Nature Loss 'Dwarfs' Bank Crisis

An economic study commissioned by the EU estimated that the annual cost of forest loss around the world is a staggering $2-$5 trillion. Flikr photo courtesy of Jessejay using the Creative Commons License.
Author: Bevan Griffiths-Sattenspiel

Over the last few weeks it has been hard to avoid the news about the global economy tanking. Few people realize, however, that the losses on Wall Street are relatively small compared to the economic losses we incur each year from habitat destruction.

In the beginning of October, the BBC reported on an economic study commissioned by the EU which estimated that the annual cost of forest loss around the world is a staggering $2-$5 trillion! These estimates were derived by quantifying so-called “natural capital,” which refers to the monetary value of all the beneficial processes that forests perform for free: carbon sequestration, cleansing water, providing sustainable food and materials, eco-tourism, etc.

By decimating forests, humans place the burden of these otherwise free services on themselves, which often require huge capital investments to make up for the lost natural processes. To put this cost in perspective, the Bank of England has put the cost of the current financial crisis—deemed the worst financial meltdown in nearly 80 years—around $2.8 trillion, on par with what we end up losing on account of forest destruction each year. (Note: when the BBC article was originally published the cost of the crisis was estimated at $1-1.5 trillion)

Cleansing drinking water is one of the most valuable services that forests provide, and ideally every watershed should have protected land around the sources of drinking water to reduce treatment and corresponding energy costs.

According to the American Water Works Association (PDF, 500KB), “Protecting forests—which reduces erosion and sediment, improves water purity, and in some cases captures and stores water—is a cost-effective way to provide clean drinking water.” Below are a couple factoids about the value of protecting the forests around source water:

  • For every 10 percent increase in forest cover in the source area (up to about 60 percent forest cover), treatment and chemical costs decreased approximately 20 percent.

  • Approximately 50-55 percent of the variation in operating treatment costs can be explained by the percent of forest cover in the source area.

A number of cities—including New York, Portland, OR, Boston and Seattle—have found that their investments in source water protection have paid for themselves many times over. Further more, deforestation is one of the largest causes of green house gas emissions. It has been estimated that under a carbon trading scheme, reducing global deforestation rates by 10% would generate $13.5 billion in revenue from carbon credits. Protect our drinking water, protect our planet. Protect our forests.