On Tuesday night, President Obama and former Massachusetts governor Mitt Romney met at Hofstra University for their second debate of the 2012 election. Since climate change, the environmental elephant in the room, had escaped mention in the previous presidential and vice-presidential debates, I was confident that a fairly esoteric topic like ecosystem protection would get short shrift on stage in Hempstead. Sure enough, when Obama and Romney's question-and-answer exchange with the audience shifted to energy development, the two candidates delicately avoided substantive discussion of a subject that could have important ramifications for our domestic and foreign policy in future years: the conservation of natural capital.
The World Bank defines natural capital as the stock of renewable and non-renewable "gifts of nature" used for production. These gifts include mineral resources and timber, as well as other things like aquifers, wildlife, and wetlands. Until recently, many economists downplayed the importance of natural capital when accounting for societal wealth, and only factored it in when said capital could be chopped down, hacked out of the ground, or harvested from the land or water for sale, in which case it could be grouped under gross domestic product (GDP). However, the past four decades have witnessed a change in how these endowments are valued, with policymakers and their advisers slowly realizing that traditional metrics like GDP failed to account for the services rendered by ecosystems, services that we often benefit from without market transactions taking place. As you can imagine, this results in situations where, by the conventional reckoning of accountants, the net present value (NPV) of a natural asset like a mangrove swamp, which generates positive externalities such as flood protection and fish habitat for a coastal community, is low compared to the NPV of a real estate project capable of yielding a future stream of rents. This leads market participants to favor bulldozing the swamp and erecting buildings in its place. While this brings a short-term fillip of economic activity, the long-run effect is the loss of storm surge buffers and the disappearance of subsistence fishing grounds, leaving many of the region's residents worse off.
Understanding this, economists, landowners and government entities have begun developing tools to monitor, and in some cases monetize, the valuable services provided by nature. As a consequence, forest reserves are being established for the protection and responsible management of woodland carbon sinks, and the development of markets for greenhouse gas credits is allowing the owners of these assets to receive payment for the sequestration of carbon dioxide under emissions reductions mechanisms. Natural capital is now believed to account for as much as a third of all the wealth in low-income countries, and the proper measurement of natural capital is seen as a vital step towards improving food security in developing nations and promoting sustainable development by public institutions such as the United Nations (UN) and private insurance companies looking to reduce disaster risk.
But while this holistic view of synchronized economic and environmental analysis is translating into policy through programs like the UN's System for Environmental-Economic Accounts (SEEA) and the World Bank's Wealth Accounting and the Valuation of Ecosystem Services (WAVES) partnership, it seems like this line of thinking is now under attack in the very nation where much of the theory on natural capital accounting was incubated. Maybe it's because of the bursting of the housing bubble, the financial collapse, the jobs crisis, or a host of other economic travails and worries that have dominated political discussion over the past few years, but the fact is that a Gallup poll released earlier this year showed that a smaller percentage of Americans prioritize environmental protection over economic growth now than in 2002 and 1992, even though the United States was in the midst of recession or modest recovery during all three years. In fact, in the years prior to 2001, consistently clear majorities of voting age Americans polled annually by Gallup had described themselves as willing to forego some "economic" growth to protect the environment, but in the decade since, the tables have turned decisively in the opposite direction.
It seems crazy that this shift in perspective should be happening when the cost of protecting and expanding our stock of natural capital is comparatively low and the potential damage from neglecting this endowment is so high. In a recent report in Science, researchers from Cambridge, Princeton and several other institutions estimated that the annual bill for lowering the risk of extinction for threatened species and establishing protected habitat reserves across the entire globe would amount to roughly $76 billion, equivalent to 0.5 percent of U.S. GDP. The money spent on such a project would generate employment for both blue- and white-collar professionals, and provide a new lease on life for vulnerable animals and plants in the United States and other countries. Yet for some reason, it appears as though the belief that environmental protection runs counter to economic progress is gaining, rather than losing, steam in America's public consciousness.
This is worrisome because such polling shifts in the American electorate will eventually be reflected in the decisions our country's political leaders make regarding land, water, and ecosystem management. If the short-term desire for job growth overrides thoughtful consideration of the long-run effects of economic activity on natural spaces, we could make rash decisions about resource utilization that harm us and our descendants. Moreover, the example set by the United States will be reflected in the actions of other countries that look to us for leadership in environmental affairs.
The third, and last, head-to-head meeting of President Obama and Governor Romney will be held next Monday in Florida, which ironically provides us with some of the worst and best examples of natural capital management in our nation's recent past. One of the five policy areas set for discussion in the foreign-policy themed debate will be "America's role in the world". If I were moderating the event, I would ask the candidates how much capital -- financial and political -- they would be willing to commit to further the protection of our nation's land, water, and ecosystems during the next four years, and if I were in either of the candidate's shoes, I would present the potential ways that domestic investment in natural capital could improve our resilience to environmental and economic shocks in this era of anthropogenic climate change and act as a template for the international community. Call it wishful thinking, but it's a debate we've needed to have for a long time.