Natural capital can save cities billions

BLOOMBERG NEWS

The Hilton Hotel stands in the city centre in Nairobi, Kenya.

A swamp that filters sewage from Uganda’s capital Kampala is providing ammunition for Nobel Prize-winning economist Joseph Stiglitz and lawmakers from at least 86 nations seeking ways to save oceans and the atmosphere.

The Nakivubo swamp, where wastewater flows from the city toward Lake Victoria, provides as much as $1.75 million (R14.3m) a year in purification services. Without it, Kampala would need a sewage plant costing at least $2m a year, according to the International Union for Conservation of Nature (IUCN). The findings helped prod the city into protecting the area.

“Economic logic prevailed,” said Pavan Sukhdev, a former Deutsche Bank economist who in 2010 led a UN report on the Economics of Ecosystems and Biodiversity. “It’s going to cost $2m per year to do what the swamp was doing for free, and they don’t have that money.”

Lawmakers and economists converging on a UN conference in Rio de Janeiro, which began on Wednesday, are trying to convince 130 world leaders to place a value on nature, moving beyond gross domestic product (GDP) as the usual measure of national well-being.

From Uganda’s swamps to New York’s water supply in the Catskill Mountains, it’s already happening around the world.

Supported by Stiglitz and an estimate from the World Bank that “natural capital” stored in forests, reefs and glaciers is worth $44 trillion, they’re encouraging authorities to take into account the value of water retention, air-scrubbing and coastal protection provided by trees, soil and reefs.

When countries don’t consider their natural resources, “it’s like grading a corporation based on one day’s cash flow and forgetting to depreciate assets and other costs”, Stiglitz said in the World Bank’s report “A Smarter GDP “ this month.

If adopted, the measures could affect planning decisions for projects from new drinks-bottling plants to oil pipelines, power stations, mines and canals.

“It might sound like a hippie thing, to go beyond GDP,” EU climate commissioner Connie Hedegaard said. “It’s from the core economic establishment that the call is coming… that we have to measure our growth in a more modern and intelligent way. This is a very important paradigm shift we could decide in Rio.”

More than 50 000 delegates from 190 nations are due to attend the Rio+20 summit on sustainability marking the 20th anniversary of the first Earth Summit in the city. On the agenda are 80 pages of recommendations on how to preserve the diversity of plants, eradicate poverty, protect oceans and clean the air as the population swells 29 percent to 9 billion by 2050.

The devastation wrought by Hurricane Katrina on New Orleans in 2005 provides an example of how failure to account for natural capital can backfire, said Barry Gardiner, a former British environment minister pushing for what’s known in the UK as “GDP-plus”.

The US Congress in 1956 authorised construction of the Mississippi River Gulf Outlet (MRGO), about a 122km shipping channel that cleared about 7 851 hectares of wetlands into open water for ships. The US Army Corps of Engineers project allowed salty water to encroach on surrounding marshes, degrading a further 242 820ha of wetlands surrounding the city, according to the National Wildlife Federation.

The loss of swamps destroyed a buffer for storm surges that had protected New Orleans from hurricanes, according to a 2009 study in the Journal of Coastal Research led by Gary Shaffer, a biology professor at Southeastern Louisiana University. Without the MRGO, the potential for water to breach levees protecting the city would have been cut 80 percent, according to the study.

Rene Poche, a spokesman for the Army Corps of Engineers, declined to comment, citing “ongoing litigation”.

In Rio this weekend, executives from companies with annual sales totalling more than $350bn, including Nestle, Unilever and SABmiller pledged to set targets and develop plans to protect natural capital under a University of Cambridge programme. Chief executives of 37 banks, funds and insurers, said they would account for their impacts on natural capital. – Alex Morales from Bloomberg