Climate Exchange

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Can ‘homo economicus’ help save the environment?

by Sirca S. Gogus

A contemplation about the economic human, homo economicus, its so-called “rational” strive to maximise human well-being at the expense of the environment and whether Payments for Ecosystem Services can prove to be the panacea or, in fact,  bring us perilously closer to commodification of nature.

Introduction

The concept of ecosystem services (ES), first coined to draw attention to the nature-society nexus, has gained momentum as an approach to conservation and entered into mainstream environmental policy jargon in the recent years (Redford & Adams, 2009; Lele et al., in press; Anonymous, 2009). The rising popularity of the term, which was echoed in but also further triggered by the Millennium Ecosystem Assessment (MEA) (2005), brought with it the logic of economic valuation of the nature’s functions and processes insofar as they serve the needs of humans. The translation of this understanding into practical terms ensued with the creation of the Payments for Ecosystem Services[1] (PES) schemes that carried the concept of ES from academic circles to the forefront of policy-making agenda. Whereas the theoretical underpinnings of PES have been subject to criticism, the schemes’ perceived potential for offering win-win solutions for both nature and society makes them politically and economically difficult to at least not experiment with. Nevertheless, as far as the synergies and trade-offs between the ES across temporal and spatial points of analysis are concerned, the benefits PES can yield for inter alia the environment are yet to be established (Rodriguez et al., 2006). What is more, the allocation of payments in PES design raises questions about the negative externalities they are prone to have on equity and legitimacy matters within local communities (Corbera et al., 2007). As a result, PES with their market-oriented approach to conservation can arguably prove to be counterproductive for both the environment and society.

Accordingly, this article aims to evaluate two aspects of PES schemes: whether or not they contribute to saving the environment, and who should be paid for their equitable and legitimate realisation. This will be approached in the following way. Firstly, in order to assess the former question, the article will start by elaborating on how the concept of ES, by way of incorporating within itself the logic of valuation and thereby a neoliberal framework, paves the way to PES. Secondly, in doing so it will discuss the allure, risks and limits of the conceptual foundations of PES in terms of their effect on the environment. Thirdly, some considerations about the design of PES will be introduced, which is key to understanding the allocation of ES providers and the basis of the latter question. Lastly, the article will conclude with a synthesis of the arguments made.

Source: The Breakthrough

Source: The Breakthrough

From the Concept of ES to Market Environmentalism to PES

We live in a time when anthropogenic pressures on the Earth’s systems are prompting environmental changes that might not only be irreversible for the planet itself, but also catastrophic for human well-being (Rockström, 2009). Understanding the importance of planetary boundaries is relevant for two reasons. On the one hand, the factors that put the planet in peril due to human misuse and exploitation are numerous and inextricably linked with one another. On the other hand, the conventional conservation methods at use have proved to be inadequate in terms of addressing the root cause of environmental problems (Gomez-Baggethun & Ruiz-Perez, 2011: 614). This mismatch between the scale of the problem and solution has been attributed to a disregard of the economic and socio-political drivers of environmental change (MEA, 2005). That is why the term “ecosystem services” was coined, in an attempt to reflect society’s dependency on nature and to raise awareness among decision-makers about the interplay between the environment, society and economy. It was, in fact, meant to serve as a metaphor for the purpose of bridging the gap between the scientific and political worlds (Nordgaard, 2010; Redford & Adams, 2009).

In time, however, the concept of ES transformed from being “a pragmatic and transitory short-term tool” (Gomez-Baggethun & Ruiz-Perez, 2011: 614) to “the approach . . . to assessing the nature-society relationship” (Lele et al., in press: 2, original emphasis). In its most commonly adopted definition, ES are “benefits humans receive from ecosystems” (MEA, 2005: v). Such a definition becomes problematic because it implies a uni-directionality in the relationship between nature and society, and in doing so it assigns an implicit value to nature only in terms of its capacity to benefit the needs of humans. Therefore, insofar as the concept of ES classifies nature’s functions and processes in a manner that serve the humans, rather than as part of a holistic system in its own right with an unquantifiable intrinsic value, its semantics paves the way to the rendering of its value in economic terms (Dempsey & Robertson, 2012; McCauley, 2006). This approach resonates in the oft-cited work of Costanza et al. (1997), and leads to shifting the understanding from an implicit to explicit economic valuation paradigm.

An “anthropocentric interpretation” of nature’s functions as such places the concept of ES within a neoliberal political-economic context that is characterised by free markets and strong property rights which are supported by private over public institutional frameworks (Gomez-Baggethun & Ruiz-Perez, 2011: 619-620; Dempsey & Robertson, 2012). The liberalisation of individual enterprise with its emphasis on the economic human, homo economicus, as a free and rational agent in its undertakings vis-à-vis the environment, paves the way for the justification of the logic of market environmentalism. As a result, homo economicus perceives environmental problems as market failures that get in the way of maximising human well-being. While this is attributed to the common-good nature of ES that is largely under-valued and un-priced, the solution is deemed to lie in market-based mechanisms. Consequently, with the expectation that, in a neoliberal theoretical context, people get what they pay for (Kinzig et al., 2011) ES attain exchange value that in practice gives incentive to the service providers and beneficiaries to trade that value through the creation of PES schemes. PES, in this sense, are utilised as market-correcting tools that can internalise the environmental externalities (Engel, et al., 2008).

The Allure, Risks of and Limits to PES

The Allure

It has to be acknowledged that there are certain alluring aspects of PES that make them difficult to write off completely from conservation agendas. Firstly, PES can be considered an innovative approach to conservation with the main premise of motivating the ES providers to pursue more environmentally-sound land use practices by making up for their opportunity costs compared to business-as-usual scenarios (van Hecken & Bastiaensen, 2010: 785). Secondly, it is also important to note that the logic of market environmentalism PES projects are indeed in tune with the realities of today’s global political economy. When ES are given a real economic value, the providers would have an incentive to preserve them, and by the same token, the beneficiaries would have a compelling reason to use them more prudently. Thirdly, PES are considered to be more cost-effective in comparison to Integrated Conservation and Development Projects (ICDP), which utilise indirect payment schemes with the promise of delivering social, economic as well as environmental benefits, any of which are rarely, if at all, altogether met (Muradian et al., 2013). The “you get what you pay for” approach, therefore, triumphs over indirect payments methods, because it appeals to both investors that want to spend less money and local providers that get direct access to much needed money (Ferraro & Kiss, 2002). These are some of the most cited reasons that proponents of PES schemes make in pointing to their potential to yield positive impacts on the environment. Whereas they indeed represent real and valid arguments, it becomes apparent that the only and omnipresent reasoning in all of them is from the point of analysis of economic benefits. This approach becomes problematic, because it is completely stripped of any considerations about the socio-political drivers of environmental change.

The Risks

Due to their disregard of socio-political factors, there are several aspects of PES that pose a risk to the conservation practices in place by undermining their cultural and institutional dynamics. To start with, the logic of economic valuation as the conceptual foundation of PES carries the risk of rendering ES as commodities whereby the markets expand to include the hitherto non-marketed services (Gomez-Baggethun & Ruiz-Perez, 2011; Kosoy and Corbera, 2010). However, as argued by McCauley (2006: 28), “nature has an intrinsic value that makes it priceless”. When the commodification of ES alienates society from nature, economic self-interest overtakes the primacy of ethics. This makes PES a paradoxical method for conservation because while borne out of a concern for emphasising society’s dependency on nature, PES carries the risk of dissociating the two from each other.

As concerns over economic humans’ calculated self-interest overtakes society’s vision to safeguard the nature for its own sake, social inequalities are exacerbated. This is because PES schemes rely on and only benefit those (a) with purchasing power to buy ES and therefore exclude those who cannot afford to (Gomez-Baggethun & Ruiz-Perez, 2011: 622), and (b) those who have access to resources, or rather de facto control over them (Wunder, 2005: 14). In an in-depth analysis of the projects for carbon sequestration services in Mexico, Corbera et al. (2007) found that political affiliation and social relations play a great role in the perceived legitimacy of projects and the distribution of economic outcomes from which the poorest of the poor and women are categorically excluded. They conclude that such pitfalls are a “product of the nature of emerging markets” and “contribute to reinforcing existing power structures, inequities and vulnerabilities” (Corbera et al., 2007: 587).

Furthermore, when designed poorly by undermining the conservation practices already in place, PES pose the risk of turning into a form of bribery in effect (Van Hecken & Bastiaaensen, 2010: 788). If ES providers find the satisfaction of getting paid by simply not vandalising nature or not engaging in an already illegal activity (e.g. logging, waste disposal), PES can prove to be ineffective, if not counterproductive. For instance, Costa Rica’s Pago por Servicios Ambiantales (PSA) program for conserving tropical forests by making per hectare payments was initiated, even though there had been national laws that made economic activities resulting in deforestation and forest degradation illegal via command-and-control governance structures (Pattanayak et al., 2010: 264-265). As such, there is a risk that the economic allure of PES might undermine the legal, institutional and social dynamics in local communities, which are indispensible elements for a functioning nature-society relationship.

The Limits

PES schemes also come with limitations in their applicability. First of all, in order to yield environmental benefits, PES have to be additional to business-as-usual scenarios (Wunder, 2005). But as evidenced by Corbera et al.’s (2007) study, there are socio-political factors that skew the decision-making processes about the distribution of economic gains from PES in favour of the existing structures. Secondly, the attempt to optimise an ES often results in the reduction or even complete loss of another (Rodriguez et al., 2006: 28; Kinzig et al., 2011: 603). Trade-offs already occur in the absence of PES schemes, but when the ES start to be traded for exchange value, the ramification of trade-offs are prone to be much higher at the expense of systematically limiting the economic value of, and thus causing the degradation of, one ES over the other. Thirdly, since they are constructed on a supply and demand basis, PES will ignore those functions and processes of nature “that will conflict with our interests or . . . neither help nor harm us” (McCauley, 2006: 27) or what might otherwise be called ecosystem disservices or non-services respectively. That is why the potential cure PES has to offer the environment will be limited to those that are solely beneficial to humans directly. Lastly, PES might limit conservation efforts by causing a mentality shift in ES providers if they are left demanding increasing opportunity costs that become the only reason to conserve nature.

Criteria for Payments in PES design

Based on the risks and limitations of PES schemes as explained so far, it appears that the question of who should be paid becomes a crucial part of PES design. This is because PES as a mode of trade is not immune to being subject to trade-offs that occur between environmental efficiency and equitable access to ES (Corbera et al. 2007; Engel et al., 2008). Insofar as the environmental problems are attributed to economic as well as socio-political drivers, determining who gets paid has to depend as much on the societal dynamics in local communities as economic calculations. That is why the allocation of PES receivers is a complex matter and depends very much on the context.

For the sake of striking a balance between equity and efficiency concerns, a critical mass of actors needs to be paid for the successful realisation of PES schemes. Wunder (2005: 14) notes that “whom exactly to pay is a question of negotiation, political feasibility (which includes perception of fairness), legality (particularly vis-à-vis land tenure) – and possibly also of ethics, since some actors may lose illegal revenues, corrupt payoffs, and iniquitous profits.” Consequently, it will depend on considerations about the legitimacy, status quo and political power of the negotiating parties; de facto over de jure land and property rights among the ES providers; basis of ownership of ES (e.g. private or communal); and the implications of PES on the landless and marginalised members of the community.

Conclusion

The overall argument of this article has been that because of the underlying anthropocentric interpretation of the nature-society relationship which paves the way to the logic of economic valuation of ES, PES are conceptually at odds with conservation by posing the risk of commodification of ES and the loss of the intrinsic value of nature. In an attempt to define the reasons behind this and solve the problem of environmental degradation, PES bypasses the socio-economic dynamics and their impacts on biodiversity. This in turn has ramifications on the matters of equity and legitimacy in local communities and calls for the need to carefully consider the allocation of PES benefits. Whereas PES can be attractive by offering some short-term solutions to ES providers and beneficiaries, by neglecting the socio-political dimension of problems they fail to portray a sustainable approach to solving environmental problems.

It appears that PES schemes have a limited scope and applicability in terms of when and to what extent they can contribute to helping the environment. That is why, although they can be part of the solution and should not be categorically dismissed from conservation agendas, they should not be taken as silver bullets or panaceas to solving all environmental problems (Engel et al., 2008; Kinzig et al., 2011). If we rely too much on the logic of privatizing nature in order to save it from our unsustainable consumption patterns, we will have effectively sold it out (McCauley, 2006). Therefore if and when PES schemes are employed, they need to be designed carefully depending on contextual dynamics. By taking into account the complexities related to distributional issues and power relations, PES design has an important stake in yielding environmental efficiency and equity.

[1] This article uses Wunder’s (2005) definition when referring to PES according to which a PES is defined as a voluntary transaction where a well-defined ES (or a land-use likely to secure that service) is being bought by an ES buyer from an ES provider if and only if the ES provider secures ES provision (conditionality). Although in Wunder’s acronym PES stands for “payments for environmental services”, it is understood that the academic literature on the topic does not reflect a distinction between the two for the purposes of this article.

© Sirca S. Gogus

Suggested citing:

Gogus, S. S., 2014. Can ‘homo economicus’ help save the environment? [Online]. Available at: https://climate-exchange.org/2014/08/20/can-homo-economicus-help-save-the-environment/[accessed + date when the website was accessed].

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About Sirca S. Gogus

Sırça believes that living in an ever-connected globe, at the age of Anthropocene, not only yields opportunities in front of individuals, but also bestows certain responsibilities on them. That is why she has made the very conscious decision to devote her academic and professional career to the climate-development-energy nexus. With a background in social and political sciences, which she complemented with European governance and public affairs, she's been trotting the globe for the past six years. Sirca’s greatest ambition is to be a life-long learner. Her favourite pastime is being on the beach. She might or might not be daydreaming frequently the day she can engage in both simultaneously. In the spirit of fairplay, she thinks all fields of sport are equal as football being the most equal one.

3 comments on “Can ‘homo economicus’ help save the environment?

  1. Pingback: Can 'homo economicus' help save the environment? | Gaia Gazette

  2. Anastasia
    June 13, 2015

    Privatizing nature…. what a concept.

    • Anastasia
      June 13, 2015

      As sad as it makes me I believe that the sole way to get through to many of the ‘big actors’ in the exploitation of natural resources will be through economic incentive. Sigh. On a fundamental level it is almost impossible for me to wrap my brain around how easy it is for people to disassociate with their surroundings and the needs of others, but I suppose that it must be because we are taught that “$ makes the world go ’round” as opposed to “the world will keep spinning just fine until we let $$ blind us”. Sorry for the rant, I just found certain aspects of this article quite depressing.

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