Climate and environmental governance: why the bioeconomy could be bigger than the internet

At last month’s World Economic Forum annual meeting in Davos, Coca-Cola’s chief executive floated the idea of ​​putting a global price on water. James Quincey, whose company uses more than 300 billion liters of water each year, called for water to be included in the climate change discussion. “If we could value water the same way we could value carbon, then the market will be the mechanism that drives the results, he told a panel discussion.

It’s not just chatter. Companies and governments now understand that the use of natural resources has a high cost, both for the planet and for our future. To use an extreme example, if we use all of our fresh water to make soft drinks, it will become impossible to grow the food we need to survive. And as climate change drives global temperatures higher, it will become increasingly important to preserve our natural biodiversity.

To value and protect our planet’s natural assets, we must ensure that the true cost of nature is reflected in the cost of doing business. It means moving from our classic extractive economy to a new biospheric economy, or the bioeconomy. But it would be wrong to think of this transition simply in terms of additional costs for companies, it is also a historic opportunity. We believe that the development of the bioeconomy has the potential to more than double the production of our traditional anthropogenic economy.

The evolution of carbon credits shows how this can work. Carbon credits were first introduced nearly 25 years ago as part of the Clean Development Mechanism (CDM) under the Kyoto Protocol, the United Nations’ first international agreement to reduce CO2 emissions. . Since then, the focus has shifted to economic reward structures, first incentivizing the protection of standing forests, then creating carbon credits from avoided deforestation and degradation with the launch of the REDD+ framework and the growth of voluntary carbon credit markets.

This has created a financial instrument that values ​​nature and allows it to be included in our economy. Thanks to carbon credits, nature now participates in business decisions and economic activity around the world.

The other invisible hand

Nature, of course, has long been an active part of our economy, but one that has received no financial rewards. When Adam Smith described the invisible hand as a metaphor for markets and self-interested individuals operating interdependently, he ignored the fact that hands tend to come in pairs: there is another invisible hand in our economic system under the shape of the services we receive. of nature.

The value of this contribution is significant. The Organization for Economic Co-operation and Development (OECD) in its 2019 report, “Biodiversity: Financing and the Economic and Commercial Business Case”, estimated that the real financial value of the subsidy for nature, provided to the economy through processes such as crop pollination, water purification, flood protection and carbon sequestration, amounted to US$125 trillion to US$140 trillion. To put that figure into context, it represents 160% of the global GDP of US$87.61 trillion in 2019.

This subsidy from nature is inherent in our economic system, but the risks remain dangerously undervalued.

Biodiversity loss threatens the flow of services we receive from nature. For example, damage to complex ecosystems can threaten insect populations that are essential to the pollination cycle, which sustains our cultivation of fruits and nuts to eat and cotton to wear.

Creating economic instruments to value, and in turn protect, the biodiversity systems that provide these services represents a simple model that allows us to build on our existing methodologies and recognize nature as a valuable participant in our economic activities. . Combined with carbon credits, biodiversity credits could radically change the economic incentives to protect our oceans and forests, making conservation an attractive business proposition.

bigger than the internet

Our forests and oceans are a treasure trove of biological and ethological information, and they deserve to be valued as part of our intellectual capital. From studying movements within ant colonies to improving self-driving vehicle algorithms in collision avoidance, to the venom of the Malayan Adder used to create new drugs to reverse symptoms in stroke victims, nature brings already making huge contributions to our innovation economy. According to the National Cancer Institute in the United States, 70% of the plants useful in the treatment of cancer are found only in tropical forests.

Recognizing the value of the biosphere presents a potential economic opportunity that will eclipse what we have experienced in the internet age. Today more than ever, it is vital for us to develop the methodologies and economic instruments that allow us to move towards the bioeconomy.

Going back to the water example, a better understanding of the implications of water use would also ensure that the response to climate change does not create more problems in the future. Electric batteries, for example, rely heavily on lithium mining, a water-intensive process that threatens to disrupt agriculture and deplete water resources in producing countries.

Economic instruments that value the services we receive from nature are only the beginning of the journey. By valuing forests, lakes and oceans for their contribution to our economy, we can move from a wasteful and non-renewable approach to natural resources to an economy that values ​​and nurtures the world’s resources and leverages nature as a driver of growth. ‘innovation. It is a proposition with much higher financial rewards.

Dorjee Sun is the CEO of Bioeconomy, a company actively developing carbon credits and other nature valuation instruments with landowners in Southeast Asia and sub-Saharan Africa. This column is part of a series coordinated by Climate Governance Malaysia, the national chapter of the World Economic Forum’s Climate Governance Initiative (CGI). The CGI aims to help boards fulfill their duty of care as long-term stewards of the companies they oversee, in particular to ensure that climate risks and opportunities are properly considered. .

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