October 19, 2011 | General

Editorial: Asset Appreciation

BioCycle October 2011, Vol. 52, No. 10, p. 4
Nora Goldstein
In this month’s Community Sustainability feature (page 20), “Valuing Ecosystem Services,” you will meet David Batker, Executive Director of Earth Economics, a nonprofit organization in Tacoma, Washington. Earth Economics, explains Batker, is based on the fact that natural systems are economic assets just as built capital – what has been constructed – is an asset. During our interview, we asked Batker how to assign capital asset value to natural assets, for example the ecosystem services related to flood protection. Using the Mississippi River Delta as an example, he explained that the ecosystems in that region supply at least $12 billion to $47 billion in benefits to people every year.
“If this natural capital were treated like an economic asset, the present value of the Mississippi Delta would be between $330 billion and $1.3 trillion. The Gaining Ground study we did in the Gulf region found that wetlands … account for more than 90 percent of the estimated total value of ecosystem services provided in the Mississippi Delta. For every 2.5 miles of wetlands, you lose one foot off of a storm surge. Without wetlands as a buffer, you cannot maintain either levees or cities in the Mississippi Delta where over 2.2 million people live.”
The built capital for flood protection in the Mississippi Delta is levees, which in fact erode and degrade wetlands by starving the deltaic ecosystems of sediment and fresh water. “Levees, like virtually all built capital, depreciate over time,” Batker explained. “Wetlands, however, represent an appreciating investment that provides more service capacity year after year. … That levee is going to fall apart – it has a depreciation schedule.”
Describing wetlands as an “appreciating investment” stuck with us. Asset appreciation is something we think about with our financial investments, but not so much our goods and services, including the infrastructure that keeps communities functioning. Earth Economics is working with the Army Corps of Engineers on how to include ecosystem services in routine benefit-cost analyses. Says Bakter: “Municipalities can float bonds to pay hundreds of millions of dollars for water infiltration plants, but if they remove a road to reduce sedimentation in a watershed that filters the water to a higher quality and less cost than a filtration plant, it is a write-down on the asset sheet.”
The concept of asset appreciation carries over to the resources in the waste stream. The United States still throws away more than 65 percent of its solid waste. Much of what is thrown away constitutes assets that can appreciate in value as they are utilized. On the organics side of the waste stream, those assets can be converted into composts and mulches that restore and sustain natural capital.
Just as importantly, if not more at this point in time, is that those assets are job opportunities waiting to happen. We were thrilled to learn as we were going to press that Gov. Jerry Brown signed legislation that raises California’s recycling goal to 75 percent by 2020, focusing primarily on the commercial sector. The legislative package also enacts incentives to increase recycled material processing and manufacturing in the state (page 6). All together, more than 60,000 green jobs could be created in California over the next eight years, according to Californians Against Waste.
We also learned about a new study released by Green For All (page 6) that suggests an investment of $188.4 billion in water infrastructure – the amount USEPA indicates would be required to manage storm water and preserve water quality – would inject a quarter of a trillion dollars into the economy, create nearly 1.3 million direct and indirect jobs in related sectors and result in 568,000 additional jobs from increased spending. A significant percentage of those jobs would come from green infrastructure (systems designed to provide the ecosystem services of natural capital).
The double entendre of “asset appreciation” also isn’t lost on us. It is time to appreciate these assets, not destroy them. –

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