Now That the Copenhagen Agreement Puts Deforestation on the Table, What is it Worth?

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Last year when the sub prime investment market was first collapsing, the BBC posed a novel question that is worth thinking about again, because we are about to embark on a post-Copenhagen investment in preventing deforestation in developing countries, like the Amazon.


The question that Nature’s Capital posed was  “Why should we invest in preserving the Amazon? What’s in it for me?”

Quite a lot, as it turns out.

Each year the Amazon provides about $50 billion worth of utility service. It cleans air. It provides air conditioning. It creates water for agriculture. The water it creates makes possible energy production from everything from bio-fuels to… well, even to tar sands.

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To replicate all the services it provides would use so much energy that if we were to build a giant machine to do that work instead of the Amazon, it would take 135 years of power from the largest hydro electric power plant on the planet.

The Amazon really is a giant planetary utility, performing a service that makes possible billions of dollars worth of industrial energy and food production, by releasing 20 billion tonnes of water into the atmosphere every day.

Like any utility, if we neglect it and let it run down; it becomes less and less productive. It will depreciate in value. The danger is that even a giant planetary utility like the Amazon might become decommissioned altogether.

The utility benefits all of humanity, and so all of humanity has an interest in preserving its services. However, that’s not happening. None of us is investing in the natural utility to keep it going. By contrast, we are deforesting it, or eroding our capital. Something accountants call “depreciation” is setting in.

Letting it burn endangers the foundation of our existence. Our natural capital is no longer generating any “income”. Whats worse; it gets neglected and rusty. Its deforestation now generates 7 billion tonnes of carbon emissions a year.

Shouldn’t we invest in this giant utility, just like we’d invest in any other utility?

Natural capital investments may turn out to be as safe as investments in any other public utilities. We need the equivalent of an ecosystem services market with an environmental regulatory body that forces us to value the common goods that we continue to plunder at our peril.

This is why we need a cap and trade market in carbon emissions. This puts a real market value on an intangible like stopping environmental destruction. Trade generates the funds needed to protect an asset that is otherwise brushed aside by the invisible hand.

Image: Flikr user wildimagephoto

Source: Nature’s Capital

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