Nature in the time of Covid - our Chief Economist, Stevan Lee, looks at the likely impact of the pioneering Dasgupta Review.
We all love biodiversity, and Partha Dasgupta has shown us what it means to reflect this better in economics. The Dasgupta Review on biodiversity does something similar to Nick Stern’s climate change review from 2006 but not quite the same. Stern shows climate change was likely to do so much damage to GDP that very expensive action to limit climate change would be well worth it. Actually, if Stern had included the value of climate change’s damage to biodiversity and the environment in the way that Dasgupta has attempted, alongside the damage to GDP, then even more action to limit climate change would have been justified. The problem with GDP is that it is only about production with a market value – lots of good stuff that we all love is missing from GDP. Dasgupta’s report discusses why this is a problem and thinks through how to put it right.
Dasgupta recommends, amongst other things, paying poorer countries to protect ecosystems and charging for fishing to protect the marine environment. This is in tune with a general pivot in coordinated international action away from poverty reduction (because there has been so much poverty reduction since the early 90s – success!), towards long term environmental goals, limiting climate change, protecting biodiversity. There is a mountain of “climate finance” in varying forms, mainly designed to support investments that are at least comparatively low carbon or to protect natural assets that are also carbon sinks. However, this long term finance can seem quite complicated to access.
What happens to the love of biodiversity in a crisis? When a family member is seriously ill, how much do we worry about single use plastics in the hospital? When a country faces a deep economic setback, like almost every country is doing in the wake of Covid-19, the scarcity of resources and a need to worry about now more than the future can lead to “emergency” measures that wouldn’t be taken in calmer times. This can include environmental damage. It is harder to resist the loggers and miners and fishers and polluters when the need for resources is so urgent – a decision to cut down that virgin forest becomes more likely when “lives are at stake”.
There is a real risk that long term climate finance and similar types of support appear to be of no use in the apex of a Covid-19 economic crisis or in the drawn out recovery – slow disbursing soft loans to support the gradual construction of a carbon neutral power supply do not pay the wages of teachers and doctors when the government’s revenue has collapsed. But if this somehow leads to environmental damage, it’s a tragedy and a policy failure. Poor countries should not be raiding environmental assets to generate finance when there is soft finance available with the sole aim of protecting those assets.
What is needed is less rigidity in the contracts that link the finance to environmental protection. If the need for finance is frontloaded during a crisis, can this need be met and still linked to a longer term commitment on environmental protection? This is risky, because it seems to rely on promises and pledges and the funder seems to lose leverage early in the transaction. But the stakes are high and contracts can be clever – there are many ways that a creditor can retain leverage when a debt is outstanding. And let’s not forget, once the crisis passes, the emergency is over and the desire to protect environmental assets for the longer term usually comes back.