Is it right to put a price on nature?

I’ve just spent a week trekking along Wainwright’s coast-to-coast route, walking the first section from St Bees to Penrith. The walk took us across the vast and stunning landscape of the Lake District, as described in Wordsworth’s poem ‘Daffodils’:

I wander’d lonely as a cloud
That floats on high o’er vales and hills,
When all at once I saw a crowd,
A host, of golden daffodils;
Beside the lake, beneath the trees,
Fluttering and dancing in the breeze.

Extract from ‘Daffodils’ by William Wordsworth (1804)

Along the walk, I was pondering a question posed on the discussion forum of a course I’m studying on Agro-Ecosystem Services at Bangor University. The question was whether it is relevant to put a monetary value on ecosystem services? Can it improve policy and management decisions? Is it too reductionist? Is uncertainty too high to produce credible values?

The motivation behind monetary valuation is that it provides decision makers, such as policy-makers and planners, a means to translate a complex subject into the more familiar language of money, which then helps guide an appraisal of its importance and can support decisions. Monetary valuation may also be a helpful way to engage certain audiences such as economists and investors, who can yield significant influence.

My initial reaction to introducing a monetary value on ecosystems is heavy caution. It’s against all common sense to put a price on nature. The Lake District offers a vast amount of what we call “ecosystem services”, a term that means the benefits that humans obtain from ecosystems. The ecosystem services concept helps us understand the value of ecosystems, which can help us make better land management decisions. From an ecosystem service perspective, my experience of the walk was social, cultural, aesthetic and spiritual, benefiting my health and wellbeing. I also accessed fresh water along the way, as well as oxygen and food, all vital to my survival. Was that experience worth £50 or £100,000? If forced, I could put a personal, entirely subjective financial value on it but it would be a flawed calculation and I would never want to do it. Likewise, how could I put a financial value on Wordsworth’s poem? It would be an insult to the Lake District and Wordsworth to reduce what they provide into a monetary figure.

The flaws of monetary valuation

Some people rightly argue that in many cases, valuation is a meaningless idea as ecosystem services are vital for human survival; therefore they have infinite value (Chaisson 2002, McCauley 2006). Technology is unable to deliver planet-scale services such as climate regulation, soil formation and air quality maintenance, so there’s no comparable means to value it in financial terms. Even if we do put a monetary value on it, the figure is so high that it becomes meaningless. Furthermore, if ecosystems are dynamic and inextricably linked to one another, how is it possible to segregate one ecosystem service or geographic area and put a value on it?

There’s another reason to be highly cautious of ecosystem valuation. When we start associating a financial value to nature, we are walking on a path that exposes ecosystems to commodification or privatisation (Monbiot 2002, McCauley 2006). The concept behind valuation is that it can reduce market distortions and align economic incentives with social and environmental incentives. This can sound attractive, however by aligning everything in monetary terms, we are trusting that market-based mechanisms will deliver the right decisions to protect nature. It’s perverse, as George Monbiot argues, to use the same processes (commodification, economic growth and financial abstractions) that are driving the world’s environmental crisis to try and solve them.

Another challenge with monetary valuation is that it’s often flawed due to poor data availability and quality: this includes both coverage and resolution, where data can often be inconsistent and incomplete, requiring proxies which can have high potential for error (Eigenbrod 2010).

Despite its troubles, there is a lot of interest in monetary valuation and it’s a growing science. In the UK, we have have projects that refer to monetary valuation, such as the mega interdisciplinary National Ecosystem Services Assessment. There’s also a number of smaller studies across the UK, as presented in the BESS database. Robert Costanza, a prominent ecological economist has even had a stab at estimating the global value of ecosystem services – about $46 trillion/yr if you’re interested!

Making the case for monetary valuation

With all these criticisms and flaws, what is the case for monetary valuation? Robert Costanza is a prominent voice in academia that advocates for monetary valuation and has some compelling arguments.

Firstly, Constanza argues that valuation is unavoidable since it is already done implicitly when we make decisions involving trade-offs; therefore improved transparency through monetary valuation can help us make better decisions (Costanza et al. 2014). Constanza also emphasises that it’s a misconception to assume that valuing ecosystems in monetary terms is the same as commodifying or privatising them for trade. Rather, most ecosystem services are public goods or common-pool resources, which makes conventional markets work poorly, if at all. In addition, the values do not relate to exchange values, rather use or non-use values.

“If nature contributes significantly to human well-being, then it is a major contributor to the real economy, and the choice becomes how to manage all our assets, including natural and human-made capital, more effectively and sustainably” (Costanza et al., 2014).

There are case studies that demonstrate how ecosystem valuation has led to market-based mechanisms have helped make the right decisions. A commonly cited example is the Catskill Delaware Watershed, where New York City invested in conserving a watershed that filters its water as effectively as a filtration plant, and more cheaply. Yet these examples of success are far and few between so far.

Using valuation in the right circumstances

There are many interesting uses for monetary valuation that convince me it can have a place, such as raising awareness, national income and wellbeing accounts, regional land use planning, full cost accounting and payment for certain ecosystem services. Monetary valuation can convince decision-makers to realise the irreplaceable services of nature, to treasure them deeply as sacred, delicate systems that we must protect and help thrive. However we should be very cautious about when it’s used. My pragmatic view is that monetary valuation can have an appropriate place in the discussion, but in proportion with other tools and communications. It’s purpose must be well communicated, together with it’s accuracy, as it’s no use bringing shoddy evidence to the table.

I also believe that we should also not allow monetary valuation to dominate the debate when the moral arguments are clear. Douglas McCauley, a professor at Stanford University argues against the central role of monetary values in decision making, suggesting that protecting ecosystem services should be framed predominantly as a moral issue; as the right thing to do, rather than reduced to the financial bottom line. McCauley suggests that policy-makers can be driven by more than the financial bottom line and believing otherwise is “akin to saying that civil-rights advocates would have been more effective if they provided economic justifications for racial integration” (McCauley 2006). 

Many social and environmental justice campaigners have experienced how decision making in the real world often does not follow evidence-based, rational processes. The reality is that decisions are made rashly and that the those in power can be manipulated or will act selfishly to win favour with one group over another. While monetary valuation clearly has some flaws, both practically and philosophically, it is another tool we can add to the toolbox. You never know when it might come in handy, but we just need to be very careful how and when to use it.

References

Chaisson, E.J., 2002. Cosmic Evolution: The Rise of Complexity in Nature. Harvard University Press, Cambridge, MA.

Costanza, R., 2006. Nature: ecosystems without commodifying them [Correspondence]. Nature 443, 749.

Costanza, R., de Groot, R., Sutton, P., van der Ploeg, S., Anderson, S.J., Kubiszewski, I., 2014. Changes in the global value of ecosystem services. Global Environ. Change, 26, 152–158.

Eigenbrod, F., Armsworth, P.R., Anderson, B.J., Heinemeyer, A., Gillings, S., Roy, D.B., Thomas, C.D. and Gaston, K.J., 2010. The impact of proxy-based methods on mapping the distribution of ecosystem services. Journal of Applied Ecology, 47(2), pp. 377-385.

McCauley, D. 2006. Selling out on nature [Commentary]. Nature 443, 7107: 27-8.

Monbiot, G., 2012. Putting a price on the rivers and rain diminishes us all. The Guardian.

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