Pop quiz: How much is a gallon of unpumped crude oil worth? How about an acre of unfelled mature cedar? A ton of uncaught Chilean seabass swimming vigorously down the Pacific Coast? All the coral reefs in all the world?
These are trick questions, of course. The answer’s the same in each case. The answer is zero — not a shilling, not a plug nickel, not even a Eurocent.
It’s been a convention of classical economics since the early days of the industrial revolution that natural resources have no value at all until they are put into productive use. When we talk, for example, about a barrel of crude being worth about $107 (as it is just now), we’re talking about the value of extracting and refining it. Were we to try to calculate its actual value, the calculus would overwhelm us. What, after all, is the replacement cost of a packet of dense, easily transportable energy that formed over hundreds of millions of years? By convention — on the assumption that it was beyond the ability of mere mortals to exhaust the earth’s bounty of this or any other abundant resource — we assigned oil in the ground a value of nothing. Would’ve been more accurate, actually, to value it at infinity, the value of something that can’t be replaced for all the money in the world.
Environmentalism, by accident, played right along with this tune. “Worth nothing?” cried the ecolovers. “Why, in fact nature is priceless!” Save it all, they argued, or as much as possible — not as an economic proposition but as a moral one. Economics, in the main, shrugged its collective shoulders, added an asterisk to its equations, and carried on as before. Zero and not applicable turned out to add up to the same result: relentless exploitation of all but a sainted sliver of the earth’s resources, with no price ever paid for what was lost.
This is why one of the most vital projects of this new century, defined by climate change and growing energy and resource scarcity, is to figure out a way to build these variables back into our economic system. As an excellent Ideas feature in the Boston Globe reported recently, the field of “natural capital” valuation — the assigning of hard numbers to the invaluable services provided by nature, from fuel and food supply to wastewater management and climate mitigation — is a booming academic business. And it’s an urgent one. “Conservation, using traditional approaches, is utterly doomed to fail,” Stanford University biology professor Gretchen Daily told the Globe.
Daily works on the Natural Capital Project, a joint venture of Stanford, the University of Minnesota, the World Wildlife Fund and the Nature Conservancy to develop standard tools for the measurement of natural capital. The Globe essay opens with one figure determined by another research body using such tools: $360 million per year. That’s the estimated annual economic value generated by Hawaii’s coral reefs — from fisheries, yes, but also from tourism, storm protection and defense against erosion. “To thoughtlessly damage a coral polyp in this view,” the Globe’s Rebecca Tuhus-Dubrow concludes, “ is tantamount to shredding a $20 bill.”
That $360 million figure emerged from the most thorough and high-profile global accounting of natural capital to date: a U.N.-sponsored study called TEEB (short for The Economics of Ecosystems and Biodiversity), conducted over two years under the tutelage of former Deutsche Bank economist Pavan Sukhdev.
For reasons I can’t fully fathom, the startling final results of TEEB’s extraordinary study weren’t front page news. The numbers, in any case, are eyepoppers. Among them:
► $2 trillion – the minimum amount of natural capital removed from the global budget every year, without recourse, just by the world’s 3,000 largest corporations
► $3.7 trillion – the total value in carbon sequestration that would be provided by the unfelled trees left standing if we merely reduced the global rate of deforestation by 50 percent over the next 20 years
► $45 billion – the estimated investment in preserving biodiversity that would be required to generate $5 trillion every year in “ecosystem services"
► 100,000%-plus – the annual rate of return on that initial investment
I’ll give Sukhdev the last word: “The value that nature delivers to us is economically invisible. Effectively we pretend that it’s zero. The point is, it’s there.”
To tell me what things are really worth in 140-character bursts, follow me on Twitter: @theturner.