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The Monitor's View

Green accounting of economic growth

A World Bank study offers a new attempt to reconcile growth-oriented economics with Earth-oriented environmentalism. But can economists put price tags on nature?

By the Monitor's Editorial Board / May 10, 2012

Environmental activists in the Philippines pick up trash along the coastline of Freedon island on Earth Day April 21. The clean-up drive was meant to show opposition to a planned reclamation of the island and conversion into a commercial area, destroying the last mangrove forest and bird sanctuary in Manila.

Pat Rouge/AP Photo

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How much is a polar bear worth?

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Such questions boggle economists who try to measure the value of nature. Their number-crunching pursuit is especially troubling if an animal or plant is not consumed by humans who, after all, determine “worth.”

Yet the polar bear must have intrinsic value just by its existence. It has become the symbol of what might be lost because of global warming. Its extinction would carry a cost to the animal food chain as well as a psychic cost to humans who enjoy these creatures.

The World Bank and other global bodies are now trying to practice this sort of “green accounting.” It is based on the idea that economics, or the science of understanding markets, can still help promote growth but without depleting the environment.

Some call it “nature capitalism.” And it can bring some surprises.

The World Bank, for example, recently calculated the long-term cost of China’s environmental degradation. It decided that the country’s astounding income growth isn’t really 9 to 10 percent a year. It’s more like 5.5 percent if all the damage to China’s ecosystem – and also its future economic growth – is priced in.

And now a new World Bank report titled “Inclusive Green Growth” proposes putting more price tags on the environment. The reason is clear. Economic growth in poor countries is being threatened by a depletion of natural resources.

Take farmland. One-quarter of the world’s land surface has been damaged by soil erosion, salinization, nutrient depletion, and desertification. And in about a decade, two-thirds of humanity will be facing moderate-to-severe stress in water supplies.

The bank, which funds development in poor countries, wants to rid those countries of the “grow now, clean up later” approach. “For the past 250 years,” the report states, “growth has come largely at the expense of the environment.”

Yet the bank admits the limits of attaching numbers and values to the material things of nature.

“Most environmental assets do not have widely accepted prices either for their intrinsic value or for the services they provide (such as flood protection),” the report finds. “Decisions that involve a trade-off between economic interests and natural assets (such as building a road through a rain forest) are difficult to assess.”

Some trade-offs are easier to judge than others. Mangrove forests are often best left in peace, even though they prevent shrimp farming or seashore tourism. Their value lies in being a protection from storms, a breeding ground for fish, and a source of wood for local communities.

Some countries find it economical to pay local people to maintain an ecosystem. Farmers are given cash to keep habitats for wildlife or control water flows.

For far too long, environmentalists have distrusted economists who tend to measure things like consumption and gross national product. Growth and preservation seemed incompatible. Economists see themselves as people-centered and practical. Environmentalists see themselves more as moral and holistic to the Earth.

This latest report takes a leap of faith that the two sides can find common ground. More important, they both need each other. Economic growth can continue only if the green-shade accountants can factor in the green way toward sustainable growth.

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