The way we value nature has to change if we want to restore it. In the first of a two-part feature, Matthew Hay sets out the big issues we must tackle in order to align economic and ecological interests.

Caledonian pine forest at sunrise, Abernethy NNR, Cairngorms Nat. Park, Scotland.

If you have ever been to Ballochbuie pinewood, you will remember it. A jewel in Royal Deeside’s crown, it is fairy-tale Scotland to its core. An ancient woodland and a relic of the Caledonian Forest, this is a place where capercaillie, that winged spirit of the wild pines, still cling on. But Am Bealach Buidhe – the yellow pass – was very nearly sold to an Aberdonian timber merchant in the 19th century and felled, like so many other Highland pinewoods. Priceless assets wiped clean off the map.

Luckily for the pines of Ballochbuie, they had a sentimental value for Queen Victoria, and in 1878 she paid the market rate for the old trees and added the woodland to her Balmoral estate. That’s what Ballochbuie was worth, the price of its timber.

Industries have destroyed the living resources on which they depend.

Nature and the economy have never been easy bedfellows. Perhaps the fact we talk about them as a dichotomy is where the problem begins. Rather than seeing the economy as being embedded in the natural world, separating the two makes it easier to maintain an extractive mindset and play down the costs humanity imposes.

When we ignore those costs, our behaviour can be perverse. Industries have destroyed the living resources on which they depend, as happened with Scotland’s herring and native oyster fisheries. Wetland ecosystems that regulate our rivers and our climate can be drained, dug-up and sold as compost. Wildlife can be driven to extinction.

But ascribing economic value to the natural world isn’t straightforward. Who decides what a glimpse of a wildcat is worth? Or the price of autumnal sunlight on a birch tree? What does the Scottish primrose contribute to our GDP?

Scottish wildcat (Felis sylvestris) in pine forest, Cairngorms National Park, Scotland.

Who decides what a glimpse of a wildcat is worth?

For many people, valuing nature in financial terms is anathema. Natural capital, they believe, and the philosophy it advances, will lead to the commodification of something fundamentally invaluable. There is also the risk that if nature has a monetary worth, it will be priced out by other, more lucrative, economic activities.

So what is natural capital? Put simply, it is a framework for understanding and valuing the many different ways we benefit from the natural world. Whereas the economy of 19th century Aberdeenshire valued native pinewoods only for their timber, we now acknowledge that our forests also sequester carbon, provide a home for wildlife, purify the air we breathe, protect our communities from flooding and much more. We also understand, as Queen Victoria did, that these places have an emotional, even spiritual importance, for communities and individuals, which transcends monetary value.

Once we acknowledge these complex and often hidden services, we start to look at nature through a different lens. It is no longer so clear-cut that pinewoods should be felled for timber. At a time of climate breakdown and biodiversity loss, their carbon storage and wildlife value alone might mean they are worth more left standing. The challenge has always been to express this in a way the economy understands.

When we ‘price in’ carbon, a huge range of activities are exposed as irrational.

One approach is to estimate the economic damage of emitting one additional tonne of carbon dioxide, the greenhouse gas responsible for the lion’s share of global heating. This is known as “the social cost of carbon” and one recent scientific review put the price at £152 ($185) per tonne, although other estimates remain much lower.[1]

This might all sound academic but it represents an important shift in our economic thinking, because when we “price in” carbon, a huge range of activities are exposed as irrational. Harvesting krill, for example – an organism that drives the Southern Ocean’s carbon cycle – to make into fishmeal or health supplements, starts to look like both ecological and financial insanity.[2]

Research by the World Wide Fund for Nature has highlighted that Antarctic krill sink up to 23 million tonnes of carbon in the Atlantic sector of the Southern Ocean annually. When the value of that carbon sink is priced in, by applying the social cost of carbon to every tonne locked up, it is worth $8.6 billion to humanity – 60 times more than the krill fishery's turnover. So why hasn’t krill fishing in the Southern Ocean stopped? We know it harms the region’s ecology and we know it’s worth more to humanity alive than dead. Yet the nets continue to trawl through our planet’s richest seas, hoovering up this key component of the Antarctic food web.

The reason is that valuations of nature's worth rarely change our behaviour unless they translate to a price that gets paid in the real economy. For now, krill’s ability to store carbon is only priced in hypothetically – no money is actually changing hands, no fishermen are being paid to not catch krill. This same story is playing out the world over. Natural capital valuations remain just that and no one pays the true cost for anything, whether that’s burning coal, draining peatland or trawling the seabed.

Nor do people get rewarded for good stewardship of natural resources. A landowner in Scotland can plant her ground with non-native conifers and generate future income from the sale of timber. Safeguarding a remnant of the Caledonian Forest offers no such return. When one can pay the bills and the other cannot, is it any wonder that commercial forestry covers more than three times the area of Scotland’s native woodlands?

The conservation community has a role here. Historically, all funding for the protection of our living systems has come from the public and charitable sectors. Philanthropy and government grants have been all that most conservationists have ever known, so it can be hard, unpalatable even, to imagine it any other way. But imagine it we must, if we are to restore and regenerate the natural world at the speed and scale required.

If we can turn nature recovery into an activity that pays the bills, then we can negate the choice between profit and planet.

The Green Finance Institute commissioned research in 2021 that estimated the UK’s current "nature funding gap" – the difference between the money required to achieve our environmental objectives and the money actually being committed by governments – is £5.6 billion a year. In Scotland, that translates to us needing to find between £15bn and £27bn of additional funding over the next decade. I don’t think anyone believes that the government’s coffers are in a position to foot that bill, not when the public sector is already so squeezed, certainly not without introducing much higher taxation. So, we’re stuck between a rock and a hard place. We need a step change in the funding available for nature recovery, but we are also heading into an economic recession, with public spending likely to be constrained for the foreseeable.

It is within this context that new markets for rewilding, so-called ecosystem markets, are emerging, to try to engage the private sector and plug the nature finance gap. If we can turn nature recovery into an activity that actually pays the bills, then we can negate the choice between profit and planet, and give land managers options that are good for both. We can finally answer the question: how does rewilding pay?

The journey we must take will involve dragging economics into alignment with ecology and not the other way around. This should start with proper accounting for the depreciation of natural assets such as soil and water, so that we understand the true cost of our activities and temper our profits accordingly.

Fish farm

Fish farming might provide a huge economic boost to parts of rural Scotland but profits don’t take into account the sector’s impact on wider ecosystem health.

Reconstructing our economic thinking will require bold leadership from government. It can begin with mandating businesses to disclose their environmental impacts, while emerging markets for carbon and biodiversity can be simultaneously shored up and regulated, to guard against greenwashing and the unequal distribution of benefits.

In fact, it is hard to see how nature recovery can succeed without government intervention. Effective regulation will be key to shaping this brave new world and our policy makers will often be walking a tightrope to ensure high-integrity ecosystem markets can function without smothering businesses in new costs.

These challenges, significant though they are, are not a reason to shy away from the issue. If we get this right, we will no longer have to rely on royal sentimentality to preserve our most valuable places. More importantly, we’ll be in with a chance of securing the ultimate economic return: having a habitable planet to live on. As David Attenborough wrote in the foreword to the government-commissioned report on the economics of biodiversity by Professor Sir Partha Dasgupta, “… by bringing economics and ecology face to face, we can help to save the natural world and in doing so, save ourselves.”

Exactly how we do this will be the focus of the second part of this feature.

[1] Rennert, K., Errickson, F., Prest, B.C. et al. Comprehensive evidence implies a higher social cost of CO2Nature 610, 687–692 (2022). https://doi.org/10.1038/s41586-022-05224-9

[2] Cavan, E., Grilly, E., Reid, K. and N. Mackay. 2022. Antarctic krill: Powerhouse of the Southern Ocean. WWF-Australia, Sydney.

Matthew Hay is a natural capital consultant and a director of Reforesting Scotland. The second part of this feature, What price an oyster bed?, will be published next month.