05 Aug 2016 Story Nature Action

Restoring Natural Capital Can Help Reduce Extreme Poverty

By Pushpam Kumar, Chief, Ecosystem Services’ Economics Unit, UNEP

Nairobi, 5 August 2016: In September 2015, when the international community embraced the 2030 Agenda for Sustainable Development, better known as the Sustainable Development Goals (SDGs), they decided to make eradication of poverty and hunger as the first two SDGs.  A close look at the goals shows that most of the 17 SDGs relate to poverty and hunger. This is because these two topics are inextricably linked to inclusive economic growth, climate change, and the management of marine and terrestrial ecosystems.

Achieving the ambitious SDGs depends on designing integrated policies to improve the lives and livelihoods of people and ensure a safe and sound planet for all.

Poverty, whether relative or marginal, is an extreme form of deprivation. It is an involuntary situation faced by people at the margins of political, economic, ecological and social development. It is a form of deprivation where people lack access to resources and are unable to exercise their basic rights.

The World Bank estimates that approximately 896 million people, or 12 per cent of the global population, live on less than US$1.9 a day. Extreme poverty is when people are born poor, live their entire life in dismal poverty, may or may not come out of poverty, and when they die, they may pass nothing but poverty to their children. A world with 896 million poor people is both undemocratic and ecologically unsustainable.

One of the greatest challenges facing policymakers is the complex relationship between extreme poverty and the pressure this can exert on ecosystems and natural capital. The Millennium Ecosystem Assessment provided clear evidence of the dependence of human wellbeing on different types of ecosystem services. Scientists have since gone on to quantify this in an index of people’s dependence on ecosystems (PLOS One). 
Conventional theory suggests poverty and the environment are linked as follows:

  • Poverty causes degradation of ecosystems (the poor overwhelmingly rely on ecosystem services for their survival)
  • Degraded ecosystems cause poverty (reduced natural capital leads to higher costs for basic goods)
  • Perverse economic policies cause poverty (for example subsidized irrigation leads to overexploitation of ground water)

The relationship between the incidence of poverty and the status of natural capital nevertheless remains unclear and is greatly influenced by local conditions. What is beyond dispute is that a well-functioning ecosystem will help decision-makers put in place the right policies to lift people out of poverty.  Ecosystems such as forest, fresh water, cultivated farmlands, and mountains provide services to people and are a source of subsistence for poor people. The contribution from nature sustains and nurtures communities and is a source of well being as it provides  income, health and spiritual fulfillment.

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Diagram 1: Directions of causality for natural capital depletion and extreme poverty

What we’ve observed over time is that short-sighted development policies deprive poor people of their traditional entitlement to natural capital. This situation is further exacerbated when rich people appropriate their resources, or when they have to sell their scarce resources to cope with emergencies, or when they are obliged to share resources with family members.

Measuring global poverty is no simple task – one made more difficult by different national, social and cultural contexts. To estimate the number of “marginal poor”, we need to know the basket of consumption and its corresponding cost.  The Global Poverty Commission chaired by Sir Tony Atkinson, with some illustrious experts such as the Nobel Laureates Angus Deaton and Amartya Sen, is working to tackle this challenge.

Achieving a poverty and hunger-free world is a significant challenge. Even reducing the number of marginally poor people to 3 per cent of global population by 2030 requires mechanisms for raising resources and technology transfers.

What can be done?
Since World War II only 13 countries have moved from the middle income to the high income group, and only two have moved from the low income to the high income group. To lift the 896 million marginal poor out of poverty, between now and 2030, the poverty hotspot nations need to boost their GDP by 10 per cent. This looks unlikely given that, according to the latest Growth Commission Report, only 13 countries have achieved 7 per cent-plus growth in the last 25 years or so. Needless to say, a paradigm shift in development planning and implementation is required.

Technological advances can lead to higher productivity and incomes. Countries with large numbers of poor people need to harvest economic output in which employment generating potential is higher and where the capital requirement, that is incremental capital output ratio, is lower.

Building an inclusive green economy can help achieve sustainable farming and ensure better watershed and coastal management. Similarly the restoration of ecosystems provides an excellent return on investment, with favourable cost-benefit ratios.

Restoration of natural capital like degraded ecosystems include activities such as :

  • restoration and rehabilitation of impaired terrestrial, coastal, and aquatic ecosystems
  • improvements to production systems on arable lands and other lands or wetlands that are managed or exploited for human purposes
  • improvements in the ecologically sustainable utilization of biological resources, and
  • enhancement of socioeconomic systems that incorporate knowledge and awareness of the value of natural capital into daily activities and public policy.

UNEP’s report on land degradation shows that for 42 countries of Africa the benefit of intervening to conserve land is 3-26 times greater than the cost of inaction. Land restoration reduces people's vulnerability as it mitigates the loss of ecosystem services, serves as an insurance policy against future disasters, and safeguards the genetic bank of biological material and seed for future use. 

Policies to restore natural capital include wetland banking, biodiversity offsets and compensation for ecosystem service losses. Such policies have the potential to generate funds which can be used for natural capital maintenance and poverty alleviation.

For example, the recent Compensatory Afforestation Fund Management and Planning Authority (CAMPA) in India generated US$6.3 billion. The Ecological Civilization of the 21st Century, the Sloping Land Conversion Program, and the enrolling of 120 million households into a scheme to convert cropland into forest and grassland in China – all these initiatives have had a favourable impact on poverty alleviation.

The ProEcoServ project run by UNEP and funded by the Global Environment Facility has shown how in South Africa the inclusion of ecosystem services has helped achieve poverty alleviation goals.

Poverty alleviation requires job creation programmes and the restoration of natural capital can reinforce and support this goal.

Poverty is the biggest crime and hunger is the most glaring failure of humanity. We need to act rather than do nothing. As Mahatma Gandhi said, “Even God does not dare to appear before a hungry person in any form other than food.”

 

For more information, please contact: Pushpam Kumar: Pushpam.Kumar[at]unep.org

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Related Sustainable Development Goals