When we put a price on nature this may be confused by many with the value that Nature has.
There are many who propose that we put a price on nature and those that oppose this idea. Both sides often have the same intention and that is to reduce degradation of the environment. Here I will argue that we can get the best of “both worlds” if we conclude:
A price on Nature can be justifiably used to prevent degradation but not as a reason to prevent protection of an ecosystem
When we attempt to use pricing mechanisms alone to prevent a market failure we may inadvertently encourage market failure.
We can usefully put a price on certain specific benefits nature has to offer for example a woodland’s ability to prevent erosion. This is an extremely important thing to do, however it does not represent the entire value of the woodland. It does not represent all the other benefits, known or otherwise, that the woodland has, including benefits that can be given a price or other values that cannot be given a price. There are advantages of knowing the price of the woodland’s ability to prevent erosion, but without being aware of the pitfalls drastic mistakes will be made.
As an exercise, think of all the values that a woodland has to offer. This may include benefits to visitors, to biodiversity, aesthetic values etc.
Hopefully you will see that you cannot simply add up all these qualities in the same units.
A simple example will demonstrate the pitfalls when we put a price on nature.
If a woodland (or mangrove etc) is at risk due to a commercial enterprise then the woodland may be protected because we have designated it to be conserved or we have come to realize that if it were eroded, flood barriers of some kind would have to be built. There may be some situations where this latter reason alone prevents the commercial enterprise for being implemented or may force it to change its location since the price of the flood barriers would be imposed on the potential entrepreneur. If so it seems that a market value can help us preserve natural areas.
A new political government may then remove the conservation status on various natural ecosystems and replace them with a price they deem appropriate. In this new political environment the government may claim that market values on nature are the most cost effective ways of increasing the country’s GDP while protecting ecosystems. They have exemplar situations like the case above which appears to be effective when a price is put on nature.
An alternative commercial enterprise may then at a later date be willing to pay for the flood barrier if they find their business outlook is becoming more promising. As the business does not pay the true social cost of the woodland, or perhaps better stated the true social value of the woodland, the “tragedy of the commons“ type of situation becomes inevitable. Because the price can prevent poor short term economic mistakes we can be lulled into thinking the price reflected the true value.
The price has become an excuse to allow ecosystems to be degraded which wouldn't have been otherwise. The price should be seen as a minimum price that represents some of the benefits that can be quantified by a price and only on those that we are presently aware of.
When we realize that we are a considering a minimum price then this price can be justifiably used to prevent degradation but not as a reason to prevent protection of an ecosystem. The optimum best use of land with environmental considerations should be determined by the wider community not the economic priorities of private individuals using market values with an inadequate value of the environment. In this example above eventually the price was used unjustifiably to prevent protection of the woodland. The value of the woodland was diminished to that of this inadequate price.
See also “A price or a value on nature”
No comments:
Post a Comment