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Time to pay up for depleting our natural resources … so it won’t cost us the Earth

Published 13 November 2023 in Sustainability • 7 min read • Audio availableAudio available

As temperatures hit 53C in Furnace Creek in California’s Death Valley, it’s clear we need to act and fast. Edoardo Chiarotti argues that companies need to pay a ‘vegetation debt’ to compensate for the environmental damage they cause.

This summer marked something of a first. In parts of the US and southern Europe, temperatures reached 50°C or more, with NASA describing July as the hottest month on record since comparable records began in the late 1800s. On 16 July, barometers at the aptly named Furnace Creek in Death Valley, California, reached an astonishing 53.3°C. Our planet is warming, and it’s happening faster than we anticipated.  

As heatwaves, wildfires, droughts, and flash flooding become commonplace in parts of the world historically unaccustomed to extreme weather, governments and public bodies have been forced to act. One critical measure is the United Nations Kyoto Protocol, a multilateral agreement signed by more than 50 industrialized countries to limit greenhouse gases by allocating a quota system on carbon dioxide emissions. Simply put, each country has a set quota of CO2 emissions go over and they need to pay, go under and they can sell their carbon credits to others who have exceeded their quotas.   

The Kyoto Agreement isn’t without its controversies, but as a mechanism, it has worked relatively well for carbon. The problem is that slowing climate change is more complex than simply taxing the emissions created by burning fossil fuels. The extraction and processing of natural resources minerals, water, forests, and vegetation that are cleared or used in manufacturing or farming, say are also driving greenhouse gases, pollution, and an existential loss of biodiversity. And so far, there is no multilateral economic instrument that effectively regulates how fast we are using up the planet’s natural resources resources that are both rapidly being depleted and finite. A few disparate initiatives are emerging in countries such as Brazil. Initiatives like bio credits or “debt for nature” swaps have been mooted, where financial concessions are exchanged for efforts to protect rainforests. The problem is that these actions are dispersed and decentralized, almost entirely financed with public funds, and without a clear restoration objective. 


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A better solution, we believe, is to enact a system whereby the private sector until now a major part of the problem can contribute meaningfully to the restoration of natural resources through effective nature pricing mechanisms and a dedicated centralized fund for nature restoration. 

Calculating the vegetation debt 

How do you set an effective price on a natural resource one that accurately reflects its value as something both finite and critical to maintaining environmental equilibrium?  

When organizations pay authorities or landowners for water, timber, or copper, they typically only pay the costs of extracting or harvesting those resources. These prices fail to reflect the fact that these resources are finite or the value of any other natural resources that are deployed (or destroyed) in the process. For example, when forests are cleared for mining, the biodiversity loss is rarely mirrored in the market prices paid by manufacturers. 

Wouldn’t a better approach be to charge organizations a price that not only reflects the extraction and harvesting but also the cost of restoring the finite resources that they use? And wouldn’t it be more effective if we could do this in a generalized, multilateral manner such that prices are set and paid into a centralized fund? 

When forests are cleared for mining, the biodiversity loss is rarely mirrored in the market prices paid by manufacturers.

To test these ideas, I worked with colleagues from EPFL and HEC-UNIL – two higher education and academic research institutions in Lausanne, Switzerland. We compared before and after images of one of the world’s biggest copper mines, the mining site of Antamina in Peru, using Google Earth Engine and Landsat 2, an open-source data base. Between today and 1992, when the mine was built, there was a significant loss of vegetation around the site. To get an accurate sense of the scale of that loss, we used NASA’s Enhanced Vegetation Index to measure the amount of infrared light emitted by plants during photosynthesis, and therefore vegetation density (see diagram for more details). And the cost of this deforestation? To calculate the monetary value of the “vegetation debt” of Antamina’s operations since 1992, we looked at what was spent to replant an area of similar surface in Brazil by the local NGO Instituto Terra. This comparative calculation resulted in a cost of more than $5m.

This methodology is replicable and can be applied across a diversity of industries and geographical locations. To make it work on a global scale, we suggest companies should repay this vegetation debt by transferring the due amounts into a centralized fund for nature restoration similar or indeed the same as the Global Biodiversity Framework Fund proposed by the United Nations at its COP 15 Biodiversity Conference in 2022. We know from Kyoto that enacting this voluntary is likely to work best at inception. As agreements bed in, this could then be rolled out via regulation at a country level, making it compulsory for companies by 2025.  

The only things standing between us and this kind of actionable solution are awareness and agreement awareness and agreement that need to be on the part of the private sector just as much as the public. And it is imperative that we achieve both. 

Time to act   

Climate change is an existential threat. A warming planet is a risk to everyone’s livelihood, prosperity, and well-being. The Paulson Institute and the United Nations Environmental Program estimate that these investments are currently in the range of $124bn to $143bn annually, 86% of which comes from the public sector. If we are to reach our climate goals, these investments need to at least quadruple by 2050. 

Failure to act is a dereliction of duty to our organizations, workforces, ecosystems, and communities. In the short term, the reputational risk is high. In the mid-term, regulatory measures will certainly penalize players that are slow to respond. The longer-term risks are another story. 

My co-authors and I would encourage every organization and decision-maker reading this to understand that the prices you currently pay do not reflect the environmental cost of the resources that you use. We would ask you to be active: start measuring and collecting data and go the extra mile to figure out the impact you are having. Calculate your own vegetation debt. Look at how much pollution you generate. And be sure you know everything about third parties that may be reselling your waste. You can be sure that legislation is coming soon that will force your hand if you don’t get ahead of the curve.  

We urgently need to find and rapidly enact viable measures to protect and restore our natural environment. For too long, the private sector has been part of the problem. Awareness, agreement, and a willingness to act to pay the real price for the resources we use will ensure that we become part of the solution. 


Edoardo Chiarotti

Edoardo Chiarotti

Senior Researcher and Lecturer at the Enterprise for Society Center E4S

Edoardo Chiarotti is Senior Researcher and Lecturer at the Enterprise for Society Center E4S (EPFL, UNIL, and IMD). He holds a PhD in International Economics from the Graduate Institute, Geneva. Before joining E4S, Chiarotti worked as an economist for the World Trade Organization, the Bank of England, and the Organization for Economic Co-operation and Development, among others. 


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