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Has Industrialized Farming Left Nature’s Bank in Need of a Bailout?

Nature, it turns out, has been giving away its resources a little too cheaply. Industrial agriculture has been consuming nature’s capital to a point where it can no longer provide all that’s needed to maintain global agricultural production. 

Counterfeit “natural capital” has started entering the market to hide the fact that agriculture is running a deficit. For instance, reports abound of widespread, indiscriminate use of synthetic fertilizers and carcinogenic pesticides, used to replace natural soil fertility and biological pest control. Switching capital providers results in increasing financial costs for farms, inhibits nature’s bank to provide these services for free in the future and can also cause significant impacts to public health through pollutants emitted to air, land, and water. TEEB for Agriculture and Food, a project hosted by the United Nations Environment Programme responsible for promoting the sustainable use of natural capital in agriculture, asked Trucost to investigate further.

Where to Begin

It turns out that ecosystem services are the most popular form of currency used to withdraw the hidden value of nature. Agriculture is heavily indebted to the provision of free ecosystem services but has become so focused on the pursuit of maximizing yields that nature can no longer provide the required liquidity. Man-made alternatives have tried to fill the deficit, but this results in short-term gains that mask long-term declines in nature’s reserves. Stories about this credit crisis are becoming increasingly common as businesses, politicians and society at large begin to feel the shock of nature’s credit crunch. The recent drought in California or the disappearance of the Aral Sea (formerly the fourth largest lake in the world) due to overexploitation by agriculture are salient reminders of our reliance on nature’s capital.

As a result, TEEB commissioned Trucost and other experts to look into the positive and negative impacts of agriculture on nature, which includes the value that nature is providing to agriculture for free. This included an audit of the natural capital accounts of palm oil production, rice cultivation, as well as three livestock farming sectors. The results show how each type of farming affects nature’s bank, and what can be done to rebuild its capital.

Palm Oil

Palm oil production is a global focus for sustainability efforts due to deforestation. The research found that Indonesia and Malaysia, which together produce over 70 percent of the world’s palm oil, had an impact on nature and human health of around $40 billion each year. Trucost delved into specific production practices to identify where these costs could be reduced and what the financial implication of making changes could be.

Chris Baldock
Chris Baldock is a senior research analyst at Trucost. He has been with Trucost since 2010 and specializes in ecosystem service valuation, natural capital accounting and developing Trucost’s client facing software. He is part of the team within Trucost that is developing guidance for international companies within the food and beverage sector to implement the natural capital protocol accounting framework.
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