Putting a Price on Ecosystems for Community Value

How much would you pay to save a tree, or a spider? To what extent does your local community enhance your wealth and wellbeing? These types of questions may seem abstract, but they are vital considerations for ecological economists like Neil Perry, an associate professor in corporate social responsibility and sustainability at Western Sydney University.  

"In orthodox economics, the environment is simply a resource to be drawn from and to put waste into," says Perry. "In ecological economics, we look at things in a more circular and holistic fashion, seeing the economy as part of a broader ecosystem. There are many things that are valuable, that are not currently recognised in financial markets."

Perry, like many others, is averse to monetising everything in the natural world. However, he is well aware that governments make decisions through cost-benefit analyses. In a recent book chapter he wrote on 'The Economics of Ecological Restoration', he noted that cost-benefit analysis is needed to justify the importance of government projects and to help them attract funds. 

"If we can broaden the values that they include in their economic analysis, then perhaps we can get some outcomes that we ordinarily wouldn’t, like promoting sustainable communities, the environment and endangered species," he says. "For example, we can assess the value of a national park including things such as the time and money people spend to visit it, or the value of nearby houses that enjoy good views."

In recent years, Perry has focused attention on the town of Lithgow, on the edge of the Blue Mountains, west of Sydney. Lithgow was once the centre of the coal industry in New South Wales, but one of the coal-fired power stations has now been closed. Through advisory roles with the NSW Government and the Maldhan Ngurr Ngurra – Lithgow Transformation Hub, Perry aims to help Lithgow to transition to a lower-carbon future, while also building wealth for the community. 

"We’re trying to create the best conditions for the emergence of new industries. For example, we’re helping young people imagine different futures for themselves beyond the mines or the power station. We’d like the community to own the capital, rather than just have big companies come in there and employ them."  

Lithgow has a lot going for it. There is a large area of serviceable industrial land left by the old power station, as well as very good train and road access, and plenty of water. Perry is working to promote the value of these factors, which bring competitive advantages and could attract different investors. Lithgow may become a centre for new manufacturing and logistics; other promising proposals include renewable energy schemes such as wind, biomass and a pumped hydropower plant. 

"We’re learning a lot from Lithgow," says Perry. "By publicising our experiences, we can hopefully help many other places like Lithgow around the world."

Perry’s research doesn’t just examine how people work, but also how and where they live. Through collaborations with Transport for NSW and Sydney Metro — a fully automated, rapid transit rail system — he has highlighted the wider economic benefits of transport for connecting communities. For example, his team’s research found evidence that northwest Sydney, which is well connected by the metro system, was less affected by COVID-19-induced business closures than other parts of the city. 

Perry is also involved in a project led by his colleague, Professor Louise Crabtree-Hayes, examining housing cooperatives — member-based organisations that provide home building, governance, management, maintenance and financial services. 

"Cooperative housing represents less than 1% of housing, but the members are very vocal, and adamant that they enjoy great benefits over normal social housing, where people don’t contribute or communicate as much with each other," says Perry. "We are analysing data to test the hypothesis that there are better outcomes for the members, because they’re not just residents, they’re participants in their own housing." 

Perry’s broad research interests could lead to several directions in the future. "I would like to get involved in biodiversity markets and carbon offsets, which I believe are deeply flawed. By improving these measures, we can help governments to increase the incentives for private land conservation."

One of Perry’s close collaborators, Jennifer Jenkins, an Associate Director at Infrastructure Australia, based in Sydney, is responsible for independently assessing public infrastructure business cases that are seeking Australian Government funding.  

"We have drawn on Neil’s expertise to provide cost benefit analysis training, and to provide advice on new economic evaluation approaches to improve valuation of sustainability in economic appraisals," she says. "He provides a unique and refreshing perspective to our work that is grounded in a practical understanding of the role of government and private sector in policy development."