Posts Tagged ‘HEA / REA’

Biodiversity: the new carbon?

Tuesday, February 8th, 2011

The Guardian, a leading UK newspaper, recently published an interesting analysis of biodiversity as the new “carbon”. After discussing how biodiversity has emerged as a new issue for companies to incorporate in their business strategies, the article details the main motivations for this.

The first motivation mentioned is reputational risk but the most interesting is the one concerning a company’s liability in case of impacts or damages on biodiversity. The Deepwater Horizon oil spill (BP) is used as an example. This underlies two things:

  • That the “business case” for incorporating biodiversity in business decisions and strategies is strongly dependant on an appropriate institutional context where companies are liable for impacts on biodiversity. The requirement to avoid, reduce and offset impacts is one such context.
  • That anticipating possible impacts and the potential financial losses that could result from such impacts requires the development of impact assessment procedures and methods that can be parametrized in advance.
  • The USA have developed assessment methods to be applied in the context of Natural Resource Damage Assessment procedures (NRDA), such as Habitat Equivalency Analysis and Resource Equivalency Analysis. In Europe, the 2004 Environmental Liability Directive will certainly make governments and environmental authorities push for the development of such methods.

    Discounting?

    Friday, December 10th, 2010

    In a paper in press in the journal Environmental Impact Assessment Review, Erhun Kula and David Evans discuss how long term impacts on the environment (and environmental gains) should be taken into account in cost-benefit assessments of projects. Their discussion mainly focuses on the tricky question of the discount rate which is used to calculate the net present value of future gains and losses.

    The authors’ main argument is that different discount rates should be used for economic and social costs and benefits and for environmental costs and benefits, because man-made capital (i.e. the former) is not finite and is – largely – substitutable while natural capital (i.e. the latter) is finite and not substitutable (because it is being degraded beyond its capacity to sustain ecosystem goods and services).

    (…) economic and social costs and benefits should be streamed separately from environmental costs and benefits within a cost-benefit analysis. Indeed, each stream should have its own set of objectives and constraints, costs and benefits, risks and uncertainties.