Nature's sting: The real cost of damaging Planet Earth
You don't have to be an environmentalist to care about the protection
of the Earth's wildlife.
Just ask a Chinese fruit farmer who now has to pay people to
pollinate apple trees because there are no longer enough bees to do the
job.
And it's not just the number of bees that are rapidly dwindling. As a
direct result of human activity, species are becoming extinct at a rate
1,000 times greater than the natural average.
The Earth's natural environment is also suffering.
In the past few decades alone, 20% of the Earth's coral reefs have
been destroyed, with a further 20% badly degraded or under serious
threat of collapse, while tropical forests equivalent in size to the UK
are cut down every two years.
These statistics, and the many more just like them, impact on
everyone, for the very simple reason that, in the end, we all end up
footing the bill.
Costing nature For the first time in history, we can now begin to
quantify just how expensive degradation of nature really is.
A recent study for the United Nations Environment Programme, entitled
The Economics of Ecosystems and Biodiversity (Teeb), put the damage done
to the natural world by human activity in 2008 at between $2tn (£1.3tn)
and $4.5tn.
At the lower estimate, that is roughly equivalent to the entire
annual economic output of the UK or Italy.
A second study, also for the UN, puts the cost considerably higher.
Taking what research lead Dr Richard Mattison calls a more "hard-nosed,
economic approach", corporate environmental research group Trucost
estimates the figure at $6.6tn, or 11% of global economic output.
This, says Trucost, compares with a $5.4tn fall in the value of
pension funds in developed countries caused by the global financial
crisis in 2007 and 2008.
Of course these figures are just estimates - there is no exact
science to measuring humans' impact on the natural world - but they show
that the risks to the global economy of large-scale environmental
destruction are huge.
Natural services The reason the world is waking up to the real cost
of the degradation of the Earth's wildlife and resources - commonly
referred to as biodiversity loss - is because, until now, no one has had
to pay for it.
Businesses and individuals have largely operated on the basis that
the natural resources and services that the planet provides are
infinite.
But of course they are not. And only when the value of protecting
them, and in some cases replacing them, is calculated, does their vital
role in the global economy become clear.
Some are obvious, for example the clean and accessible water that is
needed to grow crops to eat, and the fish that provide one-sixth of the
protein consumed by the human population.
But others are less so, for example the mangrove swamps and coral
reefs that provide natural barriers against storms that devastate
coastal regions; the vast array of plant species that provide
pharmaceutical companies with endless genetic resources used for
live-saving drugs; and the insects that provide essential pollination
for growing around 70% of the world's most productive crops.
Bee collapse It is a hugely complex process, but an economic value
can be placed on these resources and services.
In the US in 2007, for example, the cost to farmers of a collapse in
the number of bees was $15bn, according to the US Department of
Agriculture, contributing to a global cost of pollination services of
$190bn, according to Teeb.
As Paven Sukhdev, a career banker and team leader of Teeb, says:
"Bees don't send invoices".
Research by consultancy group PricewaterhouseCoopers also suggests
the economic losses caused by the introduction of non-indigenous,
agricultural pests in Australia, Brazil, India, South Africa, the US and
the UK are more than $100bn a year.
In 1998, flash flooding in the Yangtze River in China killed more
than 4,000 people, displaced millions more and caused damage estimated
at $30bn. The Chinese government established that extensive logging in
the region over the previous 50 years had removed the trees that
provided essential protection from floods. It promptly banned logging.
Indeed the Centre for International Forestry Research has estimated
that, in the 50 years prior to the ban, deforestation cost the Chinese
economy around $12bn a year.Business costs The impact of biodiversity
loss is felt hardest by the world's poor. The livelihood and employment
of hundreds of millions of people depend upon the world's natural
resources, whether it be fish, fertile soil for farming or trees for
fuel, construction and flood control, to name just three.
As Mr Sukhdev explains: "Biodiversity is valuable for everyone, but
it is an absolute necessity for the poor".
For example, Teeb has calculated that the Earth's natural resources
and the services they provide contribute 75% of the total economic
output of Indonesia, and almost half of India's output.
But it's not only the poor who suffer.
Businesses will increasingly be hit as they start paying for their
part in biodiversity loss.Not only will they have to pay to protect or
replace services that nature has historically provided for free, but
they will be forced to pay by regulatory instruments such as pollution
taxes, like carbon credits and the landfill tax that already exist, and
higher insurance premiums.
Then there is the cost of paying for the increased number of natural
disasters, resulting in part from more extreme weather conditions caused
by rising temperatures due to greenhouse gases, and even reputational
damage among consumers that are becoming increasingly sensitive to
environmental issues.
Trucost has estimated the cost of environmental damage caused by the
world's largest 3,000 companies in 2008 at $2.15tn.
That equates to around one-third of their combined profits.
Again, these figures are only estimates, but the scale of the costs
that will have to be paid by companies for their damage to the
environment cannot be ignored.
As Gavin Neath, senior vice president of sustainability at consumer
goods giant Unilever, says: "It's pretty terrifying. Nobody in business
thinks that at some point this is not going to hurt us".
And higher costs for business mean higher prices for consumers.
Only this summer, massive floods in Pakistan and China forced the
global cotton price to 15-year highs, pushing up the costs of clothes,
with retailers such as Primark, Next and H&M all warning of higher
prices to come.
Drought and wildfires in Russia also sent wheat prices rocketing,
sending global food prices sharply higher.
But consumers won't just be hit by rising prices. As Trucost's
research shows, earnings and profits of the world's largest companies
will come under increasing pressure, undermining share price growth.
And it is precisely these companies that pension funds invest in.
Pension values, therefore, are likely to suffer, reducing retirement
incomes for all.
The cost of the current, rapid rate of degradation of the earth's
natural resources will, then, be borne by everyone, environmentalist or
not.This is the first in a series of three articles on the economic cost
of human activity on the natural world.
The second will look at which sectors and businesses have been hit
hardest, and the third will look at what can be done to slow
biodiversity loss, and what opportunities it presents.
- BBC
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