Edward Barbier is the John S Bugas Professor of Economics at the University of Wyoming, and serves on the Advisory Board of TEEB. His recent books are Scarcity and Frontiers: How Economies Have Developed Through Natural Resource Exploitation and Capitalizing on Nature: Ecosystems as Natural Assets, both published by Cambridge University Press. Barbier’s blogs on environment and development issues are posted bi-monthly at Triple Crisis (http://triplecrisis.com/author/edward-barbier). Thank you to Ed for providing this blog for TEEB4me.

One of the most important changes in the global mind-set in recent years is the recognition that ecological scarcity is not just an environmental problem but also a critical development issue. The 2005 Millennium Ecosystem Assessment was a key landmark in fostering this changing mindset by showing that, over the past 50 years, ecosystems have been modified more rapidly and extensively than in any comparable period in human history, largely to meet rapidly growing demands for food, fresh water, timber, fiber and fuel. The result has been a considerable decline in the economic benefits provided by ecosystems. The key role of TEEB has been to provide an indication of the magnitude of the benefits that are impacted, and why they are valuable to all aspects of economic development decision-making, from the standpoint of government, business and the general public.

But perhaps the most important message to emerge from TEEB is that the wise management of ecosystems and the benefits they provide are essential to any development strategy for global poverty alleviation. In other words, the artificial dichotomy between environmental concerns and development objectives, such as poverty eradication, must end.

Poor people in developing countries will be most affected by the continuing loss of critical ecological services. The rural poor in developing regions tend to be clustered in areas of ecologically fragile land, which are already prone to degradation, water stress and poor soils. In addition, by 2019, half of the developing world will be in cities, and by 2050, 5.33 billion people, or 67% of the population in developed countries, will inhabit urban areas. This brisk pace of urbanization means that the growing populations in the cities will be confronted with increased congestion and pollution and rising energy, water and raw material demands. Although such environmental problems are similar to those faced by industrialized countries, the pace and scale of urban population growth in developing countries are likely to lead to more severe and acute health and welfare impacts.

As in the case of climate change, the link between ecological scarcity and poverty is well-established for some of the most critical environmental problems. For example, for the world’s poor, global water scarcity manifests itself as a water poverty problem. One in five people in the developing world lacks access to sufficient clean water, and about half the developing world’s population, 2.6 billion people, do not have access to basic sanitation. More than 660 million of the people without sanitation live on less than US$2 a day, and more than 385 million on less than US$1 a day. If worldwide economic development fails to tackle the emerging problem of global water scarcity, or if it makes the problem worse, then more and more of the world’s poor will be unable to afford improved access to clean water and sanitation.
Given the disproportionate impacts on the world poor of increasing ecological scarcity, the claim that perpetuating the same pattern of global economic growth will reduce poverty significantly is questionable. Although from 1981 to 2005 the number of extreme poor fell globally by slightly over 500 million, from 1.9 billion to 1.4 billion, it may be more difficult to make further inroads on reducing poverty simply through growing the world economy without addressing its underlying structural problems. One problem is the number of extreme poor keeps growing due to demographic trends. By 2015, there will be nearly 1 billion people living on less than US$1 a day and almost 3 billion living on less than US$2 a day. Improving the livelihoods of these populations may be an intractable problem unless their vulnerability to ecological scarcity is reduced. One reason is where many of the poor are located and how they survive. In general, about twice as many poor people live in rural than in urban areas in the developing world. Well over 600 million of the rural poor currently live on lands prone to degradation and water stress, and in upland areas, forest systems and drylands that are vulnerable to climatic and ecological disruptions.

A global economic development strategy that does not also address directly the problems of energy and water poverty, climate change and ecological risks will have little impact on improving the livelihoods of many of the world’s poor.

How to fund any new global environment and development strategy is, of course, a key issue. Conventional development assistance has reached its limits. But that does not mean that new sources of financing mechanisms cannot be devised. For example, a Gates Foundation report, Innovation With Impact: Financing 21st Century Development has estimated that even a small tax of 0.10% on equities and 0.05% on bonds could bring in about $48 billion from G20 member states. A variant of the FTT is a currency transaction tax (CTT), which is a charge applied to any foreign currency exchange transaction. Foreign exchange transactions are around US$ 800 trillion annually, which means that a CTT of only 0.05% could raise $400 billion in revenues for global public goods, such as aid to poor economies, climate change mitigation and ecosystem conservation. Such small tax rates would not deter financial speculation but they would ensure that the global financial sector contributes to a more sustainable and fairer world economy. Allocating 1% of sovereign wealth funds based on accumulated foreign exchange reserves in G20 countries would also raise at least $40 billion annually. UNCTAD suggests that developing economies invest 1% of their $3.5 trillion in sovereign wealth funds in regional development banks, which could in turn facilitate a wide range of sustainable development initiatives.

Ecological scarcity is not an environmental issue; it is a growing development challenge for the 21st century. There are numerous ways in which this challenge can be met through devising new sources of financing and funding mechanisms. The key question is whether the international community is willing to take up this challenge.