This article is an installment of my column’s Climate Catalysts feature. Climate Catalyst articles highlight cutting edge research into climate science and its implication on economics and investing.
This month, rather than covering a climate science paper, I feature an economics paper that quantifies the value of our ecosystem and of the losses our civilization accrues through the same kinds of poorly planned, executed, and subsidized activities that have led to climate change.
- The Economics of Diversity: The Dasgupta Review, an independent report commissioned by the British government in 2019 was published by its lead author, Sir Partha Dasgupta, a professor of economics at Cambridge University, in February 2021.
- This in-depth report, the first of its kind, finds that the demands we are making on Nature “far exceed its capacity to supply us with the goods and services we all rely on.”
- The Dasgupta Report attempts to quantitatively model a monetary value for the goods and services Nature provides human civilization for “free,” discusses the management of nature-related financial risk and uncertainty and sets forth ideas for how the public and private financial sectors might be harnessed to spur a sustainability revolution.
- In this article, I mention Blue Nest Beef and PrairieFood and quote a recent conversation with Mr. Jimmy Emmons, a regenerative farmer and rancher in Oklahoma.
First, a confession: I have not read the report.
The full Dasgupta Report is 500 pages of densely detailed and carefully argued points even before the glossary and references sections begin. Reading and digesting the entire report will take a few months of work.
Even the Executive Summary, at around 100 pages, is long enough to require a few hours of close reading to finish and understand. I am happy to report that there is a highly abridged, easily manageable five-page document that highlights the report’s Headline Messages. I highly recommend every reader of this column to start there and work your way through the longer versions as I am doing.
Here are some of the frightening tidbits and interesting observations I learned leafing through the full report and reading through the Headline Messages:
- Humans and the livestock we raise for food constitute 96% of the mass of all mammals on the planet. 70% of all birds alive today are poultry. (David Attenborough’s forward to the full report)
- Between 1992 and 2014, assets produced per person roughly doubled but the stock of natural capital per person declined by nearly 40%. (Headline Messages)
- Current extinction rates are 100 to 1,000 times higher than at any time in human history. (Headline Messages)
- Around one-sixth of the carbon footprint of the average diet for a citizen in the EU is directly linked to tropical deforestation. (Abridged Version)
- Natural ecosystems have been easily ignored in economic and political conversations to this point because they are silent (e.g., trees), invisible (e.g., underground fungi and microorganisms), and / or mobile (e.g., schools of fish).
I am frustrated with the economics profession in general. Reading through economics papers is often torturous for me. The subjects covered are arcane and the authors of the papers seem to take a position similar to the architects of the Spanish Inquisition: if you abuse the statistics long enough, they’ll tell you anything you want to hear.
The Dasgupta Report is markedly different. Its topic is foundational, and its equations are easily understandable. It should be required reading for policy makers globally and anyone who eats or drinks should understand the points the report raises.
Why This Research Matters
Economics is the science of how to make choices when confronted with limitations.
When I was in school, most economists took for granted that natural capital (e.g., potable water, arable land, minerals, etc.) was unlimited, and only considered limitations in investment capital and labor as necessary for understanding how supply and demand would come into balance by changes in prices.
The Dasgupta Report makes clear that economic systems are embedded within nature — affecting nature and being in turn affected by it. Considering economics separate from ecology is a recipe for civilizational disaster and for an extinction event that is taking place even as I write.
Over the past few weeks, I have been gathering information for a series of articles about carbon sequestration. When I originally set out to cover this topic, I thought I would mainly be writing about the chemical and mechanical engineering that goes into Direct Air Capture technology.
Thanks to a fortuitous connection I made with Erica Dodds at The Foundation for Climate Restoration — a non-profit organization that seeks to educate, advocate and collaborate to create a civilizational paradigm shift towards climate restoration — I have started to rethink what my coverage of this topic will look like.
My connection to The Foundation for Climate Restoration led to a conversation with Russ Conser, CEO and Chief Impact Officer of Blue Nest Beef.
Blue Nest is a company that provides direct-to-consumer steaks, ground beef, and “Tree Range Chickens” produced using an innovative grazing method that regenerates the soil and produces meats that are off the charts nutritious and delicious.
Blue Nest has partnered with the National Audubon Society in a program designed to renew grassland bird habitat. The Audubon Conservation Ranching program establishes protocols for 1) habitat management, 2) animal forage and feeding, 3) animal health and welfare, and 4) environmental sustainability. Blue Nest sources all its beef from ranches certified under this program.
Conser’s definition of regenerative agriculture struck me one which spoke directly to the issues raised by the Dasgupta Report: “Regenerative agriculture is a process of growing food that increases the planet’s capacity to grow food.”
In Conser’s vision, humans can operate in concert with Nature — paying Nature back for the services and goods Nature provides — in a way that the Dasgupta Report says is vital for the health of our planet and the survival of our civilization.
Conser’s vision aligns nicely with that of Rob Herrington, co-founder and CEO of a company about which I have written before, PrairieFood. PrairieFood’s bioreactors allow farmers to “recharge the batteries” of their soil — increasing the soil organic matter that is vital to microbe growth, water retention, and crop nutrition. These vital markers of soil health have been declining since the advent of synthetic fertilizers and proliferation of “factory farming” techniques.
The 2020 field trials I mentioned in my last ClimateTech Updates article show that when PrairieFood is applied onto crops, it increases plant mass both above and below the ground. PrairieFood feeds the microbes, the microbes provide nutrients to the plants, plant mass increases, and photosynthetic activity is boosted. When photosynthetic activity increases, plant roots start returning nutrients back to their symbiotic microbe partners and the virtuous cycle begins anew.
This virtuous cycle is important to us because soil with happy microbes and high levels of organic matter can store more water and sequester more carbon than can poor soil.
Both Conser’s grazing techniques and Herrington’s bioreactors represent ways of paying Nature back for the bounty it provides us in the only currency it can use — increased carbon levels in the soil. Increasing the carbon content of our soils helps the cause of climate restoration because it decreases the carbon concentrations in our atmosphere.
In other words, by paying Nature back, we end up paying ourselves as well.
The lessons I learned from Conser and Herrington came home to me in a recent conversation with Mr. Jimmy Emmons, a regenerative rancher and farmer based in Dewey County, Oklahoma. Emmons believes that the strategy we have used to farm since the end of World War II has not only decreased biodiversity, lowered the productive capacity of the land, and made farms more susceptible to rains and drought, but has also devastated the economics of American farming families.
Emmons’s operations have generated much higher revenues at a much lower cost since he switched from “conventional” to regenerative techniques, and that is a combination that any businessperson — from a family farmer to a venture capitalist — can appreciate!
The Dasgupta Report tells us that we must start recognizing the debt to biodiversity we are accruing as a civilization. Blue Nest Beef, PrairieFood and regenerative producers like Emmons are showing us how we can pay back that debt with interest.
Conser, Herrington, and Emmons know, as I know, that the methods we have used to feed ourselves for the last three generations reached their “Best By” date long ago. It is time for a new paradigm.
Intelligent investors take note.