The benefits human civilization enjoys from the world’s natural ecosystems — grasslands, marshes, coral reefs, forests, and the like — amounts to something in the vicinity of $142.7 trillion a year. That’s over eight times the value of the entire U.S. economy ($16.2 trillion a year), and almost twice the value of the world economy ($71.8 trillion a year).
According to a report in the New York Times last week, which flagged a new study that tries to put a dollar value on these “ecosystem services,” those benefits run the gamut from food production to protection from storm surges, water purification, preventing soil erosion, and carbon dioxide sequestration. Human civilization’s entire ability to function rests on the ability of those ecosystem services to keep functioning reliably. But because those services are inherently difficult to put a price tag on, they remain largely invisible and thus undervalued by markets.
For instance, one of the central reasons human economies continue to pump out massive amount of carbon dioxide, despite the looming threat of climate change, is that there’s no cost to those emissions. The social cost of carbon (SCC) is an attempt to put a price tag on those emissions. This tells policymakers what cost they should impose on emitters when designing a cap-and-trade system, a carbon tax, or similar environmental regulations — or even a rule about microwave oven efficiency. As with the SCC, studies like this one try to make the value of natural ecosystems visible to markets.
The study is also an update to original work done in 1997. That analysis pegged the value of the globe’s ecosystem services at $48.7 trillion. But since then hundreds of new studies have revealed that ecosystems do far more for humanity than originally appreciated, forcing the research team to massively update their figures.
These assessments of the natural world’s value mirror how “stocks” and “flows” are understood in economics. We have stocks of financial capital (often literally called “corporate stocks”) that provide a flow of income (like capital gains) to their owners. Similarly, there are stocks of natural capital (ecosystems, land, water, air, etc) that provide that flow of ecosystem services to human beings at large.
We’ve long known how to measure economic stocks and flows in dollar terms, but we’re still working on how to price natural stocks and flows. We can put a price tag on things like mineral deposits or fossil fuel reserves, but not so much things like rivers or forests or fish populations. That’s a problem, because in capitalist markets, prices are the signal by which we know how big a stock of capital we’ve got, or how much a particular decision may lose us, or how great a flow of services we are (or aren’t) getting from that capital.
“This paper reads to me like an annual financial report for Planet Earth,” Douglas J. McCauley of the University of California, Santa Barbara, told the New York Times. “We learn whether the dollar value of Earth’s major assets have gone up or down.”
Not surprisingly, left without that information, we’re wrecking our global supply of natural capital. Work by TruCost in 2013 estimated that we’re consuming the world’s natural capital at a rate of about $7.3 trillion per year. And while natural capital can replenish itself over time, it can be consumed too fast — just like selling off stock options from your portfolio faster than the interest can accumulate means the value of the portfolio just keeps dropping over time.
According to the Global Footprint Network, human society has been in a state of ecological overshoot since around 1970. Every year we burn off more natural capital (or “biocapacity”) than the global ecology can naturally rebuild in one year. So that natural capital is in decline. And as the stock of natural capital declines, the flow of ecosystem services it provides drops as well. The researchers quoted in the New York Times determined the annual value of ecosystem services would now be $23 trillion higher were it not for the damage being done by human practices like deforestation and the burning of fossil fuels.
Admittedly, the different measurements for natural capital and ecosystem services, and the regular revisions to those numbers, show that this field of knowledge is still very much a work in progress. But the sheer scale of the measurements suggest what a grossly inadequate measure traditional gross domestic product actually is when it comes to telling us meaningful things about a society’s sustainability and well-being.
“We basically said, ‘It’s an imprecise estimate, but it’s almost definitely a pretty big number,’” Robert Costanza, a professor at Australian National University who led the study, told the New York Times.
“And we’ve got to start paying attention.”