Trees in the balance: natural capital is on the accounting ledger, and it's not a moment too soon

American Forests, Summer, 2005 by Deborah Gangloff

From downtown Manhattan to the jungles of Panama, trees are finally taking center stage for their exceptional value. Sure they're valued as beautiful living things, but their real value has more to do with giving and maintaining life than with scale and shade. And now this "natural capital" is on the balance books, financially justifying an investment in healthy forests.

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In 1997, increased agricultural practices were taking a toll on New York City's aging drinking water system. New water-filtration plants would have cost $4 billion to $6 billion up front to build and $250 million a year to operate. Instead, the state is making a $350 million investment to buy land to prevent development and to pay farmers to reduce water pollution. That's a big savings that pays even bigger dividends like wildlife habitat, cleaner air, and increased tourism.

In Panama, trees are being recognized as the way to save the canal, according to articles in The Economist and the New York Times. On a busy day more than 2 billion gallons of water are pumped into the Atlantic or Pacific oceans to allow ships to traverse the canal. But keeping enough water in the canal to guarantee ships passage has become a problem. Massive deforestation from agriculture and road building, and the logging that follows the opening of new roads, has reduced the ability of the forests that surround the canal to absorb and filter rainwater.

In this example of natural capital, healthy forests are worth a great deal because they'll keep the canal open for business (each ship pays $65,000 to pass). But how do we put the financial value of trees on the books, so to speak, to justify an investment in Panama's reforestation? One banker in London offers this idea: Get insurance companies to underwrite a 25-year bond that pays for reforestation. The insurance companies would ask clients who ship through the canal (think Wal-Mart, Toyota, etc.) to buy the bonds. These companies already insure against the canal's closing, so they'd get a discount on the forest bonds. Now we're talking forests with tangible financial worth and real earning power!

The powerful value of trees is a message students around the country are learning and proving in their communities. Using AMERICAN FORESTS' GIS software, CITYgreen, students are taking classroom lessons on the financial value of trees for air and water quality out-of-doors with community service projects that plant and grow new tree canopies on their school campuses and in their communities. These young people are not just reading about the value of trees, they're seeing it for themselves.

Faith-based organizations, many with long histories of respect for Mother Earth, are turning their beliefs into environmental action in their communities. In the cities of Salem, Oregon; Roanoke. Virginia: and Charlotte, North Carolina, trees are coming into their own as residents learn how a healthy urban forest can make development sustainable and help prevent flooding.

And in the shadow of the U.S. Capitol last month, attendees of a conference co-sponsored by AMERICAN FORESTS envisioned landscape-scale strategies that promote conservation of forest ecosytems and other working landscapes through new kinds of public and private policies and initiatives. One hundred people from around the country and representing a range of disciplines participated in the discussions. The goal: a better understanding of how to develop effective markets for ecosystem services, and how those markets could be combined with existing strategies for conservation. The end result: larger-scale protection of wildland habitats and new sources of revenue to compensate private landowners and create incentives to protect open space.

These innovative strategies come not a minute too soon. The recently released Millennium Ecosystem Assessment has warned that 60 percent of the world's ecosystem functioning has been degraded. It's time that we started appreciating what nature does for us. Otherwise, we may end up as people who know the price of everything but the value of nothing.

DEBORAH GANGLOFF

EXECUTIVE DIRECTOR