“If we were running a business with the biosphere as our major asset, we would not allow it to depreciate. We would ensure that all necessary repairs and maintenance were carried out on a regular basis.”
Prof. Alan Malcolm, Chief Scientific Advisor, Institute of Biology, IUPAC
Does investing in natural capital make economic sense? Increasingly, ecological restoration – and more broadly, the restoration of renewable natural capital– are seen as important targets for public and private spending to complement manmade engineering solutions. Here at TEEB we have found that by carefully weighing the costs versus the benefits, ecological restoration can offer a significant saving to local and national governments as an alternative means to man-made solutions. This can be seen through the restoration of mangroves, as storm protection versus manmade dykes, or the restoration of forests to rejuvenate watersheds or can be part of local projects to restore an ecosystem which can have multiple benefits for the livelihood of the community.
What do we mean by restoration?1
Ecological restoration is defined as “the process of assisting the recovery of an ecosystem that has been degraded, damaged, or destroyed” and is “intended to repair ecosystems with respect to their health, integrity, and self-sustainability” (International Primer on Ecological Restoration, published by the Society for Ecological Restoration (SER) International Science and Policy Working Group 2004). In a broader context, the ultimate goal of ecological restoration, according to the SER Primer, is to recover resilient ecosystems that are not only self-sustaining with respect to structure, species composition and functionality but also integrated into larger landscapes and congenial to ‘low impact’ human activities.
The concept of restoring natural capital is broader still. ‘Natural capital’ refers to the components of nature that can be linked directly or indirectly with human welfare. In addition to traditional natural resources such as timber, water, and energy and mineral reserves, it also includes biodiversity, endangered species and the ecosystems which perform ecological services.
According to the Millennium Ecosystem Assessment2 , Natural Capital is one of four types of capital that also include Manufactured Capital (machines, tools, buildings, and infrastructure), Human Capital (mental and physical health, education, motivation and work skills) and Social Capital (stocks of social trust, norms and networks that people can draw upon to solve common problems and create social cohesion).
Restoring renewable and cultivated Natural Capital (Restoring Natural Capital – RNC) includes “any activity that integrates investment in and replenishment of Natural Capital stocks to improve the flows of ecosystem goods and services, while enhancing all aspects of human wellbeing”3 . Like ecological restoration, RNC aims to improve the health, integrity and self-sustainability of ecosystems for all living organisms. However, it also focuses on defining and maximising the value and effort of ecological restoration for the benefit of people, thereby helping to mainstream it into daily social and economic activities.
In sum, RNC focuses on achieving both the replenishment of Natural Capital stocks and the improvement in human welfare, all at the landscape or regional scale.
Why should we restore our ecosystems?
There are many reasons why restoration can be a good idea, although careful consideration of cost versus benefit needs to be calculated. Letting ecosystems degrade can exacerbate the devastating impact of natural disasters. Many cases have shown that deforestation, destruction of mangroves and coral reefs or wetland drainage has significantly increased the vulnerability of regions to natural hazards and the level of damage caused.4 Hazard protection through ecological restoration tends to yield economically beneficial results: The damage potential of storms for coastal areas, floods from rivers and landslides can be considerably reduced by a combination of careful land use planning and maintenance or restoration of ecosystems to enhance buffering capacity. In Vietnam, for example, mangrove re-planting by volunteers cost US$ 1.1 million but saved US$ 7.3 million annual expenditure on dyke maintenance and benefited the livelihoods of an estimated 7,500 families in terms of planting and protection.5 Other opportunities include coastal area restoration activities implemented after the catastrophic 2004 tsunami in the Indian Ocean, and Cyclone Nargis in 2008. The goal is to improve the buffering function of coral reefs and mangroves for future events.6
Not all that is lost can be restored
The timescale required for ecosystem restoration varies considerably. Full restoration is not always feasible for many ecosystems destroyed or degraded beyond a certain point. Even the more realistic goal of rehabilitation (recovery to an acceptable state of ecosystem resilience and performance) tends to be a slow process though recovery may be quick in some instances.7
Costs versus benefits
One way to decide whether investments are worthwhile from an economic perspective is to compare the costs of services provided by ecosystems with those of technically-supplied services. The most famous example of this type of cost-effectiveness estimation is New York City’s decision to protect and restore the Catskill-Delaware Watershed. By purchasing and restoring the Catskill watershed for US$ 2 billion, New York secured its source of drinking water. A comparable pre-treatment plant would have cost US$ 7 billion.8
Cost effectiveness analysis often focuses only on one particular ecosystem service e.g. in the Catskills case, watershed protection and restoration costs were more than compensated by the single service of water purification. However, investing in natural capital enhancement becomes even more economically attractive if the multitude of services that healthy ecosystems provide is also taken into account (e.g. climate regulation, food and fibre provision, hazard regulation). This calls for identification and valuation of the broad range of benefits of natural capital investment in order to adequately compare costs and benefits.
Investing in natural capital does not only concern the environmental sector. Other policy sectors can also reap benefits from public investment to ensure or enhance the delivery of services provided by Natural Capital. Considering all benefits provided by ecosystems can make investments worthwhile whereas approaches focused on single sectors and services may not.
A wide range of sectors – especially those dealing with natural hazard prevention, natural resource management, planning, water provision, alternative energy sources, waste management, agriculture, transport, tourism or social affairs – can gain from explicitly considering and valuing the services provided by Natural Capital. Investing in natural capital can thus create additional values, especially where natural capital has itself become the limiting factor to economic development.9
Restoration and PES
Innovative and integrated regional or landscape scale programmes to restore or rehabilitate degraded natural systems can make use of instruments such as payments for ecosystems services (PES).10 In Ecuador, two PES funded restoration programmes include the six-year old Pimampiro municipal watershed protection scheme and the 13-year old PROFAFOR carbon-sequestration programme.11 ‘Pimampiro’ is mostly about forest conservation, but it has also achieved some abandonment of marginal lands that have grown back into old fallows, enrolled in the scheme.
Restoration Success Stories
Success stories exist, such as providing nurseries for fish in mangroves, reconstructing natural wetlands for water storage, restoring entire forest ecosystems after centuries of overuse and reintroducing valuable species e.g. sturgeon in the Baltic Sea for replenishing fisheries:
Restoration of Salmon Habitats USA: Investment in restoration of two acres of salmon habitat in North Wind Weirs proved critical. The decision makers’ options were either to convert the prime location to industrial use, or to conserve and restore critical salmon habitat.
A simple analysis of the direct costs and benefits on-site showed that the option of restoring habitat did not break even. However, the off-site impacts, in particular the critical nature of this area for salmon restoration throughout the entire catchment, make this option a ‘bargain’. Treating these two acres as the constraining factor in restoration efforts, it would be worth paying up to US$ 47 million per hectare to secure the restoration. Although the opportunity cost of the land is potentially high, the area is argued to be critical natural capital. Industry could be located elsewhere, whereas salmon habitat must be situated where freshwater meets tidal salt water.12
Restoration of grassland, South Africa: In the Drakensberg Mountains, local communities depend heavily on various ecosystem services for their livelihoods. By restoring degraded grasslands and riparian zones and changing the regimes for fire management and grazing, early results suggest that it may be possible to increase base water flows during low-flow periods (i.e. winter months when communities are the most vulnerable to not having access to any other source of water) by an additional 3.9 million m3/year.
Restoration and improved land use management should also reduce sediment load by 4.9 million m3/year. While the sale value of the water is approximately € 250,000 per year, the economic value added of the additional water is equal to € 2.5 million per year. The sediment reduction saves € 1.5 million per year in costs, while the value of the additional carbon sequestration is € 2 million per year. These benefits are a result of an investment in restoration that is estimated to cost € 3.6 million over seven years and which will have annual management costs of € 800,000 per year. The necessary ongoing catchment management will create 310 permanent jobs, while about 2.5 million person-days of work will be created during the restoration phase.13
Restoring and protecting areas, Bangladesh: The wetland of Hail Haor, in north-east Bangladesh, provides fish and aquatic plants that are essential sources of food and income for local communities. Severe over-exploitation put the annual benefits of US$ 8 million at risk. This motivated local and regional efforts to improve wetland management and install protection zones. Protecting just 100 ha of wetland, by restoring some critical habitats and establishing closed seasons for fishing, contributed to increased fish catches across the 13,000 ha of the entire Hail Hoar wetland by over 80% and local fish consumption by 45%.14
Are you part of a restoration project? Or do you have an idea about restoring a local ecosystem in your area? Tell us about it either by leaving a comment below or joining the discussion on Facebook and Twitter.
For more information on retoration you can visit IUCN’s page on the Society for Ecosystem Restoration. You can also check out the Global Restoration Network and the Earth Island Institute to get more involved, or for success stories and link have a look at Managing Wholes.
- Taken from the TEEB for National Policy Makers Report, Chapter 9 [↩]
- MA – Millennium Ecosystem Assessment (2003) Ecosystems and human well-being. A framework for assessment. Island Press, Washington, D.C. [↩]
- Aronson, J.; Milton, S. J. and Blignaut, J. N. (2007) Restoring natural capital: definitions and rationale. In: Aronson, J.; Milton, S. J. and Blignaut, J. N. (eds.) Restoring natural capital: science, business and practice. Island Press, Washington, D.C.: 3-8. [↩]
- Harakunarak, A. and Aksornkoae, S. (2005) Life-saving belts: Post-tsunami reassessment of mangrove ecosystem values and management in Thailand. Tropical Coasts, July: 48-55
Barbier, E. B. (2007) Valuing ecosystem services as productive inputs. Economic Policy 22(49): 178-229. [↩]
- IFRC – International Federation of Red Cross and Red Crescent Societies (2002) World Disasters Report 2002. Eurospan-London. URL: http://www.grida.no/publications/et/ep3/page/2610.aspx (last access Nov 20, 2009). [↩]
- IUCN – International Union for the Conservation of Nature (2006) Ecosystems, livelyhoods and disasters – An integrated approach to disaster risk management. Ecosystem Management Series 4, 57.
UNEP–WCMC (2006) Shoreline protection and other ecosystem services from mangroves and coral reefs. UNEP–WCMC Biodiversity Series No. 24. URL: http://www.unep-wcmc.org/resources/publications/UNEP_WCMC_bio_series/24.cfm (last accessNov 20, 2009). [↩]
- Jones, H. P. and Schmitz, O. J. (2009) Rapid recovery of damaged ecosystems. PLoS One: e5653. [↩]
- Elliman, K. and Berry, N. (2007) Protecting and restoring natural capital in New York City’s Watersheds to safeguard water. In Aronson, J.; Milton, S. J.; Blignaut, J. N. (eds.). Restoring Natural Capital: Science, Business, and Practice. Island Press, Washington D.C.: 208-215. [↩]
- Herman Daly quoted in Aronson, J.; Blignaut, J. N.; Milton, S. J. and Clewell, A. F. (2006) Natural capital: the limiting factor. Ecological Engineering 28: 1-5. [↩]
- Blignaut, J. N.; Aronson, J.; Mander, M.; and Marais, C. (2008) Investing in natural capital and economic development: South Africa’s Drakensberg Mountains. Ecological Restoration 26: 143-150. [↩]
- Wunder, S. and Albán, M. (2008) Decentralized payments for environmental services: The cases of Pimampiro and PROFAFOR in Ecuador. Ecological Economics 65: 685-698. [↩]
- TEEB for Local and Regional Policy Makers, Chapter 2, Box 2.4 “Critical value-restoration of salmon habitats, USA” Source: Batker, D., Barclay, E., Boumans, R. and Hathaway, T. (2005) ‘Ecosystem Services Enhanced by Salmon Habitat Conservation in the Green/Duwamish and Central Puget Sound Watershed’, Asia Pacific Environmental Exchange. URL: www.comfortclubvip.com/FileLibrary/file/Reports/WRIA_9_Ecosystem_Service_Analysis.pdf [↩]
- TEEB for National Policy Makers, Chapter 9, Box 9.7 “Socio-economic benefits from grassland restoration projects, South Africa.” Source: MDTP – Maloti-Drakensberg Transfrontier Project (2008) Payment for Ecosystem Services: Developing an Ecosystem Services Trading Model for the Mnweni/Cathedral Peak and Eastern Cape Drakensberg Areas. INR Report IR281. Development Bank of Southern Africa, Department of Water Affairs and Forestry, Department of Environment Affairs and Tourism, Ezemvelo KZN Wildlife, South Africa. URL: http://www.futureworks.co.za/maloti_drakensberg_pes.htm and www.inr.org.za (last access Nov 20, 2009). [↩]
- TEEB for Local and Regional Policy Makers, Chapter 5, Box 5.6 “The benefits of protecting critical habitat in Bangladesh” Source: TEEBcase by Tasneem Balasinorwala and Paul Thompson (2010),Wetland protection and restoration increases yields, Bangladesh, available at: http://www.eea.europa.eu/teeb/wetland-protection-and-restoration-increases.pdf Case study references: Thompson, P.M (2008). Conserving and Restoring the Benefits from Bangladesh Wetlands [↩]