POSTCARD: Natural Capital

BEIJING, China–In Asia, the current center of global economic growth, every consumer, organization and government faces difficult environmental choices on a daily basis. Chinese industry develops quickly throughout the country, leaving rising emissions in its wake, while the Japanese government fights against much of the rest of the world for its right to continue hunting threatened whales. In India, governments and courts debate the merits of developing industry at the risk of harming sacred and vital freshwater sources.

These are by no means easy decisions. Countries such as China and India, after being mired in poverty for centuries, are not enthusiastic to adjust their entire development plans for environmental objectives. Japan has a history of whaling and fishing that extends centuries. Yet when these countries make decisions harmful to the environment, they ignore some clear costs that have often not been discussed in policy debates. Through a variety of fundamental processes, healthy ecosystems provide “natural capital,” a public good that has a clear material value.

Healthy ecosystems provide measurable economic benefits, including supplying us with clean air and freshwater, protecting us from disease, and supporting global agriculture. These “ecosystem services” are not easily replaceable: water filtration or desalinization processes are unbelievably expensive, no one has yet found a way to manufacture clean air, and the genetic diversity provided by a variety of species and plants is a major bulwark for producing valuable medicines and preventing the spread of diseases.

Different ecosystems can all be valued according to the services they provide. Right here in the Beijing metropolitan area, not exactly an environmental hotspot, researchers valued the “stock value of forest natural capital” at 19.46 billion RMB (in 2007), and the value of its output, in providing services such as water conservation, air purification, and biodiversity conservation, at 61.77 billion RMB, or almost 7% of the region’s GDP. The current Chinese national accounts, however, only measure 0.20% of this figure in current GDP figures.

Many might wonder why we want to place a value on the abstract concept of “nature” or “biodiversity.” After all, some might view these as precious areas separate from the forces of capitalism. Others might wonder why trees and animals should get the same treatment as factories and workers in national accounts.

It is important to place a value on ecosystems and biodiversity because this is the only way to realize nature’s role as perhaps the world’s most important public good and make informed, accurate decisions on its care. By placing a value on the availability of clean water, it became clear to the Chinese government that it was worthwhile to pay farmers to plant less water-intensive plants, and subsidize residents not to kill exotic birds. In the 1990’s, the U.S. government used a similar method of analysis to decide to protect the forests of the Pacific Northwest and retrain and compensate the affected loggers.

In essence, valuing ecosystem services creates a market for the functions that nature provides for humanity. It is impossible to imagine Asia without its sacred rivers, vibrant oceans, teeming forests, and stunning landscapes, but the continent will soon face life without its natural treasures if it does not realize their true value.

Ravi N. Mulani ’12, a Crimson editorial writer, is an applied mathematics concentrator in Winthrop House who is interning for a life insurance company in Beijing this summer.