Protecting our grasslands is good economics
EDITOR’S NOTE — Dr. Peter Tsigaris, an economics professor at Thompson Rivers University, is providing a series of articles for The Armchair Mayor News about ideas. This is the third in the series.
By DR. PETER TSIGARIS
In the past, it was commonly believed that nature was a resource available in abundance that would somehow renew itself or not be significantly affected by economic activity.
Dr. Peter Tsigaris.
The impact of economic development on nature was rarely examined. Over time and in recent years, the impacts of development have shattered this belief.
Around the world, British Columbia is highly valued for its natural beauty. Unspoiled landscapes including grasslands, forests, wetlands, lakes, rivers, natural habitats, spectacular mountain ranges, ocean, dramatic coastlines, semi-arid luminous settings and many more have an immense value.
To capture this natural wealth, the province of British Columbia registered “Super, Natural British Columbia” as a trademark for branding purposes.
Kamloops is surrounded by beautiful grasslands that provide us with many ecosystem services. These ecosystem services include fresh water, food, recreation, flood prevention, soil erosion control, carbon sequestration and storage, pollination, and others.
Furthermore, grasslands have an option value for future use, a bequest value for future unborn generations to use, and an existence value to maintain the habitat for plants, animals and species that are at risk.
In 1997, a study by Costanza and his team of academics entitled “The value of the world’s ecosystem services and natural capital” attempted to place a monetary value (price) on nature and the ecosystem services it provides. They published a groundbreaking paper in the prestigious journal Nature.
The team of researchers conservatively estimated the value of the world’s ecosystem services at $33 trillion per year, while world Gross Domestic Product, which measures the market value of all goods and services produced worldwide, was estimated at $18 trillion per year. The value of ecosystem services was almost two times larger than the world economy’s production.
Since this seminal paper, many studies have re-examined the value of nature. A report in 2009 by Sara Wilson titled “The Value of B.C.’s Grasslands” placed the value on the scarce 740,000 hectares of B.C.’s grasslands between $1 and $4 billion per year.
If we allocate this value proportionally to the 2,500 hectares of land where the KGHM Ajax mine will be operating, we arrive at a figure between $3.4 and $13 million per year for ecosystem services.
These services occur every year into perpetuity. What is today’s value of these ecosystem services? Because a dollar today is worth more than the same dollar tomorrow, we usually discount the future.
Discounting future ecosystem services is not without its controversy. Famous economists and philosophers have puzzled and debated over this issue. A conventional discount rate that has been used for discounting future ecosystem services is three percent per year.
Using this rate and assuming that the $3.4 million to $13 million per year of services grow at two percent per year – a rate similar to the growth rate of income per person over the long run – today’s value of the grasslands would be somewhere in the range of $340 million to $1.3 billion.
No one individual (or firm) would be willing to pay this amount to protect grasslands, as the benefits accrue to all community members. The benefits from nature are collective just like the benefits from clean air. Thus grasslands are vastly undervalued by the market.
A very interesting Ted talk on putting a price on nature is given by Pavan Sukhdev, http://www.ted.com/talks/pavan_sukhdev_what_s_the_price_of_nature.
There are large collective benefits that accrue to the community from ecosystem services provided by grasslands. Protecting scarce B.C. grasslands is good economics.
Nature’s benefits far exceed the resource costs needed to maintain these services. In a Kamloops Daily News column on Oct. 29, 2013, Richard Wagamese expressed the interplay between humans and nature by elegantly stating: “beyond the science, environmental angst, and speculative economic payoff to Kamloops over time, lies the issue of our relationship with the planet.”
References
Costanza, R., d’Arge, R., de Groot, R., Farber, S., Grasso, M., Hannon, B., Naeem, S., Limburg, K., Paruelo, J., O’Neill, R.V., Raskin, R., Sutton, P., van den Belt, M., (1997). “The value of the world’s ecosystem services and natural capital.” Nature, 387, 253–260.
http://www.nature.com/nature/journal/v387/n6630/abs/387253a0.html
Costanza, Robert, et al. (2006).”The value of New Jersey’s ecosystem services and natural capital.” Gund Institute for Ecological Economics, University of Vermont and New Jersey Department of Environmental Protection, Trenton, New Jersey, 13.
Province of British Columbia, (2011). Super, Natural British Columbia is a registered trademark of the Province of British Columbia. See http://www.destinationbc.ca/getattachment/Resources/British-Columbia-s-Tourism-Brand/Super_Natural_BC_Brand.pdf.aspx
Wagamese, Richard, (2013). “Will Ajax honour the land?” Kamloops Daily News. Access at:
Wilson, Sara, (2009). “The Value of BC’s Grasslands: Exploring Ecosystem Values and Incentives for Conservation.” Report submitted to Grasslands Conservation Council
Of British Columbia. Access at:
ArmchairMayor.ca 
Just to put this in perspective. There are 740,000 hectares of scarce grasslands and over 13 million hectares of mineral claims due to the mineral tenure act. Another tragedy of the commons.
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Beautifully clear and forcefully presented. When I was at University of BC in the 60’s a highly revered Geography professor taught his students that all of “that Nature” out there is valueless, just “stuff”, unless proven economically useful – harvestable, mined, despoiled. I argued for an esthetic value but to no avail – The balance sheet contains no space for the soul, and what I spoke to him was a totally foreign ethic and language.
And yet we still revere those whose bottom line is “progress.” Anyone else recommend greed?
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Thanks P. Graham.
I just noticed a small typo where I write: “The value of ecosystem services was almost three times larger than…” Should be “was almost two times larger than…”
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