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Ecological Economics has emerged as an important tool in financially valuing natural resources thereby influencing policy and decision-making. According to Ecological Economists natural resources form the ‘Natural Capital’ of the Earth. Tampering with the Natural Capital can lead to unforeseen economic losses and long-term irreversible human crises.

The Earth’s Natural Capital is contributed to by biodiversity and ecosystems. Ecosystem services are manifold. Provisioning of food, water, clean air, moderate temperature, rainfall, medicines, recreation, mitigating floods, pollination, soil nourishment, etc., are all ecosystem services. Modern humans have unfortunately taken these nature’s services for granted, placing little economic value on them. It is only after Ecological Economics emerged as a decision-making tool that the economic value of these freely available nature’s gifts have come to light.

Ecological Economists have demonstrated how a hectare of tropical rainforests, when left alone, would provide long-term ecological services, the monetary value of which is many times more than the alternate uses they were planned to be put to. Natural ecosystems like tropical rainforests, mangroves, coral reefs, rivers and mountains attract nature-lovers and eco-tourists, generating significant amounts of revenue that is much higher than what may be realized by destroying them. Take for example mountaineering in the Himalayas or Alps. How much revenue do they generate? How much revenue do African countries generate by showcasing their abundant and diverse wildlife, than by destroying them? How much revenue does Australia generate from tourists who visit the Great Barrier Reef? These are just a few examples of the benefits of conserving the Natural Capital.

Significant contributions to the discipline of Ecological Economics have been made in the past two decades, starting with a landmark publication by Robert Costanza and colleagues. Costanza and colleagues made an attempt to monetarily value the different ecosystems of the Earth’s biosphere and showed that they valued much more than all nations’ GDP put together. Although faced with criticism, the publication and subsequent research have influenced global thinking in many ways. It also strengthened the foundation of Ecological Economics.

Ecological Economics is a sub-discipline of Economics that has been widely accepted and researched since the 1980s. It is treated as distinct from Environmental Economics in that it recognizes the interdependence between humans and the Earth’s biodiversity and ecosystems. It also recognizes that biodiversity is fundamental to the sustenance of land, water and air. To strengthen the platform for research in Ecological Economics in India, the Indian Society for Ecological Economics (INSEE) was established in 1998. INSEE has its head office in the Institute of Economic Growth, New Delhi. Earlier, the International Society for Ecological Economics (ISEE) was founded.

Biologists believe that the Earth is home to an estimated 8 million species of plants, animals and other living organisms. Of these, only around 1.75 million species have been scientifically documented till date. While more than 6 million species remain unknown to science, there is the danger of losing many. A recent UN report titled ‘Global Assessment’ has stated that in the next 10-20 years the Earth may lose 1 million species. This is an alarming report for we do not know how these species have been influencing the Earth’s ecosystems and biosphere.  Direct human exploitation, habitat loss and global warming are some of the main causes for this dire situation.

There is consensus among biologists that life on Earth began some 3.5 billion years ago and biodiversity is the product of that many years of evolution. Except probably rocks, minerals and water, everything else on Earth is the product of biological evolution. Biodiversity is no doubt the key to the sustenance of Earth. The Convention on Biological Diversity acknowledges that biodiversity has an ‘intrinsic value’, along with an economic value. It is in this regard that Ecological Economics, with its focus on valuing biodiversity and ecosystems, becomes very relevant.

There are however limitations to the application of Ecological Economics in valuing biodiversity and ecosystems. The limits are set by inadequate biological and ecological knowledge – knowledge of what makes a species (biology) and how the different species create and sustain natural ecosystems (ecology). First of all, there is little agreement between biologists on the definition of species although it is widely accepted that species are the nuts and bolts that hold together an ecosystem. The incomplete understanding of how many and which species are required to sustain an ecosystem is another concern. Ecologists have come up with numerous ways of classifying and studying ecosystems based on the species composition and abundance. However, since more than 6 million species are not known to science, such species-based classifications are unstable and subject to debates.

Incomplete biological and ecological knowledge has rendered the definition and classification of species and ecosystems somewhat unstable. Economists have to work with these limitations. When economists discuss ecosystem services, they have to adopt broad systems of classification of ecosystems such as tropical rainforests, temperate grasslands, mangroves, coral reefs, riparian systems, etc., without taking into account the regional differences. For example, a patch of tropical rainforest in the Western Ghats of India and that in Malaysia may vary considerably in their services due to the difference in species composition. Such differences cannot be accounted for without full knowledge of the species in the two locations. The great diversity of species and the lack of clarity on what a species is have left both biologists and economists in the dark. With the exception of a handful of charismatic species such as the Tiger, Lion, Elephant, Crocodiles or Rhino, the economic values of most other species have not been worked out and may never be known. What will be the economic loss due to the extinction of 1 million species in the coming decades? Questions like these will plague biologists, ecologists and economists for years to come.

Further, economic valuing of biodiversity and ecosystems is based on a limited set of variables that are broadly categorized as direct use and indirect services. Take for instance a medicinal plant. A medicinal plant can be valued economically for its use in treating a certain disease and based on how it is sourced and marketed. This is its direct economic value. Similarly, the indirect economic value of a patch of forest, such as its recreation value, can be assessed. However, the ecological roles that the medicinal plant played in the ecosystem or that of the many other species in the patch of forest which has considerable recreation value cannot be so readily valued.

Biodiversity and ecosystems are impacted by humans in various ways. Currently, one of the greatest threats to the ecology of the Earth, especially the oceans, is from the disposal of plastics. Plastics disposed on land ultimately reach the sea. Direct and indirect ingestion of plastics by marine animals and accidental choking (such as by discarded fishing nets) are killing them in thousands. While there are efforts throughout the world, including in many states of India, in banning disposable plastics, there are also concerns being raised about the loss of human livelihoods. How can the ecological costs and economic benefits of plastics be worked out, taking into account the damage they cause to biodiversity and ecosystems?

The use of economics as a tool to value natural resources has a great potential in influencing policy and decision-making, especially at a time when the Earth and its biosphere are rapidly degrading. Scientists are of the opinion that the earth is currently going through an epoch called ‘Anthropocene’, wherein human development is generally at the expense of the Natural Capital. Biologists and ecologists are racing against time, grappling with incomplete knowledge of biodiversity and ecosystems to slow down the loss of biodiversity and ecosystems. Long-term efforts to conserve the Earth’s biodiversity and ecosystems will benefit from biologists and ecologists working together with economists.



By Dr. Ranjit Daniels

Dr. R J Ranjit Daniels is an ecologist. He obtained a PhD in ecology from the Indian Institute of Science, Bangalore in 1990. He has travelled widely in India and abroad, studying birds and other vertebrate animals. He has published more than 50 peer-reviewed scientific papers and 12 books. He is the Co-founding Trustee of Care Earth Trust in Chennai.

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