Natural capital: the race to put a price on the world's oceans

To a significant number of the world’s businesses, the oceans are vital assets that receive no capital maintenance. Economists are trying to change that.

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The world’s oceans feed hundreds of millions of people a day, produce half the world’s oxygen, absorb almost a third of global CO2 emissions, generate clean energy and provide a home for both animals and people. To put a price on the seas might seem not just difficult, but wrong: why place a monetary value on a priceless natural resource?

The answer to this, for many scientists and economists, is that only by stressing the huge economic influence of the world’s oceans are we likely to see any meaningful action to preserve the habitats and ecosystems they contain.

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Five years ago, the World Wide Fund for Nature (WWF) produced a report that estimated the “Gross Marine Product” of all human activity that depends directly on the oceans – shipping, fishing, coastal tourism and other sectors in the “blue economy”  – at $2.5trn per year, equivalent to the GDP of India. The report’s estimate for the total value of the Earth’s oceans as an asset base was more than $24 trillion.

Climate change, pollution, overfishing and the destruction of natural habitats by human activity represent not only a threat to oceanic flora and fauna, but to human economic activity and to the “natural capital” marine ecosystems represent. 

Dieter Helm, a professor of economic policy at the University of Oxford and chairman of the UK government’s Natural Capital Committee, defines “natural capital” as “everything that nature gives us for free”.

To attach an economic value to the oceans, says Helm, isn't like trying to put a price on birdsong or the smell of flowers. Natural capital is, he says, not an abstract notion but the “building blocks of any economy and human survival”.

“If you say that you can’t put a price on nature, or that it has nothing to do with economics, then you have to explain why there are demands on resources in the environment that trump all other resources,” he said.

These demands are forcing ocean ecosystems into rapid decline. Among the worst affected are coral reefs; more than half of the world’s coral reefs have died in the past 30 years. Louise Heaps, head of sustainable blue economy for the WWF, says the future for looks bleak for these habitats. Although coral reefs only occupy about 0.1 per cent of the oceans, they sustain 25 per cent of marine species.

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As with rainforests, the enormous biodiversity of coral reefs is important to science – treatments for cancer and HIV have been developed from corals, for example – and their benefit to fishing, tourism and coastal protection is measured in the tens of billions

Helm believes that if we know which assets constitute “natural capital”, we can establish how much capital maintenance is required to ensure they do not decline. Economic activity linked to the oceans is not going to stop, he observed, so significant investment will be needed to preserve the economic and environmental benefits they offer.

Louise Heaps agreed that “urgent investment into the restoration, protection and effective management of ocean habitats and ecosystems is required if we are to deliver a sustainable blue economy”. The most important areas to invest in, she added, are “those which secure human wellbeing through coastal protection, carbon dioxide sequestration and the provision of food and livelihoods”.

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Conserving and sustainably using the oceans, seas and marine resources is the aim of the UN’s Sustainable Development Goal (SDG) 14 – life below water – but there is currently a gap of $2.5trn per year between current investment and the amount needed to achieve all 17 SDGs by 2030.
 
For this reason, Helm said businesses need to understand the huge opportunity cost of allowing ocean environments to continue their rapid decline. Governments – or at least the UK’s, as its recent ten-point green plan shows – are not going to pour large sums of money into the environment.

“I don't see the whole of a government's budget being spent on the environment anytime soon,” Helm said, which means that “we have to decide how to allocate that money”. This is where natural capital comes into play.

For Helm, “to not see the environment in natural capital terms is to condemn it to the kind of treatment we've inflicted upon the environment over the past 100 or 200 years. It is not sustainable.”

Marina Leiva is a senior reporter at Investment Monitor.

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