By the second hour of my interview with Stanford ecologist Gretchen Daily, her seven-month-old, Luke, let it be known that he needed a change of pace. So Daily took him outside her cabin at the Las Cruces Research Station in southern Costa Rica to look for chestnut-mandibled toucans. There they were, agreeably perched just off her deck, which overlooks 600 acres of mountain rainforest where Daily and a squad of graduate students are studying the conservation value of rural countryside.

In addition to baby entertainment, Mother Nature provides us with countless valuable services, and Daily, whose academic background includes economics and law as well as ecology, says it’s time we started reimbursing her for all her hard work. Instead of essentially giving away natural resources, Daily argues, we should be paying people to preserve them. For instance, forests that are pulped for pennies per tree are worth much more. They absorb heavy rainfall and keep soil in place, thereby protecting communities from dangerous—and expensive—floods and mudslides. Some nations are already recognizing and paying for these "ecosystem services," including Costa Rica.

Daily has received numerous awards for her work, including the 21st Century Scientist Award. Her most recent book, coauthored with Katherine Ellison, is The New Economy of Nature: The Quest to Make Conservation Profitable (Island Press, 2002). (For a review, see "Mixed Media," July/August 2002.)

Sierra: Why put a price tag on nature?

Gretchen Daily: We are losing biodiversity at an unprecedented rate. This century we’re driving probably half of the world’s species to extinction—the very plants and animals that control processes we depend on, like the carbon cycle and pollination. And our conservation efforts have hardly made a dent.

The trick is to somehow make it in people’s best interest to protect the environment. What’s the most powerful way to do that? Make saving nature profitable. People say you can’t put a price tag on the priceless.

I agree—nature is priceless. But if we don’t, it’s like an all-you-can-eat buffet: People go whole hog and it’s gone.

Sierra: Who makes the money?

Daily: Each case would be different. Here in Costa Rica, which has by far the world’s boldest program, the government has eliminated subsidies for converting forest to cattle pasture, and it pays landowners who either maintain or restore tree coverage. If you have forested property, your land is helping to stabilize the climate by absorbing carbon from the atmosphere. It’s also helping control flooding and purify water. Forests hold soil in place and soak up water like a sponge, gradually meting it out to provide a steady, year-round supply. And they provide scenic beauty for everybody.

It’s not just the large landowners who make the money. There are all these little NGOs organizing small landowners to manage their properties for conservation. Even a 100-square-yard grove along a creek in downtown San José could qualify. Since this program was initiated in the 1990s, Costa Rica has gone from having one of the highest deforestation rates in the world to one of the lowest, along with Bhutan.

Sierra: Where does the money come from?

Daily: About 5 percent of what everybody pays at the gas pump helps fund the program. Additionally, hydropower companies pay for watershed protection. More than 90 percent of Costa Rica’s electricity comes from hydropower, and dams silt up quickly in this mountainous terrain if you don’t have a well-vegetated watershed above them.

A beer company pays to keep the water it uses in its beer pure. And in 2001, the country received about $40 million from the World Bank and the United Nations’ Global Environment Facility to put toward the program. Each nation will have to figure out how to pay for particular benefits and to whom—that’s the tricky part.

Sierra: What about the United States? What’s the incentive for big corporations to start paying for their pollution?

Daily: It would work differently in each industry. For instance, fossil-fuel producers have a huge effect on the climate. Many industry executives don’t see this issue disappearing and are now lobbying for some kind of agreement like the Kyoto treaty on climate change, because there’s nothing worse than total uncertainty about the future.

They see a binding—and likely very costly—emissions cap coming, but they don’t know when, so they don’t know how to position themselves against competitors. What kind of technology should they invest in? Should it be clean? Or can they have another ten-year run of dirty technology that might be cheaper?

British Petroleum voluntarily reduced its emissions to lessen the cost of doing so once it’s legally required. It took, in part, an "ecosystem services" approach. In addition to shifting to other fuels, including solar, BP footed the bill to restore tropical forest that will absorb some of the carbon it emits. The company has such so-called carbon-offset projects all over the world; it has, in fact, gone well beyond the emissions reductions that are required under Kyoto.

About 35 Fortune 500 companies have since followed suit. American Electric Power invested some $5.5 million in reforesting 17,000 acres in southern Brazil. The reforested plot will extract approximately one million tons of carbon a year, so the company was able to offset that much emission for roughly $5.50 per ton. At that time, a "pollution permit" from the federal government was predicted to rise to $20 a ton. So the power company saved big bucks and reduced its impact, while a Brazilian environmental organization received the funds necessary to restore a substantial tract of forest.

Sierra: So we have to put our faith in the good judgment of multinational corporations?

Daily: Not exactly. An interesting case is developing now, led by reinsurance companies—outfits that insure entire regions, corporations, and governments against the biggest disasters—who’ve started to assess the role of forest cover in reducing greenhouse gases and controlling floods. They’re saying, if you’re a major company that has a large impact on climate but you’re not doing anything to offset it, then we’re going to charge you a much higher premium. That could induce huge shifts in the industry.

And it’s not just corporations. The city of Napa, California, plagued by floods for years, completed an ambitious project in 2000 to rip out buildings and bridges along the Napa River and restore marshes. The river now spreads out over the wetlands, losing its energy and its potential for damage. By the following year, flood insurance premiums dropped by 20 percent while real estate prices rose by 20 percent.

In Australia, the rivers and land of the Murray-Darling River system are becoming extremely salty because the removal of native vegetation has caused the water table to rise, which brings up natural salts. This has devastated crops and ruined roads. To address the problem, state governments, with help from the federal commonwealth, are paying farmers to replant native vegetation. At a price of $1.4 billion and an area of more than a million square kilometers, it’s the biggest ecosystem services project to date.

Each nation has its own stock of natural capital—the native ecosystems providing services to society. You can wipe it out and convert it into something else, which is what we routinely do. Or you can invest in it and the many services it offers. We’re very good at managing assets such as homes, cars, and employees. The challenge now is to apply those management skills to ecosystems. There is no greater challenge confronting society today.

Dave Brian Butvill writes from Costa Rica.