The economics of biodiversity

When the Treasury commissioned Professor Partha Dasgupta to conduct an independent review into the economics of biodiversity in 2019, I have to admit to feeling a little bit underwhelmed. Surely it was already widely understood that our economy relies on the natural environment and that humans derive a great deal of economic value from nature? This is certainly something farmers and land managers are intimately aware of. From the weather to soil, to crop biology, not to mention wider stewardship of the environment, CLA members are more aware than most that what they do affects and is affected by the natural environment.

With the release of the final report this week, it is clear that the message still bears repeating and possibly translating from the academic into something more tangible. As Boris Johnson said in a message at the launch event, Professor Dasgupta is now passing on the baton to politicians and policy-makers to take these messages seriously. And the fact that the Treasury commissioned the report is important. Often, it seems that Defra and other parts of government are clear that what they are doing makes economic sense, but the Treasury has seemed slow on the uptake at times. They now have no excuse not to heed what the report they commissioned has said.

So, what were the main conclusions of this hefty review? Well, it starts by pointing out that we do not properly account for nature in our economic decision-making. Therefore, decisions about how to invest, what to build where, or how to produce the goods and services we need are often taken without considering the impact on nature. Not only this, he highlights that in some cases, governments actively encourage unsustainable activities, supporting industries that are harming the natural world and wildlife.

He sets out some solutions in the report: Focus on more sustainable production and consumption so that we are not demanding more from nature than it is capable of supplying. Natural ecosystems, whether oceans, forests or indeed the soil on which farmers rely, need to be managed so that they continue to function and deliver what society needs (food or timber, for example). Maintaining and restoring these systems can also help to lock up carbon, thus helping in the fight against climate change too (so-called nature-based solutions to climate change – such as planting trees or restoring peatland).

The report also calls for new ways to measure progress and success in our society and economy. Under traditional measures, ploughing up a wildflower meadow to plant crops or chopping down ancient woodland to build roads or factories count as economic progress. But often what is lost may have more value than what takes its place, depending on how this is measured. A full account of the benefits of nature – for carbon storage, water management or for health and wellbeing can give a different view of what good looks like.

Finally, Professor Dasgupta calls for transformation of institutions including the financial sector. This would mean that financial investment and business decisions take greater account of the costs of depleting nature and the benefits of conserving or enhancing it. 

What does this mean for CLA members? 

For a start, it vindicates the CLA’s position (now adopted by government with the Environmental Land Management (ELM) scheme) of an agricultural policy based on rewarding land managers to enhance the natural environment. It seems unlikely that the momentum behind this change of policy direction will be reversed now. But more importantly, it underlines the importance of getting these policies right. ELM must adequately reward farmers and land managers for the role they play in restoring nature and combatting climate change. And the scheme must not be beset by the complexities and administrative failures of the past. As Professor Dasgupta says, we and our descendants cannot afford for this to happen. 

Finally, the role of private investment in the environment is also crucial. The CLA’s work on natural capital shows how this could become increasingly important. Government funding alone will not solve the ecological crisis we face. It will need both public and private sectors working together. Luckily, land owners and managers are in a perfect position to deliver what society needs.