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Cost of Deforestation is Vastly Greater than that of the Current Financial Crisis

| Friday October 10th, 2008 | 0 Comments

deforestation.jpgWhile your 401K smolders in ruins, take a gander at this BBC article and it might give you some perspective. Unfortunately, it’s not immediately an optimistic perspective: We are actually losing more money through deforestation than through the current financial meltdown. The reasoning behind this is clear when we start calculating the often overlooked value of Natural Capital – resources provided by our environment including minerals, water, air, sunlight, heat, plants, animals, and other organic matter.
Looking at the costs of deforestation and other forms of resource depletion from a purely economic perspective may seem perverse to many environmentalists, but it may be the only way that these issues are ever going to get real attention from government, big business, and society at large. The study cited by the BBC comes from a Deutsche bank economist who states:

… whereas Wall Street by various calculations has to date lost, within the financial sector, $1-$1.5 trillion, the reality is that at today’s rate we are losing natural capital at least between $2-$5 trillion every year (emphasis mine)

Bear in mind that’s an annual cost… and it’s just about forests.

Burning or bulldozing complex ecosystems such as tropical forests removes the benefits that those ecosystems provided for a short term gain – such as whatever price you can get for the lumber. But leaving an ecosystem more-or-less intact allows it to continue to provide “ecosystem services” such as clean air and water, plant pollination, climate regulation, soil regeneration, ozone protection, shade and shelter, etc. – all of which must be replaced by artificial means costing lots of money. If you want to get even more depressed, read the Stern Review which attempts (not without some criticism) to calculate the overall cost of climate change in general.
Now, the good news: The fact that calculations like this are being made means that economists, governments, and businesses are starting to listen. It also provides hard data that didn’t exist in the past to make the case for land conservation, resource efficiency and a more proactive stance on environmental issues in general.
This is the essence of the Triple Bottom Line, and, I think, some good stuff to ponder for the weekend.


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