We talk a lot about climate change and reducing carbon emissions, but perhaps less about the fact that there is also an ecological crisis. Although a historic agreement was reached at the COP15 biodiversity summit last December, it received less attention than the COP27 climate summit held one month earlier. Albeit the issue of biodiversity loss is at least as urgent as that of climate change.
We talked to Dr. Zsuzsanna Marjainé Szerényi, Professor at the Corvinus, Institute of Sustainable Development, about the economic evaluation of biodiversity. The interview has been edited for the sake of length and easier understanding.
At first glance, you might think that biodiversity loss is more of a problem for a science university, because it is a biological issue. How does Corvinus relate to this?
It’s a good question because we can only really approach these problems if we are aware of the scientific background, i.e. if we know what is happening in nature itself. This is not something an economist really understands.
So, economists have to get their inputs from other professions. Nature is a very complex system, if a small change happens in one part of it, it affects the rest. If it’s positive, we usually don’t notice it, if it’s negative, we notice it all the more.
Let me give you an example. If there are enough pollinating insects, everyone takes it for granted. But there are severe economic consequences if biodiversity is altered. Of course, the effect is not always as direct as between the reduced number of pollinating insects and reduced yields but can also be indirect. We have so much to thank nature for, which remains hidden and unconscious.
How can the links between ecological and economic systems be made more visible?
First, we need to be aware of the situation. The state of different habitats, different species, how agriculture fits in with the landscape’s characteristics and traditions, and economists can only get involved at the end.
When we know everything about the environment, the habitat, the plants and animals that live there, we can tell how much we benefit from keeping it as it is or how much we lose by changing the community. For example, we can answer questions such as whether it is worth converting an area into agricultural land or whether it is worth letting it revert to its original state.
The fundamental question is how to capture this from an economic point of view, which in most cases means evaluation in monetary terms. For example, deterioration in air quality is quite easy to quantify because certain diseases are linked to it. The cost of illnesses, the number of days spent in hospital, the amount of money spent on medicines, all quantify the economic damage caused by an environmental problem. But the function of the forest, for example, to go out there and regain our energy while listening to the birdsong, is much harder to capture by economic means.
The concept of ecosystem services is used to capture the impacts produced by ecosystems. How does this concept help measure the often intangible value of biodiversity?
The concept of ecosystem services has been in the public domain since the early 2000s. By looking at nature through ecosystem services, the benefits and harms of the processes that take place there become much more concrete. For example, we can assess the carbon sink effect of forests, but we can also look for valuation methods for pollination.
Depending on how tangible the ecosystem service is, different methods can be used. For a forest, I can measure, for example, how many tourists have visited it, how many hours they have spent there, what they have travelled to the area for, or how much money they have spent to walk in that forest. Provisioning services are perhaps the most visible, such as the timber, herbs or mushrooms we collect. These are easier to evaluate than cultural services, which include recreation.
The hardest thing to evaluate is the regulating services, even though these services play the biggest role in our lives. These include carbon storage, oxygen production, the breakdown of pollutants in water, flood control, water retention. Nature provides a huge variety of regulating services, but these are the hardest to get at. These are tricky services because they show very little, we know very little about them, and that is why their economic evaluation is much more difficult.
As far as I understand, these are the services that work well until we know about them.
It is possible, yes. Until we realise what they are capable of, we leave them alone. But if we realise that they could be even more useful, we might change them in the wrong direction. Or we only notice their role when we are already in big trouble.
How do ecosystem services appear at Corvinus?
Students will be introduced to them for the first time under the first-year subject called Global Sustainability Challenges. What we want to show here is that when we evaluate something in economic terms, in monetary terms, it does not necessarily mean that we are enemies of nature. We actually do not want to devalue it, we want to give it more value.
Nature is often said to be invaluable, but that doesn’t help. If everything was considered to be priceless, no economic activity could be carried out, since nature could not be transformed. The Corvinus building, for example, should not be here, because only then could we have preserved the original habitat.
Were there specific projects focusing on this evaluation?
We were involved in a project led by the Ministry of Agriculture, with many research institutes working together. Among others, twelve ecosystem services were assessed together with colleagues from the Centre for Ecological Research of Vácrátót, the Institute for Agricultural Economics and the Institute of Soil Research.
In this research project we mapped the state of the ecosystem in Hungary. Three of the services were also subject to an economic valuation, namely climate change risk reduction, flood risk reduction and hiking in nature.
It was not easy. For me, perhaps the biggest challenge was to reduce flood risk, because there are many factors involved and many different methods. Counting always requires data, which is not always readily available.
Since then, there have been several publications on the subject, including an international article on hiking in nature. I worked with Anna Szécsi on this project, but Anna and Zsófia Nemes also published an article on carbon pricing.
Ed: for more information on the project, see the Ecosystem basemap site.
How can these scientific results be used in decisions at different levels?
They can be used at all levels. If a company knew how its activities affect wildlife, habitats, air pollution data or, say, water pollution, it could calculate the negative impact of its activities on society and nature in monetary terms.
At national level, Hungary also has an obligation to register the different ecosystem services. The science side plays a big part, but it would be even better if we were aware of the economics side as well. We need to know where we stand, because very often we don’t even know what state our habitats are in, what negative processes have started and where they are.
A statistical accounting system is also needed. Natural capital also constitutes the wealth of a country. If we knew the wealth represented by each country’s natural capital, we could make much better decisions. For example, we could calculate what to use a particular area for, such as whether to continue farming or return it to nature.
The challenge for the future is to work out how to include the ecosystem services of habitats in the system of accounts of natural wealth beyond the quantity of minerals or timber.
So far, we have addressed mainly systemic evaluation. Does understanding natural systems as ecosystem services have an impact at the individual level?
What you ask is extremely difficult, and I’ll tell you why. If we stick to ecosystem services, we see that they are very diverse, but finite in number. I could make a decent list of roughly what services a habitat can provide.
At first glance, the answer is simple: protect them. The problem is that by the way we live, by the way we work, we use a certain infrastructure. And we cannot produce this without disturbing biodiversity and habitats. That’s why it’s important that we all take just a little bit more care and be more polite to nature. We should not interfere when not necessary, if we go into a forest, we should not shout, we should follow the beaten path, we should not trample upon small plants on the soil. The problem is systemic, of course, and many open issues need to be tackled systemically, but with a little bit of attention, everyone can do something and everyone should know that they have a role to play.