Valuing nature for what it is worth

A lack of housing supply is currently seen as one of the major challenges facing the UK economy and the government is yet again under pressure to build on the green belts that surround cities such as London. It is timely therefore to be reminded of the value that nature represents, be that through green belts or urban parks. Natural Capital Accounts for Green Space in London was published last week and estimates the value of London’s parks at £91 billion. Moreover, it finds that each £1 spent on maintaining the parks produces £27 in benefits to the capital’s citizens and businesses.   

It is easy to conceptually understand that nature produces a host of benefits: for London’s parks they include physical and mental health benefits, recreational opportunities, and carbon storage. But it is much more difficult to put a monetary value on these benefits. The study by Vivid Economics does just that, as well as highlighting the large uncertainties that exist in these estimates. It is interesting, but intuitive, to note that the uncertainties around amenity value – as expressed through housing price differentials – are much higher than those around avoided health costs or the value of recreational activities.

Reading the study brought back memories of a paper I co-authored some ten years ago (self-promotion alert!) where we assessed the local health benefits in China of projects aimed at reducing global CO2 emissions. Again, the benefits were found to be substantial albeit covering a wide range depending on assumptions and estimation methods (unsurprisingly, we found that answering the question ‘how much is a life worth?’ very difficult to answer).

Not all green spaces are equally valuable though and preserving green belts at the expense of building more housing may not be the right policy. London’s parks are an asset, not a costly liability, but whether green belts are might require further study. If not already underway, now may be the right time to take a fresh look at the benefits of the UK’s green belt policy, uncertainties and all.