Accounting scandal at Mother Earth, Inc.

Put that rainforest on your spreadsheet and suddenly the global economy looks different, by trillions of dollars, a new study shows.

By Farhad Manjoo

Aug. 19, 2002 | Grandchildren have figured prominently in the politics of environmentalism. When a president sets aside preservation areas, he does it for the benefit of "our grandchildren." When a policy group wants to tell us about the problems caused by a few-degree rise in the mean temperature over a hundred years, it asks us to think not about ourselves but to remember that our grandchildren will have to live here, too. Why should we recycle, or buy hybrid cars, or boycott restaurants that serve Chilean sea bass? That's easy: Think of the grandchildren.

It's obvious why environmentalists care so much about our grandchildren -- by the time the earth manifests the full effects of this generation's environmental recklessness, we'll all be on death's doorstep, and the grandkids will be left holding the bag. The problem with the appeal, though, is that it's hard to get too worked up about the lives of grandchildren who, for most of us, don't exist yet; it's a fuzzy argument, disconnected from the daily whims of working people, and -- if the popularity of President Bush is any sign -- it's been a failure.

That's where Robert Costanza comes in. Costanza is one of the founders of ecological economics, an emerging field that attempts to measure environmental damage more meaningfully than by predicting unpleasantness for putative grandchildren. Ecological economists believe that the planet's ecology contributes significant economic output to the world's markets, and that each time some environmental resource is destroyed, it costs us dearly, in dollars. Which means, Costanza says, that there are more than moral reasons for governments to pursue environmentally friendly policies: There can also be significant economic value.

In 1997, Costanza, who co-founded the International Society for Ecological Economics, published a widely-quoted article in Nature that estimated the global value of "nature's services" -- such as its regulation of the climate -- at somewhere between $18 and $61 trillion each year. That's comparable to the gross economic output of the globe, not a small sum.

Now, working with Andrew Balmford, a conservation biologist at Cambridge, and more than a dozen other economists and ecologists from around the world, Costanza has found that environmental protection is a very good investment opportunity. In a new study, published in the August 9 issue of the journal Science, he finds that for every dollar spent on conserving the world's remaining intact natural habitats, society will get at least 100-fold payback in nature's services. (The full report is available online to subscribers of Science, and others can register at Science's website for an abstract.)

The report is to be presented at the second World Summit on Sustainable Development, which will be held late in August in Johannesburg. In the decade since the first earth summit, held in Rio de Janeiro, the destruction of natural habitats has accelerated. How can this be, if protecting the environment makes economic sense? In a telephone interview with Salon, Costanza explained that the problem is -- what else, these days? -- bad accounting. If governments devised rules that required corporations to "internalize" any environmental damage they might cause, Costanza says, we'd probably see a lot of companies thinking about the fate of our grandchildren.

Tell me what your new study found, and how you found it.

The bottom-line answer is that the benefit-cost ratio for preserving most of what's left of relatively wild natural areas is at least 100 to one: From the society's point of view, when you preserve wild nature, you're getting at least a hundred times the benefits over what it costs.

We looked at the rates of loss of wild nature, and the economic value of that loss in terms of lost ecosystem services -- it's about $250 billion lost each year, out into the indefinite future.

We said, given what's left of these natural areas, what would it cost to maintain them? We had a hypothetical network that consisted of 15 percent of the terrestrial biosphere and 30 percent of the [oceans]. We're already spending about $6.5 billion on natural area conservation preserves right now. We figured to expand to this hypothetical area would take about $45 billion a year, worldwide. So it's an order of magnitude [greater than what we spend now], but it's a lot more area, and $45 billion a year in the larger scheme of things is not that much money. It's a small fraction of the global military budget.

And it's also a small fraction of what's spent on perverse subsidies -- those are huge subsidies that are not benefiting society at all but are benefiting only the private recipients of those subsidies. Society would be much better off if they were eliminated -- so if you eliminated even a small fraction of those perverse subsidies you could pay for this reserve network. So $45 billion a year for the global reserve network: We're not saying that's all you have to spend, but it's our hypothetical scenario.

How did you find this? How do you measure what's being lost, and what's being gained with the $45 billion?

That's the other side of the coin, the benefits. There we looked at the value of the 17 different ecosystem services. Those were largely calculated in the 1997 paper that came out in Nature magazine.

The services [provided by the ecosystem] range from things like climate regulation -- from very global things to more regional things like storm protection, erosion control, soil formation, nutrient cycling, to even more local things like pollination services from insects and birds, water supply services, food and raw martials, recreation, genetic resources and cultural and scientific amenities.

Next page: Who's going to pay for it?