Economic report into biodiversity crisis reveals price of consuming the planet

In every corner of the globe the evidence of the global biodiversity crisis is now impossible to ignore.

In the UK, a third of high priority species and two thirds of habitats are declining, according to government figures that emerged today on the UK's Biodiversity Action Plan. Since 1994 despite the extra attention provided by the plan, 5% of the species it covered are thought to have gone extinct.

Around the world the picture is as bad or worse: the International Union for the Conservation of Nature believes one in five mammals, one in three amphibians and one in seven birds are extinct or globally threatened, and other species groups still being assessed are showing similar patterns.

Simon Stuart, a senior IUCN scientist, has warned that for the first time since the dinosaurs humans are driving plants and animals to extinction faster than new species can evolve.

For decades, nature lovers have watched the fens being drained, or noticed the decline of cuckoos in spring and butterflies in summer. But until recently these changes have been overshadowed by growing fears about the impact of climate change.

However, as the impact of these species losses around the world have mounted – riots over food shortages, costly floods and landslides, expensive bills for cleaning polluted water, and many more disasters – attention has finally started to turn to the impact of human beings literally consuming the planet's natural resources.

So it was in 2007, just months after the British government made global waves with the biggest ever report on the economics of climate change by Lord Stern, that world governments met in Potsdam, in Germany, and asked the leading economist and senior banker Pavan Sukhdev to do the same for the natural world.

The study – called The Economics of Ecosystems and Biodiversity (TEEB) shows that on average one-third of Earth's habitats have been damaged by humans – with, for example, 85% of seas and oceans and more than 70% of Mediterranean shrubland affected. It also warns that in spite of growing awareness of the danger of natural destruction it will "still continue on a large scale".

Following an interim report last year, the study group will publish its final findings this summer, in advance of the global Convention On Biological Diversity conference in Japan in October, marking 2010 as the International Year of Biodiversity.

Based on a host of academic and expert studies, the TEEB report is expected to say that the ratio of costs of conserving ecosystems or biodiversity to the benefits of doing so range from 10:1 to 100:1. "Our studies found ranges of 1:10, 1:25, 1:60 and 1 to almost 100 in the case of," said Sukhdev. "The point is they are all big ratios: I'd do business on those ratios...I'm fine with 1:10."

One report estimated the cost of building and maintaining a more comprehensive network of global protected areas – increasing it from the current 12.5%-14% to 15% of all land and from 1% to 30% of the seas – would be $45bn a year, while the benefits of preserving the species richness within these zones would be worth $4-5tn a year. Another unpublished report for the UN by UK-based consultants Trucost claimed the combined cost of damage to the environment by the world's 3,000 biggest companies was $2.2tn in 2008.

Echoing Lord Stern's famous description of climate change as "the greatest and widest-ranging market failure ever", Sukhdev – who supports action on climate change as well – said the destruction of the natural world was "a landscape of market failures", because the services of nature were nearly always provided for free, and so not valued until they were gone.

"The earth and its thin surface is our only home, and there's a lot that comes to us from biodiversity and ecosystems: we get food, fuel, fibre; we get the ability to have clean air and fresh water; we get a stable micro-climate where we live; if we wander into forests and wildernesses we get enjoyment, we get recreation, we get spiritual sustenance; all kinds of things – which in many cases are received free, and I think that's perhaps the nub of the problem," said Sukhdev who was visited the UK as a guest of science research and education charity, the Earthwatch Institute.

"We fail to recognise the extent to which we are dependent on natural ecosystems, and not just for goods and services, but also for the stability of the environment in which we survive - there's an element of resilience that's been built into our lives, the ability of our environment to withstand the shocks to which we expose it...the more we lose, the less resilience there is to these shocks, and therefore we increase the risk to society and risk to life and livelihoods and the economy," he added. Sukhdev is a senior banker at Deutsche Bank, adviser to the UN Environment Programme. He also owns a rainforest restoration and eco-tourism project in Australia and an organic farm in south India.

The final reports, in five sections covering the economic methods and advice to policy makers, administrators, businesses and citizens, will make a series of recommendations for how to use economic values for different parts of nature, such as particular forests, wetlands, ocean habitats like coral reefs or individual species (one example given is paying farmers to tolerate geese wintering in Scotland), into ways to protect them.

One of the most immediate changes could be reform of direct and indirect subsidies, such as tax exemptions, which encourage over-production even when there is clear destruction of the long-term ability of the environment to provide what is needed, and below-cost pricing which leads to wasteful use and poor understanding of the value of the products. "Particularly worrying" are about $300bn of subsidies to agriculture and fishing; subsidies of $500bn for energy, $238-$306bn for transport and $67bn for water companies are also singled out.

Although the report is likely to argue some subsidies should be reformed rather than axed, an example of the huge potential impact was given by Sukhdev told a meeting in New York this week that to stop the global collapse of fish stocks, more than 20 million people employed in the industry may need to be taken out of service and retrained over the next 40 years.

Other suggested reforms include stricter limits on extraction and pollution; other environmental regulations such as restrictions on fishing net sizes or more damaging agricultural practices; higher penalties for breaking the limits, reform of taxes to encourage better practices; better public procurement; public funds for restoring damaged ecosystems such as reedbeds or heathlands; forcing companies that want to develop an area of land to restore or conserve another piece of land to "offset" the damage; and paying communities for the use of goods and services from nature – such as the proposed Redd international forestry protection scheme. Money raised by some policies could pay for others, says the report.

Sukhdev's team also wants companies and countries to adopt new accounting systems so alongside their financial accounts of income, spending, profits and capital, they also publish figures showing their combined impact on environmental or natural capital, and also social capital, such improvements in workers' skills or national education levels.

"We're in a society where more is better, where we tend to reward more production and more consumption... GDP tends to get associated with progress, and that's not necessarily the case."