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[Target Audience: Upper elementary grades]
Quiz game!
Q1: Choose the response that most appropriately expresses the meaning of wealth in our society.
Q2: What do you think about the value of nature?
Answers
Q1: Choose the response that most appropriately expresses the meaning of wealth in our society.
A2: Being wealthy means having more money and goods, but also conserving nature.
A2 is the correct answer. Before explaining the reason, we would like to say that A1 or A3 are not completely incorrect. Some think that it is important to be rich, even if they need to make sacrifices; and others feel happy if they are surrounded by nature. It is important to understand that environmental issues are always associated with an individual sense of value, which can differ by country, religion, culture, and time. Therefore, it must be kept in mind that environmental issues will not be resolved by pushing individual ideas, but by taking account of a full range of ideas.
Then, let's think about Question 1.
Economically developed countries have reconsidered their impact on nature in pursuit of economic growth, and have learned of the difficulties involved in trying to reduce that impact afterwards. Developing countries eager to expand their industries do not consider damage to nature because of their focus on achieving quick economic results rather than on caring for nature. They will also come to regret their impact on nature, just as developed countries have.
If, on the other hand, a country neglects its economic development to conserve nature, the poor will remain poor. It is, therefore, important to maintain a good balance between economic growth and the conservation of nature.
Question 1 asks which is most appropriate. Looking back on world history, it is clear that A2 makes more people happy.
Q2: What do you think about the value of nature?
A2: We can put a price on the value of nature, and this helps us to recognize the price easily.
Many economists have tried to calculate the monetary value of goods and services produced by our economic activities. The GDP, or gross domestic product, of a country is an indication of the monetary value of the goods and services it produces in a specific year. Stock prices reflect the value of business and the performance of individual companies.
What will happen if a country or a company continues to destroy nature to expand growth? The destruction of a forest, for example, damages the forest's water retention function. This in turn increases the risk of flooding and landslides, which puts people's lives in potential danger. To counter this, we need to build infrastructure such as dams and water purification plants, infrastructure that costs a tremendous amount of money. Such infrastructure also requires money for annual maintenance. Economic activities that disregard nature lead to loss in the long term.
As explained above, there are many ways to evaluate the monetary value of our economic activities. What about evaluating the value of nature? While countries have not traditionally attempted to do this, a wide range of methods for estimating the value of nature have been established in the field of environmental economics.
Pavan Sukhdev, who received the Blue Planet Prize in 2016, developed one of these. He worked to develop a system that recognized the value of nature.
Important points!
Pavan Sukhdev has considered the conservation of nature from the perspective of an economist and through his experience as a banker.
When the GDP of a country grows, we tend to think that the economy of the country has been growing. However, continuing to lose natural capital, which is not reflected in GDP during the process of such economic growth, may threaten our economic activities. Pavan Sukhdev thinks that economic growth at the sacrifice of nature causes economic loss in the long term.
It is important to implement environmental accounting as an economic indicator that includes natural and human capital (knowledge, training, etc.), which are not included in GDP.
It is necessary to measure and evaluate the dependence and influence of each company on natural capital.
Both countries and companies should include the costs and benefits of ecosystem conservation and the use of ecosystem services when making decisions, which will lead to long-term benefit.
More information!
We have used nature freely and have destroyed it without giving it much thought. However, we have realized the benefits obtained from nature (ecosystem services) and have come to know that evaluating the economic value of nature would make it possible to understand the the value of ecosystem services and help us to use them sustainably.
What in nature should we evaluate economically?
Before learning about the methods of economic evaluation used in TEEB, we need to review the preconditions.
- Nature is complex and largely unknown; therefore, it is hard to evaluate all of it economically.
- TEEB focuses on the ecosystem services among all natural systems whose economic value can be evaluated.
- Their evaluation methods are not yet complete, but continue to be developed and improved.
Major methods of economic evaluation used in TEEB are shown below.
Swipe left to browse all
| Classification | Evaluation Method | Overview | Example of Evaluation Item |
|---|---|---|---|
| Based on Market Price (Market Valuation) |
Market Price Method | Use of market prices for goods and services traded in markets | Market prices of agricultural products |
| Replacement Cost Method | Calculate the cost of replacing functions of nature with artificially-made facilities and technologies | Cost of using water purification plants in exchange for the water purification function of rivers | |
| Avoided Cost Method | Calculate the cost of bearing the functions of nature, such as disaster prevention and environment restoration, by human beings | Cost of civil engineering to prevent flooding in exchange for the flood prevention function that forests have | |
| Based on the Payment Amount According to Consumers' Preference (Revealed Preference) |
Travel Cost Method | Cost of traveling to tourist sites | Value as tourist sites |
| Hedonic Pricing Method | Calculate the differences in real estate prices because of the existence of favorable nature | Real estate value of land that is/isn't surrounded by favorable nature | |
| Based on the Amount that Consumers are Willing to Pay (Stated Preference) |
Contingent Valuation Method (CVM) | Questionnaire on the prices that consumers prefer to pay to receive ecosystem services | Applicable to overall ecosystem services, especially those whose information is not on the market |
TEEB reports show some cases in which the economic values of ecosystem services have been evaluated utilizing the methods described above. Here are two examples.
- Although coral reefs around the world account for only 1.2% of the entire continental shelf, about 1 to 3 million species of marine fish, which is more than one fourth of all marine life, live among them; and they provide food and income for people. The value of the benefit from coral reefs is estimated to be between 30 billion to 172 billion USD a year.
- The New York City Government paid individuals engaged in agriculture and forestry in the upstream region of the Catskill and Delaware Rivers, which supply 90% of the water used by the residents, to reduce the amount of waste water discharged into the rivers in order to improve water quality. Because of this, the government could alleviate the need to build an expensive new water purification plant.
The cost involved was 1 to 1.5 billion USD, and water bills for the residents in New York increased by 9%. However, building a water purification plant would have cost 6 to 8 billion USD with an additional cost of 3 to 5 billion USD each year for maintenance, which would end up costing more than double the amount of the water rates
More information (Reference):
· TEEB: The Economics of Ecosystems and Biodiversity
· TEEB Synthesis Report