Eco-Capitalists Save Mother Nature By Charging for Her Services

Interesting piece from this month’s Wired magazine.

The eco-capitalists are coming, and they aren’t wielding Thoreauvian platitudes about the sanctity of nature. Their jargon is far less lyrical: ecological assets, environmental markets, ecosystem services, natural capital. For these guys, biofuels and long-lasting lightbulbs are fine but they’re nothing more than a short-term play. The real money is in nascent markets indexed to the health of Mother Nature.

People understand the economic value of nature’s goods because we constantly pay for them: seafood, timber, copper, cut flowers, natural gas. But nature also provides services that stabilize spaceship Earth. Insects pollinate crops, wooded hillsides purify water, trees sequester CO2, and wetlands buffer cities against storm surges. How much are those services worth? Who knows. They’ve always been free, or treated as such. Nature has never submitted an invoice.

It’s a twist on carbon cap-and-trade systems. In Europe, governments force companies that emit too much carbon to buy credits from those with excess credits (because they’ve cut back their own emissions). As the economy expands, the demand for — and thus the price of — carbon credits increases. Despite its growing pains, the European Emissions Trading Scheme has created a $4 billion-a-year carbon market, and no amount of cynicism about its efficacy can change the fact that skyrocketing public interest in carbon neutrality equals big money for carbon traders.

A similar setup in the US is wetland banking. Thanks to the Clean Water Act of 1972, developers must compensate the state for wetlands they pave over. Specialized businesses from Florida to California now buy up wetland areas and sell mitigation credits to developers.

I can’t discuss this in too great a detail, because I intend using this article in a problem set for my Economics class, and I don’t want them writing my own answers back at me (non-lecturers: you would not believe what undergraduates sincerely believe we will believe). Suffice to say, there are two flaws in the argument – or rather the implication being Oliver Stoned into us by this article.

The one to which I can point is the association of this with Coasean solutions, drawn through discussion of cap-and-trade systems, etc. The trouble is with the nature of the wetlands and woodlands being discussed.

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