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the myriad goods and services they provide. Valuing ecosystem goods and services is not easy, yet it is fundamental to ensuring the sustainability of global economic development efforts.

A major international research effort supported by UNEP, the Economics of Ecosystems and Biodiversity (TEEB), is illustrating how ecological and economic research can be used to value ecosystem goods and services, as well as how such valuation is essential for policy making and investments in the environment (Sukhdev 2008; TEEB 2010).

Second, the role of policy in controlling excessive environmental degradation requires implementing effective and appropriate information, incentives, institutions, investments and infrastructure. Better information on the state of the environment, ecosystems and biodiversity is essential for both private and public decision making that determines the allocation of natural capital for economic development. The use of market-based instruments, the creation of markets, and where appropriate, regulatory measures, have a role to play in internalising this information in everyday allocation decisions in the economy. Such instruments are also important in correcting the market and policy failures that distort the economic incentives for improved environmental and ecosystems management.

However, overcoming institutional failures and encouraging more effective property rights, good governance and support for local communities, is also critical. Reducing government inefficiency, corruption and poor accountability are also important in reversing excessive environmental degradation in many countries. But there is also a positive role for government in providing an appropriate and effective infrastructure through

public investment, protecting critical

ecosystems and biodiversity conservation, creating new incentive mechanisms such as payment for ecosystem services, fostering the technologies and knowledge necessary for improving ecosystem restoration, and facilitating the transition to a low-carbon economy.

Third, continuing environmental degradation, land conversion and global climate change affect the functioning, diversity, and resilience of ecological systems and the goods and services they supply. The potential long-term impacts of these effects on the health and stability of ecosystems are difficult to quantify and value. Increasing collaboration between environmental scientists, ecologists and economists will be required to assess and monitor these impacts (MEA 2005; Polasky and Segerson 2009). Such interdisciplinary ecological and economic analysis is also necessary to identify and assess the welfare consequences for current and future generations from increasing ecological scarcity. Further

progress in reversing unsustainable development calls for more widespread interdisciplinary collaboration to analyse complex problems of environmental degradation, biodiversity loss and ecosystem decline.

Interdisciplinary research also needs to determine the thresholds that should govern the transformation of specific types of natural capital into other forms of capital. For example, how much forestland is allowed for conversion into farmland, industrial use or urban development in a given area? How much underground water is allowed for extraction each year? How much and what fish species can be caught in a given season? Which chemicals should be banned from production and trading? And more important, what are the criteria for setting these thresholds? Once these standards are established, incentive measures at national or international levels can be devised to ensure compliance.

The other key to balancing different forms of capital recognises that substitutability is a characteristic of current technologies. Investing in changing and substituting these technologies can lead to new complementarities. Most renewable energy sources, such as wind turbines or solar panels, considerably reduce the amount of natural capital that is sacrificed in their construction and the lifetime of their operation, compared to fossil fuel burning technologies. Both of these types of solutions – setting thresholds and altering technologies – are important for achieving a green economy.

In sum, moving towards a green economy must become a strategic economic policy agenda for achieving sustainable development. A green economy recognises that the goal of sustainable development is improving the quality of human life within the constraints of the environment, which include combating global climate change, energy insecurity, and ecological scarcity. However, a green economy cannot be focused exclusively on eliminating environmental problems and scarcity. It must also address the concerns of sustainable development with intergenerational equity and eradicating poverty.

A green economy and eradicating poverty Most developing countries, and certainly the majority of their populations, depend directly on natural resources. The livelihoods of many of the world’s rural poor are also intricately linked with exploiting fragile environments and ecosystems (Barbier 2005). Well over 600 million of the rural poor currently live on lands prone to degradation and water stress, and in upland areas, forest systems, and drylands that are vulnerable to climatic and ecological disruptions (Comprehensive Assessment of Water Management in Agriculture 2007; World Bank 2003). The tendency of rural populations to be clustered


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