Reinventing Europe

This article by Dr Andrew Seidl, Head of IUCN's Global Economics and Environment Programme, appeared recently in New Europe - the European weekly newspaper which carries news and analyses from 49 countries with a particular emphasis on EU institutions and EU-world relations.

Solar Panels

In an era of shrinking budgets and financial challenges, no government expenditure goes without public scrutiny. Agriculture and fossil fuel subsidies, bank, steel and auto-industry bailouts, industrial accidents and natural disasters cost countries (that is, people) money and opportunity, lots of it. Environmentalists are often criticized for asking for more spending. Really, we’re calling for less spending and more investing, less waste and more opportunity. Environmentalists want improved livelihoods through better management of the planet by taking the stock and flow of ecosystem services into full account.

Public policy corrects for misaligned incentives and makes the ‘prices right’ such that better resource allocation decisions can be made. When it comes to biodiversity, the environment, the public commonweal, and the green economy, the prices are wrong by a good distance. They are wrong both due to the presence and the absence of public policy at various scales. Perverse incentives should be removed, externalities internalized (or offsets paid) and ecosystem services valued in order to reveal potential opportunity and create a level playing field where private and social incentives are well aligned. That is, full costs and benefits of resource use should be accounted for in a consistent fashion at all levels from the farm gate to the federal government.

For example, due to air pollution and other adverse external effects, market prices for fossil fuels distort the true social costs of their use. Subsidizing fossil fuels is still worse, exacerbating the ill-effects of market imperfections. Subsidized fuel is reducing the incentive to innovate and to find low or no fossil fuel options for economic development. Among other things, it has helped to fuel sprawling, automobile centered, urban design, the legacy of which will be difficult, if not economically infeasible, to reverse.

The ongoing and increasingly dire BP disaster in the Gulf of Mexico clearly illustrates that the full expected costs of oil extraction are not reflected in the accountancy calculations of businesses and insurance companies. Tax payers and local communities are left to subsidize the shortsightedness of such accounting. Biodiversity, the basis for past, current, and future economic development in the region is irreversibly damaged.

In addition, the planet’s natural riches lie largely in developing nations and environmentalists understand that poverty is bad for the environment. Poverty causes people to make perfectly rational short-run decisions that result in catastrophic longer-term environmental and economic consequences. Poor people living in countries that are struggling to emerge are being asked to provide stewardship of the ‘natural treasury’ on behalf of the rest of us.

We contend that ecosystem-based adaptation and nature-based solutions can reduce poverty, create more resilient and robust resource-management systems, and improve human welfare. If biodiversity pays, biodiversity stays. As a result, incentives, such as REDD(+) and (I)PES, are all the more appropriate to encourage the stewardship of ecosystem services and globally pro-social behavior and embrace the ‘beneficiary pays’ principle.

Finally, we should be careful not to forget the power of markets and the private sector. While the GEF is an excellent step in the right direction, coordinated private sector finance for green development has hardly been tapped. Recent discussions of a Green Development Mechanism, or GDM, proposes financial mechanism to create enabling conditions for increased private sector finance to mitigate biodiversity loss, much as the CDM has done to mitigate climate change, has excellent potential to address this shortfall.

The question is not whether we can afford to take the environment into full account. We must do. The question is what costs we will have to suffer and what opportunities will be forever lost due to our delays in doing so.

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