Want to convince politicians why they should protect the environment? Talk like an economist
Calculating the economic value of a threatened wetland proved a turning point for IIED's Essam Mohammed. He argues the case for putting a value on nature to get your message across.
Day in and day out, many of us in the environment and development sector ask ourselves the same question: "How do I persuade politicians that they should protect the environment?"
For those who are not in the sector, this may sound ridiculous, yet it is one of the main challenges we face. While it seems obvious to many of us that living in a cleaner and resilient environment would be good for society, for politicians and policymakers, it is not so straightforward. I know this because I was once a bureaucrat myself.
Haso, the dying wetland
Back in 2006, when I was based in Japan, I joined a voluntary group striving to protect the Haso Wetland in Inuyama City, Aichi – just a 30-minute train ride from Nagoya. The wetland was under threat from exotic trees that had been planted on the periphery as part of the 'Greening Japan' programme introduced by the Japanese government in the 1920s.
These trees were so invasive that they started encroaching on the wetland ecosystem. Haso was shrinking. To make it even worse, rising wages made felling the trees financially implausible. It was much cheaper to import wood and wood products. This phenomenon eliminated the useful interactions between the human social system and the natural ecosystem.
Therefore, unlike many countries such as Brazil and Indonesia which suffer from deforestation, in Japan the problem was the opposite – an unmanaged and expanding forest was threatening wetland ecosystems.
I asked what budget the local municipality had allocated for looking after the wetland. When they told me, I was shocked. They had an annual budget of (equivalent to) US$1,600 – about $245 per hectare per year. You can imagine how little and insignificant that amount of money is in a place such as Japan.
The turning point
In retrospect, I think that was a turning point in my life. Without even realising it, I started to think like an economist. Until then, I was just a marine biologist and fisheries scientist who only cared about fish biology and ecology. Even for someone who is not an economist, it was obvious that something was not right.
The first word that came to my mind was "undervaluation". I argued that the reason why the municipal authority was allocating such a small amount of money was mainly because resource managers and policymakers did not 'know' the value of the resource in question. Then came the Eureka moment.
I decided to develop a methodology that estimated the economic value of the environment. I genuinely thought I was the first person to have come up with that idea – only to realise that there have been thousands of similar studies conducted elsewhere.
Valuing the undervalued
Environmental economists, including myself, have long argued that one of the main reasons why we allow our economic systems to overexploit environmental goods and services is that because the benefits of the environment are either undervalued or NOT valued. In economic terms we call this "market failure".
Economic valuation techniques (I'll spare you the detail) are used to estimate the economic value of an environmental good and make a strong economic or business case as to why governments or individuals should invest in these resources.
My very first economic experiment was to estimate the economic value of Haso Wetland. I calculated it was worth more than $4,600,000 per year. This is equivalent to more than $70,000 per hectare per year. Compare that with the $245 per hectare per year allocated to manage the wetland...
Investing in the environment
Now that we can put a monetary figure on a given environmental good or service, the next step is to effectively communicate that to policymakers.
For instance, a study by the United Nations Environment Programme (UNEP) (PDF) has found that the 'total economic value' (more useful jargon) of mangrove forests in the Gazi Bay in Kenya is estimated to be around $1,000 per hectare per year. Similarly, another study commissioned by IIED found that the economic benefits from mangrove restoration are approximately double that of aquaculture development.
These kind of statements, if communicated effectively, can help make a strong case to governments as to why they should invest in improving or restoring environmental goods and services.
One of the main challenges that politicians constantly face is knowing at what point the economic benefits outweigh the environmental costs of natural resource exploitation. What level of trade-off is acceptable? In the case of the mangrove study, it is very clear that developing aquaculture production systems at the cost of mangrove restoration does not make financial or economic sense.
Valuation studies make it easier to persuade politicians why they should consider natural capital as an asset and invest in its productive capacity. Some governments have started to buy into this idea. China, for instance, has been steadily increasing its spending on environmental protection, investing $97 billion in 2011, $134 billion in 2012 and an estimated $162 billion in 2013.
Mainstreaming in national accounts
Politicians who increase environmental expenditure often come under fire and are criticised for not getting priorities right. This is a particular problem in democratic states where politicians seem to care more about short-term economic and political gains, while investments in environmental protection often deliver longer-term benefits.
Now, here's the trick. Imagine if our balance sheets had entries beyond financial inflows and outflows. Imagine there were a couple more columns that showed environmental gains (e.g. restored fish populations) and losses (e.g. degraded forests).
This means net gains or losses in natural resources would be reflected in reported gross domestic product (GDP). The World Bank's WAVES programme is just one project working with national governments to realise this ambition through a system of natural capital accounting.
Election, election, election
Environmental issues are increasingly becoming important in national elections. In the UK some people are debating whether or not a Labour or Conservative government would be better for the environment, while in India candidates were criticised for glossing over environmental issues in the recent elections.
In another example, in a recent survey conducted by Latino Decisions in the United States, 67 per cent of Latinos in North Carolina said they were "much more" likely or "somewhat" more likely to vote when candidates highlighted their environmental targets. In Florida, 77 per cent said they were more likely to vote for the pro-environmental candidate, and in Colorado the figure was 66 per cent.
So, if you are an advisor to a presidential or local governor candidate, I strongly advise you to help them work out how much investment or expenditure on environmental protection they want to make.
And remember that government expenditure is positively proportional to GDP. So the higher the expenditure, the higher the GDP – ceteris paribus, typical economist, eh?!