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"Natural Accounting"
Essential for Poverty Reduction

Poverty to
Rise Unless Economies Factor ‘Nature’s Capital’ into
National Accounts

Economists and Environmentalists Gather in
London to Bring Environment into Centre of Wealth
Creation

London, 10 October 2005 - Poverty will only be made
history when nature’s capital is factored into national
profit and loss books, one of the world’s leading
economists will assert today.

Key to this is creating markets that give real and
long lasting value to the goods and services nature
provides.

Traditional measures such as gross domestic product
(GDP) are short changing current and future generations,
says Professor Sir Partha Dasgupta of Cambridge
University.

This is because they fail to value the goods and
services generated by the natural world and instead
treat them as free to use and limitless in their
abundance and ability withstand damage and decay.

Such services include the carbon soaking power of
forests, the fisheries and coastal defense activities of
coral reefs, the pollution filtering-potential of
wetlands and the nutrient recycling processes of the
earth’s soils.

Currently countries that fell their forests for
timber exports, dynamite reefs for fish, pollute their
land for intensive agriculture and contaminate their
waterways with farm and factory run off can appear to be
getting richer in the short term.

In reality, they are likely to be sliding into
poverty or, at the very best, treading water, because
they are plundering their natural capital—a key pillar
of medium and long term wealth.

“Take the Indian sub-continent as an example. On the
basis of traditional measures, like GDP, the region has
been getting richer since the 1970s but in reality
wealth per capita has actually declined. This is
because, relative to population growth, investments in
manufactured capital, knowledge, skills and health, and
improvements in institutions were not sufficient to
compensate for the depreciation of natural capital,”
said Professor Das Gupta.

This has alarming consequences for not only this but
the next generation who stand to inherit a planet with
insufficient clean and functioning ‘ecosystems’ to
sustain their basic needs let lone their hopes and
aspirations.

“Poverty will only be made history when nature enters
economic calculations in the same way as do buildings,
machines, roads and for example software. It is a
particular catastrophe for the very poor,” said
Professor Das Gupta.

“As countries mine their natural wealth to fuel
economic activity, the poorest of the poor lose their
very life support systems. If fish disappears from a
rich country’s supermarket shelves shoppers can
substitute this loss of protein by buying another form
for example pork, beef or soya. Poor people, depending
on the natural resources around them, do not have this
luxury, do not have this kind of choice,” said Professor
Das Gupta.

Klaus Toepfer, Executive Director of the United
Nations Environment Programme (UNEP) which is running a
two day brainstorming at the London School of Economics
on how to mainstream environment in pro poor development
strategies, said: “In the end we are all facing poverty
if we fail to address environmental decline, if we fail
to reinvest in nature’s capital. You cannot continue to
drive a car if all you do is put petrol in the tank. It
needs servicing, parts require replacing and we must pay
for the roads and infrastructure on which it runs”.

“In reality, nature is even more complicated. By
continually depleting and damaging it and without
investment in the running, maintenance and management
costs, the Earth’s life support can suddenly and
abruptly fade or switch to become less productive and
unpredictable. I believe we are slowly winning this
political and economic argument but not fast enough. So
we must hurry up otherwise all six billion of us will
eventually be scratching around trying to survive,” he
added.

Mr Toepfer said this was given fresh urgency by the
Millennium Ecosystem Assessment, the work of over 1,300
experts.

According to the assessment, some 60 per cent of the
planet's ecosystem services are currently being degraded
by human activities.

This week’s two day brainstorming, running from 10 to
12 October, has brought together some of the finest
minds in environmental economics as well as senior
figures from the environmental and intergovernmental
fields.

It is hoped to engage the so called Multilateral
Environmental Agreements, covering areas like biological
diversity, migratory species and climate.

These treaties could go a long way towards helping
refine ecosystem valuations and to improve cost benefit
analysis of targeted investments in degraded ecosystems
to boost political and financial support for this
nature-based approach.

One of the primary aims is to see how pro-poor
markets can be created that generate income for those in
desperate need while conserving the life support systems
upon which they and the rest of the world depend.

Currently, most of the good and services provided by
ecosystems have little or no market value despite their
importance in the economic lives of communities, nations
and the globe.

It has been calculated that tropical forests are
worth some $60 billion a year as a result of their
carbon removal activities alone which are helping in the
fight against global warming.

But these forests, found in countries like the
Democratic Republic of Congo or Indonesia, are only
valued as timber resources rather than for their even
more valuable carbon sequestration services.

Thus governments and local people have less incentive
to conserve them and more incentive to cut them down.

Mr Toepfer said the Millennium Ecosystem Assessment
and other reports released during the year have made
compelling economic cases for conserving ecosystems and
for carrying out targeted investments in restoring
degraded ones.

Valuing Natural Capital and Ecosystems

New figures show that an intact wetland in Canada is
worth $6,000 a hectare versus $2,000 a hectare for one
cleared for intensive agriculture.

Intact tropical mangroves, coastal ecosystems that
are nurseries for fish, natural pollution filters and
coastal defenses, are worth around $1,000 a hectare.
Cleared for shrimp farms, the value falls to around $200
a hectare.

The Assessment also puts a value on peat bogs and
marshlands. It estimates that the Muthurajawela Marsh, a
more than 3,000 hectare coastal bog in Sri Lanka, is
worth an estimated $5 million a year as a result of
services such as local flood control.

Losses as a result of damage by alien invasive
species in the Cape Floral region of South Africa is
calculated at around $2,000 a hectare.

The annual recreational value of coral reefs in the
six Marine Management Areas of the Hawaiian islands
ranges from $300,000 to tens of millions of dollars a
year.

Studies from Algeria, Italy, Portugal, Syria and
Tunisia also point to the value of intact forests.

These estimate that the value of the timber and
fuel-wood from a forest is worth less than a third when
compared with the value of their services such as
water-shed protection and recreation to the absorption
of pollutants like greenhouse gases.

The burning of 10 million hectares of Indonesia's
forests in the late 1990s cost an estimated $9 billion
as a result of factors including increased health care
and tourism losses.

There are also new findings on the link between the
spread of disease and environmental destruction. The
provision of treated bed nets, the better availability
of low cost anti-malarial drugs and the development of
vaccines are crucial but so are healthy ecosystems.

Studies in the Amazon by researchers at Johns Hopkins
University in the United States have concluded that for
every one per cent increase in deforestation, there is
an eight per cent increase in the number of
malaria-carrying mosquitoes.

This has implications for human health but also to
economic development. It is calculated that Africa's
Gross National Product (GNP) in 2000 could have been 25
per cent or $100 billion higher if malaria had been
eradicated 35 years ago.

Investing in Ecosystems to Meet the Millennium
Development Goals on Poverty, Health, Women and Water

Research indicates that investing in nature can
provide an excellent rate of return and help meet the
internationally agreed development goals.

Every dollar invested in fighting land degradation
and desertification may conservatively generate over
three dollars in economic benefits helping to fight
poverty among the millions living on fragile lands.

Money could be spent on such traditional and soil
conserving features like terracing.

Meanwhile every dollar spent on delivering clean
water and sanitation is likely to give impressive rates
of return of up to $14. It indicates that in some cases
the income of the very poor could be boosted fourteen
fold.

Here the economic benefits arise from areas including
reduced health care costs, increased productivity
because of workers spending less time searching for
water and improved school attendance.

Conservation of habitats and ecosystems are also cost
effective when compared with the short term profits from
environmentally damaging activities such as dynamite
fishing, mining and sedimentation as a result of
deforestation in the interior.

A study of coral reefs in the Caribbean indicates
that sustainable harvesting of coral fish for food and
industries such as the pet and aquaria trade may be
worth $300 million a year, coral-based tourism just over
$2 billion annually and shoreline protection from reefs
up to $2.2 billion a year.

However, these economic benefits are threatened by
damage and degradation amounting to between $350 million
and $870 million a year. Overall for every dollar
invested in coral reef conservation economic returns
will total up to $5.

Meanwhile the carbon storage or “sequestration”
potential of forests ranges between $360 and $2,200 per
hectare which makes them worth far more than if they are
converted to grazing or cropland.

Indeed once carbon reaches over $30 a ton it becomes
far more cost effective to conserve forests than to
clear them.

Natural capital also serves as back up against
calamities such as droughts or crop failures. Studies
from Brazil show that farmers in the Amazon’s Tapajos
National Park turn to forests products such as nuts and
berries when crop yields tumble.

In other words, the forest acts as a kind of
nature-based insurance policy for those denied access to
formal insurance and financial markets.

Notes to Editors

Creating Pro-Poor Markets for Ecosystem Services

A High-Level Brainstorming Workshop 10 – 12 October
2005, London School of Economics, United Kingdom

Organized by UNEP through its Division of
Environmental Conventions and Division of Policy
Development and Law, UNEP in conjunction with the LSE.

http://www.unep.org/dec/support/mdg_meeting_lon.htm

For More Information Please Contact

Nick Nuttall, UNEP Spokesperson, on Tel: 41 79 596
5737 or E-mail: [email-masked]

UNEP News Release

Further Resources

High-Level
Brainstorming Workshop 10 – 12 October 2005
London , United Kingdom
Web site for
more information.

“Investing
in Development: A Practical Plan to Achieve the
Millennium Development Goals”
Report of
the UN Millennium Project [PDF file 3370KB]

Workshop
for MEAs on Mainstreaming Environment Beyond MDG
7 ,July 2005, Nairobi, Kenya

Millennium
Ecosystem Assessment (MA)
Ecosystems and
Human Well-being: Opportunities and Challenges
for Business and Industry

UNDP/UNEP
Poverty and Environment Initiative (PEI)

World
Resources 2005 -- The Wealth of the Poor:
Managing ecosystems to fight poverty

UNEP
Poverty and Environment Unit

Nature’s
Capital at Centre of Poverty Eradication

Editorial by Klaus Toepfer, UNEP
Executive Director 2005 World Summit Must be Red
Ribbon Day for Environment

“Natural
Capital” Investment or Higher Costs and Lower
Profits
New Millennium Ecosystem
Assessment Report Urges Corporations to Face
Environmental Challenges and Maximize Green
Opportunities (UNEP Press Release, July 2005 )

Green Room

A collaborative effort by a range of
partners from the UN family, the NGO community,
and beyond, to communicate the central role of
environmental sustainability in development
planning

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