Biological Diversity, sustainable development and the Economy

Getting the biodiversity targets right – working for sustainable development, Trondheim 5.2.2010

To be checked against delivery

Sustainable development
Thank you for inviting me to make a few final comments on this important topic. Some of you may wonder why the Minister of Finance is summing up a conference about biological diversity. In Norway the Minister of Finance is responsible for coordinating the Government’s work on sustainable development. We presented a new National strategy for sustainable development in the National Budget for 2008, and we report annually on the follow-up of this strategy in a separate chapter in the National Budget.

Biological diversity is an important part of the strategy. People sometimes raise an eyebrow when they learn that we report on sea-bird populations in our National Budget. But sea-birds are important indicators of the health of our marine ecosystems, which are of great economic significance.

Attention to biological diversity and natural resources are essential to achieve a sustainable development. Protecting this diversity is not only important in itself, but also as a base for economic activity. In my opinion, this is not only the case for Norway, but for all countries.

Since I am the coordinating Minister of Sustainable development, I would like to broaden the perspective somewhat. The way I see it, biological diversity is necessary to achieve a greater goal, – a development that is socially and economically sustainable, within the boundaries of healthy ecosystems. Sustainable development should be given attention in Governments’ work in all areas. It should not be seen only as relevant to environment ministers. Many of the challenges to over all sustainability are really about how to combine economic and social development with viable ecosystems. It is thus important that finance ministries are involved. 

As defined by the Brundtland Commission sustainable development means ” Meeting the needs of the Present Generation without compromising the ability of Future Generations to meet their own needs”. (Mrs. Gro Harlem Brundtland is a former Norwegian Prime Minister – actually leading the government when I served as Finance Minister in the 1990ies.)

To me, loss of biological diversity and an unbalanced economy can be seen as two sides of the same coin. As Minister of Finance I am concerned about the contract between generations. By that I mean the responsibility of our generation to hand over to the next generation a society that is in good shape.

The idea of sustainable development is older than one often thinks. In the old days the farm should be handed over to the next generation in at least as good condition as it was when taken over one generation earlier. In a modernised version we can say that the total value of labour or human capital, production capital, financial capital, and not least, natural capital must be upheld or increased for a society to be on a sustainable path.

We must manage the economy and our resources well. In Norway, we have established the Government Pension Fund – Global to handle petroleum revenues in a sustainable way. In 2001, the fund was supplemented by a fiscal guideline. The guideline states that we shall only spend the expected real return of the Fund. In this way we arrange for a gradual phasing-in of petroleum revenues to the mainland economy and secure that all generations will benefit from the oil revenues. 

However, when measuring progress in a nation’s wealth it is not enough only to look at its economic wealth. In nature there is a balance between species and ecosystems. If we destroy this balance we risk starting harmful processes that could become very expensive to repair or even irreversible. The precautionary principle should guide our policies at all times.

The Stern report, TEEB and economic tools
The Stern Report was an eye-opener on the costs of climate change. The original report and later revisions stipulate the cost of solving the problem to 1-2 pct. of global GDP – provided cost-effective policies. However, the report also makes clear that there is a cost of inaction. According to the report, climate change could lead to a permanent loss equal to 5-20 pct. of GDP. The report has contributed to a strong demand for action on climate change.

A similar report is now being developed for biological diversity: “The Economics of Ecosystems and Biodiversity” – or TEEB. The aim is to develop a global study on the economics of biodiversity loss. I am proud to say that the Norwegian Government is a financial contributor to this very important project.
 
Some of the preliminary results of the TEEB project were presented at this conference on Tuesday and have been discussed in later sessions. The findings clearly show that economies around the world will suffer if the current rapid loss of species and ecosystem services (like pollination, water cleansing and protection against floods) continues.
 
There is also a strong connection between poverty and degradation of ecosystems. Many of the world’s poor are depending on healthy ecosystems in a very direct way. We will not be able to reach the Millennium goals for sustainable development and eradicate poverty if the natural resources are lost or degraded.

This conference has helped emphasise how the real value of ecosystems and biodiversity is often strongly underestimated or ignored. What is commercially profitable for one company or for one private actor may not be profitable for society as a whole. This is not always visible in the national accounts, since the reduction of stocks of natural resources due to extraction is not measured in the same way as other inputs. Fishing activities that seemingly contribute positively to GDP may actually hurt the economy in the long run if coral reefs are destroyed or the remaining stock of fish is reduced below a secure level. We must take into consideration what services nature provides for us and how much it will cost if these services are lost. 

At the initiative of the Ministry of Finance, a group of experts recently conducted a study on how sustainable development could be attended to in public decisions in a better way.  The experts were asked also to cover biological diversity in their study. One of the recommendations in the report is to reduce subsidies that can be harmful to nature. According to OECD studies, global subsidies to fossil fuels amount to more than 300 billion dollars every year. That is about three times the total global investments in renewable energy.

Another recommendation is to extend the use of economic instruments as a way to protect nature.

Ecological financial transfers and Payments for ecosystem services are two examples of instruments to compensate local communities or countries for protecting nature. To secure fair access and sharing of benefits from biological and genetic resources is another important issue. It could help finance development and make sure local communities benefit from local resources.       

Norway is now paying for ecosystem services at a large scale. Deforestation and forest degradation in developing countries account for about 15-20 pct. of the World’s greenhouse gas emissions. As this conference has emphasised, climate change is also an important driver of the loss of biological diversity. This is why Prime Minister Jens Stoltenberg launched Norway’s International Climate and Forest Initiative at Bali in December 2007, and announced that Norway is prepared to allocate up to NOK 3 billion a year (500 million USD) on efforts to reduce deforestation in developing countries.

In general, I think it is absolutely necessary that industrialised countries should compensate developing countries for climate initiatives. In the case of saving the rainforest, these initiatives go hand in hand with protecting biological diversity, making them even more valuable.

Investing in and protecting the World’s natural capital can be a cost efficient way to reduce global warming and reduce the loss of species. This is a necessity if we want the world to see a development that is ecologically, economically and socially sustainable in the long term. That should be the ultimate target we should reach for.

By way of conclusion I will emphasise that getting the biodiversity targets right is important – reaching them even more so. This is a great challenge – and an important one. I think this conference has made a valuable contribution by pointing at what economic values are at stake when biological diversity is lost.

I also think it has made a contribution by starting to discuss how economics can be used to serve nature and not, as has often been the case, the other way around. 
To me, this conference also shows that many competent people take the challenge of achieving a sustainable development seriously. The Norwegian government will also do its part. 

Thank you.