Climate Change Talks Do Not Consider Nature In Its Economics

The international climate change negotiations are built on a wrong economic construct, according to eminent environmental economist Professor Sir Partha Dasgupta, Frank Ramsey Professor Emeritus of Economics at the University of Cambridge in the U.K. Speaking at length to Mongabay-India, Sir Partha explained that the economic model being used for climate change negotiations is built on the conventional GDP-based growth model practised in countries across the globe. It adds the element of climate on top of this model and if enough money is spent to mitigate the emissions, then global economic growth can continue unabated. However, this is a flawed understanding, since it does not take into consideration the importance of biodiversity and ecosystem services provided by nature.

Sir Partha was invited by the Treasury Department of the UK Government to review nature’s contribution to economics. The Economics of Biodiversity, also known more famously as the Dasgupta Review, which was published in February 2021, has resulted in natural capital accounting being accepted by many countries – the UK, New Zealand, Canada and the United States. The Review also increased the awareness on taking natural capital into consideration in economic considerations. “The idea is to look beyond flow accounts – like the GDP – to stock accounts, looking at natural assets and ecosystem. The accounts will look at how these assets look like today when compared to a year ago, or 10 years ago,” he said.

The discipline of environmental and ecological economics has been growing across the world, and especially so in India and the South Asian region, according to Sir Partha. His regret – even though the researchers and research products are of high acumen, their ability to influence policy is still limited.

Sir Partha was named as one of the four Champions of Earth during 2022 by the United Nations Environment Programme. Excerpts from his interview with Mongabay India.

Mongabay: Sir Partha, we are having this conversation when the international community is preparing to meet in Dubai for the Climate Change Convention Conference of Parties. Again, this year, like the previous years, the issue of climate finance and loss and damage funds are going to take centre stage. While one can argue that these are environmental economics discussions, why is it that even after two decades from the Millennium Ecosystem Assessment Report, the TEEB (The Economics of Ecosystem and Biodiversity) report and more recently, your Dasgupta Review, the economic value of biodiversity and ecosystem services has not come into mainstream discussions?

Partha Dasgupta: Wow, that’s, that’s a tough question to answer and I can nibble at it at best and probably will be misguided but I will have a whack at it. Obviously, I’ve thought about it a lot. And that doesn’t mean I’ve come to any firm conclusions as to why.

Well, first of all, I should say that one reason I’m less than fully impressed with the discussions, with the way the economics of climate change has developed, is that it has seen Mother Nature’s regulation of climate as the one service that she offers us. So, the technique that’s been followed in developing the entire discussion, the debate on climate change, the economics of climate change – I’m talking about the economics of it now, not the science of climate change – is that it’s planted a climate model as being the sole service provider on to a conventional model of economic growth and development, which has no nature in it. So, the one piece of nature that occurs in the normal models, that is in the climate models, is the climate. And the reason I think that subject has taken off in the sense that at least people can discuss it, and you know, we’ve had many COPs on it. Now, our work by agreement may have been slow to take is a different matter, I’ll come to that in a minute. But the reason that nobody’s questioning the language in which the discussion is taking place, is that it also enables you to think of clean alternative energy sources.

So, the thought here is that if we spend enough money; and enough money could be, say, 2% of global GDP at best per year, then over a 10, 15 or 20-year period, you can transition to clean technology and the sense that your net emissions can become zero. Once you do that, then business can be as usual, you can grow indefinitely, because there’s no other service that Mother Nature offers us. This one service, if you can get and keep to the limits at 1.5 or 2 [degrees] or whatever. That, in some sense, is why I am less than impressed, because of course, climate regulation is tied up with many other regulatory services that Mother Nature offers us, for example, decomposition of waste, or soil regeneration, or water cleansing. So, these are all related services.

My Biodiversity Review was really addressing the sum of these interlinked services, which are not substitutes of each other, they’re complementary to one another. Which means that if you press against one heavily, the others will start unravelling as well. Because these are complementary, it’s a sort of a complex system that the earth system is.

So, I think that’s what makes the economics of biodiversity subsume the economics of climate change. And I think one reason people find it difficult to think about the economics of biodiversity is that it is complex. And many of these services, the people don’t have any perception of – I mean, the average member of the finance ministry will not know anything about soil regeneration. Ministries of finance don’t have ecologists there, or soil experts. They have economists, of course, but they are the last people you would go to, to have an appreciation of the inner workings of nature, what happens under our feet, what happens deep in the forests or what happens in the oceans.

These are the ones which are churning out the services, these totality of assets are churning out these services, which many of you don’t know, because you haven’t studied them, you certainly don’t see them. These are processes, you don’t see them. And most often you don’t hear them. So you have to be sensitive enough to recognise that they’re working away. And we are making use of them.

Our own lives depend on the workings of these. Imagine if the decomposition of waste stopped, we would just have piles and piles of waste, and it would be unliveable. But silently these services are being provided by almost invisible objects – fungi, bacteria and so forth. So, I think that may be something like an answer to your question as to why it’s falling behind.

The other reason is the standard one, each country wants to free ride on the others. So, unless you have some commitment device, you can agree at every COP but then go and get on with your life as usual. So it has been a failure. And we have now in a way even within climate, of course, we go to break the 1.5 degree without any sweat. And the question is, whether it would be three or four degrees. Now people are talking along that line, and that’s terribly dangerous. So, I think it’s two things.

As I said, there are two things. One is more fundamental. And the other is standard stuff about negotiation among parties in which each one is to free ride on the others, unless you can have agreements which are enforceable.

Mongabay: I have read your statement that one of the weaknesses of the climate change negotiations is that it looks only at carbon dioxide and greenhouse gases and not at the ecosystem services in totality. Since the Millennium Ecosystem Assessment has the growing discipline of environmental and ecological economics got enough strength to push its argument with something like climate change negotiations? Because part of the problem is some of these don’t have tangible, measurable arguments. We know about pollination, but how would you put an economic value that pollination contributes? Has the discipline grown in the past few decades to be able to be included in the climate change discussions?

Partha Dasgupta: Yes, I think there has been a great deal of progress. First of all, the measurement issue, which is I think you’re quite right to point to it. I think we economists have misled the public in thinking that if you can’t measure something, or if you find it very difficult, then you bypass it. And it’s almost like saying, If I can’t measure it, I’ll pretend it to be zero. Which is a very precise number, by the way. That’s a very common tendency on our part.

Remember, there’s another set of COPs that run parallel to the climate change. And that’s biodiversity. And I think they are making moves in the right direction. They’re not saying something silly, like, let’s conserve species. Of course, there’ll be some cases where you would say, for example, charismatic species, like the gorillas. You want to conserve them, because you can see them and they’re important, they are valuable to you, or you feel awful if a whole species like that disappears. So then you want to preserve the habitat in which that species exists.

But most species, you can’t even see, we don’t even know how many species there are. I mean, think of insects. We don’t know how many millions of insect types there are in terms of species. So the alternative is really the right one, which is to think in terms of land use.

I mean, after all, they’re somewhere – in the water, in the land. And the question is, you have some sort of notion of the prevalence of species in different types of land – in different types of ecosystems, whether it’s grasslands, or whether it’s wetlands, whether it’s coastal fisheries, or whatever. And I think the latest (biodiversity) COP was right in thinking in terms of preservation of the assets as measured in terms of space, conserving 30% of land and oceans by 2030 rule, which they is in there now, is in that direction. It’s not, it would be stupid to say, if we do that we will protect so much percentage of, insects, or other categories of species, because you don’t know where they’re located or how they’re distributed in the location. So, I think the preserving the habitats is a very good move. That’s the right move to make. So now the question is, then you say how do you value that habitat? Absolutely. Right. And it’s a good thing.

First question to ask, but I think it will be specious to think that we can value them easily. We can’t do that easily. We could talk to ecologists to talk about the physical consequences of habitat losses. We economists like to think that we have to give a value. And we’ve encouraged the public to think that we have to give a monetary value without which we cannot discuss anything. But typically, say if you go to a doctor, medical doctor with the health problem, if the diagnosis will be in terms of a characteristics of what will happen if you don’t do this, or if you don’t do that, so it will be in terms of the functions, your bodily functions, and you have to make an assessment of what the consequences of that are to your psyche, or your ability to earn money, or whatever the case might be. And I think the best thing we can do when it comes to, and I’ll come back to climate, by the way, because the same problem arises there is you instead of trying to value the, let’s say, the mangrove forest, or a wetland, although they can be valued by the way. The only trouble is that the value of a wetland in one place is different from the value of a wetland in another place, depending on where it’s located. So in a way, your indicators are going to be quantitative in terms of quality of the landscape itself as to whether it’s a healthy wetland or a not healthy wetland.

Now, let’s come back to say climate change. If you think about the discussion on it, you’re thinking of the temperature, which is a limit to which you are allowed to go or you think you shouldn’t bypass, it was used to be 1.5 degrees Celsius. Right? That argument was not given on the basis of price. Nobody said that at 1.5 degrees increase, the price of carbon, negative price of carbon would be so many dollars. I mean, lots of people have the estimate, trying to estimate the social cost of carbon, by the way. But that’s not how the discussions have been taking place in the COPs, they think in terms of limiting the concentration in the atmosphere, which is related to the mean temperature, and then you work backwards to see what kind of temperature mean temperature is tolerable that we can actually withstand, and then the costs and benefits of bringing it forward, reducing it or allowing it to be raised.

So, the discussion saying almost invariably, in terms of quantities, and quantities of the stock, in this case, carbon concentration, or in the case of ecological resources, assets, it will be about the health of the ecosystems and the variety of resource ecosystems that are there. Right. I mean, you destroy all the wetlands, but keep the coastal fisheries, you’re in trouble, or vice versa, because they’re interconnected. So, we have to do that, in the end, that kind of answer analysis can only come from the ecologists, the scientists themselves, they can give you a characterisation of what kind of services will be at risk, if too much pressure is put on a certain category of assets. So I think the discussion needs to be in that form. And that’s why I think the 30X30 kind of reasoning is probably the right one to go for.