Valuing Environmental Services: a Key Element of Climate Policy or a Slope too Slippery to Scale?

By Emma Schneck

Originally published by the University of Oxford School of Geography on 04.08.2023

How much would you pay for a waterfall? How about a coral reef? Could you place a number value on how much these things mean to you? How about for the services we humans rely on? How much would you pay a tree or forest to remove carbon dioxide from the air? We enjoy and consume nature on a daily basis, but rarely think about how much we would pay for them in a market.

While most of this thinking seems rather far-fetched and abstract, there are significant elements of this conceptualization of natural services already at play in environmental policy. We do pay for technology to remove carbon from the atmosphere, and have created filtration systems to provide us with clean water. We pay for machines to perform the role of nature. We also value environmental services in more abstract ways as well. Things like carbon credits and Payment for Environmental Services (PES) schemes are key examples of how this type of thinking is already at play–and how it has already begun to be abused.

This way of thinking begs us to tackle the question–can you put a price tag on nature?

Throughout the Nature, Society, and Environmental Governance (NSEG) course, students are forced to challenge how we understand and conceptualize “nature”. One of the dominant ways in which nature is framed and understood is its relationship to economic activities. With core modules like Economics and Business for the Environment and elective options like Ecological Economics and Degrowth–students in NSEG and other SoGE masters courses are urged to examine the positive and negative aspects of viewing the environment as an economic property.

One such example of this is the discourse around the economic valuation of nature. Earlier last term, two of the most prominent voices in environmental economics sat down here in Oxford to discuss some of the latest arguments in this debate. UCL Professor Robert Costanza—the former president of the international society for ecological economics—took the first stance in the debate, and Erik Gomez-Baggethun—president-elect of the International Society for Ecological Economics and guest lecturer here at SoGE—followed with his take. While both Costanza and Baggethun acknowledge the serious dangers that come with putting a “price” on nature, their beliefs differ on how useful a pragmatic approach to environmental valuation really is.

To many, the phrase “monetary valuation of nature” might sound incredibly complex and dauntingly abstract. In practice, the monetary valuation of nature is a rather simple concept. Essentially, it is a way to frame the value of nature by assigning a certain dollar amount to indicate the worth of a particular environmental service or feature. Sometimes this amount is thought of in terms of the value it provides to humans. Say if the cost of constructing a water treatment plant is $15 Million, an economist might label the value of a nearby natural fresh water reserve $15 million. Other times, these values are much more abstract such as the pricing of carbon credits or other “right to pollute” schemes.

To many, this framework is considered helpful especially in government and policy applications such as deciding the tradeoffs between developing certain areas of land.

Professor Costanza views monetary valuation of the environment as a helpful policy tool, but one that must fall short of outright “pricing” nature. To Costanza, putting monetary values on nature can help preserve ecosystems by telling economists the real value of nature in a language they understand.

Economists, politicians, and policy makers have long agonized over how we can fit nature into our current economic model. Neoliberal capitalism, however, has traditionally conceptualized the environment as an “externality”, or something that is adversely impacted by economic activities. Costanza argues that by placing nature in terms of its economic value to humans we can center the environment as a central actor in the economy. The global economy–after all–exists within the confines of nature, not the other way around.

While Costanza notes the benefit of this way of thinking, he’s wary of all types of environmental valuations. While it might be helpful to explain to a national economist the value of keeping a rainforest intact for example, we should be careful of outright putting “prices” on nature. Putting prices on nature might lead us to thinking of pollution in the same way a rich person may view a parking ticket–simply the cost of being able to continue bad behavior. Wealthy countries and individuals may find that paying for the ability to destroy nature might be cheaper than keeping it intact.

Professor Gomez-Baggethun–a key environmental economics and degrowth scholar–has a more skeptical outlook on the environmental valuation debate. After many years in the discipline, he has distanced himself from the environmental pragmatism outlook. To start, he questions our ability to even quantify the countless values of nature. While we can theoretically quantify the economic benefit that an ecosystem provides for us, how can we begin to quantify the more abstract values of nature? How can you put a price on history? Culture? Aesthetic beauty? Baggethun likens this to putting a price tag on the Notre Dame–you just can’t capture the cultural value of these spaces in any dollar amount.Nature has many values that transcend our economic system. If we go along with a more utilitarian understanding of environmental value, we are bound to omit other crucial factors.

Goméz-Baggethun is understandably wary of the power of monetary valuation. If we even begin to “quantify” the natural world, how can we stop ourselves from commodifying nature? As Gomez-Baggethun argues, once we begin to put monetary value on the environment, people will begin to talk of property rights and ownership. Mix that in with our highly unequal capitalist system and we are certain to see abuses of this framework. Commodification and privatization of ecosystems will only create more disparities and environmental destruction. The more we try to commodify nature, the more we drive existing inequalities.

We see this manifest itself in our debate around carbon credits. While at first carbon credits were introduced as a system to reflect the real cost of emitting carbon into the atmosphere, they have quickly transcended their original use and have been transformed into a lucrative commodity. Carbon credit markets have exploded in recent years, driving both interest and demand for these credits. Instead of being seen as a meaningful pollution deterrent, these credits are now highly-sought after commodities.

While Baggethun and Costanza are both bound by a deep care for the environment, their ideological differences represent a key conflict in the environmental scene. On one hand, some may argue that placing ecosystems in our current economic model may give further agency to stewards of the environment. On the other hand, we’ve seen how the commodification of nature has led to the abuse and exploitation of both nature and people.

In an ideal scenario, Constanza argues that quantifying nature in terms of its value to humans could support the argument for collective ownership. He imagines that by placing nature in terms of its economic value, leaders can argue for the preservation of nature for society as a whole. Gomez-Baggethun argues that concepts like ownership and private property are inherent to the environmental valuation debate. Even if we attempt to use this framework for the common good, it will inevitably be co-opted and exploited by powerful actors.

All in all, the debate on environmental valuation has demonstrated the need to translate environmental issues to different audiences. If, as Costanza argues, we speak the language of an economist to an economist, maybe we can cut across divides and bring more powerful people into the environmental debate. While this translation is helpful in communicating just how important nature is to society, we must be wary of letting markets dictate conservation decisions.

Wherever you may fall on the environmental valuation debate, one thing stands out as certain—solving the climate crisis might just require us to speak in multiple tongues.