25 Sep 2014
Aniol Esteban on why economics needs to make space for nature
Aniol Esteban is head of Environmental Economics at the New Economics Foundation. He is a biologist and environmental economist. He is the author of, among other things, Natural Solutions: Nature’s role in delivering well-being and key policy goals – opportunities for the third sector, published by nef. I started by asking what, for him, is the link between nature and wellbeing?
“The link between nature and wellbeing is multiple. At one level, it provides everything we need to live and so guarantees our survival. That’s a very basic condition. At the other level, it makes our lives worth living and delivers multiple benefits. The Millennium Ecosystem Assessment produced by the United Nations describes very well the different services the natural environment provides to human beings, using the ecosystem service framework. That’s a very good starting point.
It’s very important to make clear that that framework is obviously purely anthropocentric. It’s about what nature does for us human beings, and it doesn’t look at the value of nature per se. The framework includes things like the provision of food, provision of guaranteeing the stability of the climate, delivering pollination services which is part of the food, minimising our risk to shocks, like flood protection. It also includes things like aesthetic value, recreational value, spiritual value. Nature obviously contributes to our wellbeing in a multiple range of ways.
Now look at it from a public sector perspective. Nature contributes to our mental health. It delivers mental health benefits and physical health benefits. It delivers a wide range of societal benefits. It contributes to our education. It can help reduce levels of crime. It can help urban regeneration. There is a huge range of areas and ways in which nature contributes to our wellbeing – individual wellbeing and collective wellbeing.
Given that it’s so useful, is it reasonable, as some environmental economists do, to try and put a value on nature?
It’s very important to be clear with language here. Describing how nature contributes to humans’ benefits and describing some of those benefits in economic terms is a useful exercise in that it helps you visualise where the benefits are created, where the costs are generated, who receives the benefits, who bears the costs. That, as such, is a useful geography that can help identify actions that we can take as a society to make the most of nature or deliver societal benefits or be clever about how we manage it.
However, the danger lies in how we use that information. If we are using that information to put the conservation of nature in a pure conventional cost-benefit analysis framework, then that’s dangerous. If we are using that information because we think that we can create environmental markets and the markets will deliver the efficient level of nature conservation then that’s extremely dangerous because we know that markets are very inefficient in delivering public goods.
I don’t see any problem in running the exercise of describing how nature contributes to our wellbeing and benefits us, not even describing those benefits in economic terms and in some cases putting a monetary value on them. The problem lies in how the values are used and what the motivation is that leads some people to want to do that. That’s where I think the red lines are.
I’m very glad you asked that, because environmental groups are not even clear themselves about where those red lines are and we have now started a process together with nature conservation organisations to try to clarify where those red lines are. The environmental movement has jammed onto nature evaluation a bit blindly, believing that it’s going to sort out all their problems. They are now starting to realise that actually it’s a very dangerous game.
What are the societal costs when a society loses its connection with nature? When you have a generation that grows up spending very little time in nature or experiencing nature or becoming familiar with nature, what are the wider societal costs and impacts of that?
I would imagine that one of the biggest costs is that it increases humans’ inability to understand why nature and the natural environment as a whole is so fundamental to our economy and our society. It makes it more difficult for people to understand that nature underpins our socio-economic system and that obviously puts the whole of society at risk of taking the wrong decisions. So that could be the micro-cost of that.
Another big cost is that biophilia theory shows how we humans are intrinsically and naturally programmed to engage in contact with nature. That’s still very lively within some individuals, whereas some others have been able to disconnect a bit more. But that natural connection with nature, or the lack of that connection with nature seems to be the underlying factor explaining lots of mental illnesses or depression or all sorts of mental related health issues.
There is evidence showing that more connection with nature, being outdoors, engaging with green spaces and so on has positive effects on mental health and physical health. There is also evidence showing that having more contact or access to green spaces incentivises people to go out more and do more physical exercise, and obviously that has health benefits and savings to our health system.
I’m just trying to turn around your question and say actually one of the costs of not having contact with nature is health costs, both mental and physical. The health aspect is one of the clearest.
The Fabian Society published a study a few months ago called Pride of Place, which argued that the environmental movement has lost connection with people, and the way to re-engage was to start at the local scale, a bit like Transition does I guess, and that actually people have attachments to the places where they live and that attachment needs to be the foundation you start with because people feel they can affect that in their own back yard and then from there you build out. Is that something that you would agree with as well?
I absolutely agree with that. It’s a very strong argument and it’s absolutely true. The environmental movement has done lots of good things and succeeded in many things, but it has not been effective enough for two reasons. One is because sometimes the environmental movement, and I include myself within that, we have talked about macro issues. Big problems and people don’t know where to start, or big issues that people feel a bit lost about, and then they don’t know where to engage or how to engage. So therefore starting from the local place makes a lot of sense.
But the other aspect is that sometimes the environmental movement has failed to recognise the social and economic realities that people face. It’s very hard to tell someone to care about the environment if they don’t have a job, or if they might be moved from one place to another because they have financial insecurities or if they don’t have a proper house or a decent place to live. In those contexts, it’s very hard to go to people and say – listen, we need to protect these beautiful newts here.
So the environmental movement needs to move into the social and economic territory, because we all know that things are interlinked, and campaign about things which are out of their comfort zone like housing or minimum wage, or all these very basic things that people need to have a decent life, and then they you are creating a much more favourable context for people to care about the environment.
People can care about a local place assuming that they will be able to live there for most of their life. Sometimes that’s not true, because of the economic system in which we live. Maybe in a particular town there are no jobs and people need to move away from there, and that’s something that needs to be taken into account.
Do you feel that actually there is a strong economic case nationally for rewilding (as set out in George Monbiot’s book Feral), that that should be part of our national economic policy?
I personally love the rewilding project. I have very strong preferences for natural conservation and biodiversity to obviously I believe that it’s a fantastic idea. However, at a national level I think rewilding is a great project. It makes sense and there are lots of benefits. But how do we explain to the rest of society that rewilding makes sense?
The way I think about it is that at the moment nature is seen as a barrier to progress. We live in a context in which there is this narrative that says “it’s nature or the economy”. When there are economic problems, protecting nature is a luxury we can’t afford. The opposite is true. The predominant narrative is one that says no, at a time of economic trouble you need to forget about nature.
Then you hear George Osborne talking about “gold plating” European directives! There is DEFRA saying there was not too much legislation about the environment constraining the economy, which was the hypothesis, and then they did a report that showed actually the level of legislation was right. So there is this predominant narrative that it is very difficult to protect nature because it is seen as a constraint rather than a condition for progress.
What we need to do is create a narrative that puts nature at the heart of economic policies and wellbeing policies. Rewilding is one solution to that. The way to explain to the rest of society or to decision makers to do that is that if you can communicate effectively that nature delivers a triple win. The triple win first of all of giving you more resilience to have everything you need to live. More resilience to floods because it prevents flood risks and it will prevent some potential natural disasters and will save some money. It will also create resilience to guarantee food provision. It will make you more resilient to avoid pests. It will deliver all the things you need to live. That’s the first benefit, the first win.
The second one is that it can help you do more with less. That’s something that governments should be very interested in doing. Nature can be critical to help you deliver health outcomes and education outcomes and crime reduction outcomes in a cost effective way. At the moment we have government departments working very much in silos. You have a Nature Conservation department, you have an Education department, you have a Health department. Nature should be cost cutting, so should be at the heart of health policies, together with other things. Nature should be at the core of education policies. If we integrate nature into other policies that could deliver some savings to the public budget.
Then the third win is the potential change in people’s behaviours towards more sustainable lifestyles. That’s something you need if you want to move towards a low-carbon economy and deliver all the changes you need to deliver to face the environmental challenges that we face. As I said, all these are potential wins.
So rewilding can be the solution that can help you to that, but you might need to find a more persuasive way to reach the decision makers and the wider section of society, because otherwise you could alienate some people.
If you were the chancellor and the next budget was to be one which truly put nature at the heart of it, what kind of things would be in there, do you think?
I would create an ecosystem restoration fund. That fund would help us move from over-exploited systems to sustainably managed systems, because to move from exploitation to sustainable management you need to ease the pressure on those systems.
I’ll give you two examples. One would be the seas. You let the fish stocks grow, you have more fish, but to let them grow you need to reduce fishing. Reduced fishing means that fishermen will have less income. So this fund would help manage the transition, letting fishing communities live through this period and maybe improving their fishing techniques so that they are more environmentally friendly and so on.
Another example would be soil fertility restoration. Trying to use this fund to increase the fertility of our soil systems, which are being dramatically reduced and lost. That would fund farms to leave some significant amounts of land to be able to fix nitrogen and other nutrients naturally through different crops, and then after three, five, seven years you have restored the quality of those soils and that will allow you to deliver food for many more years in a much more stable way.
This is just an example of how you could use that fund. You could use that fund obviously to guarantee the good management of nature reserves, because what happens is you protect some spaces and then those spaces are not managed properly and you need to take some action to restore them to guarantee high nature spaces and to meet all our biodiversity commitments you need some investment.
The big question is where would you get the money from. That’s what economists will tell you. If you’re going to fund this, where are you taking this money from? What else are you going to stop funding? You could find many different solutions, whether you move some money from the Ministry of Defence and you then do Trident and then do more nature conservation.
But one solution that we could consider is to use strategic quantitative easing. This is something that Tony Greenham has written about. It’s about using our central bank to generate money that goes to fund this transition to sustainably managed ecosystems. We will be printing money to do that rather than give it to banks and then expect them to lend it to what we think it should be lent to.
If I was the Chancellor I would also change lots of things from the treasury rule book to ensure the way economics captures environmental and societal needs much better. To start with, I would reduce the discount rate that is used in cost benefit analysis because – I know this is a bit complex to explain – if you use a high discount rate, then any long term investment, the benefits resulting from a long term investment are going to be zero or very little. So there will be less incentives to invest in any long term project as a result of having high interest rates.
This affects lots of social and environmental restoration projects. Delivering environmental or societal goals takes a very long time. If you have a high discount rate you’re making it less likely for people to invest into that.