Opinion – Why? Economês in good Portuguese: Ecosystem services and nature’s contribution to people

The notion that natural systems are fundamental to sustaining human well-being is very old. Plato, in 400 BC, documented the relationship between deforestation and water supply. And even mainstream economists of the 18th century already spoke of the value provided by land and other natural resources as assets. However, it is only in the 1970s that the concept of ecosystem services appears, incorporated in the following decades and recently expanded to a more global concept coined by the IPBES (Intergovernmental Science Policy Platform on Biodiversity and Ecosystem Services) in 2017, the “contributions of nature for people” (or NCPs).

These are the benefits that people enjoy from nature, directly or indirectly, and that sustain life on the planet and societies. For example, pollination carried out by bees and other organisms contributes to food production and is therefore considered an ecosystem service, or NCP. Another example is the attenuation of floods provided by riparian forests.

Despite being well present in everyday life, ecosystem services are not always fully integrated into the economy. Researcher Pavan Sukhdev, in the report “The Economics of Ecosystems and Biodiversity”, writes: “not everything that is very useful is of high value (water, for example) and not everything that is of high value is very useful (a diamond, for example )”. As ecosystem services are generally not bought and sold directly in markets, market activities do not fully reflect the benefits provided by these services. We talk a little about why this is problematic in the text “Nature is priceless, but we need one”, published in June in this column.

Researchers recognize that ecosystem services are essential for human well-being and also that there are ecological limits (or planetary boundaries) that cannot be crossed for these services to continue to function. For example, we know that the Earth’s temperature cannot rise by more than 1.5°C, or the ecosystem service of climate regulation will not be working properly and there will be catastrophic consequences for humanity.

However, recognizing the key role played by ecosystem services opens several debates. From an economic point of view, it is questioned whether marginal analysis and monetary evaluation are adequate tools to measure the value of these services, and which instruments are better to create incentives for people to take this value into account when making decisions. (thus avoiding the tragedy of the commons, which we explain in the text “The tragedy of the commons explains global warming, international trade and some effects of Covid” published in this column in December 2021). From the perspective of social justice, it is questioned who has (or should have) the right to ecosystem services and the ecosystem structure that generates them. And from the perspective of efficiency, it is questioned whether what should be the goal of public policies is the maximization of human well-being (which is represented by a monetary value and can only be achieved if ecosystem services are fully integrated into the structure of market) or the highest possible quality of life compatible with the conservation of resilient and healthy ecosystems (which needs the adaptation of economic institutions to the physical characteristics of ecosystem services to be achieved).

The answers to these questions have profound implications for choosing the right economic and political institutions. Therefore, there are increasing efforts around the world to incorporate information about ecosystem services into public and private decisions.

An interesting example is the payments for ecosystem services (PES) initiatives. These are subsidies offered, for example, to farmers or other landowners in exchange for managing their land to provide some kind of ecological service, such as achieving greater carbon sequestration in soils through sustainable production management. PES are very interesting instruments because they encourage the provision of ecosystem services by private providers. We already see positive results from these programs when implemented nationally, in countries such as Costa Rica and China.

In the case of Brazil, it also seems that such initiatives can work. A recent article published in the journal Ecological Economics provides empirical evidence that payments for avoided deforestation in the Amazon have contributed to reducing deforestation and improving the well-being of the affected population. The researchers analyzed the PAS (Sustainable Settlements in the Amazon), a REDD+ initiative implemented by the NGO Ipam (Amazon Environmental Research Institute). The PAS started in 2012, but was suspended in 2017, after Ipam had its refinancing request denied by the Amazon Fund. The researchers concluded that not only was deforestation reduced, but that the payments-induced conservation gains were maintained even after the project ended.

This is just one example of how Brazil could gain a lot from a government that actively invested in this type of initiative, and that made efforts to integrate ecosystem services into national policies.

This text refers to the study by researchers Cauê D. Carrilho, Gabriela Demarchi, Amy E.Duchelle, Sven Wunder and Carla Morsello, “Permanence of deforestation avoided in a Transamazon REDD+ project (Pará, Brazil)”. Ecological Economics, vol. 201, Nov. 2022