February 4, 2023

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Economics has helped to destroy the environment. Can it be used to save it?

Australia is on the verge of having the world’s first national accounting system that tracks the health of a country’s natural environment, according to former Treasury secretary Ken Henry.

It may help to solve one of the most urgent problems facing humanity: how to reverse global environmental destruction. 

“I think this is a game changer, I really do,” he told the ABC.

“What we’ve done for the first time anywhere in the world at regional scale is to make an assessment, an audit if you like, of the environmental condition of the landscape.

“We’ve now demonstrated that it can be done … and there is intense interest from financial markets people in seeing whether it’s possible to commercialise this data, in the form of a biodiversity credit for example, and it looks like there is the possibility to do so.”

Dr Henry said it will hopefully lead to future business profit-making also regenerating the planet.

“After all, almost all of human activity on earth rests one way or another upon the condition of the natural environment, and if we don’t address the deterioration of the natural environment sometime pretty damn soon, the rest of it’s going to come crashing down,” he told the ABC.

So what is he talking about?

Ken Henry, former Treasury secretary, says the traditional business model of profit-maximisation that excludes environmental destruction from its calculations has done terrible damage to the planet(Source: John Gunn, ABC News)

One of Australia’s systems of resource management

Australia is divided into 54 natural resource management regions (NRMs — see map below).

They are a mix of government and non-government organisations (NGOs) that deliver projects on the ground designed to improve the environment.

Many have been in existence since the mid-1990s and their origins can be traced to the landcare movement of the 1980s.

They’ve all been recognised as regional NRM organisations by the federal government as part of the Natural Heritage Trust and its successor programs including the National Landcare program.

NRMs across Australia
The Australian Government has been a major investor in natural resource management since the mid 1980s(Source: NRM Regions Australia website)

One of those NRMs is the Burnett Mary Regional Group (BMRG) in Queensland.

Its territory includes Bundaberg, the Burnett and Mary rivers, and the world heritage-listed K’Gari (formerly Fraser Island).

It is the NRM that has conducted the environmental audit Dr Henry is talking about.

Burnett Mary Regional Group

It has employed scientists to take a stocktake of the natural assets within its borders, including its plants and animals, its vegetation cover, its soil condition (including CO2 stores) and the health of its rivers and waterways, over 56,000 square kilometres.

To collect the data, the scientists used eDNA metabarcoding, portable water sensor smart-stations, satellite remote sensing and Bayesian modelling, and their methods were complemented by consultations with traditional owners.

Sheila Charlesworth, BMRG’s chief executive, said it took over 18 months to compile the “environmental account”, but it took years of work beforehand to perfect the methodology.

And she’s excited about the next step.

“Now we can actually quantify and measure, on an annual basis, the difference that we’re making [to the environment],” she said.

“It’s not just for BMRG, it’s for all NRM groups across Australia.”

She said at the NRM national conference in Western Australia earlier this month, other NRMs made a commitment to take their own environmental stocktakes using the same methodology.

“We’re currently working on the rollout of the road map for training across Australia,” she said.

Sheila Charlesworth Burnett Mary Regional Group
L to R: Tom Espinoza, director of research at BMRG, Brendan Fletcher, land and sea ranger at Gidarjil Development Corporation, Sheila Charlesworth, chief executive of BMRG, Brent Mclellan, operations manager at Gidarjil Development Corporation, Ben Hoekstra, project officer at BMRG(ABC News: Patrick Heagney)

So what exactly does the environmental account do?

Dr Henry said the environmental account in the BMRG was important for one key reason.

He said it created a baseline dataset of the environment in that region, and that will allow scientists to track changes in the health of the environment over time — to see if it’s degrading or improving.

He said that will lay the foundation for the creation of new markets that will attach a financial value to the improvement in environmental conditions.

And that means businesses will be incentivised to start pouring vast sums of money into projects that improve the environment because it will be the profitable thing to do.

He said the new markets will hopefully spread across the country as other NRMs take stocktakes of their own natural assets and “environmental accounting” goes mainstream.

Dr Henry said this concept was a personal passion.

He’s now a director of a company called Accounting for Nature (AfN) that has developed the methodology and scientifically-based framework for the environmental accounting that has been used in the Queensland pilot.

Other AfN board members include Peter Harper, the former Deputy Australian Statistician at the Australian Bureau of Statistics who was responsible for the ABS’s environmental statistics program, and chair Peter Cosier, the renowned conservationist and co-founder of the Wentworth Group of Concerned Scientists.

He said AfN was only established a few years ago, but the history of the company stretched back much further to his time in Treasury when he was having conversations with people like Peter Cosier.

“It’s really his brainchild,” he said of Mr Cosier.