Edward Barbier keynote: The economics and financing of nature-based solutions
The day 3 keynote address of the NbS conference 2022, The Economics and Financing of Nature-based Solutions: Challenges and Opportunities, was delivered by Edward Barbier, University Distinguished Professor in the Department of Economics, Colorado State University. Professor Barbier 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.
The NbS Conference 2022 brought together researchers, practitioners and policymakers from across government and industry to discuss the values, governance, metrics and financing of nature-based solutions to address climate change, biodiversity loss and major socioeconomic challenges, locally, regionally and globally. In his keynote address, Barbier presented the case for embedding nature into our economies by tackling two consequential economic failures: the underpricing and underfunding of nature.
“There is something fundamentally wrong with our economic approach to nature”
– Edward Barbier
Barbier highlighted that the ecosystem services provided by nature are not only under-valued in our economic system, they are even given a ‘negative price’, as environmentally damaging activities are subsidised, thus referred to as the underpricing of nature. Globally, $1.8 trillion USD is spent on damaging subsidies in total, and across the OECD (Organisation for Economic Cooperation and Development; an intergovernmental organisation with 38 member countries), environmentally harmful subsidies in the agriculture sector alone account for $112 billion USD annually. Barbier argues that if we repurposed this money away from harmful subsidies and put it to fund and finance nature, we could double the amount of money internationally used for nature protection.
While estimates differ, the gap between current funding for nature and the means needed to restore and implement NbS is around $890 billion USD. Public sources account for over 85% of nature funding presently, meaning that the private sector is severely lagging behind. Nevertheless, the private sector is becoming more and more aware of the increasing environmental risks posed to them by climate change and the degradation and destruction of ecosystems. The World Economic Forum estimates that $44 trillion USD (over half global GDP) is moderately or highly dependent on nature and its services. Returns on investment in nature can also be high: for every $ spent on conservation, almost $7 more are generated in the economy after just 5 years in low-middle income countries.
To address the economic failure resulting from underpricing nature, Barbier proposed a three-step strategy:
- To phase out environmentally harmful subsidies.
- Tax and regulate activities (particularly land uses), that degrade the environment, over-exploit natural resources, and unnecessarily convert ecosystems.
- Recycle these savings and revenues to conserve and restore ecosystems.
There are a wealth of opportunities for the funding and financing of nature. Innovative financing options include biodiversity offsets, payments for ecosystem services, voluntary carbon markets, REDD+ programmes, ‘debt-for-nature’ swaps, green bonds, corporate contributions, corporate initiatives, and voluntary certification. Limitations can arise from funds such as green bonds generally being structured for large scale investment rather than smaller-scale programmes that may miss investment. In such cases entities could build portfolios of multiple conservation and restoration projects.
Barbier summarised by reasserting that if policy, businesses and markets undertake the three-step strategy to address the underpricing and underfunding of nature, NbS can be a triple win for climate, biodiversity and people.
Watch the full keynote address, The Economics and Financing of Nature-based Solutions: Challenges and Opportunities, on the NbSI Youtube channel.