Review

# Economic Reasons for Conserving Wild Nature

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Science  09 Aug 2002:
Vol. 297, Issue 5583, pp. 950-953
DOI: 10.1126/science.1073947

## Abstract

On the eve of the World Summit on Sustainable Development, it is timely to assess progress over the 10 years since its predecessor in Rio de Janeiro. Loss and degradation of remaining natural habitats has continued largely unabated. However, evidence has been accumulating that such systems generate marked economic benefits, which the available data suggest exceed those obtained from continued habitat conversion. We estimate that the overall benefit:cost ratio of an effective global program for the conservation of remaining wild nature is at least 100:1.

Humans benefit from wild nature (1) in very many ways: aesthetically and culturally; via the provision of ecological services such as climate regulation, soil formation, and nutrient cycling; and from the direct harvest of wild species for food, fuel, fibers, and pharmaceuticals (2). In the face of increasing human pressures on the environment, these benefits should act as powerful incentives to conserve nature, yet evaluating them has proved difficult because they are mostly not captured by conventional, market-based economic activity and analysis.

In 1997, Costanza et al. published a synthesis (3) of more than 100 attempts to value ecosystem goods and services using a range of techniques including hedonic pricing, contingent valuation, and replacement cost methods (4). Using case studies to derive average values per hectare for each of 17 services across 16 biomes and then extrapolating to the globe by multiplying by each biome's area, the Costanza team estimated the aggregated annual value of nature's services (updated to 2000 US$) to lie in the range of$18 trillion to $61 trillion (1012), around a rough average of ∼$38 trillion. These figures are of similar size to global gross national product (GNP), but have been criticized by some in the economic community (5–9).

One problem is that such macroeconomic extrapolations are inconsistent with microeconomic theory: extrapolation from the margin to a global total should incorporate knowledge about the shape of the demand curve (3, 58). In practice, it is very likely that per-unit demand for nonsubstitutable services escalates rapidly as supply diminishes, so that simple grossing-up of marginal values (as is also done in calculating GNP from prices) will probably underestimate true total values. On the other hand, high local values of services such as tourism may not be maintained if extrapolated worldwide. In addition, while some policy decisions are made using macroeconomic indicators, many others are made at the margin, and so are more appropriately informed by marginal rather than total valuations (9).

Another problem with the original estimate is that landscapes can yield substantial (albeit rather different) flows of goods and services after, as well as before, conversion by humans (which is of course why people convert them). A clearer picture of the value of retaining habitat in relatively undisturbed condition might therefore be obtained by estimating not the gross values of the benefits provided by natural biomes, but rather the difference in benefit flows between relatively intact and converted versions of those biomes.

## Reasons for Continued Conversion

In economic terms, our case studies illustrate three broad, interrelated reasons why the planet is continuing to lose natural ecosystems despite their overall benefits to society (21). First, there are often failures of information. For many services, there is a lack of valuations of their provision by natural systems, and particularly of changes in this provision as human impacts increase. Although this is an understandable reflection of substantial technical difficulties, we believe that future work needs to compare delivery of multiple services across a range of competing land uses if it is to better inform policy decisions. Our examples show that even when only a few ecosystem services are considered, their loss upon conversion typically outweighs any gains in marketed benefits.

Second, these findings highlight the fundamental role of market failures in driving habitat loss. In most of the cases we studied, the major benefits associated with retaining systems more or less intact are nonmarketed externalities, accruing to society at local and global scales. Conversion generally makes narrow economic sense, because such external benefits [or related external costs, as in the case of the damage caused by shrimp farming (13)] have very little impact on those standing to gain immediate private benefits from land-use change. Hence, conserving relatively intact habitats will often require compensatory mechanisms to mitigate the impact of private, local benefits foregone, especially in developing countries. We see the development of market instruments that capture at a private level the social and global values of relatively undisturbed ecosystems—for instance, through carbon or biodiversity credits or through premium pricing for sustainably harvested wild-caught fish or timber (22, 23)—as a crucial step toward sustainability.

Third, the private benefits of conversion are often exaggerated by intervention failures. In the Cameroon study, for example, forests were cleared for plantations because of private benefits arising from government tax incentives and subsidies (12). The same is true for the Canadian wetland example (14), as well as for many other wetlands across the United States and Europe (24). While over the short term these programs may be rational with respect to public or private policy objectives, over the longer term many result in both economic inefficiency and the erosion of natural services. Globally, the subset of subsidies which are both economically and ecologically perverse totals between $950 billion and$1950 billion each year [depending on whether the hidden subsidies of external costs are also factored in (25,26)]. Identifying and then working to remove these distortions would simultaneously reduce rates of habitat loss, free up public funds for investing in sustainable resource use, and save money (25–27).

## Costing Conservation

Tackling these underlying economic problems requires action on many levels, but should in due course result in public and private decision-makers acting to reduce conversion of remaining habitats worldwide. More immediately, given concerns about the practicalities of exploiting natural resources sustainably, one of the most important strategies to safeguard relatively intact ecosystems is the maintenance of remaining habitats in protected areas. This costs money, and predictably, our current undervaluation of nature is reflected in marked underinvestment in reserves. To the best of our knowledge, the world spends (in 2000 US$) ∼$6.5 billion each year on the existing reserve network (28). Yet, half of this is spent in the United States alone. Globally, despite increased expenditure since the Rio Summit by both international institutions and private foundations, available resources for existing reserves fall far short of those needed to meet basic management objectives (29). Moreover, terrestrial and marine reserves currently cover only around 7.9% and 0.5% of Earth's land and sea area, respectively (30,31), well below the minimum safe standard considered necessary for the task of maintaining wild nature into the future (32–34).

To estimate the resources needed to meet this shortfall on land, we reworked recent calculations (28, 35) of the costs of properly managing existing terrestrial protected areas and expanding the network to cover around 15% of land area in each region. We found that a globally effective network would require an approximate annual outlay of between ∼$20 billion and$28 billion [including payments to meet private opportunity costs imposed by existing and new reserves, spread out over 10 and 30 years, respectively (10)]. New work derived from the costs of existing marine reserves suggests that an equivalent initiative for the world's seas, this time covering 30% of total area (34, 36), would cost at most ∼$23 billion/year in recurrent costs, plus ∼$6 billion/year (over 30 years) in start-up costs (10). The estimated mean total cost of an effective, global reserve program on land and at sea is some $45 billion/year. This sum dwarfs the current$6.5 billion annual reserve budget, yet could be readily met by redirecting less than 5% of existing perverse subsidies (25, 26). The crucial question is whether this is a price worth paying.

Although limited data make the answer imprecise, they indicate that conservation in reserves represents a strikingly good bargain. We assumed that the mean proportional loss of value upon conversion recorded in our case studies is representative of all biomes and services, and that previous gross per-hectare values of those services are roughly correct (3). If these assumptions are valid, then our hypothetical global reserve network would ensure the delivery of goods and services with an annual value (net of benefits from conversion) of between ∼$4400 billion and$5200 billion, depending on the level of resource use permitted within protected areas, and with the lower number coming from a network entirely composed of strictly protected reserves [for working, see (10)]. The benefit:cost ratio of a reserve system meeting minimum safe standards is therefore around 100:1.

Put another way, the case studies, the service values of Costanza et al. (3), or our reserve costs would have to be off by a factor of 100 for the reserve program envisaged to not make economic sense. We consider errors of this size to be highly unlikely, because most of our assumptions are conservative [for other sensitivity analyses, see (10)]. For example, in terms of the values of services, we assume that unit values will not increase as supply diminishes, that nature reserves do not increase the flow of services beyond their boundaries [whereas some clearly can (34, 37)], and that all of a biome's services not included in the Costanza et al. survey (3) are worthless. On the reserve costs side, we assume that management costs do not decrease once local communities' private opportunity costs are met, and that expanding reserve systems yield no cost savings through economies of scale or dissemination of best practice. Because all of these assumptions are biased against conservation, we consider our 100:1 ratio as a low estimate of the likely benefits of effective conservation.

## Development and Wild Nature

In advocating greatly increased funding for the maintenance of natural ecosystems, we are not arguing against development. Given forecast increases in the human population of more than three billion by 2050 (38) and the fact that some 1.2 billion people still live on less than 1 US\$/day (39), development is clearly essential. However, current development trajectories are self-evidently not delivering human benefits in the way that they should: income disparity worldwide is increasing and most countries are not on track to meet the United Nations' goals for human development and poverty eradication by 2015 (39). Our findings show one compelling reason why this is the case: our relentless conversion and degradation of remaining natural habitats is eroding overall human welfare for short-term private gain. In these circumstances, retaining as much as possible of what remains of wild nature through a judicious combination of sustainable use, conservation, and, where necessary, compensation for resulting opportunity costs [as called for at the Rio Summit (40)] makes overwhelming economic as well as moral sense.

## Supporting Online Material

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• * To whom correspondence should be addressed. E-mail: a.balmford{at}zoo.cam.ac.uk

• Address after Sept. 2002: Gund Institute of Ecological Economics, The University of Vermont, Burlington, VT 05405, USA.