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Sustainability

Protecting China’s tropics with a new kind of accounting

Tim Nixon  Managing Editor, Sustainability at Thomson Reuters

Tim Nixon  Managing Editor, Sustainability at Thomson Reuters

Along China’s southern coast you can find a city with tropical beaches and a thriving tourist economy. It’s called Sanya, and it, like many other places in China, has seen rapid economic development over the last 15 years. What is different about Sanya is that local leaders decided that as the city embarks on its growth plan, it’s also critically important to keep an accounting of the amount of natural resources and associated ecosystem services being lost, or gained, along the way. This methodology is a form of “natural capital accounting,” or more specifically development of a “natural capital balance sheet,” and confronted with daunting challenges, the city of Sanya provides an example for China and the world of how to grow sustainably.

Taking Stock Over Time

A first step in natural capital accounting is taking stock of the value of the services provided by natural ecosystems. Sanya began its survey using data from 2005, and below is the result, with results measured in million RMB/hectare, and red zones being the areas decreasing in value and the green zones increasing.

Map: A first step in natural capital accounting is taking stock of the value of the services provided by natural ecosystems
Note the attribution given the surrounding ocean, and the bright green clusters off the coast which represent island areas.

And now consider how GDP (colored red), natural resources value (i.e. a forest or river, colored blue), and ecosystem services value (i.e. harvested timber or fish, colored green), have changed in value over the period from 2005 to 2013:

Chart - Values: 100 Million RMB in current prices
Values: 100 Million RMB in current prices

The city of Sanya is trying to grow its economy and the value of its natural capital stocks (e.g. forest lands) and the services provided by those stocks (i.e. eco-tourism on coral reefs, clean drinking water from aquifers) at the same time. As presented at the February 2015 De Tao Group workshop on the Future and New Economy, here are the conclusions the city itself draws from the multi-year exercise:

  • With its unique geographical position and rich natural resources, and based on initial calculation, Sanya enjoys natural capital valued at 210 billion yuan (approximately $40 billion), 5.6 times Sanya’s GDP in 2013, which is a valuable asset and a base for Sanya’s sustainable development.
  • Some key natural resources in Sanya decreased in value with over-development and lack of planning in recent years. Marine resources (coral reef, mangrove and sea-weed beds etc.) and soil resources were the most disturbed.
  • With continued use of strategic planning and industrial restructuring around natural capital stocks and ecosystem services, Sanya’s ecosystem service value can and will be substantially increased.
  • In 2013, 56% of the benefits gained from ecosystem services in Sanya are shared beyond the city boundary, including Hainan Island, China and the world. This fact demonstrates the interdependency of ecosystem services, and that Sanya is integrating with national and global economic and ecological systems.

A New Global Model

The model adopted by Sanya looks at the relationship between GDP and Natural Capital growth in terms of tradeoffs. Under scenario A (red line), GDP grows, but at the expense of natural capital stocks. Scenario C (green line) depicts an approach where planners have decided to sacrifice nearly all growth in order to rapidly build or rebuild natural capital. Scenario B (blue line) represents what is now being referred to as the “new normal” in China. This is where achieving growth in part results from also investing in natural capital stocks (e.g. reforestation) or developing or leveraging ecosystem services (e.g. renewable energy).
The model adopted by Sanya looks at the relationship between GDP and Natural Capital growth in terms of tradeoffs. Under scenario A (red line), GDP grows, but at the expense of natural capital stocks. Scenario C (green line) depicts an approach where planners have decided to sacrifice nearly all growth in order to rapidly build or rebuild natural capital. Scenario B (blue line) represents what is now being referred to as the “new normal” in China. This is where achieving growth in part results from also investing in natural capital stocks (e.g. reforestation) or developing or leveraging ecosystem services (e.g. renewable energy).

Building a Sustainable Paradigm

This is a time for paradigm shifting change in the economic growth model in China, and hopefully globally. It’s a time for new moral leadership on caring for the planet while we bring the benefits of economic growth to the world’s population. It’s a time for new transparency to drive investment towards these nodes of green innovation.

Premier Li Keqiang recently declared “war on pollution”, and described smog as “nature’s red-light warning against inefficient and blind development”. President Obama is increasingly taking leadership on funding investment in the green economy, with pledges to reduce carbon emissions by 25% by 2025. These important global leaders, and many others, are making the right kind of decisive statements. In the end, action, impact, measurement, and transparency will be critical to the success of our new growth paradigm.

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