Submitted by Mark Smith on Fri,06/05/2015

Article originally posted in Economist Insights on World Environment Day.

Can you manage what you don’t measure?  Produce such as coffee, cotton, and oil are traded commodities that are measured, managed, negotiated and priced based on market supply and demand.  Yet, what happens when measuring things of great value that are more nuanced, more complex, not commodities, not privately owned and not traded in markets,  such as rainfall, rivers, wetlands, or biodiversity?

Designed for the World Forum on Natural Capital, this infographic illustrates the short-term value of felled trees to the timber industry when compared to the long-term benefits of healthy forests to society. The numbers speak for themselves, $0,4 trillion versus $3,7 trillion.

 This valuation approach is not new. Inspired by the Stern review, TEEB or ‘The Economics of Ecosystems and Biodiversity’ is a global initiative set up in 2007 that focuses on making nature’s values visible. As Prof. Ed Barbier (a member of TEEBs Advisory Board) puts it, “we use nature because it is valuable, we lose nature because it is free”.

 Adam Smith’s ‘Diamond-Water paradox’, differentiating value and price, states that water is considerably more valuable than diamonds, yet diamonds command a much higher price. This resonates with more people than ever before.  Daily news on floods and droughts, and the loss of services we receive from ecosystems is concerning.  Securing Water, Sustaining Growth from the Global Water Partnership/OECD Task Force on Water Security and Sustainable Growth, reports the ‘monetization of environmental risks, and the ecosystem services the aquatic environment renders’ – is classed as a pressing challenge we have still not been able to address. 

 Pollution, over-abstraction, dams altering river flows, deforestation causing soil erosion and desertification, and climate change can all have devastating impacts on our water resources. The...Read more