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our next speaker this morning and i think dennis set it up nicely in yesterday tom as vada was talking a lot about where we really need to get to in our thinking about valuing and putting dollar amounts on on the services that what we’re all doing providing we discovered david factor of Earth economics during a webinar that EPA region 10 put on and and ended up doing a QA and we’re just like oh my god this is this really puts a lot of the pieces of the puzzle together so I’m not going to read david’s bio but what I would like to say is he recently co-authored a book called what’s the economy for any way and has copies available if anybody wants an autographed copy to buy I got mine I’m looking forward to reading it on the plane ride home so with that awesome day thank you very much Nora well I’m going to talk a little bit about being sort of economics in general and why the bios cycle community is so important for the 21st century and then talk a little bit about ecosystem services and then a few other things on looking at appraising the value that you’re providing doing the accounting for that value and then the funding mechanisms income assets and such so first of all think about nineteen twelve hundred years ago that big green bridge wasn’t out there across the the Columbia River that was built in nineteen seventeen which was a pretty big pretty impressive i thought this country was a nation of dirt tracks outdoor plumbing organic farms I mean that’s what the United States was horses did most of the powering of the our nation at that time it was tough and we needed a new economic philosophy really these are children from the coal mines we had about eighteen percent of children worked full-time jobs and more at that time the I show my kids these photos when they complain about like you’ve got it easy you know so and if we if we think about it at that time if you needed more salmon for example we needed more boats and nets just go out and catch him they’re out there natural capital was plentiful built capital was scarce and so we had an economics that has reflected that and if you think about it 1912 all we had was what’s called microeconomics and that’s the economics of firms households small businesses and markets that’s all we had and it wasn’t sufficient by 1930 we really had a crisis because we had still gold as our commodity trading we had no measures at this time macro economic measures they were there was no GDP no measure of unemployment no measure of inflation no manager the money supply no measure of how many durable goods we produced in the country people have no idea how much stuff was produced in the United States and as a result we hit because the economy had been transformed so economies don’t just change or because they don’t just grow in fact they’re transformed we went ok we went from 1 million horses to 20 million horses in the United States then we had the automobile and the internal combustion engine hey that was a big change we went from the library Congress do you having the Library of Congress handy at your fingertips so the nature of economies is that they are really transformed and and so we got macroeconomics we didn’t have it before then we got new measures and I want you to think about this because this is critical to the bio cycle community we got new goals like let’s produce more stuff let’s reduce unemployment since we’re in a depression it’s a crisis we got new measures for those things GDP unemployment inflation etc we became very good at measuring our built capital because we didn’t have much of it and we wanted a lot more of it and then we got new institutions the agriculture department was an expanded Social Security on and on and this was the basis for a real 20th century economy and we’re a non-profit we title ourselves earth economics because there’s still something not in the equation just like we didn’t measure GDP or unemployment in the 30s and when it ever measured unemployment we haven’t been measuring the benefits of our soil that’s crazy we’re not looking at it as a capital asset we’re not looking at the full value of our air and water you know if I think about EPA and what EPA oversees our air our water our health

think about the capital asset value of those assets and then you’d think they’d have a pretty tiny budget they have a pretty small budget for we have got him a small staff or for that charge but one of them so some of the hindrances so that we’ve had our now we’re shifting to the 21st century were no longer short of asphalt in plastic toys we’re really not sure to vit anymore we’re short of things like flood protection soil quality we’re short of air quality water quality if we want more salmon we need more habitat boats and nets don’t cut it anymore okay so we need more of these natural services we need the goods and services that the bio cycle community is producing and in fact I would say that if you think about the role that GM Ford Chrysler paid played during the period of the early 1900’s into the 1920s that’s the role you’re playing for a 21st century economy we have new goals sustainability we have new measures looking at how we measure the value of the products and goods you’re providing new policies we need new Institute oceans to make sure that I am I came from a families of dairy farmers and I there’s still dairy farmers and it’s frustrating that they don’t have a bio digester it really is my uncle it’s tough how can he get a bio jig gesture he’s not a wealthy farmer milk prices or rock bottom today they’re where they were in the 40s so these are the problems we need new institutions and a financing mechanism to bring it about think about this in 1912 we didn’t have roads really in this country then we set up a system where we got cities counties States federal government all funding roads we spent trillions of dollars on roads and now we have a lot of roads private industry same thing with goods and services we didn’t have too many cars at that time now we have loads and loads of cards and so we need to think about how to generate these things and I’m gonna you know we’ve got good measures for built capital that’s all the stuff that we produce like chairs and cars and digesters we don’t have good measures for social capital how we all get along our laws are when social capital breaks down economies break down our human capital our education and knowledge skills we have to change that just like I love bio cycle and its role for education and composting and natural capital the benefits we get from natural systems and it’s that last one that I’m going to kind of focus on here because now just as GM and ford produced a new product that transformed the economy now with you taking things ways waste products and producing goods and services now we need markets we need the ability to measure these benefits so ecosystem services and i would say these are service is not just out of only wild ecosystems but farms bio digesters compost piles etc ecosystem services of benefits we get out of natural systems what happens if we lose these natural services well i’ll give it a case that we’ve worked on for quite a few years Louisiana I’m from Washington State but I went to school in Louisiana I look at ecosystem services this is what’s happened to the Louisiana wetlands we’ve lost 1.2 million acres of wetlands and those wetlands are a buffer against hurricanes Orleans is there by Lake Pontchartrain the Crescent City you can see the mississippi river winding through and we cut canals in we channeled all the water and sediment in the mississippi down and then we got hurricane katrina and it was a category five hurricane huge hurricane and if you measured the storm surge the pile of water that brings it dwarfed all previous hurricanes unquestionably slammed against the coast we lost 30 linear miles along the path of hurricane katrina wetlands take one foot off the storm surge of a hurricane for every 2.5 miles you reduce that huge pile of water as it was we still did the wetlands before it hit the first levee still took off half of all the storm surge with the degraded wetlands but they called me because I worked on hurricane protection value wet wetland so they called me right after Hurricane Katrina I was down there shortly after this is a Ninth Ward you can see the demolition cost 1400 lives two hundred billion dollars and a huge amount of damage why is this important because once you start measuring if you looked at our cost benefit analysis a levee counts the wetlands don’t count so we built a lot of levies huge number of levees forty billion dollars worth of levees just in Louisiana since 1930 and he didn’t work right and we lost an asset the provided huge amounts of hurricane buffering the

wetlands and since the analysis and since the Army Corps has said Wow wetlands do provide a lot of benefits they shifted five hundred million dollars to wetlands restoration and putting and in fact there’s going to be a shift of a lot more money to invest in wetland restoration because there’s no way you can maintain that system when you think about the bio cycle community and the vast amount just is Dennis mentioned of just food waste that is a resource we cannot waste and we must be able to count the benefits and if you count the benefits you shift finance you shift investment both private and public investment and that’s why valuing are the services and goods we produce is so important so I’m going to talk a little bit about ecosystem services they’re all kinds of categories of these services all of which the bio cycle community has an impact on carbon sequestration food things like recreation medicinal resources that’s the the yew tree which is the source of tax all we didn’t even know it was a benefit it was you trees were slashed and burned across millions of acres the northwest forest as a junk tree then tax all is a key was found by the university of washington and the bark of the yew tree here for breast cancer and 20 other cancers not a perfect cure but the best known cure that turned out to be worth hundreds of billions of dollars so all of a sudden the junk tree became the most valuable tree and that’s what I like about the Bible cycle movement you’re discovering a huge amount of value where other people saw waste and that means to be recorded in accounting in appraisals in valuation so I want to talk about the categories and think about where you fit in here goods goods are things that you can drop on your toe okay like food salmon like the gas from a bio digester and goods are very easy to value compost should be considered it good very easy to value in fact they are very amenable to markets we can trade them in mark it’s and private industry private financing mechanisms are good mechanisms for goods another category our services services are things you can’t drop on your toe like soil formation water quality waste treatment flood risk reduction climate stability water quality sediment transport or erosion control pest control you know the city of Denver because Matt because of climate change and global warming natural beetles have killed off the watershed they have to do a gigantic 600 million dollar water recycling plant because they’re not going to get the same amount of water they got out of the watershed this is so these things just natural pest control the very big value it’s worth a lot and we haven’t counted it so a lot of these services are also very easy to value these days I can tell you how much an acre of wetland is worth for reduced storm damage for New Orleans we can value that and the same with waste treatment value nutrient reduction etc so and yet many of these things are not amenable are easily amenable to market mechanisms this is it’s easy to trade in goods everybody wants goods right but when you want to treat in Bad’s that’s a different manner markets and baths don’t just pop up if we don’t have the EPA or somebody saying actually you’ve got a nutrient limit or a carbon limit or something else you won’t have a market in that good or service okay so the difference between the market and goods and bads is the market in bed marketing goods has to be regulated otherwise people cheat and sell you something that’s bad like tainted milk or whatever and the market in beds is the market that needs to be driven by a regulatory structure and that’s just reality we had a nice nutrient trading market which in fact EPA was promoting in Boise but since the the city and all they weren’t going to put clampdown enough on the tmb else will then there isn’t going to be a market because why trade then so one of the lessons is and then there are also supporting functions but one of the lessons is we have to understand how markets are created in the goods and services for digesters for compost for the bio cycle community there another set of functions supporting functions like biodiversity inhabitant nutrient cycling some of these can be valued some are more difficult to value some are quite difficult to value but we’re getting the techniques and finally looking at cultural functions aesthetic value recreation cultural value spiritual etc and I can tell you that for instance aesthetic value there’s a lot of value there you look at the folks who have a view of Mount Hood or Mount Rainier Puget Sound their property values are higher just because of that aesthetic value doesn’t implored include my aesthetic value because I don’t have

a property that views Mount Rainier but I get a lot of aesthetic value so often we can only capture a portion of the value provided and this is very typical of projects around the bio cycle community where we can we can measure some of the benefits very clearly liking composting some of the benefits are more difficult we need to make a lot more effort to measure them health benefits and other things so the first I will talk about this more in my next talk on ecosystem services but this is what we’ve done is the dahp sort of an appraisal approach which is very difficult think about your house of basil business appraisal etc first you want to mark out where value exists so if you think about an operation where your composting what systems are affected who are all the downstream folks affected the beneficiaries and then we can put dollar values to those things and again we use kind of a high and low values obvious as these are values that come out of peer-reviewed academic journals and just to give one quick example because we don’t have too much time here the Mississippi River Delta we did a valuation of natural systems including waste treatment value benefits at a low it’s about 12 billion dollars a year at a high at somewhere around 47 billion dollars per year now some people go well that’s such a big range you know what do you mean how could you do that but then I think about these shoes here and I you know they were on sale for a hundred and forty dollars at rei and then i went to the garage sale and got him for 19 bucks so a lot of times my natural science friends and environmental they’re like I don’t like all these numbers they’re just so you know they change so much that’s the way economics works now washington mutual bank was worth three hundred and six billion dollars in january 2008 by october it was sold for 1.6 billion whoops you know I the the fortunate thing is that the values that you’re dealing with like cleaner water likes building soil assets those values are a lot more solid they’re more they don’t change like bank stocks do or Wall Street Stocks actually they’re they’re much more tangible like you look at the value of water drinking water in the United States very stable pricing structure doesn’t just go way up and way down so the part of that is because of the utilities well think about that now it for each of your operations you should think about this just like with soil you’re providing value every year there’s a flow of value and then there’s what we call the asset value so if you take all those values over years and amortize it or or do a net present value calculation than that 12 to 47 billion dollars as an asset the Mississippi Delta is worth about 300 to 1.3 trillion dollars just the Mississippi just the Mississippi Delta think about we wanted to do we had a proposal to the Agriculture Department with Washington State University to look at soil and the value the dollar value provided of soil who benefits and the asset value unfortunately it wasn’t funded but but that’s the kind of thing we need to fund because soil is an asset a critical asset and then this nation when we didn’t measure unemployment Herbert Hoover it came out and said we don’t the depressions over when almost twenty five percent of Americans were out of work because we didn’t measure it and now we’re doing the same thing with soil if you think about our composting systems it’s critical that we measured the value now ecosystem services and you think about whether it’s my uncle’s dairy farm or anyone else think about the benefits and how they flow they’re an ecosystem services those categories they go move differently across the landscape we had a National Science Foundation grant to look at this and so if you look at water like flood protection or other water based services waste water treatment etc those are our watershed bound ecosystem services so the beneficiaries of flood protection are down at the bottom of the watershed whereas most of the provisioning is in the upper watershed by forests wetlands etc dams levees as well aesthetic our view sheds more or less carbon see question sequestration is global so when you think about a funding mechanism for a digester or something like that you’re providing benefits across different geographies there needs to be sort of a larger scale funding mechanism like the California climate initiative for actually providing a funding mechanism for carbon sequestration okay whereas it might be the flood district this is our view we think that the flood districts should be paying for more water infiltration if folks are in filtering filtering water in or looking at just the water storage value of better soils and composted areas in fact we suggested a funding mechanism for the Army Corps and FEMA

looking at the value of farms for flood protection and if that soil quality is high are you doing more infiltration I did a talk which I don’t have the slides for here but if you looked at the flood for all the National Association of floodplain managers if you look at the Mississippi Flood of 2011 the worst flood in US history after we had built 15 billion dollars worth of levees on the Mississippi well at the same time farmers had tiled there Oh millions of acres of their lands that has put these tubes in to take the water off their lands make it a little more you know bring it a little faster you can earn a little bit more money per acre but that took trillions of gallons of water away from flood storage on farm lands percolating into groundwater keeping nutrients actually on the farm lands when they might might do better rather than watching the Mississippi quickly flushed it into the Mississippi and then we flooded our most valuable urban areas instead of the floodwaters coming down and flooding the city’s the flood waters came down just couldn’t get through those big levees and flooded back up into cedar rapids Cairo a lot of other cities so if you think about the value that you’re providing on the landscape flood protection is one of those benefits so as an economist what I like to see is who’s providing who’s got the provisioning assets who’s got the bio digester who’s got that composting project the waste treatment because that’s the provisioning assets from there who are the beneficiaries in the impairments so if you think of each one of those ecosystem services and soil for example is key to more than half of them then for say someone using compost you’re increasing that then you can map the beneficiaries and the IMP errors and you build the IMP errors just like stormwater fees you build those who have impervious surface and you build beneficiaries like those receiving clean water and you invest back into the provisioning assets so what I’m talking about is how do we create some large and new funding mechanisms for the bio cycle community because you’re producing a great deal of value which needs to be counted and but because my talk is short you’ll have to come to my next talk to hear more about that I’m going to talk a little bit about why accounting is so important I worked on from Tacoma Washington but worked on changing policies of the World Bank and some large institutions if you look at investment in China why was there no investment in Chinese early 80s and suddenly everything is produced in China well the first step the very first step was the world bank gave a loan to China to change their whole accounting system to make their accounting compatible with North America Japan and and Europe if you can’t if you invest your money you have no idea where it’s going or what’s happening to it you’re not going to invest your money there and this is why it’s so important i’ll give you one example here Seattle Public Utilities SPU in 1898 they had cholera and typhoid and lots of people died in Seattle and it was declared by the GNAT the the New York Times is the most unhealthy city in the United States if you wanted to die fast go to Seattle waste waste water they pulled we had four private utility water you companies they pulled water out of Lake Washington and of course waste also went into black Washington so big problem then the downtown burned down that year and people created 65 acres then we created this utility in the city just said that’s it we’re purchasing the utility I want you to think about this goal their goal was not to maximize present value with that investment the goal was to provide clean water for the citizens of Seattle at any population in perpetuity how about that for an economic goal that is something provide water at any population clean potable water in perpetuity and it’s more or less being achieved so instead of building a filtration plant Seattle and Portland water here too is filtered by natural systems and those benefits but if you but there’s a problem with that and I’ll fast forward to it so that a filtration value alone of that watershed is worth 200 million dollars if you had to build a filtration plant it would cost about two hundred million dollars we don’t have to build when the trees do it for free and we don’t have to build another filtration plant every 40 years so critically what I want to say is that the asset sheet though of Seattle Public Utilities or San Francisco Seattle is a San Francisco is about five billion dollars Seattle’s 1 billion and the the system that produces every drop of water that watershed and filters every drop of

water counts as 35 million dollars on the asset chief of a utility that has a billion dollars now there’s a problem with that if you want to take a bond and put pipes in and built our or built get vehicles or build a building for Seattle Public Utilities you offer you know 200 million dollar bond and it shows up as a liability on your asset sheet you can raise your rates and the bondholders go I’m going to buy that because it showed up on the asset sheet and I see I’m going to get paid back and so there’s you’ve got a funding mechanism and that’s how built capital is whether it’s a power plant or anything else unfortunately since the watershed doesn’t show up if Seattle Public Utility wants to remove roads for 10 million dollars and improve water quality more than building the 200 million dollar filtration plant it doesn’t show up on the asset so how are you going to offer bond and raise rates and do all these things for now this improvement in natural capital and this is the Condon Durham still facing our community as as Dennis said these markets are young we need to have these funding mechanisms it means we need to count value so Seattle San Francisco Portland here New York City have come together to approach the governmental Accounting Standards Board to change accounting rules so that they can count the watershed as a full asset and it means those utilities will probably double or more than double their assets and actually the important thing is if they offer a bond and show that these assets are in good shape they can get a lower rate even for their built capital I like I’ll explain that a little bit further but if you know you’re going to be at repaid because that’s where your water sources and that’s an asset in good shape then purchasers with about those bonds there’s less risk and so the interest rate is lower well I’ll just wrap up here oops for some reason I’m not going on to the next slide well I’ll just wrap up by saying these are to the tools for transition for the bio cycle community really it’s looking at these oops a little bit slow but changing accounting rules we’re working with the National Institute of appraisers so that they can go out and say yeah this farm that needs a bio digester this is an asset this waste is an asset an appraiser is never counted on it if you go I know because my dairy farming family no appraiser is going to go out there and say that waste is an asset but but actually they should be saying that so if you think about 1912 changing accounting rules changing funding mechanisms looking at developing these markets this is important these are the same problems that GM had this is the same type of problem that the early water utilities had so we’re in 2012 now and you are really at the basis of a 21st century economy because I’m very convinced that this economy in the 21st century will not be better off if we don’t actually take the work that you’re doing and expanded on a very large scale this is the basis for a 21st century economy so thank you very much and as Nora said I do have my new book with john de Graaff available what’s the economy for anyway it’s humorous it’s easy to read the New York book book review said it was in the top 10 economics books in the most readable and most fun of all the haha so and thank you very much the last thing I want pressing I wanted to say the first magazine to cover this book was bio cycle it was really impressive

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