Photo credit: Lily Montalbetti, The Hindu
As a concept and practice, ecosystem services (ES) draw extensively from economics and finance including stocks, flows, capital, assets, valuation, and accounting. To foster integration between the economy and ecosystems, Ouyang et al. (2020) push to create a new index comparable to the widely-used gross domestic product (GDP)—the Gross Ecosystem Product (GEP). Similar to GDP, GEP provides a useful means to monetize complex natural systems and human well-being into one, simple metric. Given the growing demands for Environmental, Social, and Governance (ESG) investing, the GEP can help to quantify the information needed to make ESG investment decisions.
What are ecosystem services, you might ask? ES are defined as the benefits people obtain from healthy ecosystems. These benefits are categorized as provisioning (e.g. food, energy, building materials), regulating (e.g. carbon sequestration, water purification), supporting (e.g. nutrient cycles, habitat), and cultural (recreational, spiritual). I like food on my table, do you? Watching a sunset over a gorgeous landscape? Yup, me too. How about access to clean drinking water? Definitely. Those things all have value to our quality of life, and need to be maintained in perpetuity. Recognition of that ecosystems provide these valuable benefits helps us to preserve them, and keeps us from squandering our limited resources. To some, the value of nature is priceless, and the idea of trying to put a number on that value is absurd or somehow unethical. However, everyone understands the value of a dollar, and using dollars people can compare apples to apples, apples to dogs, and dogs to water. Those comparisons help us make important investments in our individual and societal well-being.
Without going into the technical details of the article (if you’d like to read it, it’s free to download from the Proceedings of the National Academies of Sciences, https://www.pnas.org/content/117/25/14593), the study shows a few results I would like to highlight. First, it demonstrates how China is integrating ES and GEP into its regional and national policies, well beyond current efforts in the US. Second, in the “Water Tower” of Qinghai Province at the headwaters of the Mekong, Yangtze, and Yellow Rivers, the GEP was $26.5 B (US), or 75 percent of GDP, in 2015. Between 2000 to 2015—using the same accounting methods—restoration investments returned an increase in GEP by over 125 percent. Third, water-related ES such as water supply and purification made up over two-thirds of the different types in the GEP (Fig. 1); many of the benefits flowed downstream as exports to communities lower in the river basins. This study demonstrates how multiple ES can be combined into the GEP to create a useful index showing nature’s value.
Figure 1: Spatial distribution of multiple types of ecosystem services produced across the Qinghai Province (Ouyang et al. 2020).
Perhaps these numbers are fudged, you might say? Well, maybe there’s room for improvement. That’s a common enough criticism of ES methods. After all, the basic formula of the approach is as follows (Eq. 1):
Where:
Equation 1: The value of the Gross Ecosystem Product (GEP, Ouyang et al. 2020)
I is a set of ecosystem services,
γi is a proportion of accounting value attributable to nature,
pi is an accounting price of ecosystem service i, and
qi is a quantity provided of ecosystem service i.
Indexed heavily, you may say this formula has waaaay too many of devils within the details to lead to any realistic results? Granted it is a work in progress, yet efforts continue to improve and move forward. For example, the United Nations is working on an international agreement to standardize these approaches of the GEP in the System of National Accounts. And, decades of scientific literature exist to back up certain viable methods to quantify ES.
The pressures of development will not stop, and some places will do better than others. The problem is: can make wiser decisions about which way to push the pressures for the greater good and equitable solutions? I believe the GEP can help with that problem. I wonder what the results would look like for the Water Towers of the US? The Columbia River Basin? The Colorado? The Mississippi? Your local municipality or irrigation district?