Gulf oil spill shows the need to put a price tag on nature

Gulf oil spill shows the need to put a price tag on natureEcosystem services refers to vital services natural systems provide that, if damaged or degraded, are expensive or impossible to replace. In the rush to exploit non-renewable energy sources, the value of these services is not currently taken into account. As a result, private interests put public assets at risk to the detriment of both public and private enterprises.

The BP Deepwater Horizon oil spill last year clearly shows the need to value ecosystem services. The Gulf Coast region provides important resources, such as nurseries for fisheries and wetlands to mitigate hurricane damage. These resources provide value simply by being there. Unfortunately, the economic benefits of wetlands and fish nurseries are not recognized until they are damaged by an event such as the BP oil spill.

If a price tag were to be put on the ecosystem services of the Gulf Coast, how much would they be worth? According to Earth Economics:

The Mississippi River Delta ecosystems provide at least $12 – 47 billion in benefits to people every year. If this natural capital were treated like an economic asset, the present value of the Mississippi Delta would be between $330 billion and $1.3 trillion.

As a comparison, the market value of BP before the spill was just under $200 billion.

This isn’t to argue that resource extraction should not occur, but rather that the activity needs to properly account for the real financial risks of the undertaking. If BP had been required to insure the Mississippi Delta for damage to the tune of around $300 billion, perhaps they would have been more attentive to Halliburton’s cementing job on the Deepwater Horizon’s well casing.

The example of the Deepwater Horizon spill should encourage the use of valuing ecosystem services as a risk management tool not only for deepwater oil drilling, but also for the shale gas rush in Pennsylvania and other regions. The Nature Conservancy estimates that between 34,000 and 83,000 acres of Pennsylvania forestland will be cleared for gas development in the next 20 years. Much of these forests are in the headwaters regions (in fact, water from Potter County, Pennsylvania, which is seeing heavy gas development, ultimately drains to the Gulf, the Chesapeake Bay, and the Saint Lawrence River), and are among the most pristine areas in Pennsylvania. The loss of these forests will impact water supply, water purification, flood control, and the fragile health of the Chesapeake Bay. And that doesn’t take into account the accidents that invariably will occur. But without a mechanism to put a value on these natural systems, they are considered valueless.

As any angler or hunter or hiker knows, natural systems have a value beyond their economic worth. The reality of our economic and political system, however, is to value only that which can be assigned a dollar amount. Putting a price tag on the services provided by natural systems is essential in order to protect them.