Nature's sting: The real cost of damaging Planet Earth
By Richard Anderson
Business reporter, BBC News
The global cost of replacing insect pollination is around $190bn every year
You don't have to be an environmentalist to care about
protecting the Earth's wildlife.
Continue reading the main story
Biodiversity: The threat to
nature
A new washing powder?
World Bank to account for nature
More species slide to extinction
Biodiversity talks hit problems
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 for free.
And it's not just the number of bees that is dwindling
rapidly - 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 oceans' 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 we will 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.
Continue reading the main story Drivers of biodiversity loss
Land use change - for example cutting down forests that provide
essential water regulation, flood protection and carbon storage, to
make way for agriculture Over exploitation - for example over-fishing or
intensive farming that leads to soil degradation Invasive species - for example
the introduction of non-indigenous species that crowd out endemic insect
populations Climate change - for example rising temperatures that cause more
extreme weather conditions.
A recent, two-year 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, for the UN-backed Principles for Responsible
Investment (PRI), 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.
Continue reading the main story “Start Quote
It's pretty terrifying. Nobody in business thinks that at some point this is
not going to hurt us”
End Quote
Gavin Neath
Unilever
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.
Deforestation increases the risk of flooding in surrounding areas
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 to eat or
sell, 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 landfill taxes that already exist, and higher insurance
premiums.
Increased flooding is partly due to land conversion by humans
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 and PRI have 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".
Pension values
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.
http://www.bbc.co.uk/news/business-11495812
[Non-text portions of this message have been removed]
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