Putting a Price on Nature

Planting a forest to improve air quality may prove to be as cost-effective as expensive new pollution control equipment, according to preliminary results from a novel experiment at a Freeport, Texas chemical plant. Officials involved in the study say this innovative approach could become a test case before the federal Environmental Protection Agency, which has identified reforestation as a potential air quality improvement strategy.

Leaders of an unusual collaboration between The Nature Conservancy, the world's largest conservation group, and the Dow Chemical Company, a Fortune 100 corporation, told a Harvard Kennedy School (HKS) audience this week that they were encouraged by initial findings validating a dollars-and-cents approach to valuing nature that may help businesses with their bottom line while improving the environment in local communities.

The two organizations were recipients of the prestigious 2013 Roy Family Award for Environmental Partnership, an HKS prize administered by the Environment and Natural Resources Program (ENRP) at the school’s Belfer Center for Science and International Affairs.

“We uncovered material benefit from reforestation as an air quality control,” said Glenn T. Prickett, the Washington-based chief external affairs officer for The Nature Conservancy (TNC). The pilot project at Dow’s Texas manufacturing plant on the Gulf Coast of Mexico also examined how marshlands can help protect against intensifying storm surges and what interventions might help save a vital river crucial to plant cooling operations that is suffering the effects of drought and increasing water demand.

“This project asks how do you make the economics of ecological systems work hand-in-glove with business decision-making,” said Neil C. Hawkins, Dow’s vice-president for global environment, health and safety and sustainability at its Midland, Michigan headquarters. The ultimate goal is a company-wide effort to make nature a part of doing business at its 188 sites in 36 countries and to serve as a model that can be adopted by other companies, government, and non-profit groups, said Hawkins, who holds a Harvard School of Public Health doctoral degree.

Started in January 2011 with a $10 million contribution from Dow, the collaborative five-year project is conducting practical science-based work on the economics of biodiversity and “ecosystem services”—the benefits provided by natural resources such as water, land, air, oceans, plants and animals to companies and communities.

The massive Freeport, Texas plant, Dow’s largest manufacturing facility and the biggest chemical complex in North America, was selected for the first “living laboratory” study because of its ecologically important location on the Gulf of Mexico, amidst coastal marshes, the lower Brazos River basin, and a largely depleted hardwood forest ecosystem. The Freeport area is also a key conservation region for migrating birds and a haven for diverse animals and plants. Stressors include the growing Houston-Galveston urban area and local climate change, including a severe drought that has dried up the river in recent years.

In calculating the economic value of these natural resources, Prickett and Hawkins said one of the “most surprising” findings was the value of planting forests in the Freeport area as a natural air pollution control measure to remove ozone precursor emissions. Sophisticated modeling by Conservancy and Dow scientists, as well as outside experts, found that large-scale reforestation is likely a cost-effective air pollution abatement strategy when compared to the installation of conventional emission control equipment at the plant. It also provides broader benefits to communities and wildlife and an opportunity to restore the hardwood forest ecosystem.

The Conservancy plans to approach EPA to discuss how “green infrastructure,” such as reforestation, could potentially supplement existing “grey infrastructure”—air pollution abatement equipment—or provide an alternative to installation of new, and increasingly expensive, engineered solutions to comply with government pollution standards, said TNC’s director of science Jennifer Molnar (a 1998 Harvard College graduate).

Scientists participating in the Dow/TNC collaboration are also developing a water conservation plan upstream on the 800-mile Brazos River and a hybrid model that evaluates the value of “green” protection provided by coastal marshes along with “grey” manmade levees to help protect against storm surges and long-term sea level rise.

In June 2012, Dow and TNC started work at a second pilot site in Santa Vitoria, Brazil, where Dow is part of a joint venture company growing sugar cane around a manufacturing facility site. This poses business decisions about appropriate agricultural land use in an environmentally sensitive area. The Dow/TNC team plans to choose a third pilot site after assessing the findings thus far.

The collaborative effort is developing methods and tool kits that it hopes will be widely applicable and is committed to sharing results publicly. Scientific papers on the Freeport pilot project are being submitted to peer-reviewed journals, said TNC’s Molnar. A 2012 progress report summarizes the progress to date.

At a glance, Dow and The Nature Conservancy might seem like odd bedfellows. Prickett said the Conservancy was “ruthlessly pragmatic” and had long worked with industry to leverage its global land acquisition efforts. Nonetheless, in the panel discussion and a joint interview, Hawkins and Prickett acknowledged the difficulties involved in bringing two very different cultures together—Dow’s chemical engineering base and TNC’s committed conservation base. Strong CEO support helped smooth the way (as well as Hawkins’ and Prickett’s personal friendship).

Panelist Leslie Carothers, a Pace Law School scholar-in-residence and former Environmental Law Institute president, praised the Dow/TNC collaboration for “providing an opportunity to develop credible evidence that ecosystem services really can work.” She believes that the project’s success goes beyond pure economics to the less tangible reputational value of good corporate citizenship. “If you save money, that’s great.  But it is also a chance to demonstrate how you are doing something for the environment, working with nature rather than against it,” she said in an interview.

HKS professor William C. Clark, an environmental scientist who moderated the panel and served on the Roy Award selection committee, lauded the Dow/TNC collaboration as “an amazingly rich” experiment with the potential for “finding ways society can value the benefits we get from ecosystem services that are not normally incorporated into the marketplace.” But, he cautioned, such projects are “really hard to do,” and over the long run “the number of failures exceed the successes.”

Supported by an HKS gift from the Boston-based Roy family, the environmental partnership award is given every two years. ENRP director Henry Lee said the key element is “transferability. Will it make a difference? The idea is to encourage public and private entities to work together for a common purpose.” The 2013 recipient was selected from 25 global entries in an 18-month process led by ENRP assistant director Amanda Sardonis.

The Roy Award citation recognized the Dow/TNC collaboration “for protecting our precious natural resources through the development of replicable, transferable tools that encourage sustainable business decisions. This project demonstrates the highest levels of environmental leadership, setting an example for public, private, and non-profit organizations throughout the world.”