World Business Council for Sustainable Development

World Business Council for Sustainable Development

Natural Assets: Conservation instruments or instruments for change?

Nobody is surprised when their water is cut off if they haven’t paid the bill. We admit that companies have to recoup their investments and maintain infrastructure (water withdrawal, treatment, distribution, etc.), on top of paying staff and suppliers.

Why don’t we apply the same logic to the services offered by nature? The answer is simple: they are perceived to be free. Year after year, plant roots have acted as enormous filter systems and, in spite of not getting compensated, they have not stopped filtering.

Since ecosystem services are not valued as assets, they have little influence on political decision-making processes, or on other decisions regarding funding, marketing of environmental products and services, and consumer preferences. We are literally dismantling the machinery that supports life on the planet.

Currently, a country that exhausts its forests and oceans is increasing its GDP without being able to control the decrease of those assets that are essential to guaranteeing the future well-being of its citizens.

The introduction of ecosystem services that are essential for life (soil fixation, nutrient cycles, carbon absorption, climate regulation, water supply, along with aesthetic, cultural and spiritual values) into market considerations would help to create a school of thought that is sensitive to conservation interests.

By doing so, new trading opportunities would emerge that build on the experience of carbon markets. Buyers and sellers would exchange environmental services with a net result that does not imply the loss of natural assets.

The European Union’s Water Framework Directive is open to such an approach. From 2010, member states must ensure that water pricing policies provide adequate incentives for users to use water resources efficiently. In addition, each economic sector will have to contribute to the recovery of the costs of water services, including environmental costs (related to ecosystem deterioration such as salinization or the deterioration of productive lands) as well as those costs associated with opportunities that others are missing.

Likewise, the Environmental Liability Directive includes complementary measures to compensate for the damage caused at different sites. Financial security instruments could be guaranteed by acquiring credits from an ecosystem bank before the damage is caused. The EC Habitats Directive and the Biodiversity Strategy embrace the principle of no net loss, setting the target of zero biodiversity loss by 2010.

The Spanish Ministry of Environment’s WATER program has created water banks to alleviate the country’s water resource problems. Centers for the exchange of water rights have been established in four river basins (Segura, Júcar, Guadalquivir and Guadiana).

Then there is “Natura 2000”, Europe’s network of protected natural areas, accounting for 29% of the continent’s landmass, which obliges Spanish businesses to act in the fight against biodiversity loss. Some countries, such as the Netherlands, have addressed the issue by including environmental costs and the cost of depletion in the budgets of large public infrastructure.

The US has also joined in: in the 1990s the Clinton administration stimulated the creation of platforms for the exchange of environmental services by different agents operating in one territory.

Could such a thing be done at the European level? Indeed, but the challenge lies in finding credible and positive arguments for the different agents who have yet not identifi ed their opportunities in this type of market.

Fundación Entorno-BCSD Spain has come together with 14 Spanish companies to explore how these market approaches could be set up. The positive outcomes of this initiative include:

Promoting the sustainable use of ecosystem services by giving the owners of natural assets economic incentives to conserve them through compensation by those who demand them. These buyers will in turn be motivated to reduce the costs of buying these natural assets, by increasing the efficiency of their processes.

Including environmental costs in accounting: The purchase and sale of natural assets will reflect their economic value, obliging finance departments to take them into consideration.

Contributing to the development of a market for environmental services: the restoration and protection of natural assets together with technologies that increase process efficiency will be necessary in order to be competitive.

Increasing financial capacity for ecosystem conservation and restoration: government fi nancial capacity is clearly limited and private sector participation, which should be stimulated by profitable market conditions, becomes necessary.

Promoting the growth of less developed economies and sectors, such as rural environments and agriculture. Both have big opportunities in this market.  Some global needs can only be addressed by joint decisions at the international level. Starting from a common position – ecosystem degradation has dangerous consequences on human well-being; we have common needs; we need more knowledge of the services that nature offers to us – we should be able to estimate the economic value and financial capacity needed for ecosystem conservation.

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