The Economics of Nature

In this week's Voices & Views Pavan Sukhdev, the founder of Green Initiatives for a Smart Tomorrow (GIST) Advisory speaks to capacity4dev.eu about the economics of biodiversity. 

Nature is the world’s most generous service provider. Just to give two examples, pollination by insects is indispensable for many crops, while forests provide flood prevention and drought control.

“But most of these services that nature provides are for free,” says Pavan Sukhdev, a former banker at Deutsche Bank and Special adviser and Head of UNEP’s Green Economy Initiative.

“They are public services, we don’t measure their value – the net result is we ignore them. You cannot manage what you do not measure.”

Sukhdev leads The Economics of Ecosystems and Biodiversity (TEEB), a global initiative focused on drawing attention to the economical benefits of biodiversity, including the growing cost of biodiversity loss and ecosystem degradation.

TEEB was proposed by the G8+5 Environment Ministers at a meeting in Potsdam in 2007, and is co-financed by partners such as the German, Japanese and Swiss environment ministries, PricewaterhouseCoopers, London School of Economics and the United Nations Environment Programme. To date, the European Commission remains the main funder.

TEEB seeks to explain to governments and businesses the monetary value of ecosystem services, such as fresh water, clean air, fisheries, timber and nutrients.

"For example, insect-based pollination is estimated to be worth almost $200 billion or nearly 12 per cent of global agricultural output."

“We help companies by encouraging them to look at our methodologies and to use them to assess the value that nature provides to the business, and the impacts that business has on nature, which can be negative,” Sukhdev says.

The TEEB Guidance Manual

For governments TEEB has produced a Guidance Manual to demonstrate how development goals can be achieved without compromising the sustainability of natural resources. Almost 25 TEEB Country Studies are currently underway.

Although ecosystem services amount to roughly five or ten per cent of countries’ gross domestic product, Sukhdev says the “economics of nature” is even more compelling for the most vulnerable people in society.

“The real question to ask is what are ecosystem services as a fraction of the household incomes of the rural poor?” In India the answer is 47 per cent, in Indonesia close to 75 per cent, and 89 per cent in Brazil’s northern Amazon.

“When you start looking at ecosystem services for the value they deliver to the poor household you realise that there cannot be a sensible development model that destroys the GDP of the poor. You have to maintain the GDP of the poor and on top of that build education, build better health services, build a diversity of alternative employment opportunities – that’s true development.”

Sukhdev says the key is convincing industries to move as one.

He gives the example of the Tropical Forest Alliance 2020 where industries including beef, soya, pulp and paper, and palm oil, have joined forces to reduce their impact on deforestation.

“We are not here talking about one or the other company trying to do its own thing and then effectively ending up with competitive pressures and ending up with a first mover disadvantage,” Sukhdev says. “We are talking about entire sectors moving collaboratively, together with the key governments involved… That’s the right model.”

European Commission and European External Action Service staff can view the full 15-minute interview with Pavan Sukhdev in a closed working group on Biodiversity and Livelihoods. 

This collaborative piece was drafted with input from Augustin Malou and Thierry Dudermel with support from the capacity4dev.eu Coordination Team.