COP26: Dasgupta calls for ‘World Bank for biodiversity’

In a conversation with fellow economist Lord Stern at COP26, Sir Partha Dasgupta said that a ‘bold and imaginative’ response is needed to provide a financial incentive to protect globally valuable ecosystems.

“Rainforests are a global public good… and yet they are in national jurisdictions,” said Dasgupta, the author of a review of the economics of biodiversity commissioned by the Treasury. But the incentive that they have to protect such habitats is less than their value for the biosphere as a whole, posing an economic dilemma. There is a similar problem with the deep ocean, too: “nobody has to pay for it” when extracting resources such as fish or minerals, the professor said.

So a new body to protect global public goods, akin to the International Monetary Fund or World Bank but operating under the United Nations, should be established, he argued. They could charge for access, providing funding for the maintenance of ecosystem services.

A good deal of negotiation would be needed to set it up, of course – “but I think we should not fear that”.

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Introducing the debate, UN Environment Programme executive director Inger Anderson, reflected that, “In a way, the biodiversity crisis could be considered a lot more alarming”, than climate change, as it is broader and more complex. Stern agreed, saying that it is “much more difficult” to tackle than climate change. In comparison, CO2 reduction is “a very simple story”.

She noted that next year’s COP15 biodiversity negotiations will address funding for nature and that the world is now “within squeaking distance” of covering 10% of the oceans with marine protection areas. A more ambitious 30% goal is now on the table.

Turning to Dasgupta’s report, she asked what Stern’s view of it was.

Stern described it as an “extraordinarily valuable and important piece of work”. “The great thing in the biodiversity review is to confront people with the costs of what they do”. He compared it to the role of the Task Force on Climate-related Financial Disclosures, which “shines a light and forces people to recall the consequences of their actions”.

He noted that his own work on the economics of climate change, “is a subset of the whole story”. “Climate change destroys biodiversity and destruction of biodiversity accelerates climate change,” he remarked, adding that, “there is lots we do that is bad for both”.

Anderson said that their common driver is unsustainable consumption and production, and asked what tools are available to “make gear shifts”.

“We are going to have to make consumption and production far less damaging... and it would be great if we could make it positive,” for nature, said Stern. There are “all sorts of ways you can break the relationship. It’s fine to start with prices but you have to go beyond that,” through regulation and standards, though, “people tend to say ‘boo’ when you mention regulation”.

Dasgupta agreed, saying that the assumption that prices alone can deal with scarce resources is “naïve”. “Mother nature is extremely non-linear, there are all sorts of tipping points hanging around out there,” he added, noting how “stocks of capital assets” have been destroyed in areas severely affected by climate change, causing migration.

The debate later moved on to discuss the vast sums spent in response to the pandemic, put at around $1tn by Anderson, and how that compares to the amount spent on climate and nature.

“I think you have to think of the big resources that have gone into Covid recovery as rescue,” by dealing with an immediate problem of health and unemployment, said Stern. “It hasn’t been change or reform… and I think that now is the time to move from rescue” to a new model “that doesn’t destroy. We have to invest to get there but those investments” would give tremendous returns, he added, like how renewables have become the cheapest energy option almost everywhere.

He suggested that the cost of green hydrogen production could reach $1/kg by the end of the decade, in line with projections by KPMG and on a par with the cheapest ‘grey hydrogen’ made from unabated natural gas.

“These are investments with very powerful returns,” Stern said, while adding that, “some things will become more expensive for a while” or perhaps permanently – but bring huge benefits overall.

Summing up, Stern said: “We are in a desperate hurry. We don’t know how close we are to where the Amazon becomes a different type of ecosystem… so we have to, right now,” respond institutionally. “We have to get [countries and development banks] to step up in what they are doing – and stay up,” he added.