Anne Reeves and Rachel Fitzhardinge, NPA Park Management Committee
Introduction
Classical economics does not deal with social or environmental issues. The intrinsic and complex world of nature, our life support system, is overlooked. Accordingly, national economic accounts do not identify negative impacts of economic activity on nature, the environment, nor recognise measures that would benefit the environment and human well-being.
Although environmental issues such as loss of biodiversity have the potential to cause significant economic impacts, governments are providing less direct funding to address the problem. Arguably, the concepts of the public good and collective responsibility to conserve nature have been eroded.
Monetising Nature
Some environmentalists argue that monetising, i.e., putting an economic value, on the contribution of nature and its services, can heighten public awareness of environmental issues and bolster conservation efforts. Others go further and seek to establish tradable prices for ecosystem services, claiming that markets can achieve better environmental outcomes than politics has.
We question the soundness of both approaches. Firstly, the economic values placed on nature and ecosystem services are arbitrary. One economist might value the ecosystem services that the earth provides at $100 trillion, another $1,000 trillion. There is no accepted methodology for calculating economic values on ecosystem services or other aspects of nature.
Natural ecosystems are complex, and unique. Economic valuations of nature or ecosystems services rely on simplistic assumptions that are not consistent with how science describes natural ecosystems. Monetising nature also does not recognise less tangible aesthetic, cultural, and spiritual values that people, especially First Nations’ peoples may have for the natural environment. Putting a $ value on nature potentially changes how people appreciate and interact with nature.
The second approach to establish markets for components of nature and natural services, i.e., commodify them, has the same problems as simply monetising by putting a market price on nature and its services. Although the environmental benefits of setting up such markets has been touted, there is little evidence of any environmental benefits. For example, the water and carbon markets in Australia have complicated methodologies and rules and created compensable property rights. They have not resulted in good environmental outcomes. The motivation of many participants in markets, which are set up nominally to give environmental benefits, is solely to make money. Inevitably, the environmental benefits are undermined.
We are particularly concerned by trading schemes, where development can be “offset” by paying money to buy land or by undertaking other actions. In the case of biodiversity offsetting, there is a net loss of biodiversity because the offset “payment” made cannot replace the habitat which is destroyed by the development.
Offsetting under the NSW Biodiversity Conservation Act 2016 and the Federal Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) does not protect the habitats of threatened species or threatened ecological communities. It has facilitated inappropriate development in NPWS’ reserves by allowing developers to “offset” those developments even though what will result is the destruction of unique and irreplaceable ecosystems.
It is disappointing that the Federal Government has included offsetting in the Nature Market Repair Bill 2023. The bill lacks detail and has been put on hold after much criticism pending the report of the Federal Senate Inquiry into the Bill and related legislation, which will be handed down on 1 November 2023. Without appropriate limits and safeguards in legislation, market-based mechanisms undermine genuine conservation efforts by legitimising scientifically unsound policies and facilitating the continuation of high-impact activities such as land clearing.
What alternative approaches should be considered?
- Application of the principles of ecologically sustainable development (ESD) should be revisited and ESD principles updated to give better outcomes for the conservation of biodiversity
The concept of ESD seeks to integrate social, economic and environmental considerations in decision-making. We consider that monetising nature potentially undermines this aim because it focuses primarily on the economic value of nature.
The principles of ESD have been incorporated, not necessarily consistently, in some Commonwealth and State legislation. Their application has been undermined in some Acts because achieving ESD has not been made an overarching objective so that multiple objectives can be inconsistent with each other – for example, in the NSW Environmental Planning Act and Assessment Act 1979.
The precautionary principle is one of the core principles to be applied when assessing whether a project is ecologically sustainable. It is an important tool for governance and management. We consider that there needs to be consideration of how it can be applied more effectively to promote biodiversity and environmental conservation. This consideration should include whether its application should be broadened so that it applies whenever there is likely to be a measurable impact on the environment and not just invoked wherever there is a serious or irreversible environmental threat.
Two other principles that should be applied when assessing whether a project is ecologically sustainable are: (a) Inter-generational equity and (b) the conservation of biological diversity and ecological integrity. The ever-increasing number of threatened species of Australian flora and fauna and threatened ecological communities suggest that decision-makers are not giving proper weight to these two principles.
Monetisation of nature through market pricing mechanisms is not consistent with the effective application of these two principles because it does not apply scientific methodology to assess the full value of nature. Indeed, offsetting is contrary to those principles because it results in a net loss of biological diversity and ecological integrity, which the next generation will inherit.
Improved valuation, pricing and incentive mechanisms are other issues in assessing whether a project is ecologically sustainable. Although there is a requirement that the “polluter pays”, there is no equivalent that those who destroy biodiversity or ecosystem integrity should pay. A direct payment to an agency responsible for acquiring, administering and sustaining land of high conservation value should be mandatory. It would provide a more effective way of acquiring and managing land for biodiversity conservation, as well as being simpler, more transparent and accountable than offsetting schemes.
We consider that at an international and national level there is an urgent need to review the application of the principles of ESD, including whether monetisation of nature and natural services undermines their proper implementation in decision-making.
- The Role of the Federal Government:
A flourishing economy and thriving communities depend on a healthy and sustainable environment, so direct funding for conservation and restoration should be a core Federal Government budget expenditure rather than shifting the obligation to conserve Australia’s biodiversity to ill-defined and untested markets in the private sector. One way in which the Federal Government could promote biodiversity conservation is to fund acquisitions under a National Reserve Scheme to meet the 30 by 30 initiative for terrestrial conservation.
The Federal Government could also provide funding to other effective area-based conservation mechanisms (OECMs). However, the Federal Government should, before increasing funding to OECMs, review the effectiveness of existing OECMs to ensure that OECMs effectively conserve biodiversity in perpetuity and public funding is accountable and transparent.
The Federal Government has announced a full audit of compliance with environmental offsets conditions imposed under the EPBC Act. This move is welcomed but we argue that offsetting itself is the problem and that its efficacy needs urgent review.
As new models for biodiversity conservation are proposed, the Federal Government should only implement those that can be shown to effectively conserve biodiversity as well as being cost effective, transparent and accountable.
Recently, the Federal Treasurer Jim Chalmers released “Measuring what Matters” as a preliminary exploration into an alternative to the Gross Domestic Product to measure our wellbeing. It seeks to measure five aspects of well-being, one of which is “A society that sustainably uses natural and financial resources, protects and repairs the environment and builds resilience to combat challenges.” This is a step in the right direction. However, how meaningful it will be in the future is dependent on how appropriately items are measured.
- The Role of State governments
State governments have primary responsibility for environmental planning and natural resource management. Conservation and restoration of natural systems should be better integrated into planning and land use policy. Ending broadscale clearing and native forestry are two ways in which State Governments can promote biodiversity conservation. State Governments can also provide financial and other incentives to protect biodiversity. Such incentives must be accountable and transparent.
- What is the most effective way of conserving nature at all levels of government?
Local, state and federal governments must be empowered to refuse highly destructive projects. Achieving this is politically unpalatable but it should be pursued.
Conclusion
There is no evidence that market-based mechanisms maximise environmental benefits, including conservation of nature and natural services as proponents have claimed. Even though they reduce direct government expenditure, arguably, they are inefficient at achieving good environmental benefits. NPA should be wary and look critically at government proposals to create markets for aspects of nature or natural services before endorsing them.
Economics does not provide a sound basis for valuing nature and the ecosystem services it provides. NPA can play a pivotal role in putting forward alternative ways of assessing the health of the Australian environment and biodiversity and highlighting the place that natural places and nature have for the well-being of the Australian community. NPA can also play an important role in educating the community and decisionmakers about why monetising nature is not the solution to conserving the environment and biodiversity and why science and the knowledge of First Nations’ peoples must be relied on instead to promote these outcomes.
As Ross Gittins said, “Good luck with your economy once you’ve irreparably damaged the natural environment on which the economy depends”.
References:
Ross Gittins (26 July 2023) Wellbeing? Measure what matters, then start fixing it, Sydney Morning Herald.
Barbara Unmüßig, (2014) “Monetizing Nature: Taking Precaution on a Slippery Slope,” Great Transition Initiative, http://www.greattransition.org/publication/monetizing-nature-taking-precaution-on-a-slipperyslope.
Barbara Unmüßig (2016) Valuation and monetisation of nature – No thanks!
https://www.boell.de/en/2016/11/29/valuation-and-monetisation-nature-no-thanks
Environmental Defender’s Office (2023) https://www.edo.org.au/publication/submission-to-the-senate-standing-committee-on-environment-and-communications-on-the-nature-repair-market-bill-2023/
You must log in to post a comment.