A recent article in the Los Angeles Times by Robert H Frank argues that Charles Darwin should be given the same honour that Adam Smith enjoys. The simple reason is Darwin's theory of competition and struggle for survival makes more economic sense. I am not keen to either understand the basis of competitive theory or survival of the fittest here. We need to understand ‘economics of nature' in a different way — move the discussion on realising the potential of natural resources for the national and local economy from seminar halls to markets and living rooms.
Biological resources (biodiversity) are the most important component of natural resources. Biodiversity or biological diversity is the variety of life on Earth. In spite of centuries of research and study on biodiversity, we know only as little as less than 10 per cent of this variety. How many of us realise that every action of a human being is dependent on this variety, which is unrecognised, under-valued and often misused. Just to sum up in the words of Martin Luther King, we are dependent on more than half of the world and its biological diversity even to have a simple breakfast everyday!
Biological diversity underpins the very existence of human and animal life. The food we consume, the medicines we use, the culture and aesthetics we want to preserve around us, the economic well-being of almost all our businesses is all squarely dependent on this diversity. Can one think of having a meal of just nothing but one variety of rice world-over? Can one think of a business that does not depend on water, soil and natural resources? Vehemently one will say, ‘no'. If this is the case, why is that we are not seriously considering the value and contribution of such a resource to human development?
TRUE VALUE
Biological diversity contributes to billions of dollars to national economy for all countries around the world. This is real, and not potential. According to the Secretariat of Convention on Biological Diversity (SCBD), the estimated economic potential of biodiversity in the pharmaceutical sector is about $640 billion of which 25-50 per cent is derived directly from biological resources, globally. Herbal supplements, personal care products and food products collectively have a market size of $65 billion representing the largest ‘nature' based market. The economic potential of coral reefs, on an average, at any given site include the following — an estimated $189,000/hectare/year in reducing natural disasters, tourism up to $ 1 million/hectare/year, genetic material and prospecting up to $57,000/hectare/year, fisheries up to $3,818/hectare/year.
Collectively we are looking at an economic potential of $1,250 million/hectare/year from coral reefs. These are researched figures by economists. Consider that we realise a mere 10 per cent of this potential for the local people. We are talking about $125,000 per year/hectare. It translates to Indian Rs 61,25,000/hectare/year. If India has on an average 2,330 hectares of coral reefs, we are talking of Rs 14,27,12,50,000 of revenue per year from this simple but critical ecosystem as of now. The contributory figures can go up many-fold if we invest in the proper maintenance of this ecosystem.
Consider the second example, land conversion for development. It was found in Southern Thailand that converting mangroves for shrimp farming generates $1220/hectare/year along with the subsidies provided for. Of this, $584 comes from commercial profits from mangrove forests and the rest from raising fish nurseries. If the mangrove area is protected without conversion, the average yields from these measures are estimated as $10,821/hectare/year that includes the savings from storm protection in the area. How much of this economic arguments appeal to us?
The interim report of the study titled The Economics of Ecosystems and Biodiversity (TEEB), mentions that we have two challenges today with regard to ecosystems and biodiversity. Firstly, we are still learning the ‘nature of value', as we broaden our concept of ‘capital' to encompass human capital, social and natural capital. Secondly, we are still struggling to find the ‘value to nature'. It also says that lack of valuation is the underlying cause for the observed degradation of ecosystems and loss of biodiversity.
POLICY POSSIBILITIES
Reviews of economics and ecosystems identify five key solutions for better stewardship of natural capital. These include: Rewarding benefits through payments and markets, reforming environmentally harmful subsidies, developing local entrepreneurship, addressing losses to natural capital through regulation and pricing and investing in ecological infrastructure.
We need to address the million dollar question – if India is a mega-biodiverse country bestowed with great natural capital, why are we not considering translating the natural capital into actual value? A few possible approaches in this regard are: Payments and markets should be made to work for conservation and the poor. The misunderstanding that payments for ecosystems is akin to privatising the natural resources should be dispelled. One of the challenges will be to mainstream the costs and benefits of ecosystem services into local and regional development plans. Sectoral policies that consider local markets as key to scaling up regional markets should be designed.
Capture Nature's values
We need to capture the values of nature and use them to develop appropriate policies.
Taking a precautionary approach: One needs to understand that loss of ecosystems and biodiversity can take place in less than a decade but restoration and rehabilitation can take several centuries, depending on the ecosystem.
Valuing ‘public goods': Ecosystems, their goods and services and biodiversity are often systematically under-valued. Lack of methods to value public goods and/or understanding of how to protect such goods, often pose serious challenges to policy makers to recognise public goods and integrate their preservation into policy making. One way to overcome this challenge is to develop appropriate national policies to not only value public goods, especially ecosystems and biodiversity, but internalise these into economic and development policy making.
Realistic markets: The potential markets and tradability of ecosystem goods and services and biodiversity need to be addressed using both market-based mechanisms and trade policies. The role of governments in enhancing the confidence of private investments into ecosystem-based markets needs to be looked into. Assessments by reviewed studies indicate a possible increase in government investments into market opportunities, such as payments for water-related ecosystem services (from $5.2 billion in 2006 to $6 billion in 2030).
The time has come for India to link economic indicators with ecological indicators to deal with development. If we consider ‘Nature' as an asset we need to do something to secure this for our own futures if not for the next generation.
(The author is Chairman, National Biodiversity Authority.)