UVM's Gund Institute

Seven Days published an article today by Ken Picard entitled 'Earth Economics: UVM's Gund Institute puts a price tag on nature'. I love what the Gund Institute has accomplished thus far and I always enjoy reading about their achievements. Here is the article:

Imagine assigning a monetary value to bees pollinating a meadow. Or assessing the economic value of wetlands that provide critical habitat to endangered species and prevent coastal communities from being flooded. Right now, a logging company can put a price tag on a forest's uncut timber, and a real estate agent can assess the fair market value of undeveloped fields. But neither can measure, in actual dollars and cents, what those undisturbed ecosystems are worth in terms of the human benefits they already provide.

That ability will soon be at our fingertips. Experts at the University of Vermont's Gund Institute for Ecological Economics have launched an ambitious new project to assign monetary values to all the world's ecosystems based on the natural functions they perform -- from regulating climate to purifying water, replenishing soil to providing recreational opportunities. The science of "ecosystem services" is revolutionizing the field of conservation by giving environmentalists and land-use planners tools for factoring nature into the cost of doing business. Ultimately, they hope, it will marshal the forces of the marketplace to encourage sustainable human activities and discourage unsustainable ones.

The project is the brainchild of Robert Costanza, founder and director of the Gund Institute. In May 1997, he published a now-famous article in the journal Nature in which he argues that, because the Earth's natural life-support systems contribute to human welfare, they represent a significant portion of the world's total economic worth. Costanza estimates the combined value of the world's ecosystems at about $33 trillion per year, in current U.S. dollars. For comparison, the combined gross national product of all the world's countries totals about $18 trillion per year.

Historically, economists and environmentalists have been averse to assigning monetary values to those things often described as "God's creation," Constanza explains. The traditional business model holds that, because such resources as clean air and clean water aren't manufactured or owned by anyone and can be accessed for little or no cost, they have no monetary worth. The benefits they provide -- to companies, cities, states or countries -- are considered "externalities" that needn't be factored into anyone's bottom line.

The traditional model of environmentalism, on the other hand, holds that nature has its own intrinsic worth. Often described as "priceless," the biosphere's social, cultural and spiritual value cannot be quantified in purely economic terms. This approach assumes that it's perilous to put a monetary value on, say, Lake Champlain or Yosemite National Park, because they would then be viewed as commodities, subject to the whims of the marketplace and available for buying and selling.

Constanza isn't advocating the privatization of nature. But the problem, he points out, is that neither approach to nature adequately accounts for the fact that ecosystems are affected by human activities all the time -- usually to their detriment. Assigning an ecosystem a monetary value of zero or infinity makes it impossible to calculate its financial impact on the human economy. As Costanza puts it, "Just because it's hard to measure these things doesn't mean we should leave them out. In fact, those are just the things we should pay the most attention to."

The goal of the Gund Institute's new project, he explains, is to reframe the entire debate by capturing that economic impact so it can be factored into environmental and land-use decisions. Thanks to a recent $813,000 grant from the Gordon and Betty Moore Foundation, the Institute has begun collecting data, building computer models, and compiling scientific research from around the world to begin assigning those values. Eventually, anyone with access to the Internet will be able to pick a spot on Earth -- a tract of wilderness, a watershed, a state, even the entire planet -- and calculate the combined value of that area's ecosystem services.

Drawing from the expertise of hundreds, if not thousands, of scientists, economists and researchers around the globe, the project is not some abstract academic exercise with no real-world applications. The modeling and valuation of ecosystem services are already being used for day-to-day functions, from New Jersey to New Zealand.

Azur Moulaert, a native of Costa Rica, is manager of the Gund Institute's ecosystem services project. In his home country, he explains, operators of hydroelectric dams spend millions of dollars every few years dredging the reservoirs when their sediment levels get too high. It is therefore in the country's economic interest to encourage landowners upstream to conserve forested areas that slow sediment runoff.

In 1996 the government of Costa Rica set up a fund to pay fees to small and medium-sized landowners who conserve or replant forests in order to protect the country's water resources. Such payments also encourage the protection of that country's biodiversity and scenic beauty, which have economic values measurable in such things as ecotourism dollars.

The problem, Moulaert notes, is that the Costa Rican government currently makes the same payment to all landowners who conserve or replant forests regardless of their land's location or its long-term benefit to the watershed. The Gund Institute's ecosystem services computer model is now helping Costa Rica identify exactly which areas should be targeted for conservation. The same goes for other ecosystem services performed by forests, such as biodiversity protection and carbon sequestration, which slows the effects of global warming.

Similarly, the state of New Jersey was recently involved in a lawsuit in which the judge ruled, in effect, that natural areas have no intrinsic value and only increase in value when they are developed. The state disagreed, but didn't have a methodology to show the court exactly what those areas were worth in economic terms. In response, the New Jersey Department of Environmental Protection hired the Gund Institute to help measure the state's natural capital and quantify the value of all its ecosystem services. The recently completed project gives the state a powerful new tool for assessing the true costs and benefits of proposed developments, from strip malls to condominiums to new arboretums.

Thus far, the project planners haven't determined what should be the smallest area on which to place a value. Says Moulaert, "The price of an ivory-billed woodpecker or an endangered turtle is not in there. But the prices of their ecosystems are." Likewise, there isn't a monetary value for a hive of honeybees, though there is one for the ecosystem service of pollinating gardens and farmlands.

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Assigning a dollar value tO ecosystem services isn't a new idea, Costanza notes. In the past, most valuations of nature were based on the concept of the public's "willingness to pay." Researchers would ask people how much they'd be willing to invest in a particular service. Some ecosystem services aren't difficult to conceptualize in monetary terms. For example, people can estimate what they'd be willing to pay to hike the Long Trail or visit Adirondack Park.

But other ecosystem services are far too technical or abstract for most laypeople to assign them a meaningful value. It would be hard for residents of, say, a low-lying coastal area to fully estimate the value of a hectare of wetlands that protects them from hurricane storm surges. Even harder would be assessing the value of such services as "nutrient cycling" and "soil formation," which are beyond most people's understanding even if they indirectly benefit from them.

To tackle these and other issues, in October the Gund Institute will bring experts to Burlington from around the world to participate in a weeklong conference to discuss this valuing process. By 2007, the goal is to have mapped the entire planet and have a working computer model that anyone can access online. For an idea of what that might look like, says Costanza, "think Google Earth."

Ultimately, anyone involved in land-use planning will be able to download the Gund Institute's data and computer models, enter a zip code or other geographic description, and then calculate the current value of their own region's various ecosystem services, based on how similar ecosystems are valued. As in the human marketplace, the values of those natural areas will fluctuate based upon the abundance or scarcity of similar ecosystems.

Academically, the idea isn't as radical or controversial as it might seem, Costanza argues, since economists have long acknowledged the concept of externalities. "It's just politically controversial because you're now saying, 'Here's something that you've been getting for free. This is something you've been stealing from the public, and now you've got to pay for it,'" he adds.

And, as Moulaert points out, such modeling could also be useful for scrutinizing environmentalists' own proposed solutions to problems. For example, evaluating the ecological feasibility of biodiesel by factoring all of its benefits and costs into the equation. Likewise, such a system could be used to create "ecological tax reform," in which those human activities that benefit the ecosystem are rewarded and those that harm it are discouraged.

"Right now, people are not getting any positive benefit for the services their ecosystems are providing," Costanza notes, "and they're not paying the cost of the damages to other people's ecosystems."

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The Gund Institute was originally founded in 1991 as the Institute for Ecological Economics at the University of Maryland. In 2002, it was moved to UVM's Rubenstein School of Environment and Natural Resources and renamed the Gund Institute, after its major benefactors, the Gund family of Cleveland, Ohio.

The Gund Institute has a unique relationship with UVM, in that its faculty aren't appointed to the Institute itself but are affiliated with other departments all around the university. The goal, Costanza explains, is to "build bridges" among the various disciplines at the university, while offering classes that are largely problem-solving endeavors and not simply "ivory-tower" exercises.

For example, the Gund Institute held a two-week course entitled "Earth Inc." in which students at UVM and Vermont Law School evaluated the planet as though it were a corporation, created bylaws and articles of incorporation, then discussed the current state of the corporation's "assets" -- its air, water, forests, soil, oceans, etc. Eventually, Earth Inc. will write a shareholders' report. As Costanza told the magazine Adbusters in September 2004, if Planet Earth truly were a corporation, "We would definitely fire the CEO."

Ultimately, the ecosystem services project will provide a comprehensive cost-accounting system for such a corporation, which, unlike current economic models, is fully transparent and won't send Earth Inc. the way of Enron.