Commodification and Marketization of Ecosystem Services - Essay Example

Commodification and Marketization of Ecosystem Services Name Institution Date   Introduction Ecosystem services are the conditions and processes through which natural ecosystems and the species that make them up sustain and fulfill human life (Daily, 1997). They are regarded as the benefits that human beings acquire from the ecosystem. Ecosystem services include provisioning, regulating, supporting and cultural services. Each of the service has its role in the ecosystem; Supporting services help in production of ecosystem services like soil formation, nutrient cycling, and water cycling and photosynthesis process of manufacturing food in plants. The role of provisioning services is to give products that come from the ecosystem, include food, fuel, herbs, fresh water and ornamental resources. Regulating services are the goods that come from the control of ecosystem processes like air quality regulation, climate regulation, disease regulation, pest control and pollination. Natural hazard regulation process is also found under regulating services. Finally, there are cultural services which include non-material benefits that people get from the ecosystem through spiritual enhancement, reflection, recreation and aesthetic skills. This service takes into consideration the values that come from the landscape. Most ecosystem services are never recognized in the economic markets, management guidelines and also in land management strategies since most of these services are not easy discover and determine. This makes their contribution on financial and public welfare to be less considered during decision making processes. Human health eventually depends on the products and services of the ecosystem. Recently, scientists have intensively studied the ecosystem services and ecological consideration. Although, the ecological problems can be solved by scientific approaches in ideal, in realistic, there are many factors affecting it. One problem is the lacking of public concern and the other major issue is the unclearness in the capital of the ecosystem services, i.e. how much the ecosystem services worth in the total inventory. Based on such concern, the commodification of ecosystem services was introduced, following by the marketization of the ecosystem services as commodity, which was an outrageous idea at that time because traditionally ecosystem services tend to fall into the categories of open access and pure public services. This means that they tend to have no producer property rights. The mostly renown example is the Kyoto Protocol’s Clean Development Mechanism, which regulate greenhouse gases emission by introducing the concept of carbon credits. The principle is simple, set certain limits for countries’ greenhouse gases emission, and leave the countries with two choices – either reduce their emission under the limit, or purchase more carbon credits from less emitted countries. The money will be used for ecological conservation purposes. Although the concept of Clean Development Mechanism is simple, the effects are controversial, because people argued the mechanism is purely economic driven. The aim of reducing greenhouse gases pollution was not considered at the first point. It may promote the riches to keep polluting by simply paying more money to buy the credits. From this point, the arguments went deeper and people started to discuss whether commodification and marketization of ecosystem services are appropriate. In this essay, the evolutionary history of commodification of ecosystem is described, along with how the market of emission trading changed overtime. Then, the economic benefits and other issues in associate with commodification of ecosystem services are also discussed, with introductions of several cases as examples. The final section discusses the appropriateness of valuation of the nature, whether it is a right decision, and how it is possible to be improved. History and Background Recently, people’s attention towards the ecosystem services has been increased, especially since the past 40 years, the values of the ecosystem services and their commodification has been intensively studied. In ecology, the term ecosystem function has traditionally been used to refer to the set of ecosystem processes operating within an ecological system without the concern of the values of ecosystem provided to humans (Loreau et al., 2002). These functions include physical, chemical and biological processes. However, in the late 1960s, people put more attentions on how the functions of nature serve the human societies. Referring to the Millennium Ecosystem Assessment (2005), the ecosystem services “comprise the functions of ecosystems that are useful to humans: storage of carbon by soils, vegetation and oceans, habitats for plants, animals and micro-organisms, filtering of fresh water and even the aesthetic or spiritual significance of landscape”. The aim of the MA assessment was to find out the effects of the ecosystem modification for the survival of human beings. In other words, MA findings are that human activities are contributing greatly to the loss of the Earth’s natural capital. This has put great damage on the environment to its ability of the planet’s ecosystem to support future generations. There were a number of things that were found out according to the MA included; deprivation of ecosystem services may possibly grow considerably worse for the duration of the first half of the century and this would be an obstacle to attaining the Millennium Development Goals. There was also the challenge of trying to undo the deprivation of ecosystem so as to meet the increasing demand since the ecosystem services could be to some extent met under some circumstances that MA considered to be helpful. This could entail significant changes to be done in policy making, institutions that supported ecosystem sustainability and also to the practices that are not currently being used to reduce deterioration of these services. There was also the issues of human having been accused of contributing to the change s that occurred in the ecosystem in a more rapid and extensive manner and this was to help humans meet the rapidly growing needs for food, water, timber and fuel. This has lead to irreversible damage to the diversity of life support in any species on Earth. The millennium ecosystem assessment report has outlined major impacts of human activities that affect the ecosystem namely; there is a link between the ecosystem functions and the humans hence the uneven impact of ecosystem deterioration by both the poor and the wealthy nations since it has been noted that wealthy nations have a high impact on the ecosystem deterioration. The situation about ecosystem deterioration has been recognized that it’s getting worse thereby regarding the use of many ecosystems as unsustainable. The report also recognizes that the non- market functions of the ecosystem are of high value especially in human beings but the market technique used is not capable of supporting and restoring the ecosystem functions. Changes in economic activities, business functions, institutions and government policies have to be needed if the ecosystem services have to be sustained for future generations. In this report economic growth is regarded as the main driver that leads to ecosystem deterioration. There are various techniques that have been discovered according to the report so as to restore and prevent ecosystem services and some policies have to be put into work for sustainability of ecosystem services. There is no consistent time in the changes that occur in the ecosystem since there is continued strains on the ecosystem services hence difficulty in predicting the changes. The millennium ecosystem assessment report has suggested some steps which can be used to minimize the degradation of the ecosystem services including; Making improvements in policy, planning and Management so as to incorporate decision making between various departments and sectors that deal with ecosystem in order to make sure policies focus on ecosystem conservation. The management of ecosystem services should be involved in poverty decline strategies that are used by various nations. Marginalized people should also be involved in decision making especially those that have impact on ecosystem services and have greater economic and management support to the existing resources for sustainability. Decision making processes about the ecosystem should include both local and indigenous resources so as to make decisions that add value to the ecosystem. Another step that can be used to help ecosystem to get better is by adjusting the way economic background of ecosystem services has been so as decision making will be easier to conclude. This can be done by making sure that each ecosystem services have been put into consideration by making sure a value has been included for good decision making. Subsidies on agriculture, fisheries and energy have to be removed especially those that cause harm to the environment and people. Payment of ecosystem services has to be introduced to people who own lands so as they carry out activities that promote ecosystem regeneration. Introduction of market techniques which minimizes the amount of nutrient release and carbon emissions in a cost effective manner should be encouraged. Individual behavior should be influenced by provision of public education on ways of minimizing the consumption of intimidated ecosystem services. There should be certification systems that encourage people to make choices on sustainably harvested goods. Information should be made accessible to all people about ecosystem in decisions that have impacts on these services. The final step that MA suggests should be used is the development and use of environmental friendly technology that invests in agricultural techniques which intend to increase the production of food with less harmful operations. Ecosystems that have deprived should be restored for ecosystem sustainability. There should be introduction of new technologies in order to maximize on energy effectiveness and minimize greenhouse gases. The first idea of modern concept of ecosystem services started in the 1970s, when Westman (1977) and others studied the benefits of ecosystem services, which was aimed to increase the public awareness towards the biodiversity conservation, rather than introducing the values of ecosystem as a commodity. The author tried to evaluate how much benefits our human beings have received from the ecosystem services and how much damage towards the ecosystem we have done in return. However, it is widely agreed that by understanding the limits of the damage (i.e. pollution) the ecosystem can take is essential to increase the public awareness to the value of ecosystem. Such principle, together with recognition or creation of tradable property rights to ecosystem functions, lays the foundation for the commodification of ecosystem functions (Dales, 1968). In the 1970s, markets in ecosystem services had already emerged in the United States, beginning with the legislation of limiting the industrial air pollution and destruction of wetlands (Roberson, 2004). The legislation also introduced the system of applying permits to those who caused pollution of damage to the local ecosystem, and allowing those to purchase permits to offset their pollution by paying for conservation. This was the first case when ecosystem services became tradable commodities. However, the global market of ecosystem services trading was not fully developed until the establishment of the markets of greenhouse gases emission permits. Environmental science and policy have made increasing efforts to value ecosystem services in monetary terms, and to articulate such values through markets in order to create economic incentives for conservation (Balmford et al., 2002). As the largest and fastest growing form of ecosystem services trading, the market of permits trading of greenhouse gases emission is one of the world’s largest global markets. For example, the European Emissions Trading Scheme (ETS) is the world’s biggest emissions trading program, has proved highly profitable for sectors of European industry and finance (Kanter and Mouowad, 2008). These ecosystem markets play key roles in providing a connection between people who are willing to pay for the activities that will help improve and safeguard the environment and those people who can acquire those actions for the good of the sustaining the environment for the future generations. The markets also identify certain environmental products and services that are as a result of restoring and caring for the environment. Ecosystem services markets help in coming up with economic incentives for various cities, industries and businesses that cannot stay away from the impacts of the environment so as to assist in funding protection and restoration activities. People who can restore and sustain ecosystem services get an opportunity to earn from these ecosystem services. Apart from the above roles, the ecosystem service markets get to aim in conservation and restoration of the environment in strategic places especially those locations that are heavily affected by pollution of various substances. Ecosystem service markets help in coming up with new business ideas that will help in increasing the efficiency, rate and the area that will be covered by such business for the good of the environment in promoting conservation and preservation of the ecosystem goods and services. In order to establish a fair trading condition over the global market, the ecosystem services have to be well regulated in terms of commodities. Such commodification process also has a long evolutional history. As mentioned before, the first step of commodification of ecosystem services was to frame the ecosystem services for political and economic decisions making, and evaluate the ecosystem services. In the 1990s, the monetary values of ecosystem services were introduced by increasing in the awareness of the economic importance of the ecosystem services, highlighting how the conversion of natural ecosystems for development purposes could be counter-productive even from monetary cost-benefit logic (Balmford et al., 2002). The final step of ecosystem services commodification was to cash ecosystem services in real markets through the design and implementation of institutional structures for the ecosystem services' appropriation and exchange (Gómez-Baggethun et al., 2010). The commodification process is finally completed with the implementation of institutional structures allowing for transactions in market exchanges. Advantages and Issues of Commodification of Ecosystem Services As the monetary values of ecosystem services have been introduced through commodification, the economic values of ecosystem services can be discussed like other commodities. It is possible for the investors to obtain economic returns from environmental assets while ensuring ecological conservation. For example, many major corporations, namely British Petroleum and Monsanto, have improved their financial performance by cleaning and greening their operation, as they are making money by reducing their environmental impact (Chichilnisky and Heal, 1998). If the goods and services provided by the ecosystem are treated as the “capital of nature”, such capital, speaking in the economic term as described by Wilson (1993), has to be securitized by assigning the obligations to corporations to manage and conserve natural capital in exchange for the right to the benefits from selling the services provided. In Chichilnisky and Heal’s (1998) article of Economic Returns from Biosphere, the authors introduced an example to demonstrate the business success in ecosystem conservation. The New York City suffered from water quality issues in 1996; when the root systems and soil microorganisms were polluted by sewage, fertilizers and pesticides, and they could no longer function properly to purify the water to meet the standards established by the US Environmental Protection Agency. The city was looking at building a filtration plant costing at $6billion to $8billion as initial plus $300million per annual as the running cost. Alternatively, the city decided to invest in natural capital by buying land in and around the watershed to restore the local ecosystem, which cost $1billion to $1.5billion in total. Another one of the economic advantages of ecological conservation is the ecotourism value, which can be seen as the by-products of commodification of ecosystem services. As the values of the ecosystem services are introduced and the market is well established, government and private sectors could invest in the ecological conservation under well-controlled regulations. The aesthetic value of biodiversity is also enormous, and one of the major buyers of the ecosystem services is the tourism enterprise that benefit from the presence of wildlife (Carrol et al., 2009). It is natural to expect that private investment will be forthcoming to finance the conservation of a region with significant ecotourism potential, in return for the right to some of the revenues. Across the globe, there are many examples of showing the success in business of ecosystem conservation, but the effectiveness of commodification of ecosystem services towards the ecology and biodiversity also have to be concerned, and in fact, the ecological perspective of commodification of ecosystem services by far is more important than its economic value, because ecological conservation was the primary goal. However, despite of the economic success, the ecological benefits are sometimes minimal. For example, as mentioned before, the European Emissions Trading Scheme is a highly profitable sector of the European industry and finance, but it has not brought a net reduction in European greenhouse gases emission (Kanter and Mouowad, 2008), which also is the case for most of the ecosystem services trading schemes for developing countries. One of the possible explanations is because the people from the developing countries do not want to compensate their living standard for ecosystem conservations. These ecological benefits are usually described as natural benefits that come from the economic value of goods and services that are made available by the ecosystem services. These goods include mineral deposits, water, crops and livestock since they already have market values that are computed for them. In Europe, the emission trading schemes are linked to the targets for greenhouse gases emissions reductions that European Union countries accepted as signatories of the 1997 Kyoto Protocol, which established the world’s first framework for an international market in greenhouse gases emissions credits (McAfee, 2012). Although the Kyoto Protocol’s Clean Development Mechanism was aiming to ease the global environmental problems by reducing the greenhouse gases emissions, it allows polluters to offset a share of their emissions, while continuing to produce them, by paying for global-warming mitigation projects in lower- income countries (Vlachou and Konstantinidis, 2010). Clearly, the Kyoto Protocol’s Clean Development Mechanism was not the most appropriate strategy to reduce the greenhouse gases emission. In this case, the commodification of ecosystem services and its trading scheme was more concerned from the economic and political perspectives, whereas the ecological perspective was barely taken into consideration, or in other words, the ecological perspective should always comes ahead of the economic perspective during establishment of such kind of global policies. Ecosystem services that are based on incentives are regarded as vital means of put into practice sustainable ways of managing resources and also an important policy tool which deals with changes in environment. The development of market and payment for ecosystem services has made alterations on social performance and accessibility of land. This has resulted to increase in economic value of some of the ecosystem services like land due to their demand. Increase in demand of the ecosystem services has resulted to degradation since these resources cannot hold the increasing population. This results environmental degradation hence ecosystem diversity. Climate change is adjustment in the distribution of weather conditions over a period of time usually more than thirty years. There are a number of policies that the United States can endorse to diminish the impacts of climate change globally and the first one is; engaging industries that emit carbon gases in trading the excess carbon so as to equalize the emissions at a different source either in or outside the country which is according to the agreements of Kyoto Protocol. The United States can also apply the Kyoto Protocol mechanism of identifying countries that produce low emissions so that it can reduce the amount of emissions on the atmosphere. The third idea that United States can borrow from the Kyoto Protocol is the encouragement of developed countries to use the Clean Development Mechanism which involves proposal of projects which can be used to reduce the amount of emissions in developing countries. United States has to be involved in coming up with global climate accords that help in evolution of developing countries to clean energy sources like wind and solar. The state has to ratify regulatory tools and economic incentives that encourage businesses and its people to reduce carbon emissions. Under the U.S Environmental Protection Agency, United States can use its regulatory plan to minimize carbon emissions starting with the biggest sources of carbon emissions. One way that can help in reducing effects of climate change is; use of energy efficiencies. It involves turning off lights in places of work at night, encouraging manufacture of higher-mileage vehicles and also build up more efficient household equipments and lighting. To help this work out, consumers have to be provided with tools that can help in observing and adjusting their energy uses in day time so that they can try and cut back when the prices are at maximum. This will help in reducing amount of carbon that is emitted in the country and also help the people in saving their money. Carbon cap and trade system is another way that the United States can use to reduce effects of climate change. This is a system that makes use of financial incentives to promote companies to help in minimizing the quantity of carbon emission that they produce. Companies have right to decide on various ways that they can use to reduce their emissions using the cheapest means possible. Another way of reducing effects of climate change is by use of carbon tax which is a tax levied on the emissions of carbon dioxide and other greenhouse gases. The aim of this tax is to minimize the amount of carbon emissions by making it costly for the companies to pollute the environment. The United States legislation has to come up with policies that minimizes global warming pollution and against upsetting effects of climate change. The legislature of U.S has to provide funds and a policy that supports the protection of natural resources in the country and also worldwide to assist people cope with the effects of climate change. Discussion In the previous sections of this essay, they history of commodification of ecosystem services, as well as its benefits and issues are described. There are clear evidences showing the advantages of pricing the nature, but it is also important to understand what can go wrong, or how about the primary goal of ecosystem conservation is not going to be achieved after all. For example, scientists (Haya. 2007 and references therein) argued the Kyoto Protocol’s Clean Development Mechanism has created negative impacts in the practice of carbon credit production because the economic value of credits is completely separated from any notion of ecological sustainability beyond the reduction of carbon emissions, and concluded that climate change mitigation, including some of the activities of Clean Development Mechanism projects, should not be financed by the commodification of carbon reductions. It would be very pitiful if the economic criteria of commodification of ecosystem services further the opportunities for profit generation without achieving the promised social and environmental benefits. In economic theory, the nature has no intrinsic values, and the reason for their existence was only to provide resources and services for the human needs. Therefore, the true ecological values of the ecosystem services are often unseen or discarded on purpose during marketization. In order to avoid this problem, the ecosystem services during marketization must not be treated as a pure economic category, because the services provided by nature cannot be generated in free market and also cannot be substituted anywhere else. Besides, a lot of the ecosystem services’ value stays unknown, or unable to be defined, therefore very hard to get a price for. Even if the price of ecosystem services can be determined, it is even more difficult to figure out who has the legitimate right to own it. For example, many countries surround the Mediterranean Sea, and they are all beneficial for services provided by the ecosystem, fish, traffic, and even the aesthetic values. It is very difficult, or even impossible to clearly classify who owns which part of the ecosystem. The difficulty in pricing the nature then leads to another question – should we price the nature? The answer is definitely “yes”. No matter of what, by commodification the ecological services is the first step to conserve the ecosystem in the modern way, but the main point is how to put the price on it during marketization. People may argue that the nature worth so much and it is priceless. However, without commodification of ecosystem services, people, or industrial sectors would keep damaging the ecosystem as usual, because the public awareness of ecological conservation is not there yet. If the world is waiting for the public awareness of ecological conservation to get there, the global ecosystem would already be damaged irreversibly, and in fact it have already had. Therefore, the ecological conservation has to be tied together with something that people are aware of and care about. Introducing economic values to the ecosystem is the easiest and most straightforward method to increase the public awareness toward ecosystem conservation. It is well understood that today’s strategy of commodification and marketization of ecosystem services are not appropriate, and economic benefits are still the biggest concern against ecological conservation. The biggest concern is when the economic benefits and ecological conservation are conflict with each other, would people be willing to compensate their economic income for conserving the ecosystem, and by how much. Conclusion Without any doubt, commodification of ecosystem services is the right way for the ecological conservation and sustainable development. Although the outcome of valuation of nature might not be optimistic and there are many issues existing in associated with, it is an effective first step to increase the public awareness of ecological conservation, both objectively by increase the people’s environmental thinking, and passively by adding fees payable to those who receives ecosystem services. The enormous economic values of marketization of ecosystem services cannot be ignored; green business has now becoming one of the largest business areas in the globe. In the US, a total of $138billion profits were generated in 2011 from the green business. The profits are going to make somebody rich, but more importantly, the money will be spent on conserving the ecosystem and restoring the natural wetlands. Both of economic and ecological perspectives should be concerned during valuation of the nature, as the economy and ecology are heavily relying on each other. Climate change contributes greatly to ecosystem degradation indirectly since it is as a result of human activities that there is adjustment in climatic conditions. For instance, an effect of climate change is water pollution. This type of pollution usually leads to ecosystem diversity since there is an alteration with the ecosystem service that that functions to provide clean water is degraded. This also applies to the ecosystem function that is responsible for the provision of clean air. Reference: Balmford A, Bruner A, Cooper P, Costanza R, Farber S, 2002, Economic reasons for conserving wild nature. Science, vol.297, pp.950–953 Carrol N, Fox J, Bayon R, 2009, Conservation and Biodiversity Banking: A Guide to Setting Up and Running Biodiversity Credit Trading Systems. Herndon, Chichilnisky G, Heal G, 1998, Economic returns from the biosphere, Nature, vol.391, pp.629-630 Daily G C, 1997, Introduction: what are ecosystem services. In: Nature’s Services: Societal Dependence on Natural Ecosystems. Island Press, Washington DC, pp. 1–10. Dales J H, 1968, Pollution, Property and Prices: An Essay in Policy-Making Decisions, Toronto: University of Toronto Press. Gómez-Baggethun E, Groot D E, Lomas P L, Montes C, 2010, he history of ecosystem services in economic theory and practice: From early notions to markets and payment schemes, Ecological Economics, vol.69, pp.1209-1218 Haya B, 2007, Failed mechanism: How the CDM is subsidizing hydro developers and harming the Kyoto Protocol, International Rivers Kanter J, Mouowad J, 2008, Money and Lobbyists Hurt European Efforts to Curb Gases, New York Times Loreau M, Naeem S, Inchausti P, 2002, Biodiversity and Ecosystem Functioning: Synthesis and Perspectives. Oxford University Press, Oxford. MEA, 2005, Millennium Ecosystem Assessment: Ecosystems and Human WellBeing. Washington, DC: Island Press. McAfee K, 2012, The Contradictory Logic of Global Ecosystem Services Markets, Development and Change, vol.43, No.1, pp105-131 Robertson M, 2004, The Neoliberalization of Ecosystem Services: Wetland Mitigation Banking and Problems in Environmental Governance, Geoforum, vol.35, No.3, pp.361–74 Vlachou A, Konstantinidis C, 2010, Climate Change: The Political Economy of Kyoto Flexible Mechanisms, Review of Radical Political Economics, vol.42, No.1, pp.32–49 Westman W, 1977, How much are nature's services worth? Science, vol.197, pp.960–964 Wilson E O, 1993, The Diversity of Life, Norton Read More

Although the concept of Clean Development Mechanism is simple, the effects are controversial, because people argued the mechanism is purely economic driven. The aim of reducing greenhouse gases pollution was not considered at the first point. It may promote the riches to keep polluting by simply paying more money to buy the credits. From this point, the arguments went deeper and people started to discuss whether commodification and marketization of ecosystem services are appropriate. In this essay, the evolutionary history of commodification of ecosystem is described, along with how the market of emission trading changed overtime.

Then, the economic benefits and other issues in associate with commodification of ecosystem services are also discussed, with introductions of several cases as examples. The final section discusses the appropriateness of valuation of the nature, whether it is a right decision, and how it is possible to be improved. History and Background Recently, people’s attention towards the ecosystem services has been increased, especially since the past 40 years, the values of the ecosystem services and their commodification has been intensively studied.

In ecology, the term ecosystem function has traditionally been used to refer to the set of ecosystem processes operating within an ecological system without the concern of the values of ecosystem provided to humans (Loreau et al., 2002). These functions include physical, chemical and biological processes. However, in the late 1960s, people put more attentions on how the functions of nature serve the human societies. Referring to the Millennium Ecosystem Assessment (2005), the ecosystem services “comprise the functions of ecosystems that are useful to humans: storage of carbon by soils, vegetation and oceans, habitats for plants, animals and micro-organisms, filtering of fresh water and even the aesthetic or spiritual significance of landscape”.

The aim of the MA assessment was to find out the effects of the ecosystem modification for the survival of human beings. In other words, MA findings are that human activities are contributing greatly to the loss of the Earth’s natural capital. This has put great damage on the environment to its ability of the planet’s ecosystem to support future generations. There were a number of things that were found out according to the MA included; deprivation of ecosystem services may possibly grow considerably worse for the duration of the first half of the century and this would be an obstacle to attaining the Millennium Development Goals.

There was also the challenge of trying to undo the deprivation of ecosystem so as to meet the increasing demand since the ecosystem services could be to some extent met under some circumstances that MA considered to be helpful. This could entail significant changes to be done in policy making, institutions that supported ecosystem sustainability and also to the practices that are not currently being used to reduce deterioration of these services. There was also the issues of human having been accused of contributing to the change s that occurred in the ecosystem in a more rapid and extensive manner and this was to help humans meet the rapidly growing needs for food, water, timber and fuel.

This has lead to irreversible damage to the diversity of life support in any species on Earth. The millennium ecosystem assessment report has outlined major impacts of human activities that affect the ecosystem namely; there is a link between the ecosystem functions and the humans hence the uneven impact of ecosystem deterioration by both the poor and the wealthy nations since it has been noted that wealthy nations have a high impact on the ecosystem deterioration. The situation about ecosystem deterioration has been recognized that it’s getting worse thereby regarding the use of many ecosystems as unsustainable.

The report also recognizes that the non- market functions of the ecosystem are of high value especially in human beings but the market technique used is not capable of supporting and restoring the ecosystem functions.

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