Wednesday, April 2, 2008

Free Market Works to Save Forest

An investment group purchased wetlands in order to make money by conserving the resources:

The group, called Ecosystem Investment Partners, is at the tip of a paradigm shift that is turning one of the bedrock notions of free market economics on its head. “The fundamental pattern has to do with supply and demand,” says Adam Davis, a business sustainability consultant and one of EIP’s principals. “There used to be very few of us people out here on Earth compared to the size of natural systems. But with 6.5 billion of us, and with our consumption and production of resources per person going up and up, there’s a new relationship of supply and demand. Ultimately, it’s that new relationship that creates the financial value of natural systems.”


Some environmentalists balk at the new approach, arguing that moral suasion should be enough. They also object to the commoditization of nature and are repelled by the idea that the same sector of society that has historically destroyed the environment, the business sector, will now be the primary beneficiary of efforts to restore it. Proponents, however, say they are just being practical. “From a pragmatic point-of-view, all the indicators are going to continue to go down in terms of planetary health unless you price things into our economic system,” says BSR’s Stewart. “It is scary,” says Gretchen Daily. “It’s economic forces that have taken us to the brink. But we need a force that powerful to bring us away from that brink.”

The heart of environmentalism is the idea that nature is valuable. It turns out it is not only valuable in the "priceless" sort of way, but sometimes in real dollars. Businesses and environmental groups are finding that preserving nature is in the interest of their bottom line. The article above is just one example. The company I work for bought a huge plot of land that the city wanted to preserve. Instead of restricting growth, the city sold it for cheap, with the agreement that the company would only develop a small percentage of the land. This was also in the interest of the company, who estimated that the unique work environment they could create would attract better workers, and the land would pay for itself in a matter of years in increased productivity. This company also put in geothermal heating that not only protects the environment but also will be a good long-term investment.

While the issue of carbon credits that this article also brings up is complicated, that will have to be a post for another day. I agree with the basic premise that since the environment is valuable, it is in the interest of the free market to preserve it.

I'll bring up one more point that the article didn't get to. If we truly are facing a situation were natural resources are going to become scarce in the future, that means that those resources will become more valuable. Scarcity increases value. Considering that, wouldn't it be a great business move to buy up a whole lot of natural resources, and then do nothing with them? They will be worth a lot more in the future, right? Although the article left it to our imagination to figure out exactly how they planned to make money, it seems to me this is just what the Ecosystem Investment Partners did.

This is the first of many posts I plan to write how free-market environmentalism is, or could be, at work to save our environment. All of these posts will have the label, in the news.

No comments: