This is a guest post by Hannah Griffiths, head of policy and campaigns at the World Development Movement. She argues that measures to value nature and ecosystem services will only serve to undermine progress.
The battle for the meaning of the words ‘green economy’ at the Rio+20 summit will be every bit as fraught as the battle for the meaning of the words ‘sustainable development’ was twenty years ago. And the outcome is likely to encompass an ‘all things to all people’ type approach. This is leading to some contradictory policy measures being proposed under the heading green economy.
There are many positive proposals in the green economy agenda, such as tax reform and regulation. But one key policy measure – the valuation of natural resources and ecosystem services – threatens to undermine any progress made in other areas.
A seductive theory
Governments (especially the UK), businesses and some environmentalists have been seduced by the theory that to protect and conserve nature, we need to factor its value into the market. Having identified the role that the current economic model has played in the environmental and climate crisis, they want to use the market to fix this damage. Their argument runs like this: we degrade nature and the commons because we don’t value it properly, therefore we need to ascribe a (financial) value to these resources and bring them into the market so that we pay the proper price for them.
A different but complementary argument comes from some businesses, governments and economists who are concerned about the financial crisis and want to create new sources of profit and growth. Over the past 30 years, profit and growth have been created through privatisation of the state sector, trade liberalisation and opening up markets, and the casualisation of labour. The problems caused by this approach are well documented and include increased inequality and poverty, economic and environmental injustice and environmental degradation. But now natural resources and ecosystem functions are next in line to be sold off and traded so that profit and growth can be created.
The frightening prospect of a market for water
These two approaches can be illustrated by looking at water. On the one hand, water is considered to be an important resource, undervalued by the economy and society:
“The 2005 Millennium Ecosystem Assessment reported on the importance of water and wetlands to society and the economy through the provision of ecosystem services …. The TEEB for Water and Wetlands aims to generate a better understanding of the ecosystem service values of water and wetlands to encourage additional policy momentum and business commitment for their conservation, investment and wise use.” TEEB [The economics of Ecosystems and Biodiversity] side event at Rio+20
On the other hand, water is seen as having potential to build a market and profit:
“I expect to see a globally integrated market for fresh water within 25 to 30 years… Once the spot markets for water are integrated, futures markets and other derivative water-based financial instruments — puts, calls, swaps — both exchange-traded and OTC will follow.” William Buiter, chief economist at Citibank
The introduction of this kind of speculation on water is a frightening prospect. The impact of financial speculation on food commodity markets has been increased food prices and increased price volatility, leading to hunger and malnutrition for millions of people. We can only imagine the devastating impact that water speculation would have on people unable to pay the price.
At the moment, thankfully, this scenario is quite a long way off, as spot, or real, markets – meaning water trading between regions and countries – would have to be established before financial markets in water could be created. And for water trading to happen, water and water services would first have to be adequately priced and valued.
Why a market approach can’t meet both profit and conservation aims
But we can see that the two different perspectives outlined above unite in the same first steps: the valuation of water and freshwater services. So where would this valuation and pricing process lead for water and for other natural resources? Can it meet both profit-related and conservation-related aims?
No, it can’t. The valuing nature approach is most advanced in policy areas related to climate change, and in these areas it is not working.
The UN Reduction of Emissions Through Deforestation and Forest Degradation (REDD+) scheme is a clear example. The idea behind REDD+ is that if the carbon stored in forests is valued and quantified, forests will be more valuable standing than cut down. Companies will have to earn the right to cut down trees or emit carbon either by planting new trees somewhere else or by instituting better forest management. However, by allowing companies to offset deforestation with the creation of new plantations, REDD+ has actually opened the door to the legal destruction of rainforests and the confiscation of land from local people who often do not have formal ownership deeds to the land they have used in common for generations.
Wider carbon markets have also been ineffective. The theory is that putting a price on carbon dioxide emissions will encourage companies and governments to reduce their emissions. But these markets, such as the EU Emissions Trading Scheme (ETS), have also failed to significantly reduce greenhouse gas emissions, instead locking in high emissions activities.
To solve climate change and the other enormous social and environmental problems we face – biodiversity loss, economic injustice, poverty – we cannot rely on market based policy instruments that will, at best, have no impact and, at worst, make the problems more entrenched and difficult to solve. These market based approaches may be seductive on the surface but, in reality, they are nothing less than green spin that will serve to legitimise a process that will result in further environmental degradation and social injustice.