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A swamp that filters sewage from Uganda’s capital Kampala is providing ammunition for Nobel Prize-winning economist Joseph Stiglitz and lawmakers from at least 86 nations seeking ways to save oceans and the atmosphere.
The Nakivubo swamp, where wastewater flows from the city toward Lake Victoria, provides as much as $1.75 million a year in purification services. Without it, Kampala would need a sewage plant costing at least $2 million a year, according to the International Union for Conservation of Nature. The findings helped prod the city into protecting the area.
“Economic logic prevailed,” said Pavan Sukhdev, a former Deutsche Bank AG economist who in 2010 led a United Nations report on the Economics of Ecosystems and Biodiversity. “It’s going to cost $2 million per year to do what the swamp was doing for free, and they don’t have that money.”
Lawmakers and economists converging on a UN conference in Rio de Janeiro beginning June 20 are trying to convince 130 world leaders to place a value on nature, moving beyond gross domestic product as the usual measure of national well-being. From Uganda’s swamps to New York’s water supply in the Catskills Mountains, it’s already happening around the world.
Supported by Stiglitz and an estimate from the World Bank that “natural capital” stored in forests, reefs and glaciers is worth $44 trillion, they’re encouraging authorities to take into account the value of water retention, air-scrubbing and coastal protection provided by trees, soil and reefs.
When countries don’t consider their natural resources, “it’s like grading a corporation based on one day’s cash flow and forgetting to depreciate assets and other costs,” Stiglitz said in the World Bank’s report “A Smarter GDP ” this month.
If adopted, the measures could affect planning decisions for projects from new drinks-bottling plants to oil pipelines, power stations, mines and canals.
“It might sound like a hippie thing, to go beyond GDP,” European Union Climate Commissioner Connie Hedegaard said in an interview. “It’s from the core economic establishment that the call is coming stronger and stronger, that we have to measure our growth in a more modern and intelligent way. This is a very important paradigm shift we could decide in Rio.”
More than 50,000 delegates from 190 nations are due to attend the Rio+20 summit on sustainability marking the 20th anniversary of the first Earth Summit in the city. On the agenda are 80 pages of recommendations on how to preserve the diversity of plants, eradicate poverty, protect oceans and clean the air as the population swells 29 percent to 9 billion by 2050.
The devastation wrought by Hurricane Katrina on New Orleans in 2005 provides an example of how failure to account for natural capital can backfire, said Barry Gardiner, a former British environment minister pushing for what’s known in the U.K. as “GDP-plus.”
The U.S. Congress in 1956 authorized construction of the Mississippi River Gulf Outlet, or MRGO, a 76-mile shipping channel that cleared about 19,400 acres of wetlands into open water for ships. The U.S. Army Corps of Engineers project allowed salty water to encroach on surrounding marshes, degrading a further 600,000 acres of wetlands surrounding the city, according to the National Wildlife Federation.
The loss of swamps destroyed a buffer for storm surges that had protected New Orleans from hurricanes, according to a 2009 study in the Journal of Coastal Research led by Gary Shaffer, a biology professor at Southeastern Louisiana University. Without the MRGO, the potential for water to breach levees protecting the city would have been cut 80 percent, according to the study, which put the total economic cost of the channel, including Katrina’s damage, at “hundreds of billions of dollars.”
Rene Poche, a spokesman for the Army Corps of Engineers, declined to comment, citing “ongoing litigation.”
Environmental economists have struggled for decades to marry economic development with protecting natural resources. U.S. academics in the 1960s produced works that established the field, including a 1968 book “Pollution, Property and Prices” by John Dales of the University of Toronto, which became the intellectual foundation for tradable pollution credits, later dubbed “cap and trade.”
As the environmental movement grew and policy matured, the public debate expanded. In 1999, Paul Hawken, Amory Lovins and Hunter Lovins published “Natural Capitalism,” which thrust the ideas into the executive suite. Today, companies and pressure groups play at least as great a role as governments in designing ways to account for the critical natural infrastructure previously taken for granted.
In Rio this weekend, executives from companies with annual sales totalling more than $350 billion, including Nestle SA, Unilever NV and SABmiller Plc pledged to set targets and develop plans to protect natural capital under a University of Cambridge program. Chief executive officers of 37 banks, funds and insurers including National Australia Bank and the Brazilian investor Instituto Infraero de Seguridade Social, or Infraprev, said they will account for their impacts on natural capital.
The UN is taking steps, and its Statistical Commission in March adopted the System of Environmental Economic Accounts, the first international standard of natural capital accounting, putting it on a par with global methods of GDP measurement.
This week, the UN conference may advance a topic that was discussed at the Earth Summit two decades ago without gaining traction, said Mary Barton-Dock, director of the environment department at the World Bank.
“If we can push to get a critical mass of countries saying they’re willing to do this in Rio, it might tip the balance into seeing this as an issue whose time has really come,” Barton- Dock said in an interview.
The latest version of the declaration being negotiated in Rio recognizes “the need for broader measures of progress to complement GDP in order to better inform policy decisions,” though it deletes a phrase about the “limitations” of GDP.
The G77 group of developing nations, which includes China and India, has expressed concern the measures may give rich nations a reason to meddle in their domestic affairs. They may hold up efforts to have the GDP-plus idea inserted into the conclusions for the Rio meeting.
“There is a general mistrust, which is part of the overall atmosphere largely generated by backtracking by developed nations on key principles,” said Chee Yoke Ling, director of the Third World Network, which tracks policies of developing nations at the UN talks.
Some countries, like Uganda with its swamps, already take into account environmental wealth. Canada, Germany, Japan, Mexico and Australia are among 24 nations to use some form of natural capital accounting, the World Bank report said.
While the U.S. doesn’t produce a balance sheet of natural capital with its national accounts, in some areas environmental services are enumerated. The Agriculture Department’s Conservation Reserve Program pays farmers and landowners $1.8 billion a year to use land in a way that cleans air, filters water and preserves wildlife.
New York has spent more than $1.5 billion in a watershed protection program that started in 1991 to conserve land around the Croton River and in the Catskills where the city’s water originates. The city buys property and pays landowners to protect the area.
In the U.K., the government set up a Natural Capital Committee under the leadership of Dieter Helm, a professor of energy policy at the University of Oxford, to advise lawmakers on how to integrate ecosystems into decision-making. He says the starting point is to develop a “balance sheet” of natural capital to accompany the GDP income statement.
Gardiner as environment minister in 2006 and 2007 convinced then-Chancellor of the Exchequer Gordon Brown to fork out 6 million pounds to investigate bee diseases by pointing out that the Treasury was losing 200 million pounds in tax revenues as a result of an unexplained decline in colonies of the pollinators.
“Natural capital touches on every element of policy-making from building roads to seabed management, the construction of shipping channels and the pollination of our crops,” Gardiner said in an interview.
He’s part of the Globe International alliance of lawmakers from at least 86 nations that’s pushing governments in Rio to incorporate environmental value in their national accounts. Deputy Prime Minister Nick Clegg announced before flying to Rio that by 2020 Britain will include a measure of natural capital in statistics published with GDP.
“We’re reforming the U.K.’s national accounts so that, by 2020, they also reflect our natural wealth,” Clegg said in a statement from his office in London. “I’ll be pressing our international partners to follow suit.”
“A country can expand its GDP, creating the illusion of increased wealth, while becoming ‘poorer’ as it destroys the natural capital on which its long-term prosperity depends,” Globe President John Gummer and Brazilian Senator Cicero Lucena wrote in an e-mailed statement.
The World Bank through its program on Wealth Accounting and the Valuation of Ecosystem Services, or WAVES, is funding programs in Botswana, Colombia, Costa Rica, Madagascar and the Philippines. It’s designed to value the fish nurseries formed by reefs and mangroves and tourist revenue generated by preserving wild animals that also destroy crops and kill livestock.
In Madagascar, hilltop forests regulate the way water percolates downhill, giving a more even flow than a hillside stripped of vegetation, said Frank Hawkins, head of the Africa division at the non-profit Conservation International, which is working with the government on that country’s WAVES program.
“That’s very important for allowing people to have two crops a year of irrigated rice at the valley bottom,” Hawkins said in an interview. “That’s a service the forest is providing. You can quantify the value by showing what it is the farmers can grow in excess of what they could grow if the forest wasn’t there.”
Some developing countries also are taking steps. Presidents and ministers from 10 African nations on May 25 signed a declaration in Gaborone, Botswana, that said they will integrate the value of natural capital into national accounting and corporate planning.
If governments have a balance sheet of their natural assets, including minerals and fossil fuels, they can then be held accountable for depleting them, said Helm, citing Britain’s shrinking North Sea oil production.
“We consumed it all, had a party, pretended we were all better off than we actually were,” said the Oxford academic who is advising the U.K. “Now the current generation has got the consequences. You shouldn’t be able to squander the future without knowing that that’s what you’re doing.”
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