The Integration of Economy and Ecology

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Af Peder Agger, Danish Nature Council

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(The 10'Th International Scientific Wadden Sea Symposium, 31. October - 2. November 2000, Groningen, Netherlands. Challenges to the Wadden Sea Area)

The Integration of Economy and Ecology

I would like to thank the organisers for having invited me to this conference. It is nice to be back. After I acted as the Danish representative in the Trilateral Working Group from 1988 to 94, I left the Ministry for the University where I am now. And where I, in another capacity, am the chairman for the Danish Nature Council.

The Council is an advisory board for the ministry on issues related to the sustainable development of nature and the landscape. It is stated in our terms of reference that the Council is expected to take a prominent role in setting the agenda on these matters, and it is the hope that these issues can have the same prominence as do economic issues. The framework for the Council’s activities is very broad. No one from outside can stipulate the work it undertakes. The only limitation being that the activities, directly or indirectly, should have something to do with nature and the landscape.

It is also expected that we, once a year, writes a report about a broad or narrower theme related to this field, which we did this year.

The so-called wise-men's report, which is also based upon two background reports, try to give a broad and farsighted introduction to the social context of nature conservation and to create a better understanding of the conditions and visions for Danish nature protection.

This cannot be done without confronting ecology and the economy. And in the rest of my talk I will share with you some of the challenges, we in the Council, have found are related to this theme, hoping it might stimulate further debate during this symposium.

The Wadden Sea - a part of the world
Day by day the world we live in is becoming more complex and interrelated. Everything is connected with almost everything else. Goods, people, money and information are sent around the Globe with an ever-increasing rapidity. The overall intensity is continuously increasing due to a growing level of consumption and the growing size of the population.

When the speed of communication increases, time and place will loose some of their previous importance. Communication within a local community or within a country has no advantage compared to communication between countries or continents, if it takes place with equal ease.

One effect of technological development is therefore the initiation of the local communities’ dissolution. Liberated from local constraints, some of the things that shape a local community will be translocated to other larger more centrally located places.

The increasing loss of local closeness and clearness that is a consequence of the process of globalisation, has in the Wadden Sea area as in many other areas, lead to examples of increasing local dissatisfaction.

This happen even though the same local population takes advantage of the benefits and comfort that also is a part of the process. Thereby they contribute to the further globalisation.

The results can either be a stand by the local people against the market, which is seen as a threat to human relations and nearness. Or the result can be a stand against the central authorities, which with command and control seems to make everything troublesome, bureaucratic, and far too complicated.

This happen regardless the fact that the national state itself might be forced to do what it does, by the international or global agenda.

When the calculations are done, the causes given, and the decisions taken come from even further away it is no surprise that the cleft between centre and periphery is deepened. These trends are both valid and well known in the Wadden Sea area, and are not confined to nature and environmental protection. Though they are probably most prominent in this field because of the international importance of the Wadden Sea area.

Another aspect, which is also experienced globally, is the increasing integration of nature protection into other parts of society. The context, and here not least, the relations to the economy, have become an indispensable dimension of nature protection and ecology. This takes me to the concept of sustainability.

The need for economy
It is possible to see the broad context, which nature protection increasingly is a part of, as a question of sustainable development. And this is a discussion that necessarily has to look at the present in the light of a far future, and at the same time adopt a global point of view.

It was the World Commission on Environment and Development that in 1987 brought the concept of sustainability high onto the agenda. It defines S. as a 'development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs.' The fundamental concern is whether current economic growth is achieved at the expense of the well being of future generations.

Sustainable development is often said to rest on three equally important pillars: The ecological, the economic and social sustainability.

Ecological sustainability has a clear reference to nature and its carrying capacity. Its limits are in principle not changeable. Our impacts can be irreversible and thus finite, or they can be reversible, in which case the level of impact may be object for political discussion.

Economic and social sustainability, on their side, has primarily societal relations. They are, therefore, in principle both manageable and reversible. But in the public discussion they often threaten to exclude ecological sustainability, so this ends up being considered as an economic or social concept.

This is both inconsistent and confusing.

During the 1980'ies it became obvious in the management of environment that the methods like command and control and technological means that have dominated so far, now had to be supplied with other tools.

Firstly, the costs of still more new technical means were soaring. Secondly, it became obvious that the means used so far could not cope with multi-source disturbances such as diffuse pollution, the green house effect, marine pollution, and loss of biodiversity.

It became clear that the problems for nature and environment had a more fundamental dependence of the economy and the economical behaviour.

To sum up: Sustainable development is, generally speaking, a vision of the good life. The introduction of a holistic and cross-sectorial thinking that emphasise recycling of matter and the participation of stakeholders and citizens can hopefully, pursue it.

The more these ways of thinking are arising, as a result of either insight or necessity, the more will a common denominator - a convertible measure of value, be needed. Economy can offer a solution but it requires that nature can be valued in monetary terms.

Therefore the economy and economic theory over the recent decades have played an increasingly important role for the management of nature and environment in general and specifically for the interpretation of sustainability.

The power and limitation of economy
Economic theory can contribute to solving the problems in nature and environment in at least two ways. The one is by expanding the arsenal of means. The other is by contributing to the prioritising between different objectives for nature and environmental planning and management.

Since the well-known economist from the 18'TH century, Adam Smith, it has been an important idea among economists that the individual selfish behaviour is compatible with maximising common welfare - if the market works perfectly. Which it seldom does.

Markets are often incomplete, as you know, because the prices at which the goods are exchanged do not reflect all their production costs. These lacking costs, the so-called externalities, are abundant when it comes to nature and the environment.

If the theory of maximal welfare holds these externalities should be internalised i.e. be incorporated in the price for the goods. This is a reason for using green taxes and fees. Which are also claimed to be an implementation of the 'polluter-pays-principle.'

Another argument is that in a market oriented society economical means are by far the least bureaucratic and the most efficient way of achieving the goals in the environmental policy. Efficient means here that not only is the aim achieved but it is at the lowest possible costs.

There is little doubt that this holds true to a large extent. And economical means like green taxes are being successfully introduced in many fields in many countries.

On the other hand, it is also obvious that on many occasions it will, also in the future, - be necessary to use well known legislative means like prohibition, technical standards, planning etc.

For various reasons this holds true, not least for nature and landscape protection. Firstly because nature- and landscape protection has to be very far-sighted. And, as I will come back to, economists tend to see things in the shorter run.

Secondly because the impact, e.g. on the amenity of a landscape, is far from being caused by just one or a few activities but are multi-source problems.

Thirdly because many values in nature are tied to the locality which makes them less suitable for regulation via the market.

And fourthly, the market cannot be used to regulate the size of the total consumption itself. Like a ship being loaded, the market might ensure that the load is placed efficiently so that the vessel does not turn over. But if the loading goes on and on, the market cannot prevent the vessel from finally sinking.

The economy's contribution to prioritising
According to economic theory, there is an optimum where the overall welfare, including the environmental cost, is maximised. If externalities exist, the fees, taxes, cleaning techniques, or procedures imposed on production, should be fixed at the level where the benefits and costs balance i.e. the value of the cleaner environment should balance with the costs of the implemented measures.

This balance, or optimal pollution level, is where the costs of marginal damage equal the marginal gains. And when we talk about sustainable development, it is not only the costs and benefits of the present generation but also of the coming generations that are at stake.

To handle this more complex scenario economists may introduce what they call 'true savings'. The idea is here to widen the classical concept of capital, which only covers physical capital, to cover also 'nature capital' and 'human capital'.

All three forms of capital constitute the total national wealth. Sustainable development is defined as non-declining national wealth, and the measure of this is called 'genuine savings'.

In this way, wear and tear of nature and its resources can be considered as reductions of the nature-capital. It will, however not be considered as unsustainable if there at same time has been an increase in either human capital or the production capital or both.

In this way one type of capital can be converted to another type of capital. They can substitute each other. That brings me to the economy-Ecology conflict.

Economy versus ecology
For many non-economists, it is a highly controversial viewpoint that the three forms of capital are convertible i.e. the one can substitute the other. One of the reasons for the dissatisfaction is that not all capital can be converted. Everybody, including the economists, is aware of the existence of critical limits - so called critical capital. Without this capital coming generations can't survive.

Examples of critical capital could be many of the so-called ecological services e.g. the global recycling of oxygen. But for many types of natural capital there are large disagreements about how many of these types that should be considered as critical capital and how many should be considered just as convertible capital.

Therefore, the economists distinguish between what they call weak sustainability and strong sustainability. Where the weak sustainability operates with less critical capital than strong sustainability because strong sustainability finds fewer possibilities for substitution, and consequently it is more aware of the need of precaution and the importance of avoiding irreversible changes.

Another principal field of disagreement, or perhaps better formulated 'difference in faith', between economists and ecologists, has to do with the practicality. - Is it at all realistic to believe that all natural and human capital can be measured, counted, and paid for on monetary terms?

First of all is it clear to everybody that it will be an enormous task to estimate the economical value of all types of natural and human capital. For many forms of natural capital a market does not exist. This makes complicated investigations necessary concerning people’s hypothetical willingness to pay for things they otherwise have taken for granted.

Another more technical complication is that the ordinary everyday market-economy and accounting have difficulties in handling far-sighted aims where the annual interest rate is very low. This is because they have to compete with investments in much more shortsighted and profitable engagements, which can bring higher returns.

But perhaps the main cause of disagreement between ecologists and economists is that the ecologists, and many other people, operates with a lot of values they won't give up and won't price, although they can't be classified either as critical capital or as convertible capital.

We in the Danish Nature Council call them unique values. They are species, landscapes and other entities we want to maintain and hand over to the next generation. Not because they are critically needed, but because we like them and want our descendants to care for them as we do.

We might call these values 'genuine heritage'. Here we act as responsible members of a society, and not just as Adam Smith's selfish and rational Homo economicus.

Much of what nature- and landscape management is dealing with is in fact protection of unique values. A good example of unique values could be the cultural landscapes with their content of natural and cultural heritage.

Finally, it should be mentioned that many people and many cultures in the world find that nature has intrinsic values that cannot be paid for in monetary terms e.g. when they are given a religious meaning.

To sum up: The economy has its constraints especially when it comes to longer run considerations, complex and locally bound values, and where intrinsic values are claimed.

But in a market society economy is indispensable when it comes to proposing means with which to manage nature and the landscape and ensure that political aims are achieved efficiently. But the aims have to be set in a political process based on also other values than what the economy can handle.

The overarching common principle in the Wadden Sea Co-operation is 'to achieve, as far as possible, a natural and sustainable ecosystem in which natural processes proceed in an undisturbed way'.

How far this possibility exists depends on the political will to protect the natural assets against pollution and other changes in quality. And here the change in the material production, in trade, in values and in urbanisation in and adjacent to the Wadden Sea area is decisive.

Will it be possible to restore the local community with its closeness and clearness if it has already gone?

Will it be possible to avoid the damages from the traditional forms of production like fishing when it little by little becomes more industrialised and thus less and less traditional?

Will it be possible to manage the less conventional forms of exploitation like oil and gas?

Will it be possible to achieve a better integration of the management of the coastal zone with what goes on in the adjacent areas?

But whatever the political will to protect is strong or weak it has to be implemented in an increasingly complex world. In this world the management of nature and the environment are not a separate but an integral part of what else goes on.

In the competition with other parts of the society nature conservation and environmental protection has therefore to improve its ability to express its aims, needs, and progress in quantitative terms.

We should be better to present a comprehensive and consistent description of the state of the nature, the environment and the impact of human activities. And to do this we need both traditional natural scientific data and indicators, and we may even need shadow prices that citizen’s assign to different ecological services.

I have heard some people saying that the trilateral Wadden Sea Co-operation might come in to a dead end. In such situations it is time to plan for the next move. This planning could include a well structured programme for achieving and analysing the economy for all the activities in The Wadden Sea area. – A look at the coherent international ecosystem with economical eyes.

In doing this we should, however not forget that human beings and hence our relations to the nature and environment contain much more than what economical theory can grasp.

Therefore we have to talk much more about ecology and economy in the coming years.


Danish Nature Council, Fredriksborggade 15,3; DK-1360 København. Homepage:; Phone: 45+ 33955795; e-mail:

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