Accounting for natural wealth gains world traction

NEW DELHI — What is a sip of clean water worth? Is there economic value in the shade of a tree? And how much would you pay for a breath of fresh air?

Putting a price on a natural bounty long taken for granted as free may sound impossible, even ridiculous.

But after three decades on the fringes of serious policymaking, the idea is gaining traction, from the vividly clear waters of the Maldives to the sober, suited reaches of the World Bank.

As traditional measures of economic progress such as gross domestic product are criticized for ignoring downsides including pollution or diminishment of resources such as fresh water or fossil fuels, there has been an increased urgency to arguments for a more balanced and accurate reckoning of costs.

That is particularly so as rapidly developing nations such as India and China jostle with rich nations for access to those resources and insist on their own right to pollute on a path toward growth.

Proponents of so-called “green accounting” - gathered in Rio de Janeiro this week for the Rio Earth Summit - hope that putting dollar values on resources will slam the brakes on unfettered development.

Environmental depreciation

A mentality of growth at any cost already is blamed for disasters such as the chronic floods that hit deforested Haiti and the raging sandstorms that have swept regions of China, worsening desertification.

Environmental economists argue that redefining nature in stark monetary terms would offer better information for making economic and development decisions.

That, they say, would make governments and corporations less likely to jeopardize future stocks of natural assets or environmental systems that, mostly unseen, make the planet habitable. These systems include forests filtering water and frogs keeping swarming insects in check.

If the value of an asset like a machine is reduced as it wears out, proponents say, the same accounting principle should apply to a dwindling natural resource.

“Environmental arguments come from the heart. But in today’s world based on economics, it’s hard for arguments of the heart to win,” said Pavan Sukhdev, a former banker now leading a project that was proposed by the Group of Eight major industrialized nations to study monetary values for the environment.

That study, started in 2007, has estimated that the world economy suffers roughly $2.5 trillion to $4 trillion in losses every year as a result of environmental degradation. That is up to 7 percent of global GDP.

“We need to understand what we’re losing in order to save it,” Mr. Sukhdev said. “You cannot manage what you do not measure.”

No ecosystem markets

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