The Day 3 Keynote delivered by Edward Barbier presented the case for embedding nature into our economies by tackling two consequential economic failures: the underpricing and underfunding of nature.
“There is something fundamentally wrong with our economic approach to nature” – Edward Barbier
Not only are the ecosystem services provided by nature not valued in our economic system, argued Edward, but often these are even given a ‘negative price’, as environmentally damaging activities are subsidised, thus referred to as the underpricing of nature. Globally, $1.8 trillion USD is spent on damaging subsidies in total, and across OECD (Organisation for Economic Co-operation and Development) countries environmentally harmful subsidies in the agriculture sector alone account for $112 billion USD annually. If we repurposed this money away from harmful subsidies and put it to fund and finance nature, according to Edward, we could double the amount of money internationally used for nature protection.
While estimates differ, the gap between current funding for nature and the means needed to restore and implement NbS is around $890 billion USD. Moreover, public sources account for over 85% of nature funding presently, meaning that the private sector is severely lagging behind. Nevertheless, the private sector is becoming more and more aware of the increasing environmental risks posed to them by climate change and the degradation and destruction of ecosystems. The World Economic Forum estimates that $44 trillion USD (over half global GDP) is moderately or highly dependent on nature and its services. Moreover, returns on investment can be high: for every $ spent on conservation, almost $7 more are generated in the economy after just 5 years in low-middle income countries.
To address these economic failures, Edward proposed a three-step strategy:
- To phase out environmentally harmful subsidies
- Tax activities, particularly land uses, that degrade the environment, over-exploit natural resources, and unnecessarily convert ecosystems
- Use these savings and revenues to conserve and restore ecosystems
He went on to discuss different opportunities for the funding and financing of nature, including using innovative financing options such as biodiversity offsets, payments for ecosystem services, voluntary carbon markets, REDD+ programmes, ‘debt-for-nature’ swaps, green bonds, corporate contributions, corporate initiatives, voluntary certification. Focusing on green bonds, it was suggested that entities could build portfolios of multiple conservation and restoration projects, in order to address the challenge of green bonds generally being structured for large-scale investment, rather than smaller-scale scattered programmes.
Edward B. Barbier
Professor in the Department of Economics, Colorado State UniversityThe Economics and Financing of Nature-Based Solutions: Challenges and Opportunities
Edward B. Barbier is a University Distinguished Professor in the Department of Economics, Colorado State University. He is an environmental and resource economist and a highly cited scholar on global environmental and sustainability issues. His latest book is Economics for a Fragile Planet, Cambridge University Press.