - this is definitely not like London where it is said every mouthful of water has already been passed by seven other people.
Ten years ago, however, it began to look as if the existing system was all going to go wrong. Unfettered residential building in the watershed with inadequate septic tanks, industrial pollution, run-offs from farms . . . all were beginning to take their toll on the water. The Environmental Protection Agency (EPA) weighed in, telling the city it would have to build filtration systems at an estimated cost of between $7 billion and $8 billion.
That's what had been done elsewhere, and would have been the solution for New York. However, a determined campaign led doggedly by lawyer Robert Kennedy, the late senator's nephew, and an environmental group called Riverkeeper, convinced the city authorities that letting nature produce clean water would cost only a fraction of cleaning up that same water once polluted.
Kennedy, at one stage, advocated buying all the land adjacent to the river courses and evicting the farmers, but came round to the idea of paying them to become stewards of the water and compensating the residents of the towns of the watershed for accepting curbs on development and tough environmental standards.
The city had previously had a fractious relationship with the owners of land in the watershed because of compulsory land seizures for reservoirs and its extensive regulatory powers. But it bought the idea - at a $1.5 billion price tag - and so did the EPA, which gave it a five-year derogation from the order to build filtration plants. That five years is up shortly, but word is that the EPA will back another extension.
Today, 91 per cent of farmers in the Catskills have signed up, like the Flahertys, to become part of the unusual partnership that is transforming farming. Investment in buildings, slurry pits, fences, wells, and storm-water storage pits to stop mud flooding the river in bad weather, has flowed from the Watershed Agricultural Council (WAC), run largely by the farmers themselves, in exchange for agreed farm management plans designed to protect the water course.
The Flahertys are paid $370 a year to abandon to nature a buffer of four acres on the edges of the stream - the WAC is paying for 200 miles of such buffers and plans 400 more - and they get cash to spread manure on fields further from the farmhouse to ensure none of the land gets over-saturated with noxious pollutants.
Under the agreed plan, they rotate crops and field use to prevent erosion, reduce their spraying and regulate animals' feed to cut phosphorous levels on the land, and have drilled a new well, piping water across the farm to their sheep so they do not need to drink in the stream - lambs under six months are a potent source of the dangerous cryptosporidium pathogen which killed 103 and made 400,000 sick in a 1993 Milwaukee water-borne poisoning. All of this is paid for by a city one hundred miles away.
One of the Flahertys' neighbours has gone one step further by applying for the city-funded "easment" programme: in return for surrendering the development rights on his land to the city, he gets enough to clear his debts, continues to own and farm the land to an agreed environmental standard, and ensures that after his death the land will continue to be worked as a farm. The WAC will sign similar deals on 15,000 acres this year.
Local towns and the 70,000 residents of west Hudson have also received some $60 million in city-funded capital grants through the Catskill Watershed Corporation to assist in projects - from local employment creation to septic-tank renewal.
Farmers are enthusiastic - the new source of investment can make the difference between surviving and going out of business. Less enthusiastic, however, are developers, particularly those closer to the city, such as Putnam County's litigious Ed Heelan, who says he is opposed to the "socialistic and heavy-handed confiscatory methods of the city".
Although land-owners are compensated for land they sell to the city at market prices, he maintains the development restrictions have depressed values and cost owners billions in lost opportunities - and that compensation should reflect that. He bitterly blames local politicians, "buffoons", for selling out too cheaply to the city.
Some 140 US cities are studying the New York experiment. Boston has followed suit and a referendum in Ocean City, Maryland, has approved a $4 million a year property tax to buy up land by watercourses.
In Costa Rica, the government has begun charging 20,000 water consumers near the capital, in order to raise money for forest restoration and watershed preservation.
One scientist on the Millennium Ecosystem Assessment, a major survey of the US environment, estimates there is a solid economic case arising from water protection for preserving up to 12 per cent of the country's land surface in its natural state.
What the Catskills scheme shares with others is, as Gretchen Daily explains: "that more and more people are recognising ecosystems as capital assets and are taking a business approach to managing them". They are doing what economists call "internalising externalities" - recognising real hidden costs.
Take the fact two-thirds of crops require bee pollenation, yet the habitat for these natural workers is not valued economically. The result is a severe bee shortage in the US that is threatening agriculture. Or take greenhouse gas emissions. The International Panel on Climate Change estimates that by preserving existing forests and planting new ones, some 20 per cent of the carbon dioxide emissions from global industry and human transport could be sopped up in what are known as "carbon sinks".
The problem has been how to transfer the cost of planting or retaining forests to those creating the pollution. The answer, some suggest, is carbon credits. The idea is that governments set enforceable limits or "caps" on carbon outputs by businesses, preferably at levels lower than they are currently producing; companies are then fined if they exceed targets or, if they make significant cuts in pollution, are allowed to trade the right to produce the balance in the form of credits.
Credits can also be issued to those who create sinks to absorb the pollution of others, and, more controversially, to those who preserve existing sinks or forests that might otherwise be destroyed.
This system of "cap and trade" has a number of virtues, not least that the polluter and the owner of the sink need not have any relationship to each other, as the credits can be sold freely, like commodities in a market. The establishment of a new ecology exchange, trading in such credits and modelled on futures or commodities markets, is seen by the authors as inevitable once the Kyoto Treaty on greenhouse gas emissions begins to function, even without US participation. The World Bank has even established a $150 million Prototype Carbon Fund.
It is a controversial idea. Many traditional environmentalists see it as selling permits to pollute. But its supporters say credits can be effective where other approaches have in the past failed because of political/business resistance.
The idea has already been tried successfully in the US which has allowed trade in sulphur dioxide emissions - a contributor to acid rain - since the early 1990s. By 2000, the market in these pollution permits had grown to $3 billion and the power companies were going beyond EPA-mandated emission reduction targets, achieving reductions at a fraction of projected costs.
IN a smaller-scale scheme, the US Fish and Wildlife Service has created a market in "woodpecker credits". In a bid to save the threatened red-cockaded woodpecker in Florida, the service set a target number of breeding pairs for every acre of land owned by a paper producer, as a condition of licence renewal. Any excess pairs the company can "bank" against its failure to reach that number elsewhere, or sell in the form of credits to other producers (without, of course, moving the birds).
The company reckoned the value of the credit for each pair on the market at around $100,000, a powerful incentive to manage the land carefully. Some US states have conducted experiments in wetland banking, allowing developers to build only if they compensate for the loss of natural wetland by buying credits for newly established wetlands elsewhere.
Costa Rica, which, only a few years ago, was losing its rain forest faster than any other country has done an extraordinary about-face. It has announced its intention to preserve one quarter of the land in its natural condition and is now paying people to protect four types of natural product. It has introduced carbon sequestration (planting trees that "eat" greenhouse gases), watershed protection (preserving clean water to drink), pharmaceutical protection (safeguarding the biodiversity of the forests which are the source of innumerable new drugs) and the preservation of scenic beauty (the basis of a flourishing eco-tourism industry). Each constituency pays its way - from water consumers to carbon polluters to tourists to drug companies - with some help from international financial institutions.
In Australia, a system of "salinity credits" has been used to help farmers suffering salinisation of their land by paying for the planting of trees upstream from their farms. The roots help to draw water from deep in the soil, reducing the salt concentrations. Farmers pay in accordance with the productivity of the new trees while forestry gets a new source of income.
The radical idea that the trees can produce other outputs at the same time as timber and that their separate products can be economically unbundled and charged to separate consumers is key to the development of the new economics. One Costa Rican forest, sustainably managed, can produce timber, carbon credits, biodiversity credits, water credits . . .
Kathy Ellison says the case they are making "is no free-market treatise. In all our examples, government plays a central role. It draws a line in the sand and sets limits". The system of cap and trade requires both market and central authority. Gretchen Daily acknowledges that the idea of making nature turn a profit "is no magic bullet". It is clear that some natural products will have little or any attributable market value, she admits, but where such value can generate new sources of capital, it should be used to protect nature. "Different approaches work in different contexts," she says.
"What has happened so far," they comment, "illustrates an approach with great scope for improving the world. The goal is a planet where forests are being restored and protected and where farmland is being used more productively for the sake of the delivery of non-traditional 'commodities' such as carbon sequestration, salinity control and biodiversity. It's a world where Mother Nature at last receives fair compensation for her labour in our formal financial accounting."
At Tir na nÓg, the gentle revolution has begun.
The New Economy of Nature - The Quest to Make Conservation Profitable by Gretchen Daily and Katherine Ellison is published in the US by Island Press ($17.99)
