BIOLOGICAL DIVERSITY, ECOSYSTEM STABILITY

AND ECONOMIC DEVELOPMENT

by

Fraser Smith

CSERGE Working Paper GEC 94-10

BIOLOGICAL DIVERSITY, ECOSYSTEM STABILITY

AND ECONOMIC DEVELOPMENT

by

Fraser Smith

Department of Biological Sciences, Stanford University, Stanford, CA 94305-5020, USA

Present address: Decision Focus, Inc., 650 Castro Street, 3rd Floor,

Mountain View, CA 94041-2055, USA Acknowledgements The Centre for Social and Economic Research on the Global Environment (CSERGE) is a designated research centre of the U.K. Economic and Social Research Council (ESRC) Valuable comments on an earlier version of the manuscript were received from Neil Adger, Tim Swanson, Rob Jackson and Bob Rowthorn, Bengt-Owe Jansson and two anonymous reviewers. Thanks also to members of Stanford University's Center for Conservation Biology for helping to sharpen some of the ideas in the early stages of this project. ISSN 0967-8875

Abstract

It is clear from the scale of anthropogenic resource use that economic systems should be

brought within biophysical limits as soon as possible. But biophysical limits to resource use are

difficult to determine. Also, it is difficult to know when and where these limits are breached, and

to allocate responsibility. Economic instruments for biophysical sustainability that use reliable

and consistent surrogate measures of these limits might, however, be workable. In this paper,

an instrument based on the conservation of biodiversity is presented, and its main advantages

and limitations are discussed.

A growing body of ecological research gives compelling evidence that biodiversity confers

stability on ecosystems by buffering them against natural and artificial perturbations, and that it

increases system productivity. The stability and productivity of ecosystems are integral parts of

overall biophysical integrity. These results therefore give the first clear evidence that biodiversity

acts as a measure of biophysical integrity. Since biodiversity - at least species richness - is

comparatively easy to measure, biodiversity conservation might be a viable surrogate measure

for driving economic activity towards biophysical sustainability.

A biodiversity constraint would be a framework for policies rather than a single policy. These

policies, be they local, regional or global, would be designed to prevent and penalise biodiversity

loss, while favouring economic activities that conserve biodiversity. Possible mechanisms are

discussed briefly in the paper. What makes a biodiversity constraint doubly attractive is that it

would also conserve the potentially large economic use and option values of biodiversity itself,

thus removing the need for separate measures for its conservation.

Key words: Biodiversity; Stability; Sustainability; Futures

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1. INTRODUCTION

As the human population grows, so does its total impact on the world- biophysical systems

(Vitousek et al., 1986; Holdren, 1991). Public concern about the increasing strain on natural

systems is manifested in part in the form of political and other efforts to protect endangered

natural populations and species, and to promote biodiversity conservation (Angier, 1994; World

Resources Institute, 1992, 1994; World Conservation Monitoring Centre, 1992). This increase

in public concern has come about because the consequences of current biophysical changes

for human welfare are unknown and possibly highly detrimental.

Faced with these problems, the logical course of action would be to bring human economic

activities within biophysical limits as quickly as possible. Among the many difficulties in

achieving this aim two in particular stand out. The first is that defining and establishing

biophysical limits, and knowing when particular kinds of human activity breach them, are very

difficult tasks; the second is that a necessary conjunct to moving the global economy towards

biophysical sustainability is a substantial increase in distributional equity, the political and

economic barriers to which are formidable.

Although ways are being found to steer local economic development along paths that are more

biophysically sustainable than in the past, the intertwining of local and global economic

processes requires that sustainable development be co-ordinated to some extent at the global

level. Sustainable development is unlikely to be successful if it takes place piecemeal because

the global economy must also change from a system in which the primary goal is profit

maximisation to a system in which the primary goal is achieving efficient allocation within

biophysical limits.

This paper outlines a framework that might be used to guide the global economy (and, by

extension, local and regional economies) towards biophysical sustainability. This framework is

based on the conservation of biodiversity, which, as well as ensuring its own continuing

existence as a valuable resource base, serves to stabilise whole ecosystems, thus avoiding the

leap into the unknown that would come with global ecological degradation. The paper does not

explore individual policies that might be applicable in particular regions but instead discusses

the advantages and disadvantages of using biodiversity conservation as a benchmark for

setting economic policy, and provides a sense of the legalities and institutional structures

required to build this framework. It is intended that the consistent application of a 'biodiversity

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constraint' on economic activity would circumvent the problem of dealing with fundamental

biophysical limits, and would result in greater distributional equity.

There are several stepping-stones to be crossed before assembling the framework of a

biodiversity constraint. First, we need to know why biophysical sustaina-bility is necessary for

economic development; second, we need to know why biodiversity is a good surrogate measure

of fundamental ecological processes; third, we need to understand why biodiversity

conservation would be an efficient motivator of sustainable development; and fourth, we need to

understand the probable short- and long-term economic consequences of conserving bio-

diversity, in order to know what must be added to biodiversity conservation in order to construct

a workable constraint on economic activity. Although the structure and operation of a

biodiversity constraint are outlined in this paper, an exhaustive analysis of these areas is held in

abeyance for future work. Instead, the present paper concentrates on the rationale for adopting

a biodiversity constraint on economic development, and outlines in broad terms how the

constraint might work.

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2. TERMS OF REFERENCE, DISCLAIMERS AND CAVEATS

The problem of achieving biophysical sustainability is viewed here with an ecological-economic

perspective. This perspective views the primary task in economic development as

understanding the limits of natural systems to different kinds and combinations of economic

activity. Only once limits are known should allocative efficiency and distributional effects be

considered. In this context, a biodiversity constraint would provide a measure of natural limits

within which allocative efficiency and equitable distribution of wealth could be pursued.

This approach is in sharp contrast with mainstream economics wherein cost- benefit analysis

would, in principle, provide a means to assess how many species could be lost to economic

activity. The greatest economic efficiency would be achieved when the marginal cost of

extinguishing a species equals the marginal benefit. But the mainstream approach is

hopelessly inadequate when applied to ecosystems because we have virtually no idea how the

deletion of particular species, or the sequence of their deletion, would affect particular

ecosystems, nor how the dynamics of those altered ecosystems would impinge on the

economy, now or in the future. Not only is the option value of biodiversity in relation to

ecosystem function potentially large, it is literally incalculable, not least because the option

values of individual species depend on the presence or absence of other species with which

they are ecologically associated. The complex, interrelated nature of the natural systems on

which economies depend precludes our knowing with any reasonable degree of accuracy how

long people can get away with disrupting them. Advocating the adoption of ecological

constraints on economic activity is therefore based on the kind of a priori precautionary stance

taken in ecological economics.

Regarding option and use values of biodiversity, the distinction is made in the previous

paragraph and hereafter between the option value of species and the option value of

biodiversity in relation to ecosystem function. In addition to the current use value and the future

option value of existing genetic material1, biodiversity has option value at the ecosystem level

because it provides the option for future economic benefit from the services of stable and

productive ecosystems.

A biodiversity constraint could not conserve all remaining species on the planet. Many species

1 For example, medicinal plant species whose pharmacological properties are currently known, and those whose properties are currently unknown or for which there is currently no need.

4

are already extinct from human activities and, as the human population grows, so more

biodiversity will be lost. Even if ecologically disruptive activities could be terminated

immediately, the global rate of anthropogenic extinctions would remain high for years or

decades because the effects of human activities often take a long time to work their way

through ecological systems. In addition, highly restricted or rare species - for example, those

with geographical ranges as small as a tennis court (Mayr, 1963) - could be sent extinct

inadvertently by even small-scale activities. While vigilance for inherently vulnerable natural

systems will be important in achieving ecologically sustainable development, the conservation of

all remaining populations and species on the planet is not a realistic venture; rather, it is an ideal

for people to strive towards.

In the present paper, all extinctions during this century are assumed to be anthropogenic. The

average background rate of extinctions in the geological past is about one per year globally (see

Wilson, 1992) and the rate of recorded extinctions since 1900 for which the cause is known is

about 2 per year (see Smith et al., 1993a). But only 0.1-1% of all described species have been

reassessed since they were discovered. If, in any given region, a species is known to have

become extinct through, for example, habitat destruction, then other ecologically similar species

are probably also at risk or extinct in that region. Therefore, the true rate of anthropogenic

extinctions since 1900 is probably much higher than 2 per year, and the rate of recorded

extinctions is expected to climb by about two orders of magnitude in the next century (see

Wilson, 1992; Smith et al., 1993b).

Certain terms relevant to the discussion are defined in detail in the Appendix. In short,

'biodiversity' is taken to mean the total genetic, morphological and functional diversity of all

individual organisms that are members of an ecological community or ecosystem; 'species

richness' is taken to mean number of species per unit area; 'ecosystem' is one or more

biological communities plus its abiotic environment; 'stability' is the tendency for a system to

return to its original state; and 'sustainability' is here taken as the 'stronger' biophysical definition

rather than the 'weaker' intergenerational definition (the ability of the present generation to meet

its needs without compromising the needs of future generations) because we are considering

how to make the full transition to an economy within biophysical limits, for reasons given below.

The term 'biophysical limits' in the text is used to refer to limits to economic development that

are either biological (such as the amount of sunlight fixed by plants) or physical (such as the

capacity of the atmosphere to absorb and recycle greenhouse gases), or a combination of both.

5

3. THE NEED FOR BIOPHYSICALLY SUSTAINABLE ECONOMIC DEVELOPMENT

3.1 The scale of the global economy

Most of the time, economists do not think about what the world might be like a century or two

from now if current patterns of resource use were to continue. This would be perfectly

reasonable in a world where the material or energetic throughput of the global economy were

small relative to the overall scale of the world's biogeochemical cycles. But the global economy

is now large relative to these cycles (see Vitousek et al., 1986; Holdren, 1991) and this forces us

to con-sider how current patterns of resource use impinge on future economic welfare.

There are two problems. The first is that in a world where the scale of resource use by humans

is a substantial fraction of the global scale of resource cycling, the costs of appropriating natural

resources should be high. For the most part, these costs are currently too low (see Pearce and

Warford, 1993). The second problem is that, even if natural resources were priced

appropriately, the cost of their use is discounted into the future at far too high a rate. Because

biogeochemical processes such as the cycling of nutrients through ecosytems usually operate

over many years or decades, the full effects of economic activities on natural processes are

unlikely to be seen within a lifetime. It is therefore inappropriate to discount the future at the

standard 5% per year. In a world where future human welfare depends so heavily on the future

state of natural systems, it is more sensible to discount the future at a rate commensurate with

the time for biogeochemical cycles to absorb anthropogenic perturbations, rather than at a rate

commensurate with human lifetimes.

The interplay between economic systems and natural systems is so complex that it is virtually

impossible to know how long a biophysically unsustainable economy could continue to exist, nor

even how biophysically unsustainable the current global economy actually is, if at all2. However,

precaution dictates that biophysical sustainability should be a long-term goal (i.e. over decades

or centuries). It is not enough to achieve intergenerational sustainability, as defined above,

because the needs of even the next generation are unclear and, even if they were clear,

meeting them with the maximum possible current resource use would be foolishly risky.

Biophysical sustainability is a safer long-term bet, and intergenerational sustainability is an

important shorter-term goal towards achieving it.

2 The combination of the size of the global economy and its critical dependence on fossil fuels (as opposed to current energy flux) is one of the many - albeit weak - indicators of its current biophysical unsustainability.

6

3.2 The problem of measuring sustainability

How do we know whether or when biophysical sustainability is achieved, and what is the best

route towards it? There are two layers of ignorance which must first be peeled away before this

question can be addressed. The first is establishing whether natural systems have thresholds

beyond which they flip to new states. When perturbation experiments on whole ecosystems

(e.g. Persson et al., 1993) are carried out, ecologists are often little the wiser about the possible

existence of thresholds because either the system has no distinct states or the perturbation was

of the wrong type to take the system to a new state. Even if this first layer of ignorance can be

overcome, a second presents itself, which is that, because ecological-economic interactions are

complex, we do not know how to properly establish biophysical limits on economic activities.

Although this problem may be soluble, it is necessary also to consider surrogate measures of

biophysical integrity.

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4. BIODIVERSITY AND ECOLOGICAL PROCESSES

4.1 The solution: a surrogate measure

Surrogate measures of biophysical integrity should work in a consistent way in all geographical

regions and be easily quantifiable. One candidate might be the stability of nutrient or energy

flows through ecosystems. These flows are a substantial element of overall biophysical integrity

and powerful tools have been developed by ecologists for characterising an ecosystem's

energetic condition (Odum, 1983; Jørgensen, 1988; Wulff et al., 1989; Wagensberg et al.,

1990), as well as ecosystem stress from nutrient perturbations (Schindler, 1990; Asbury et al.,

1991; Carpenter et al., 1992; Persson et al., 1993; Rudstam et al., 1993). However, these flows

are not easily quantifiable and, moreover, ecosystems are not always easy to delineate (see

Appendix 1). A more practical measure of biophysical integrity is the amount of biological

diversity in an ecosystem -specifically, species richness because species are distinct biological

entities, and because most ecosystems have yet to lose the majority of their species. Other

measures of biodiversity (genetic diversity, population diversity) would be equally good

indicators of biophysical integrity if they were as easily quantifiable as species richness.

4.2 Biodiversity as a measure of biophysical integrity

For biodiversity to be a measure of biophysical integrity it must be demonstrated to show a clear

association with ecosystem processes such as nutrient cycling. Such a relationship has only

recently been demonstrated by ecologists. Although the results of the few studies completed so

far have yet to be widely confirmed, the results themselves are compelling.

Coming from studies of food web models, the prevailing view in the 1970s and 1980s was that

ecosystems with a high degree of internal connectivity (associations among species) tend to be

dynamically unstable: an oscillation in the abundance of one species could lead to perturbations

in the populations of many others. By contrast, ecosystems with low internal connectivity tend

to be dynamically stable. The corollary of this view is that most species in an ecosystem are

functionally redundant. Therefore, an ecosystem's stability would not be significantly reduced if

most of its component species were removed (see May, 1972, 1973, 1981; McMurtrie, 1975;

Pimm, 1979; Beretta et al., 1987; Soulé et al., 1992). However, a mixture of theoretical and

experimental work since the 1970s has produced a smaller body evidence to show that the

internal complexity of an ecosystem is positively correlated with its stability (DeAngelis, 1975;

McNaughton, 1977; Begon et al., 1986, Table 21.1; Pilette et al., 1990 Wagensberg et al., 1990;

Frank and McNaughton, 1991; Moore et al., 1993).

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Recent alterations to the prevailing view have come from studies on the functional redundancy

and productivity of ecosystems.

Ñ Functional redundancy. An alternative hypothesis from the previling view runs as follows.

Although an ecosystem's stability against small perturbations might be unaffected by species

deletion, the same cannot be said about its stability against large perturbations. In a system

from which many species have been deleted, the remaining species would be critical to the

system's integrity, and a full complement of species gives an ecosystem a kind of 'buffering

capacity' (Jørgensen, 1990) against large perturbations (see also Walker, 1992). Tilman and

Downing's (1994) work on grasslands supports this hypothesis. The primary productivity

(amount of sunlight converted to plant tissue) of grassland communities with a full complement

of species shows a greater resistance to drought, and a greater resilience in recovering from it,

than communities with less than the full complement of species. They derive a curvilinear

relationship between species richness and stability such that each species lost has a

progressively greater negative impact on drought resistance. In grassland plots with a bare

minimum of species, a stressful perturbation that eliminates one or more species risks

destabilising the system within a plot because no surviving species of a similar functional type

will be present to take the place of the lost species. In cases like this, recovery is limited by the

rate at which the lost species can recolonise from elsewhere.

In economic language, this buffering capacity is a kind of substitutability among species within

functional groups. But just as goods of a similar functional type have differential utility, so

species have differential importance. So-called 'keystone' species provide critical support to

wide arrays of other species with which they interact. If they are removed from an ecosystem,

many others will follow (see Gilbert, 1980). The sequential removal of species from an eco-

system would therefore not necessarily produce a smooth reduction in stability.

Ñ Productivity. Tilman and Downing's (1994) work on grasslands shows not only that a full

complement of species buffers ecosystems against large perturbations but also that it enhances

productivity. Experimental grassland plots with a full species complement recover faster from

perturbations than those with a minimal or near-minimal complement. Tilman and Downing

(1994) hypothesise that the 'fully loaded' plots are more efficient at processing water and

nutrients. This hypothesis is confirmed by Naeem et al. (1994) using the so-called Ecotron, a

macrocosmic, climate-controlled, laboratory ecosystem (see Lawton et al., 1993). Ecotron units

9

containing relatively more species in each functional group (producers, consumers,

decomposers) are relatively more productive, processing nutrients and waste relatively faster

and more efficiently.

Based on the supposition that these macrocosmic patterns reflect the dynamics of whole

ecosystems, the view now emerging about biodiversity (species richness) in relation to

ecosystem stability is that there are two evolutionary forces at work. As Robert May puts it,

'One [force] is to pump up species diversity to allow an ecosystem to make the most of its

resources. The other is to reduce species diversity to avoid generating fragility. History ... may

have selected a subset of complex ecosystems that balance these two pressures' (see Cherfas,

1994)3.

3 One possible test of this hypothesis would be a comparison of the deciduous forests of Europe, North America and Asia. The european forests have reduced species richness compared with the others, and Schulze and Mooney (1993) hypothesise that the European forests might be more susceptible to the effects of acid rain and stratospheric ozone depletion.

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5. THE EFFICIENCY OF BIODIVERSITY CONSERVATION AS A MOTIVATOR FOR

SUSTAIANBLE DEVELOPMENT

With strong evidence that species richness stabilises ecosystem processes, it is logical to

propose biodiversity as a measure of biophysical integrity. Eco-systems that are 'fully loaded' in

terms of biodiversity will be at their most resilient and productive, playing their full part in the

global biogeochemical processes on which the global economy is based. More particularly,

they will be able to provide the widest possible array of resources to regional and local

economies. The conservation of ecoystem processes would in principle ensure the

conservation of biogeochemical cycles but, without specific measures to conserve biodiversity,

a well-stocked larder of species would not be guaranteed. Biodiversity conservation4 not only

ensures the 'option value' of continued eco-logical stability but also guarantees the current use,

plus options for future use, on the widest possible variety of genetic resources. As a motivator

for sustain-able development, biodiversity conservation would therefore be highly effective and

efficient. Once biophysical sustainability had been achieved, an economic constraint based on

biodiversity conservation could continue to maintain it.

4 The primary goal of biodiversity conservation is to maintain all species and populations of species. It is distinct from so-called species conservation, which serves to protect only charismatic species like pandas.

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6. ECONOMIC CONSEQUENCES OF CONSERVING BIODIVERSITY THE

DISTRIBUTION OF RESOURCE USE

Biodiversity conservation by itself could not act as a biodiversity constraint. The problem is that

economies would respond differentially to the conservation of biodiversity. Here, two

contrasting economies are very briefly considered: Papua New Guinea and California. Papua

New Guinea has a few large extractive industries (e.g. gold, copper, timber) but no heavy

manufacturing industry to speak of, relatively basic financial industries, and a growing service

sector based largely around tourism. The vast majority of Papuans are rural and derive most of

their living from the natural resources around them by farming and hunting. The population

growth rate is 2.3% per year (Population Reference Bureau, 1993). A constraint on economic

activity that prevents species loss in Papua New Guinea would steer the country's economic

development slightly, but not sharply, away from its current path. Probable growth industries

would include

(i) sustainable timber extraction5;

(ii) the licensing of the country's genetic resources and, perhaps later, a domestic

biomedical industry;

(iii) tourism. Because a biodiversity constraint would not alter the country's development

path drastically, the growth in GDP per capita in Papua New Guinea might be largely

unaffected by the transition to sustainability.

By contrast, California already has a biodiversity constraint of sorts, in the form of the federal

Endangered Species Act, one of the first enactments of which was to restrict housing

developments on San Bruno Mountain near San Francisco to protect an endangered population

of the Mission Blue butterfly (Icaricia icarioides missionensis). However, the Endangered

Species Act has had arguably no effect on restructuring the Californian economy towards

sustain-ability because the Californian economy simply has too many economic links with the

rest of the world for that to be possible, and because most of the state's industries do not

directly affect its domestic biodiversity.

5 According to the Tropical Forest Action Plan, current logging activity in Papua New Guinea, much of it clear-felling, exceeds sustainable levels because the resultant land erosion has high economic costs (Bartelmus et al., 1993). Nonetheless, the country's forests are still mostly intact and in many parts of the country logging is carried out by local people using portable sawmills which cut selected trees into the manageable pieces on site. With this extraction method, the spatial patterns of logging resemble natural treefalls, and it is therefore ecologically sustainable because deleterious ecological and economic side effects are largely avoided.

12

The Californian example shows that domestic moratoria on species loss would by themselves

probably fail to restructure the economies that contribute most to global environmental change.

A global moratorium would be equally useless because, except in rare cases, it would be

impossible to apportion blame for a particular species extinction to economic players far

removed from the species- home. Therefore, a workable biodiversity constraint would need

more than just the conservation of biodiversity.

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7. THE BIODIVERSITY CONSTRAINT: A FRAMEWORK FOR POLICIES TOWARDS

SUSTAINABLE DEVELOPMENT

Having reiterated the need for biophysically sustainable economic development, and shown

how ecological - and therefore biophysical - stability is linked to bio-diversity, the task now is to

build a biodiversity constraint that connects bio-physical integrity with economic development via

biodiversity conservation. Although there are almost certainly a number of ways to do this, the

particular biodiversity constraint outlined here makes use of the forces of international trade.

The logic of a biodiversity constraint runs as follows. Because economic activities that deplete

biodiversity are likely to destabilise natural systems, and because instability in natural systems is

economically risky given the current scale of economic activity, biodiversity depletion should

carry financial penalties and its conservation should carry financial incentives. In this way,

economic activities that do not destabilise natural systems will be favoured and biophysically

sustainable economies will gradually develop.

The evolution towards biophysical sustainability in regions that are economically poor and

ecologically rich will take place only if the world's economically wealthy regions also develop in

the same direction. This is where international trade would play a vital role; wealthy regions

would probably not make the transition to sustainability on biodiversity conservation alone. The

hypothesis is that the transition to sustainability in economically poor countries would be driven

largely by biodiversity conservation within their borders, while the transition to sustainability in

wealthy countries would be driven largely by a global biodiversity constraint based on

international trade6.

7.1 Economic structure of a biodiversity constraint

To re-emphsise, a biodiversity constraint would not be a policy mechanism. It would be a set of

organising principles - a framework - to make policies for bio-physical sustainability that are

tailored to regional economic and ecological conditions.

The two main elements of the framework are, first, that trade in ecologically sustainable goods

(those whose production and delivery does not deplete biodiversty) would be free of import and

export tariffs, and second, that trade in ecologically unsustainable goods would be penalised to

6 The impetus for biodiversity conservation in poor countries might come from the global biodiversity constraint itself or from internal efforts, or from a combination of the two.

14

gradually eliminate these goods from the economy over a period of decades. It is the second

component that would serve most as a guiding principle for specific policies, be they based on

command-and-control mechanisms or on market mechanisms.

In principle, formulating a policy mechanism to conserve biodiversity would be comparatively

straightforward. Consider a market-based policy. The task is to make the extraction of a given

species, population or genetic resource increas-ingly uneconomic as that resource becomes

depleted. Roughgarden and Smith (1995) show that, for fisheries, a tax on the market price of

landings that increases as the size of the fish stock decreases will protect the stock from

overharvest. All that is required is to know the size of the stock at any time, the size of the

harvest at that time, and the tax rate that conserves the minimum viable stock size plus a buffer

against natural fluctuations. This kind of policy is equally applicable to the harvesting of other

natural resources, like timber or medicinal plants, as to the harvesting of fish. It would apply

even to the conversion of land from its natural state to human use. If such a conversion were to

push a population or species below its minimum viable size, then the tax on earnings from that

land should be so high as to make the conversion uneconomic. Note that it is necessary to link

the economic instrument to the population sizes of species, not to the number of species in the

system, in order for the policy mechanism to work.

The important feature of policies to implement a biodiversity constraint is that the policy

mechanisms relate the costs of using ecological resources to the state of those resources. As

Daly and Goodland (1994) correctly point out, the potential increases in environmental damage

caused by deregulated international trade stem from a lack of environmental accountability at

the global level. By contrast, a biodiversity constraint would build environmental accountability

through international trade. In the international arena, a side-effect of such policy mechanisms

might be to bring incomes in poor countries up towards those in wealthy countries. Another

side-effect might be an increased incentive for poor countries to export products whose demand

is elastic. For example, if Papua New Guinea's exports of ebony to California were depleting

stocks of ebony - or even of species that live on ebony trees - then the price per cubic metre of

ebony would be taxed heavily, and Papuan ebony exporters would raise prices to compensate.

But if demand for ebony in California were inelastic, substitutes for ebony would be sought. The

greater the biodiversity in the exporting country, the greater the substitutability among natural

products. Either way, Californians would be paying Papuans amounts much closer to the full

environmental costs for their products, and there would be greater incentives for biodiversity

conservation within Papua New Guinea's boders.

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Of course, the economic disruption caused by the full and immediate implement-ation of policy

mechanisms like these could potentially be very large. Therefore, a gradual adjustment of

import and export quotas would be needed in order to phase in policy mechanisms for a

biodiversity constraint. In the example, Papua New Guinea and the United States would come

to an agreement to gradually reduce trade in ebony produced unsustainably.

7.2 Legal and institutional underpinnings of a biodiversity constraint

How can countries come to implement policies for a biodiversity constraint? In the case of

fisheries, it may be in fishers' best short-term as well as long-term interests for management to

implement policies for ecological stability, given the probable frequency of stock collapse under

current strategies (Roughgarden and Smith, 1995). But such conditions cannot be expected to

hold globally. Governments in many parts of the world, under pressure from interest groups or

for reasons of 'national sovreignty', provide exactly the types of taxes and subsidies that lead to

ecological disruption (Willis et al., 1988; Southgate, 1994; Mahar and Schneider, 1994).

Although the difficuly of instituting a biodiversity constraint may seem great, the groundwork for

phasing it in has already been laid with the signing of the -albeit non-binding - Biodiversity

Convention at Rio de Janeiro in 1992. Building on this groundwork, binding treaties would be

the next step. These might take place under an umbrella organisation, for example, a General

Agreement on Trade and the Environment (GATE), proposed by DeBellevue at al. (1994) as a

reform to the General Agreement on Tariffs and Trade (GATT). DeBellevue et al.'s (1994)

vision of a GATE would bring environmental experts to the discussion table on international

trade. However, a bolder version of the GATE would be necessary to institute a biodiversity

constraint, laying out a series of steps to bring the economies of participating nations within

biophysical limits by setting targets for the international trade of ever greater percentages of

ecologically sustainable goods and services. There are two important differences between such

a GATE and other agreements like the GATT and the North American Free Trade Agreement.

First, bilateral agreements between countries on trade in specific goods, as in the example

above, would be encouraged. While the GATE would provide overall targets, the process of

forging agree-ments would be decentralised. Second, when bilateral agreement fails, unilateral

action by countries to prevent species loss - for example, restricting trade with other countries in

certain goods - should be legal (see Adger, 1994). Leap-frogged by a GATE, the GATT's

activities would then be limited to cases exter-nal to a biodiversity constraint, such as import

duties on high value added goods

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Once a treaty for a biodiversity constraint were in place, participating countries would then be

under obligation to develop and implement policies to encourage economic activities that

conserve biodiversity (e.g. by subsidies) and to penalise those that do not. The monitoring and

enforcement of the treaty would be carried out by an independent, international body, and

frameworks might be included in the treaty to assist nations struggling to meet targets. This

latter provision would be designed to guard against environmental imperialism of poor countries

by the rich.

7.3 Challenges and limitations to the operation of a biodiversity constraint

Many considerations have been ignored in this discussion, particularly further requirements for a

biodiversity constraint to work, and limitations to its scope. In particular:-

i. For a biodiversity constraint to work, a fine-grained knowledge and continuous

monitoring of global and regional biodiversity would be necessary. This would present a

sizable and expensive challenge.

ii. Biodiversity loss is often caused by the 'downstream' effects of human activities. For

example, the silting of rivers from logging can cause coral reefs to die. Therefore, policy

mechanisms that link economic development with the state of natural stocks, such as a

stock-dependent tax on market prices, must take account of these downstream effects,

and may require international co-operation.

iii. The biodiversity of some groups, especially micro-organisms, is not easy to measure,

yet these groups may be very diverse (Barns et al., 1994; DeLong et al., 1994) and vital

to maintaining basic ecosystem processes. Although recent improvements have been

dramatic (Barns et al., 1994), techniques for assessing microbial diversity are still in their

early days.

iv. The role of the World Bank might be re-cast to support a biodiversity constraint.

Development loans to be used as investment pools for ecologi-cally sustainable

businesses could be made available to needy countries.

v. Biodiversity loss might be caused directly by such global processes as climate change,

for which responsibility cannot easily be apportioned. For example, the abundances of

17

many amphibian species around the world have dropped sharply in the last ten years,

possibly in response to atmospheric changes (Wake, 1991). In addition, climate change

may cause so-called community dis-location in which species migrate at different rates

in response to changes in mean atmospheric temperature, and their geographical

ranges cease to overlap (Root and Schneider, 1993). Hence, biophysical sustainability

may require economic measures beyond a biodiversity constraint, such as taxes on

resource throughputs in preference to taxes on labour and income (Daly, 1994).

18

8. SUMMARY

Because the global regulation of human economic activity is becoming a necessity, a means of

regulation must be sought. A biodiversity constraint is a strong candidate because:

(i) the balance of ecological evidence indicates that the conservation of biodiversity

conserves ecosystem stability and productivity;

(ii) biodiversity (at least species richness) is a comparatively straightforward ecosystem

characteristic to measure and monitor;

(iii) biodiversity has value in its own right. A biodiversity constraint would, over many

decades, re-mould the economy to avoid breaching biophysical limits.

Command-and-control policies may be feasible for this purpose in some instances but

the overwhelming majority of policies probably will utilise market forces by systems of

incentives and penalties. The employ-ment of a biodiversity constraint would not only

help secure humanity's long-term future but also spawn whole new industies; indeed,

human technical ingenuity may yet bring us such wonders as a biophysically sustainable

automobile.

19

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Appendix: Definitions of Terms

(i) Biodiversity. This term is widely used to describe the total diversity of living organisms.

Hammer et al. (1993) identify four independent divisions of 'biodiversity': species

diversity, genetic diversity, functional diversity (the range of functions of species in an

ecosystem), and spatiotemporal diversity (topography, climate, etc.). Odum (1983,

Table 18.1) lists a wide array of diversity indices. Ehrlich and Daily (1993) identify

population diversity as an alternative to species diversity in the measurement and

conservation of biodiversity. Although the essence of the argument presented in this

paper would be the same for all the above definitions of biodiversity, the policy

prescriptions depend to some extent on the definition and therefore biodiversity is taken

to mean species diversity because it is usually the easiest to measure in the field.

It is important to distinguish between diversity within an ecosystem and diversity among

ecosystems. If diversity is linked to stability, then by the latter meaning one would

expect boreal ecosystems - such as arctic tundras - to be less stable than tropical

rainforests. If there are stability differences among types of ecosystems, then it is

valuable from the point of view of sustainable development to know why, but the reason

may not necessarily have anything to do with their component diversity, however

measured. In this paper I concentrate on the relationship between diversity within an

ecosystem and its stability.

(ii) Ecosystem. An ecosystem is a biological community or set of communities plus its

abiotic environment. These are the two necessary conditions for defining an ecosystem.

They are supplemented by the following sufficient conditions. Like the individual

organisms that form ecological communities, ecosystems are self-maintaining and

self-regulating. These properties arise because of feedback flows of energy and

nutrients within, and between, systems. These feedback flows maintain ecosystems far

from thermodynamic equilibrium, and buffer them against perturbations. In a

thermodynamic sense, ecosystems are orderly. In addition, ecosystems are

thermodynamically open, receiving free energy from the sun or from geothermal activity.

But this external orderliness belies their internal complexity, because the feedback flows

that operate within ecosystems give rise to non-linear dynamics - bounded chaos - in the

interactions of their components, such as among populations (e.g. Hanski et al., 1993).

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Ascribing geographical boundaries to ecosystems is difficult and, in many cases,

inappropriate. Ecosystems may be nested within each other, for example, freshwater

ponds within a prairie. Some regions of the world, such as the open ocean, contain

communities of organisms and exchange energy and matter with the abiotic

environment, and are therefore ecosystems, but they have no clear boundaries. Thus,

what constitutes a given ecosystem is often definitional.

Ecosystem processes are processes that emerge from the interaction of the biological

and physical entities comprising an ecosystem. These processes include nutrient and

energy flows, succession, species turnover by immigration and emigration (b-diversity),

speciation and species extinction. There are also certain static characteristics of

ecosystems that can be measured: these include numbers of entities per unit area

(richness) and richness weighted by entity abundance (a-diversity). The enormous

internal complexity of ecosystems has led to attempts to describe their organisation in

intelligible ways, perhaps most successfully as nested hierarchies in time and space

(e.g. Odum, 1983; Urban et al., 1987; O'Neill, 1989; Holling, 1992).

(iii) Stability. Stability is the tendency for a system to return to its original state. Local

stability (or Lyapunov stability) is the tendency for all system components to return to

their steady state equilibrium values following small perturbations (DeAngelis et al.,

1989). A large perturbation may therefore push a system into the domain of attraction of

another steady state, if such a state exists (Lewontin, 1969; Holling, 1973). This kind of

stability is - perhaps misleadingly - referred to as global stability. The parameters used

to describe stability vary from study to study: they may be population sizes, nutrient

flows, connectivity of mathematical networks, but in all cases stability is taken to mean

low variance in parameter values, and instability is characterised by high variance.

Stability is commonly viewed as comprising two parts: resistance and resilience.

Resistance is the tendency for the parameter values describing a system to remain

within the same bounds under a perturbation, and resilience is the speed with which a

system returns to its original state following a perturbation. Much of the empirical work

on ecosystem stability has focused on observing the resilience of a system following a

measurable perturbation.

Finally, the hierarchical view of ecosystems accentuates the role of spatial and temporal

scale in considering stability. For example, a 'stable' ecosystem might contain

numerous unstable populations over a given time-frame. Nutrient flows in one part of an

25

ecosystem may be unstable on a given timescale but those through the whole system

may nevertheless be stable. Therefore, it is usually informative to define the

spatiotemporal context when discussing ecosystem stability.

(iv) Sustainability. Like biodiversity, this term takes many meanings. Here, biophysical

sustainability is used and this is, in essence, defined by the biodiversity constraint itself.

An economic activity is biophysically sustainable if it does not damage ecosystems by

disrupting nutrient flows and/or depleting biodiversity.