The Economics of Desertification, Land Degradation, and Drought

3. ECONOMICS OF DESERTIFICATION, LAND DEGRADATION, AND
DROUGHT
Land degradation matters to people, because it affects
• the range of activities that people can undertake on the land and the range of services
provided by the land—in other words, it restrains choices and options;
• the productivity of these activities and services and, thereby, the economic returns they
generate; and
• the intrinsic or existence value of the land. 28
Degradation affects the economic value of land, because this value is based on its capacity to
provide services. These services include not only physical output (for example, food and resource
production) but also other services beneficial to human well-being (for example, recreational parks).
The existence of ethical, philosophical, and cultural considerations that give ecosystems a value—
irrespective of their benefits to humans—will not be part of this economic assessment. We
acknowledge that these considerations exist but believe they are better addressed by societies using
other processes than economic analysis (Pagiola, von Ritter, and Bishop 2004).
To date, the most studied impact of desertification, land degradation, and drought (DLDD) is
the decline in crop yields. In this report, we recommend also considering the production of a wider,
more comprehensive range of services in land ecosystems. Some of these services are valuable for
their support to agricultural systems (regulation of water supplies for irrigation, pollination, genetic
resources for crop improvement, and so on) but can also provide services that go beyond agricultural
production (for example, carbon sequestration, flood control, recreational activities.). The Millennium
Ecosystem Assessment (MA 2005a, 2005b) and The Economics of Ecosystems and Biodiversity
(TEEB 2010) identified three types of benefits derived from ecosystem services that are affecting
human well-being—ecological, sociocultural, and economic benefits—all of which can be affected by
DLDD.
Most of the studies on the economic valuation of ecosystem services focus either on a
selection of benefits arising from a particular service or on ecosystems at a specific location. Few
studies have attempted to estimate the value of the full range of services by regions or for the whole
planet (Pagiola, von Ritter, and Bishop 2004). Pimentel et al. (1997), in analyzing waste recycling,
soil formation, 29 nitrogen fixation, bioremediation of chemical pollution, biotechnology (genetic
resources), biological pest control, pollination, and the support of wild animals and ecotourism,
estimated that the worldwide economic value of these services is $2,928 billion, of which 49 percent
is due to waste recycling alone. Costanza et al. (1997) estimated an average annual value of nature’s
services of the entire biosphere to be $33 trillion per year, which is more than the world economy of
$18 trillion per year. A review of studies on ecosystem valuation performed by Balmford et al. (2002)
returned a mean total cost of a global reserve program, on both land and sea, of some $45 billion per
year.
Some of the existing studies on the costs of land degradation express the costs as a share of
gross domestic product (GDP). 30 But how can the impact of DLDD on present and future well-being
(not only economically) be measured as a loss in GDP (that is, the amount of goods and services
produced in a year and in a country)? Of particular importance is a work commissioned by French
president Nicolas Sarkozy and written by the Commission on the Measurement of Economic
Performance and Social Progress (CMEPSP). This study addressed the problems with existing
measurements of well-being and stressed the need for reliable indicators of social progress (Stiglitz,
Sen, and Fitoussi 2009). Despite its widespread use, GPD does not provide information about the
well-being of a nation’s social and environmental factors. The commission recommended renewing
the efforts to develop the GDP measure beyond the narrow focus on productivity to account for
28 As mentioned in the objectives in Section 1, the intrinsic value of land resources is not covered in this report.
29 Based on Pimentel et al. (1995), a conservative total value of soil biota activity to soil formation on U.S.
agricultural land is approximately $5 billion per year. For the 4.5 billion hectares of world agricultural land, soil
biota contribute approximately $25 billion per year in topsoil value (Pimentel 1997).
30 Examples are provided in Appendix A.
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