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The Contribution of Sustainable Trade to the Conservation of Natural Capital: The Effects of Certifying Tropical Resource Production on Public and Private Benefits of Ecosystem Services

August 23, 2016 |

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This study by PBL (Netherlands Environmental Assessment Agency) investigated the potential of voluntary market standards for sustainable resource production to help conserve and enhance natural capital.

In a globalizing economy, natural resources are increasingly obtained from remote production regions. The production of tropical resources like soy, palm oil, cacao and wood has several negative effects on natural and semi-natural ecosystems. Through environmental pressures and conversion processes, ecosystems loose part of their capacity to provide the economy with all kinds of goods and services. Forests are a well-known example; they are valuable to the economy as a source of wood and fuel, and they serve society by storing large amounts of carbon. When forests are not managed sustainably, they degrade and their capacity to provide resources and services is partly lost.

Numerous companies that import resources nowadays use market standards and certification processes to assure that their resource supply is set up in a responsible way. In this study, extended cost-benefit analyses were used to analyse both the private and public costs and benefits of certified production, including the values of natural capital. The extended CBA method uses approaches and techniques that closely resemble parts of the NCP. Putting a monetary value on natural capital provides information about why and for whom nature and biodiversity should be conserved, and provides insights for both private initiatives and public policy for managing ecosystems more sustainably.

The performed cost-benefit analyses show that certified resource production has several valuable societal benefits, such as reductions in environmental pollution, soil erosion and health damage. High societal benefits are found for avoiding deforestation and maintaining carbon storage in ecosystems. However, for the producers of resources, the financial returns of implementing sustainable production methods are often limited.

The uneven distribution of costs and benefits of certified production over public and private actors is a barrier to further upscaling of sustainable production methods. So there is a need for additional solutions, like additional funding from carbon trading, setting a level-playing-field on   production conditions for traded commodities, and stimulating sustainable land use on a landscape level. Also, the coverage of ecosystem goods and services in market standards is now mostly implicit or incomplete, and much can be improved.

Download the report here.

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