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Tuesday, May 27, 2008

The Wealth of the Poor: How Ecosystem Services Benefit the Base of the Pyramid

By Derek Newberry

BennettGuest blogger Karen Bennett is a Research Program Coordinator at the World Resources Institute. Her current work focuses on mainstreaming an ecosystem services approach to assure ecosystems' capacity to provide humans with needed goods and services. She also provides support to projects in the People and Ecosystems Program.

By Karen BennettWhen you drink a glass of fresh water, do you think about how it may have been cleaned by a watershed upstream? When you eat fresh fruit or grains, do you think about the thousands of species - like bats, bees, birds, and butterflies - that pollinated your food? If you do, you're a minority. Most of us don't think about - or don't even realize - the vast array of services nature provides us every day. We call this myriad of nature's benefits on which we fundamentally depend ecosystem services.

Ecosystem services range from the obvious - crops, fish, fresh water - to those that are harder to see - erosion regulation, carbon sequestration, and pest control. While people everywhere depend on nature, those in rural areas, and particularly the rural poor, are most directly dependent. Products from forests, oceans, and fields are an important source of rural income, and these goods are a safety net when other employment fails. Over a billion people depend on nature for employment - in other words, nearly half of all jobs worldwide come from the environment. Ecosystems, whether healthy or degraded, represent the wealth of the poor.

Unfortunately, the majority of the Earth's ecosystems aren't in peak form. The Millennium Ecosystem Assessment, an international report written by over a thousand experts released in 2005, found that over 60 percent of ecosystem services are in worse shape than they were 50 years ago. Where benefits have been seen, they're unevenly distributed and the poor have borne a heavy cost.

The destruction of nature has been fueled by numerous institutional and governance failures. One notable cause is market failures. Ecosystem services are rarely accounted for. If they are, it happens because those services - like timber, biofuels, and livestock - have a value in the market place. This is rare, though. Except for these few exceptions, economic markets provide incentives to producers to degrade ecosystems, rather than encourage ecosystem stewardship. As a result, in most cases people are unable to manage ecosystems in ways that sustain their capacity to provide services.
family in field
This needs to change. In the not too distant future, one can envision a revolution in the way land is managed, from farming for a single service that currently has market value to capturing the value of multiple services. A landowner in Indonesia may sell timber from his forest, but also credits for ecotourism, carbon sequestration, biodiversity, watershed protection, and flood protection. This broad vision is still only that - a vision. But there are governments and businesses that are starting to recognize the latent value of many ecosystem services, and these actors are willing to pay for the protection of those services.

This marks a new business opportunity, and many in the BoP are well-placed to capitalize on it. BoP markets are often rural. Some, like those in India and Indonesia, are in effect completely rural. Imagine the power if the BoP were able to market ecosystem services - those benefits people around the world are taking advantage of, but in most cases, not paying for. Imagine if the BoP were able to leverage real financial incentives to keep trees in the ground, to maintain a mangrove forest, to conserve water - thereby protecting the services all these natural systems provide. The poor, who have in large part been slighted by global economic growth and left to bear the burden of environmental degradation, would be able to receive money for the services they are maintaining by acting as stewards of nature.

Clearly, not all of the issues surrounding ecosystem degradation can be solved using a market approach. Developed countries must take steps to address unsustainable consumption patterns. Governments must end perverse subsidies that encourage overuse of resources and land degradation. Businesses must be held accountable for losses created by their environmental impacts. There are governance issues in many places that must be resolved before local populations can leverage nature's wealth.

But still, who better to understand and leverage nature's wealth than those living closest to it? As it turns out, business models are starting to pop up around the globe. In subsequent posts, I'll introduce you to some of them and start to outline why they're working.
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