London School of Economics 10-12 October 2005
It was the French novelist, Victor Hugo, who said: “There is nothing so powerful as an idea whose time has come”.
And that idea is the role of nature and natural capital in over coming poverty and underpinning the wealth of nations.
2005 has witnessed unprecedented interest in the economics of the environment and the goods and services that nature provides.
We had the Millennium Ecosystem Assessment in March.
The findings of the Millennium Project, the initiative of the Secretary-General designed to inform the review of the Millennium Development Goals (MDGs).
The various preparatory meetings of the G8--who can forget UK Chancellor of the Exchequer Gordon Brown’s excellent speech on the economic importance of the environment delivered at a meeting of G8 energy ministers.
The World Resources Institute’s report, “The Wealth of the Poor”, launched in late August.
Finally the 2005 World Summit itself just some weeks ago.
Here the Poverty and Environment Partnership, an alliance of more than 30 governments, UN agencies, banks, organizations and non-governmental bodies, launched ‘Environment for the MDGs.
One of the reports, ‘Investing in Environmental Wealth for Poverty Reduction”, made the compelling case.
That targeted investments in the environment and in the restoration of damaged and degraded ecosystems can deliver a “Big Bang for Your Buck” to put it crudely.
Let me give you a few figures from the report, whose lead author was the late and great British economist Professor David Pearce who tragically died just before the Summit.
Every dollar invested in fighting land degradation and desertification may conservatively generate over three dollars in economic benefits helping to fight poverty among the millions living on fragile lands.
Money could be spent on such traditional and soil conserving features as terracing.
Meanwhile every dollar spent on delivering clean water and sanitation is likely to give impressive rates of return of up to $14.
Here the economic benefits arise from reduced health care costs, increased productivity because of workers and women spending less time searching for water and improved school attendance.
Conservation of habitats and ecosystems are also cost effective when compared with the short term profits from environmentally damaging activities like dynamite fishing and sedimentation as a result of deforestation.
A study of coral reefs in the Caribbean indicates that sustainable harvesting of coral fish for food and for industries such as the pet and aquaria trade may be worth $300 million a year.
Meanwhile coral-based tourism may be worth just over $2 billion annually and shoreline protection from reefs up to $2.2 billion a year.
However, these economic benefits are threatened by damage and degradation amounting to between $350 million and $870 million a year.
Overall for every dollar invested in coral reef conservation economic returns will total up to $5.
Meanwhile the carbon storage or “sequestration” potential of forests ranges between $360 and $2,200 per hectare.
It makes them far more valuable than converting them to grazing or cropland.
Indeed the study claims that once carbon reaches over $30 a tonne it becomes far more cost effective to conserve forests than to clear them.
The report also suggests the possible costs, the financial investment needed in the environment and in nature to meet the MDGs.
(Surrounded by such a distinguished audience of economists, let me say how nervous I am quoting figures!!! But I have some background in this field too!!).
To reach the poverty reduction targets, an annual global investment in environmental assets of $60 billion to $90 billion will be needed over the next ten to 15 years.
At least $80 billion per annum more is needed to tackle global climate change in order to stabilize greenhouse gases at 550 parts per million over the next 50 years.
550 parts per million is double the concentrations of these gases from pre-industrial days.
It sounds a lot until you recall that about $25 billion is spent annually in OECD countries on pet food.
That we have such unprecedented interest in nature’s capital is in no small part due to some of the astounding guests here today.
Many have dedicated their lives to understanding the role of environment in national and global wealth.
I am particularly delighted that Professor Sir Partha Das Gupta, Frank Ramsey Professor of Economics at Cambridge University has agreed to make a key note speech.
Who can forget his excellent and seminal work, published just four years ago: “Human Well Being and the Natural Environment”.
Among its main take home messages is that some of the rapidly developing economies may be less wealthy than they seem.
This is because traditional measures, like GNP, fail to factor in the way countries may be running down their natural capital as a result of pollution, land degradation and the like.
It also asserts that it is the poor who suffer most. In the developed countries, if fish becomes scarce, people switch to other proteins like beef or soya.
The very poor cannot do this. They have nothing to switch to.
Professor Das Gupta’s work also raises the question of how running down nature’s capital may short change future generations.
Later this morning we will have a press conference. We issued a press notice to tempt our colleagues from the press here.
The notice asks the question “if we carry on destroying the world’s natural economic base, will all six billion of us eventually end up being poor”.
In other words, even the currently rich countries may not be able to substitute for lost ecosystems and services for ever.
Eventually there may be nothing left to replace that which has gone for this and future human-kind.
I am not so naïve as to imagine that we can just sit back and see environment mainstreamed and ecosystems become the darlings of the development agenda.
Even in Les Miserables, Victor Hugo’s work on the French Revolution (an idea whose time had come), difficulties arose and men and women of action were needed.
Our difficulties lie, as they do with so many environment-related issues, with politics.
We need political will to sustain the ecosystem agenda not over the life time of one or two terms in office, but over the long term.
It also requires the commitment and conviction of all players and parties which brings me to the Multilateral Environmental Agreements (MEAs)
This two day brainstorming is very much how you can help spearhead these issues.
How you can take this agenda forward as part of a world-wide effort to mainstream environment in poverty reduction.
How we can bring nature’s capital more into the centre of our efforts on the ground and in the parliaments and assemblies of governments everywhere.
The central question HERE is how the MEAs can help to better create markets in ecosystem services.
And more specifically, how these can be pro-poor markets that work rather than exclude the less well off.
I do not want to second guess the outcome. But a few thoughts.
We certainly need to refine and expand our economic valuations of the services that ecosystems like forests, coral reefs, soils and wetlands provide.
Yes we have the Millennium Ecosystem Assessment, the PEP report and others, but there is still skepticism so we need more number crunching.
(This is despite the fact that traditional measures like GNP themselves, while widely accepted, are also far from precise and based on quite a few assumptions!!!).
But we cannot wait for just numbers. We need to act and prove these ecosystem values on the ground.
We need pilot projects and we need targeted investments in degraded and damaged ecosystems to prove what we already know and what we strongly suspect.
Namely that these kinds of investments are not only cost effective, with multiple benefits.
But that they are prudent, sound and sensible ways for overcoming poverty and generating wealth for poor and rich alike.
We also need to be honest.
I mentioned that for every dollar invested in fighting desertification there is a three dollar return.
Anyone who has looked at this more closely-- one thinks of research from the mid 1990s in Latin America and the Caribbean-- knows this is in reality highly site specific.
Some locations are a real bargain, where local farmers embrace incentives to say terrace or put in ditches.
But there are others where the investment is far harder to justify.
So we must guard against shooting ourselves in the foot, temper our enthusiasm with sound science and cool heads.
We should look at how to replicate those existing schemes, such as payments for ecosystem services pioneered in countries like Costa Rica.
The Katoomba Group, represented here today, has catalogued a rich collection of experiences and lessons learnt in the field.
We must learn and build on these.
There are also issues of cheap and affordable lending or credit for the poor.
This can help them adopt nature-friendly schemes and help them overcome times of drought, famine and other crises without destroying their natural capital.
What is clear is that, most of these early stirrings in economics and ecosystems are happening outside the MEAs.
The exception would by the United Nations Framework Convention on Climate Change and the Clean Development Mechanism.
It also clear that many of the MEAs have a mandate to be more involved.
Decisions at various Committees of the Parties for conventions including Biological Diversity, International Trade in Endangered Species and Ramsar, talk about “incentives’ for sustainable use and trade.
So we have the science, the growing political will and the mandates---we have the building blocks to take this forward.
I can assure you that UNEP will be active. Under our new agreement with the United Nations Development Programme we are working to mainstream environment in national poverty reduction strategies.
Pilots are being undertaken in seven African countries.
As part of this we will be looking to work with governments to demonstrate the value of targeted investments in soil conservation up to biological diversity.
We want local communities, through management agreement and incentives, to also be among the beneficiaries.
It will not be easy, not a cake-walk, not plain sailing. Nothing of any real value is.
We may increasingly have the arguments but we have not won the final debate…not yet.
But we should and we must move forward. As my fellow countryman Johann von Goethe said. "To think is easy. To act is difficult. To act as one thinks is the most difficult of all."