Is Cost Benefit Analysis of our natural environment ‘a slippery slope’?

Helpful revision notes provided by a new government report yesterday, attempting to put a financial value on Britain’s ecology. The ‘National Ecosystem Assessment’ attempts to give a standard valuation on ‘ecosystem services’ like pollination by insects, water and air purification by soils and plants, the flood alleviation provided by woods and marshes upstream of towns and cities, and the value of living close to a green space; for example the value of living near a green space is calculated as £300 in terms of savings to the NHS. The first of 6 key findings of the NEA is: “The natural world, its biodiversity and its constituent ecosystems are critically important to our well-being and economic prosperity, but are consistently undervalued in conventional economic analyses and decision making.”

Great basic economics here, as the value of a positive externality is calculated and provides the potential for incorporating Cost Benefit Analysis of externalities into private sector investment decision making, alongside the private costs and benefits - for example it is suggested that it could give a standardised way of assessing the costs of environmental degradation onto the farmer or developer who wants to plough up a wood or concrete over a floodplain.

Stephen Tapper, president of the Planning Officers Society, says that he doesn’t think that will happen. This interview with him yesterday morning included a good description of the process of CBA - worth listening to for that as well as for his assessment of the disadvantages of the method.

However, the report is likely to be an important element of the government’s White Paper on the Natural Environment which is to be published next week, and will also be incorporated into the Government’s forthcoming review of planning legislation. The Secretary of State for the Environment, Caroline Spelman, welcomed the report describing it as a vital step forward in our ability to understand the true value of nature - the interview in which she put her side is included in this report.

Here is a link to the DEFRA website with more details of the NEA.