Nature first solutions: how technology and global incentives could save our planet and economy
co-authored with Sydney Goodfellow
Where is your car right now? If you own a vehicle, chances are good it’s exactly where you left it, waiting for you to need it again. What if when you went to work, it did, too? In this case, your car is an autonomous vehicle, and it’s not really your car at all — it owns itself. When you’re not using it, your SUV picks up Uber passengers and makes deliveries, generating real income that goes toward maintaining and fuelling itself.
Of course, there are challenges in this model, but the principle speaks to the potential of a new kind of economic thinking — one that is resilient, self-regulated and trends toward abundance instead of scarcity. It’s this kind of autonomous, value-generating model that some are applying to the natural world. Forests grow, adapt, decompose, with or without us. What if their natural, ongoing processes could deliver real, economic value that cycles right back into their own preservation? Like a car that works to maintain itself, a forest could create incentives that ensure its own sustainability.
A new way of thinking about our environment
When Trent McConaghy wrote an article three years ago on Nature 2.0, he inspired a new kind of thinking about nature. With the technology we have in our hands today, such as artificial intelligence (AI) and blockchain, combined with the economic incentives that drive our society, like profit and return on investment, Trent argued that it is possible to create a very different and hopeful vision of our future. This vision is based on an attempt to project the enormous value of nature into business entities, so that the latter can participate in our market economy and, with this, leverage nature’s enormous business assets to drive sustainable behaviour. The essence of the approach, taken even further by the Sovereign Nature Initiative, is to turn natural capital, such as forests, oceans and lakes, into self-owned business entities represented by Decentralized Autonomous Organizations (DAO). Driven by the right incentives, it would be more profitable for people to preserve rather than exploit nature.
There have been many attempts to put a value on natural capital (or rather on the ecosystem services nature provides to us — at one point estimated to be $125 trillion), but the Nature 2.0 approach is one of few that pragmatically connects natural capital to today’s economy. Another more well-known approach is linking carbon removal investments to the sale of carbon offsets, which companies buy to compensate for their own carbon emissions. Carbon offsets are, among many things, an attempt to link environmental costs with financial ones. As a result, we have seen surprising effects, such as when reducing tilling to earn carbon credits have gradually led to less farming and finally made small farmers earn more from offsets than from crops. At the same time, investors have realized that “sustainability risk, particularly climate risk, is investment risk” and have begun to factor it in their investment approaches. There is also the extreme case of the Brazilian president who suggested recently that his country must be paid $1 billion to reduce the deforestation of the Amazon.
Leveraging technology to monitor nature
All this comes with our increasing, technology-enabled ability to monitor nature and its exploitation or preservation, quantifying its services with much finer granularity. The newly approved UN guidelines for ecosystem accounting have established the first methodology to monitor nature on regional, national and global levels. Earth observation and geospatial sensing technologies, for example, will replace the current manual certification methods that ensure the balance between exploitation of nature and its conservation. As these older methods rely exclusively on physical inspections and audits, their reliability, trustworthiness and frequency do not correspond to the needs and dynamics of today’s market. Combine that with decentralized finance (DeFi) and distributed ledger technologies (DLT), which allow for building solutions that cross national boundaries and eliminate the need of a single central trusted body or a treaty, and we have accurate, standardized measures for quantifying natural resources like never before. Based on the climate data we have and continue to acquire with these new technologies, it is not difficult to build AI algorithms that can predict how the world will look 30 years from now. It might soon be possible, although not easy, to even quantify the cost of the changes to come. And finally, we are incrementally building the tools to measure and track, not only our individual activities, but also the cumulative impact on the planet through the depreciation of its biodiversity.
In other words, the ability to monitor the natural world is decentralizing and democratizing. With that comes the explosion of data, which can be used to model, quantify and value ecosystem services and our impact on them. This is now causing us to question our current economic models in which our economy and the biosphere are two separate entities. By considering our economy as embedded in the biosphere, we might be moving toward global solutions for preserving nature and its biodiversity. Some countries will be more impactful in this quest than others. The Brazilian rainforest, the example of which was given above, might actually be an investment opportunity rather than a one-time ransom.
Thinking beyond borders
Canadians are lucky to have access to about 20% of the world’s fresh water supply. We have abundant natural resources and, by land mass, are the second largest country in the world. Will countries like Canada that are home to global natural capital be paid to preserve rather than exploit them and, with this, maintain a better global balance? Maybe, but that might not be fair to those countries that have fewer resources and depend on them for essential goods and food production. Still, it seems obvious that clearing a Canadian forest to build a solar farm and then clearing even more forest to build the associated power lines would make little sense, compared to doing this in the Sahara Desert. Addressing these imbalances will likely require thinking beyond national borders.
For a model of how this could look, let’s explore the e-Residency program of Estonia, which allows anyone around the world to create a business entity in that country as if that person was living there. This has allowed Estonia to include the rest of the world in its tiny economy. In a similar way, the forests, rivers and lakes of Canada, Brazil, Russia and the countries of the Congo Basin in Central Africa could be business entities, such as DAOs, that the world invests in, and at the same time, profits from. Although they would deliver global financial returns, these ‘nature first solutions’ would certainly benefit their host countries, creating employment opportunities for nature conservation and offsetting the reduction of nature resourcing services.
Much of this thinking is inspired by Indigenous stewardship models that consider a multi-generational approach to resource usage — one that values reciprocity and sustainability over ownership and exploitation. We have so much to learn about land and resource management, and this article only begins to scratch the surface.
Accounting for the future today
Lastly, let us look at this from the ‘supply’ side and speculate on where money might come from to create this new nature conservation sector. Think back to your car — not your car, but the one you use and that sells its off-time running Uber trips to pay for its own maintenance. Some days, it makes more than enough cash to maintain itself. With its extra earnings, it contributes to an overall pot of money that could be used for other public services, like maintaining roads or installing charging stations. With DAOs like this, the options for sustainable and self-sufficient capital expand beyond a payer-payee model. We are incentivized to invest in the systems that benefit us.
In this context, let us consider the risk exposure of coastal cities. The portion of the global economy exposed to the risk of flooding is big — more than 10% of the world’s population now resides in urban or quasi-urban clusters located less than 10 metres above sea level. The top 10 of the 136 port cities in the world represent 60% of the total exposure, but are in only three countries: the U.S., Japan and the Netherlands. The sum of their currently exposed assets is $1.8 trillion per year, based on a report which is already 15 years old. Miami alone is most likely at this figure today. These three countries would, theoretically, be the biggest investors in nature conservation because reversing the trend of rising sea levels affects their economy directly. The biggest corporations in these economies are already forced to ensure that their climate strategies are highly concrete and actionable.
This is not about creating a new divide, as the above example of coastal economies versus the rest might imply. It is about funding a way to project future risk into all of our investments of today and further factoring in natural capital in our economic models. Rather than considering climate issues as something that affects others, or future generations, we can find incentives that personalize, and even monetize, the need for a more sustainable approach today.
Let’s stop thinking of natural capital as infinite and free services, just like we might need to reconsider GDP growth as our primary measure of economic progress, as growth cannot be endless on a finite planet. We need new economic models, which will start accounting for nature beyond natural resources with yields and returns. Our evolved approach would take into account our global wealth of natural capital, the current depreciation of which should be accounted for economically and with this, hopefully, turned into appreciation.
Until then, it will take a lot of experimentation with nature first solutions. While it may be hard to imagine a car or forest or solar field that transcends national borders and owns its own maintenance, these kinds of models may actually drive us towards a more sustainable future — one that looks beyond endless, untenable growth.
If you’re interested in learning more, please connect with us at the Digital Technology Supercluster or join these two upcoming online events we helped organize — Creative Collisions: Shaping the Canadian Net Zero Future on June 22 and Meeting the Net Zero Decarbonization Challenge ideation workshop on June 23.
