Genuine Progress Index for Atlantic Canada Indice de progrès véritable - Atlantique Natural Capital Accounting Genuine Progress Institute Halifax, Nova Scotia, 11 July, 2011

Valuing Natural Capital Health: Begin with scientific literature For example, a healthy forest effectively: Prevents soil erosion/sediment control Protects watersheds Regulates climate regulation/sequesters carbon Provides habitat for wildlife / biodiversity Supports recreation, tourism, aesthetic quality Provides timber

Valuing wetlands a/c function Flood prevention shoreline protection, erosion prevention storm control water purification storage and recycling of human waste spawning and nursery habitat for fish and shellfish

Wetland functions (ctd) Carbon sequestration and storage sanctuary, breeding, nursery habitat for terrestrial, near-shore, & migratory birds feeding habitat for terrestrial wildlife nutrient recycling, production & storage recreation, education, science waste treatment food production

Forests a/c Conventional Accounts

Forests: Age and species structure = key indicators of forest health / multiple functions NS forests have seen a sharp decline in valuable species such as white pine, eastern hemlock, yellow birch, and oak Forests more than 80 years now account for just over 1% of NS forest land – down from 25% in 1958 (not pristine)

Volume 1, Figure 6

E.g. Economic valuation: NS Carbon loss = $1.3 bill. Cf Bhutan as net carbon sink NS forests store 107 mill tonnes carbon, avoiding $2.2 billion in climate change damage costs But increased cutting, and loss of old growth and mature forests in NS since 1958, drastically reduced NS carbon storage capacity by 38%, costing estimated $1.3 billion in lost value. Based on the 1958 forest inventory, carbon stored would be worth $3.5 billion. Carbon loss in Nova Scotia's forests is now contributing to global climate change.

Estimated Annual Cost of Carbon Released due to Timber Harvest, NS,

Changes in Atlantic Bird Species Populations

Recreational Brook Trout Caught and Retained in Nova Scotia

Excess clearcutting, loss of natural age & species diversity have resulted in loss of:  valuable species  wide diameter and clear lumber that fetch premium market prices  resilience and resistance to insect infestation  wildlife habitat, & bird population declines  forest recreation values -> nature tourism

This represents substantial depreciation of a valuable natural capital asset.  decline in forested watershed protection & 50% drop in shade-dependent brook trout  soil degradation and leaching of nutrients that can affect future timber productivity  substantial decline in carbon storage capacity & increase in biomass carbon loss decline in essential forest ecosystem services

The Good News: Volume 2: Best Forestry Practices Selection harvesting increases forest value and provides more jobs Shift to value-added creates more jobs Restoration forestry is a good investment What incentives can encourage restoration NB: Parallels to wetland restoration efforts

Natural Resource Accounts are not enough! - Onus on producers Measuring the demand side of the sustainability equation e.g. Forests: 20% of world’s people consume 84% paper; 20% consume 1% The equity dimension of sustainability Reporting to Canadians on impacts of behaviour - e.g. GHGs

Ecological footprint Demonstrates relationship between income, consumption, and environmental impact. Higher income groups have larger footprint: 30% of people are responsible for 70% of global resource consumption and waste generation It cuts through illusions that we can improve the living standards of the poor without also examining the consumption patterns of the rich and that we can “maintain” current excess

Local consumption patterns have global consequences Local consumption may involve natural resource depletion far away We may indulge unsustainably high levels of consumption in Canada and NS, perhaps even without depleting local resources, but rather by "appropriating the carrying capacity" of other countries through trade Footprint demonstrates accounting approach without monetization + indicator trend

Current Footprint Exceeds Sustainable Capacity of Earth If everyone in world consumed at NS levels, we’d need 4 planets Earth to provide the necessary resources + waste assimilation capacity Raising global living standards to current levels in the wealthy countries would therefore put an intolerable strain on the Earth's resources.

Ecological Footprint,

Global “ecological overshoot” is temporarily possible by: –depleting reserves of natural capital (e.g., natural gas, old growth forests); –over-harvesting renewable resources to the brink of collapse (e.g. fish stocks); –causing irreversible ecological damage (e.g., species extinction) –overloading environment with waste products (air & water pollution, GHGs - climate change, ozone depletion, etc.)

Is Nova Scotia’s ecological footprint growing? Natural capital accounting will allow assessment of rate of EF growth in relation to economic growth, and what is trade-off And which sectors are primarily responsible for EF growth – e.g. relative impact of transport (cars / planes); agriculture; built environment We need this knowledge to craft responsible policies & create a better future for our children

Ecological Footprint Projections, Canada,

“What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.” Robert Costanza

NK Valuation Methods

Avoided cost methodology Assesses the value of certain services according to the degree that such services allow society to avoid costs that would have been incurred in the absence of those services. EG: the services provided by the atmosphere, forests, or soils in sequestering or storing carbon can be estimated by assessing the damage costs that will likely be incurred if that sequestration or storage capacity is compromised, depleted, or degraded by excess greenhouse gas emissions, forest cutting, or soil erosion. In other words, such damage costs can be avoided by conserving or maintaining the capacity of the atmosphere, forests, and soils to sequester and store carbon.

Replacement cost methodology Replacement costs (RC) methodologies assess the value of services that could potentially be replaced with engineered man-made systems according to the cost of those replacement mechanisms. In New York, for example, the value of watershed protection and natural water filtration services provided by a healthy, standing upstate forest was assessed according to what it would have cost New York City to build a hugely expensive water filtration plant to replace the loss of the ‘free’ services provided by the forest.

Factor Income Methodology Factor Income (FI) methodologies assess the value of ecosystem services in the enhancement of incomes. For example, healthy, sustainably farmed soils in which earth worms and micro-organisms flourish will enhance the incomes of organic farmers in the long term more effectively than depleted and compacted soils dried and hardened through excessive use of chemicals and synthetic fertilizers.

Travel cost methodologies These are based on the value of demands for ecosystem services as reflected in the costs of the travel required for effective utilization of such services. Market costs associated with such travel can then be used to reflect the implied value of the service to the user. For example, the recreation value provided by national parks, including their preservation of biodiversity, flora and fauna that attracts nature- lovers, bird-watchers, trekkers, and others, might be implied by the expenditures of these park users on travel and associated costs (accommodation, food, payments to guides, etc.)

Hedonic Pricing Hedonic Pricing (HP) methodologies reflect ecosystem service demands as they are reflected in the prices people will pay for goods associated with or dependent on the preservation of such ecosystem services. For example, the aesthetic value of a natural viewscape might be reflected in the premium rental or purchase price of an apartment or house overlooking a beautiful park, unspoiled forest, or natural river compared to the rental or purchase price of an otherwise identical apartment or house overlooking a busy street or factory.

Contingent Valuation Contingent valuation (CV) methodologies reflect demands for a particular ecosystem service as elicited through survey questions that pose hypothetical scenarios involving some valuation of alternatives. Such survey methods have been used in North America to assess the potential value to the public of species preservation, for example by asking people what they personally would be willing to pay each year to preserve the endangered spotted owl and to prevent its extinction.

This method is problematic because ecosystem services are not privately owned, and individuals may not perceive the value of those services. For example, few members of the public understand the vital services provided by wetlands to human society in flood and erosion prevention; shoreline protection; storm and hurricane control; water purification; storage, recycling, and treatment of waste; carbon sequestration and storage; nutrient recycling, production, and storage; and provision of habitat, food, and spawning, breeding, and nursery grounds for a wide range of fish, shellfish, birds, and terrestrial wildlife.

Not knowing those functions or their value, the public will not likely assign much value to wetlands in surveys, nor complain if they are drained, paved over, and developed. Such contingent valuation surveys and assessment tools must therefore be used sparingly, cautiously, selectively, and only in those cases where the public has at least sufficient prior knowledge to attach some personal value to the preservation and protection of a particular ecosystem service.

Group Valuation Group Valuation (GV): This approach is based on principles of deliberative democracy and the assumption that public decision making should result, not from the aggregation of separately measured individual preferences, but from open public debate. This method has been shown to yield far superior and more accurate and realistic results than the contingent valuation methodologies based on individual preferences described above, since an open and skillfully facilitated discussion prior to administration of survey questions can produce the knowledge base and assessment of alternative options that will allow more informed valuations.

Group Valuation ctd This group valuation methodology was recently used in Nova Scotia, in Emera hearings, to assess the value placed by the public on taxpayer-funded investments in renewable energy and what they themselves would be willing to pay for shifts from existing coal-fired power plants to a range of renewable energy sources.

Marginal Product Estimation Marginal Product Estimation (MPE) methodology in which estimates of the value of demands for ecosystem services are generated in a dynamic modeling environment using production functions to estimate the value of ecosystem outputs in response to corresponding inputs. Thus, the time and money people spend (inputs) to enjoy particular goods and services produced by a given ecosystem (its outputs) can tell us how much value they ascribe to those outputs in relation to the same amount of time and money spent on other goods and services.

This method recognizes that time, money and other means used to acquire goods and services are limited rather than infinite, so how they choose to spend these inputs reflects people’s preferences and tastes, which in turn determines value. Because this valuation method is based on the reality of limited means and scarcity, the term “marginal” in this method designation simply refers to the fact that the scarcer an object is, the greater will be its value on the margin.

Marginal Product Estimat. ctd To use an overly simplistic example just to illustrate the point  the less people trust the quality of drinking water coming out of their taps, the more likely they are to have a preference for bottled spring water, to invest in a water filter, or to spend time boiling their water. What they are willing to spend on such water purification methods in money and time (compared to the same amount of time and money spent on other activities and products) provides an indication of the value they ascribe to drinking water quality.

MPE ctd. Indeed, the scarcer pure drinking water becomes, the higher will be its value on the margin, and the more likely people are to invest time and money to obtain it so long as it remains a significant preference and priority for them.

Why we need all these methods The choice of natural capital and ecosystem service valuation method will be influenced by the reality that certain ecosystem services are more amenable to certain appropriate methods of valuation. Multiple techniques might also apply to varying ecosystem services. Therefore, a full suite of methods is generally necessary to assess the total economic value of a particular ecosystem, with different functions of that ecosystem assessed by different methods.

Genuine Progress Index for Atlantic Canada Indice de progrès véritable - Atlantique