The Economics of Nature
Pavan Sukhdev
Study Leader – TEEB &
Special Adviser & Head – Green Economy Initiative
United Nations Environment Programme
“I believe that the great part of miseries of mankind
are brought upon them by false estimates they have
made of the value of things.”
Benjamin Franklin, 1706-1790
© M. Kettunen
TEEB and its Five Reports …
“Potsdam Initiative – Biological Diversity 2010”
……the economic significance of the global loss of
biological diversity….
Science & Economics Foundations
Policy Evaluation
for National Policy-Makers
Evaluation & Decision Support for
Local and Regional Policy
Business Risks
& Opportunities
Synthesis
TEEB’s Approach to Valuation …
Norms,
Regulations
& Policies
Regional Plans
Legislations
Recognizing
value
Economic
Mechanisms
Certification
PA Evaluation
Demonstrating
value
PES
Markets
Capturing
value
Ch.5
Ch.4
Ch.3
Ch.3
P.A. Evaluation Example : Kampala, Uganda
PA Evaluation
(Nakivubo Swamp)
PES & Certification : ‘Satoyama’ Landscape, Japan
PES
Konotori no Mai /
Flying Oriental White Stork
2003 - 2007: farmers paid 40,000 JYen per 1,000m2
of rice paddies .Currently granted 7,000 JYen per
1,000m2 by Toyo-oka City
CERTIFICATION
Rice sold at 23 % higher rate for reduced pesticide
use, and 54 % more for organic farming
 White Stork habitat increased from 0.7 ha in 2003 to 212.3 ha
 Extinct in 1971, now has over 40 breeding pairs
 1 billion JPY annually in tourism, & municipal income raised by 1.4 %
How “Green” are our Economies ?
Meeting two goals of sustainability
– High human development and low
ecological impact
Source: WWF Living Planet Report 2006
Source: United Nations Human Development Index
UNEP – GREEN ECONOMY INITIATIVE
UNEP – GREEN ECONOMY INITIATIVE
Green Economy : Related Agendas
RIO + 20
Sustainable Development
MDG’s
Green Economy
Kyoto+
TEEB
UNEP – Green Economy Initiative
Are Conservation and Development Irreconcilable ?
Mrs. Indira Gandhi
“Are not poverty and need the greatest polluters?”
“It would be ironic if the fight against
pollution were to be converted into
another business, out of which a few
companies, corporations or nations
would make profits at the cost of the
many”.
“the inherent conflict is not between
Maurice F. Strong, first Executive Director of the UNEP, welcomes
conservation and development but
Indian Prime Minister, Indira Gandhi at 1972 Stockholm conference.
Courtesy: www.mauricestrong.net
between environment and the reckless
exploitation of man and earth in the
name of efficiency.”
UNEP – Green Economy Initiative
Is Natural Capital a Development Asset ?
Indonesia
India
21%
Brazil
10%
16%
Ecosystem services as a
% of classical GDP
90%
79%
Ecosystem services
dependency
84%
99 million
352 million
47%
25%
Ecosystem services as a
% of “GDP of the Poor”
Source: Gundimeda and Sukhdev, D1 TEEB
75%
20 million
11%
53%
Ecosystem services
89%
Can Rebuilding Natural Capital Provide Jobs ?
Eg : “NREGA” Income Support in India
National Rural Employment Guarantee Act 2005
Aims
Projects
• Touches the lives of poor
Water Conservation Projects (2006-2008)
• Promotes self-help & inclusion
• In Jalaun, more than 3,000 new soak
pits/hand pumps constructed – conserve an
estimated 5 mil litres of water
• Contributes to the restoration
and maintenance of ecological
infrastructure
• In Andra Pradesh, restored over 500 yearold water stroage tanks’ network – boosted
crop and livestock production / contributed
to groundwater replenishment
UNEP – Green Economy Initiative
Outcomes
• Generated more than 3.5 bn
days of work reaching on average
30 mil families per year
• Contributed to boosting the
average wage for agricultural
labourers by more than 25 per
cent over its three-year history.
TEEB & “Discounting”
1. Declining Growth Paths in per-capita flow of nature’s services imply
that discount rates should be negative
2. Marginal Utility of $1 to the Rich vs Poor … too different to merit the
same discounting treatment
3. Inter-generational Equity……following norms means valuing nature’
s utility to your grandchild at one-seventh of your own
Most of the 29 valuation studies
in our meta-study of forest
Valuations use discount rates
between 3%-5%
Present
Cash flow 50 Annual
value of the
years in the discount
future cash
future
rate
flow
1,000,000
4%
140,713
1,000,000
2%
371,528
1,000,000
1%
608,039
1,000,000
0%
1,000,000
• BC Hydro: “long-term goal of no net incremental
environmental impact.”
• Coca Cola: “Our goal is to safely return to communities and
nature an amount of water equivalent to what we use in all
of our beverages and their production.”
• Danone Group: “Attain carbon neutrality for the major
Danone brands, including Evian, by the end of 2011.”
• Marks & Spencer: “Our goal is to become carbon neutral
by 2012 in our UK and Republic of Ireland operations.”
• Rio Tinto: “Our goal is to have a ‘net positive impact’ on
biodiversity by 2015.”
• Sony: “strive to achieve a zero environmental footprint
throughout the lifecycle of our products and business
activities : “Road to Zero”
• Walmart: “Committed to permanently conserve at least one
acre of priority wildlife habitat for every developed acre.”
Natural Capital
Financial & Physical Capital
Thank You !
16
Economy
Definition
What is Green
good about
the -GEI?
“A Green Economy can be defined as
one that results in improved human
well-being and social equity, while
significantly reducing environmental
risks and ecological scarcities.”
UNEP – GREEN ECONOMY INITIATIVE
3. GEI Analysis
Greenabout
Growth
Definition
What is good
the- GEI?
UNESCAP, 2005 : “..... a regional strategy for achieving
sustainable development.. Green Growth advocates
growth in GDP that maintains or restores environmental
quality and ecological integrity, while meeting the needs
of all people with the lowest possible environmental
impacts. It is a strategy that seeks to maximize economic
output while minimizing the ecological burdens. This
new approach seeks to harmonize economic growth and
environmental sustainability by promoting fundamental
changes in the way societies produce and consume”
Green Growth - Definition
UNESCAP, 2005 : “..... a regional strategy for achieving
sustainable development.. Green Growth advocates
growth in GDP that maintains or restores environmental
quality and ecological integrity, while meeting the needs
of all people with the lowest possible environmental
impacts. It is a strategy that seeks to maximize economic
output while minimizing the ecological burdens. This
new approach seeks to harmonize economic growth and
environmental sustainability by promoting fundamental
changes in the way societies produce and consume”
Green Economy, Green Growth…
‘Green Growth’ : Other Definitions
• “Environmentally friendly GDP Growth”
nearest to East Asian models
• Growth in per-capita
inclusive wealth ?
Arrow, Dasgupta, Maler
‘Green Economy’…
….is not just about “investing more in green
sectors”
….is focussed on policy & institutional
reforms : Taxes, EHS, Environmental laws,
trade, aid, markets
….is focussed on recognizing, valuing,
conserving, and better using Natural Capital
Dasgupta
• Growth in
Comprehensive wealth ?
Stiglitz - Sen - Fitoussi
Stiglitz
UNEP – GREEN ECONOMY INITIATIVE
UNEP – GREEN ECONOMY INITIATIVE
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