The Financial Costs of Biodiversity Loss

The loss of biodiversity is a tragedy for everyone. We often forget that nature provides a plethora of services all for free. A 2012 report indicates that the world’s biodiversity is down 30 percent since the 1970s. Humanity is outstripping the Earth’s resources by 50 percent — essentially using the resources of one and a half Earths every year, according to the 2012 Living Planet Report, produced by conservation agency the World Wildlife Fund (WWF).

As we undermine natural systems we are incurring immense costs. This is the central premise of a BBC News article by Richard Anderson.

As pointed out in the article businesses will be forced to pay through regulatory instruments such as pollution taxes, like carbon credits and landfill taxes that already exist, and higher insurance premiums.

Climate change induced extreme weather also has dramatic costs. Businesses that fail to own up to their responsibilities will also pay in terms of damage to their reputations from consumers whose environmental demands are growing every day.

Trucost and PRI have estimated the cost of environmental damage caused by the world’s largest 3,000 companies in 2008 at $2.15 trillion.

Businesses are not the only ones who will suffer from these high costs. These costs will be passed along to consumers.

As earnings and profits come under increasing pressure share prices will fall and this will affect investors around the world. At the end of the day the cost of biodiversity loss will impact everyone.

We can expect “15 to 37 percent of living species” will be extinct by mid-century, equivalent to 1.25 million species. Climate change is to blame and it will force species to migrate to new regions and adapt or die as a result. To put it bluntly, “up to 70% of the world’s known species risk extinction if the global temperatures rise by more than 3.5°C.”28 The largest biomes under direct threat are polar ice and ocean coral reefs.

We have very tangible results of this trend today. The Arctic ice sheet has now hit record lows. We are facing the prospect of ice-free summers in the Arctic Ocean which implies the loss of an entire biome, the costs of which could be staggering.