World Resources Institute (WRI)
7. The Economics of NbS: moving from evidence to decision making in policy, finance and infrastructure investmentsRead full session summary
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In Session 7, The Economics of NbS: moving from evidence to decision making in policy, finance and infrastructure investments, speakers discussed using economic valuation as a tool in motivating stakeholders and decision makers to action, helping them consider the benefits that nature can provide. Session chair Erin Gray introduced the session by calling for the need to shift to a new economic paradigm, and spoke to some key policy shifts required, including moving beyond GDP as the system goal, recognition and analysis of distributional impact, inclusion of a wider set of ecosystem services (eg. cultural), the need to look at qualitative aspects beyond cost-benefit analysis, and understanding that value systems and behaviours are motivated by more than cost and price.
Edward Barbier focused on how we can use economic valuation effectively to address the central issue: that nature is underpriced, undervalued, and underfunded.
“An issue with economically valuing nature is that you can’t value everything – it will always be undervalued. However, if you can value enough elements to flip the decision from e.g. deforesting to protecting mangroves, then such valuation can help bring change.”
He presented three important considerations when valuing NbS. First, valuation must be tailored to the local context and must be based on reliable, scientifically-valid economic methods. Currently, many valuation studies are still relying on ‘second-best’ valuation methodology, or often transfer costs from other contexts without properly adapting them. Second, we need to move beyond merely monetization of the loss of ecosystem services, and look at wider economic impacts including the effect on employment, distributional impacts, and multiplier effects in surrounding economies. Third, we must be explicit about who wins and who loses from NbS implementation and nature degradation. For example, in a case study assessing the costs and benefits of developing a shrimp farm in Thailand, which would require removing mangroves, the people who gain are commercial shrimp farm operators and investors outside the local community areas, whereas those who lose are the local communities.
Next we heard about a case study about a water supply crisis in Capetown, South Africa from Louise Stafford, where she explained how a water fund model was successfully put in place to address the challenge. Water funds are based on public-private partnerships around the common goal where NbS are used to invest in keeping watersheds healthy. Scenario modelling and economic valuation, both with sound scientific foundations, as well as stakeholder engagement were among the tools used to determine the optimal areas for investment. NbS were found to be more cost-effective than grey/engineered solutions for water augmentation, while providing more co-benefits. Critical factors in the success of the intervention include the blended finance model, including downstream beneficiaries, private finance, philanthropic funding and government funding, as well as the planning for long-term maintenance and a system for monitoring effectiveness and impact.
Madhu Verma showed us how, through multiple case studies across India, agroecological transitions employing NbS can provide multiple benefits and contribute to widespread policy goals in alignment with many other Sustainable Development Goals (SDGs). A range of interventions, such as community-managed natural farming and food forests, have demonstrated tangible benefits for crop yields, carbon sequestration, avoided emissions, water retention, erosion reduction, income diversification, nutrition, and biodiversity. This macro-level analysis of influential interventions revealed the importance of social capital, that community-led co-production is needed to ensure long-term sustainability of an intervention, and that the government has an important role to play in nudging agroecological transitions through policy, infrastructure and funding.
Lastly, Yadira Mori-Clement and Florencia Zapata presented the findings of a new study on the post-covid economic recovery potential of NbS in Peru. They looked at both short-term economic recovery potential (eg. job creation, income, livelihoods, productivity), as well as long-term development outcomes (eg. social capital, resilience, food and water security, climate change adaptation). The NbS cases they looked at showed high potential for green job creation and livelihood support, as well as mostly positive outcomes for climate adaptation and ecosystem resilience.
- Economic failures result from under-pricing and underfunding nature. Proposed solutions include:
– Phasing out environmentally harmful subsidies.
– Taxing damaging activities.
– Using revenue and savings to invest in nature.
- There is an enormous funding gap ($890 Bn) for nature. Measures (e.g. tropical carbon tax) can help bridge this gap, but need careful flows.
- Sending a signal nature has value means that wider markets will follow, encouraging further sources of finance. However, we need to ensure that that finance, when made available, gets to the people and projects that need it most. We do that by asking local communities what are the problems they are facing and asking them what the solutions are and working from there.
- Recognition and implementation of NbS will require a new economic paradigm.
- Broader valuation is needed, tailored to local contexts, but based on robust science and economics.
Convenor & Chair
Senior Economist at the World Resources Institute (WRI) Economics Center
Erin is a Senior Economist for WRI’s Economics Center. She has over 10 years’ experience in Environmental Economics, with expertise in ecosystem service and natural infrastructure valuation; cost-benefit, cost-effectiveness, and multi-criteria analysis; climate change adaptation monitoring and evaluation; landscape approaches for restoration; and ecosystem service markets and conservation finance. Before joining WRI, Erin worked as a consultant for ICF International’s Climate Change and Sustainability team.
Edward B. Barbier
Professor in the Department of Economics, Colorado State UniversityEconomic Valuation of Nature-Based Solutions for Improved Policies and Investments
Edward B. Barbier is a University Distinguished Professor in the Department of Economics, Colorado State University. He is an environmental and resource economist and a highly cited scholar on global environmental and sustainability issues. His latest book is Economics for a Fragile Planet, Cambridge University Press.
Director Source Water Protection South Africa, The Nature ConservancyThe Economics of NbS: The Greater Cape Town Water Fund, A Case Study
Louise joined The Nature Conservancy (TNC) in January 2017. Her role includes the development of partnerships, provision of strategic leadership and support for TNC’s Programs across South Africa. She led the development and establishment of the Greater Cape Town Water Fund, a first for South Africa and the second water fund in Africa. Louise has over 20 years’ experience in working with diverse stakeholders to implement large scale invasive species control operations. Her areas of expertise include watershed management, invasive species management, strategic planning, and monitoring & evaluation.
Chief Economist, World Resources Institute, (WRI) IndiaImproving Agroecological Systems Health Through Nature Based Solutions (NBS) for Enhancing Farmers Wellbeing
Dr. Madhu Verma is an Environment & Developmental Economist and specializes in Ecosystem Services Valuation, Mapping and Modelling of Ecosystem Services, Environmental and Development Statistics, Statistical Modelling, Green Accounting of Forest, Oceans, Fisheries, Water Resources; Environmental & Conservation Finance, Nature Based Solutions, Payment for Ecosystem Services /Incentive Based Mechanisms. She mainly oies action and policy research. She provides the thread of Economics across various thematic areas of WRI. WRI in December 2019, she worked as Professor of Environment and Developmental Economics at the Indian Institute of Forest Management (IIFM), a Ministry of Environment, Forest & Climate Change (MoEFCC), Govt. of India for 25 years.
Director of the Mountain Institute, PeruEconomic recovery potential of Nature-based Solutions: Findings from Peru
Florencia Zapata works at Nature-based Solutions Peru and the Instituto de Montaña in Peru on nature-based solutions in the Andes. She is an anthropologist and naturalist, specializing in sustainable management of mountain ecosystems, participatory action-research methodologies and social memory. Her recent work topics include: nature-based solutions with an emphasis on ecosystem-based adaptation, sustainable and participative management of mountain ecosystems and ancestral technologies for water management in the Andes. Zapata is a member of the Latin American Studies Association (LASA) and the Permanent Seminar on Agrarian Research (SEPIA).
Yadira Mori Clement
Project Coordinator and Researcher at the Mountain Institute (Instituto de Montaña), NbS PeruEconomic recovery potential of Nature-based Solutions: Findings from Peru
PhD in Economic (University of Graz, Austria) and Master in Agricultural Sciences and in Resource Economics (University of Bonn, Germany), with experience in quantitative methods and strong research focus on applied microeconomics with emphasis on agricultural, environmental and climate economics, particularly in the design and evaluation of policy interventions. Currently, she works as Project Coordinator and Researcher at the Instituto de Montaña and teaches in the Department of Economics of the Pontificia Universidad Católica del Perú (PUCP).