Why put a price tag on nature?

Photo : Outdoor Recreation Council of BC

As the existence of our world relies on nature, some argue that nature should be viewed as priceless and, therefore, there is no need for nature valuation. At the same time there is a growing number of nature valuation initiatives. So, why do we financially value nature?

As management consultant and writer Peter Drucker said, “You can’t manage what you can’t measure.” To better manage (and protect) nature we have to, e.g., measure what the state of the environment is, whether the measures put in place to protect nature are working, what we can optimize, and what we should do next. The state of nature and the outcome of applied measures is usually measured in biophysical units. But how to compare, for example, biodiversity indexes, the amount of water retained, cooling capacity, etc.? If we want to use our limited resources wisely, we should compare where they will bring the most benefits, which means we must also compare the costs of environmental protection with the benefits of these investments. Nevertheless, only things expressed in the same units can be compared. Hence, to compare different kinds of benefits (and costs), nature’s benefits are expressed in monetary terms. One of the most important reasons why we conduct economic valuations is to be able to use these values in decision-making. Without the economic valuation of nature, nature’s benefits would be assigned zero value.

It should be noted that economic valuation is based on instrumental anthropocentric utilitarian values. However, economists are aware of other values such as intrinsic, biocentric (or ecocentric) and deontological. Few economists believe that information about the economic value of nature’s benefits should be the only criterion underpinning decision-making; nearly all economists believe that it should play an important role in evaluating environmental regulation.