Natural Heritage Systems: The Economic Benefits of Protecting Ontario’s Natural Resources

This article focuses on Natural Heritage Systems, what they are, their importance, and their benefit to our economy and livelihoods.

Background

A Natural Heritage System is a network of interconnected natural features and areas, such as wetlands, woodlands, valley lands, watercourses, significant wildlife habitats, and areas of natural and scientific interest (ANSIs). Such systems are identified to aid in biodiversity conservation, maintenance of ecological functions (e.g. movement corridors for wildlife or endangered species habitat), and the sustainability of ecosystem services that are relied upon (e.g. pollination, clean water, flood damage reduction). The purpose of an Natural Heritage System (NHS) is to ensure that an appropriate balance is struck between protecting the key elements of the natural environment, and the need to accommodate and manage future growth in a safe, healthy, and sustainable environment.

There are various components to an NHS including its design and purpose. NHS design refers to the process of identifying critical landscape areas which serve as a set of natural areas and linkages that are important to maintain the health of the landscape. Information about these critical areas, gained from activities such as mapping, can be used to support land use planning, stewardship, restoration activities, conservation efforts, the provision of ecosystem services, recreation, and other activities. Alternatively, NHS planning is a strategic approach to addressing biodiversity loss, land use change, and the uncertainties associated with climate change, so that future generations can have clean air and water, and a diverse range of plant and animal life. This planning approach also seeks to engage communities and educate citizens about the many benefits that nature provides and about nature’s fundamental place in supporting both social and economic health. In 2014, Ontario Nature published the Best Practices Guide to Natural Heritage Systems Planning, a guide whose purpose is to assist with policy development as municipalities review and update their respective Official Plans. It is intended to stimulate and facilitate innovative, systems-based policy development. The Guide includes leading examples of natural heritage systems policies in approved, adopted, or drafted municipal Official Plans from across southern and eastern Ontario, highlighting the good work that municipalities are undertaking to identify, preserve, enhance, and restore NHS.

Economizing Ecosystem Services

NHS planning is premised on identifying Greenways – spatially and functionally interconnected areas of core natural features, corridors and buffers – so that the benefits they provide can be restored, enhanced or protected. These benefits are ecosystem services, and they are vital to human well-being, and to the health and safety of communities. In recent literature, the links between nature and the economy are often described using the concept of ecosystem services. The term is commonly used to refer to the goods and services produced for people by nature for no monetary cost. The Millennium Ecosystem Assessment defined 4 categories of ecosystem services that contribute to human well-being, in relation to biodiversity. These include:

1. Provisioning Services (e.g. crops, fresh water, plant-derived medications);
2. Regulating Services (e.g. filtration of pollutants by vegetation, pollination, and climate regulation through carbon storage and water cycling);
3. Cultural Services (e.g. recreation, education, spiritual connection); and
4. Supporting Services (e.g. photosynthesis, nutrient cycling, soil formation).

The concepts of ecosystem services and natural capital can help illustrate the plethora of benefits that nature provides. An example of this can be found in The Economics of Ecosystems & Biodiversity: Mainstreaming the Economics of Nature, where it states, “from an economic point of view, the flows of ecosystem services can be seen as the ‘dividend’ that society receives from natural capital. Maintaining stocks of natural capital allow the sustained provision of future flows of ecosystem services, and thereby help us to ensure enduring human well-being.” Sustaining these flows requires a solid understanding of how ecosystems function and provide services, and how they are likely to be impacted by various pressures. However, it should be noted that very few ecosystem services have explicit costs or are traded in an open market. Those ecosystem services most likely to be priced in markets are consumptive (e.g. crops, livestock, fish, water).

There is growing evidence that many ecosystems have been degraded to such an extent that they are nearing critical thresholds, beyond which their capacity to provide useful services may be impaired. Therefore, precaution is required in order to maintain healthy ecosystems and the continued flow of ecosystem services over the long term. Due to the continuing increase in the degradation of critical natural resources, it is important to protect such environmentally sensitive areas for a variety of socio-economic reasons.

The Economic Impact of Natural Resources

Canada has an abundance of natural resources on which the country relies for a variety of ecosystem services to sustain its economy, society, and environmental needs. In order to identify the economic impact of natural resources in Canada, it is important to first determine which industries should be considered “resource-based.” According to the report Unearthing the Full Economic Impact of Canada’s Natural Resources from 2015, resource-based industries include:

• Primary extractive and agricultural industries (e.g. agriculture, forestry, fishing, mining);
• Utilities (e.g. electricity, gas, sewage, water); and
• Resource-based manufacturers and transport (e.g. metal, pulp, paper manufacturing, pipeline transport).

Ensuring there is a sufficient, and long-lasting supply of the natural resources required for the above industries, is integral, as such activities contribute substantially to provincial and local economies, and to the country’s overall GDP. In 2010, natural resource industries contributed over $260 billion or 16.6% to Canada’s GDP, with mining, oil and gas activities leading the way. Of the 16.6% of the GDP directly attributed to resource industries, 11.3% originated in the primary industries and utilities, 4.9% from resource-based manufacturing, and the remaining 0.4% reflected output from the pipeline. Overall, the production of natural resources affects all industries in Canada. For example, by stimulating a 10% increase in GDP in natural resources production, we see that each dollar of increased resource output generates $2.32 of economy-wide GDP. While the indirect and induced impacts may be larger outside of the resource sector than within it, growth in the natural resource sector is particularly beneficial to the services sector. Businesses, financial services, and transportation all see a sizeable increase in demand as output grows in the resource sector.

In addition to the significant interrelationship between Canada’s GDP and its natural resources, the natural resource sector also provides employment and business investment opportunities. While resources contribute slightly less to total employment numbers than output, about 14% of workers in the country are employed within the resource sector. As well, natural resources have become the dominant force in business investment in Canada, and this is particularly true for the energy sector. In 2013, $144.5 billion or 61% of all business investment in plants and equipment. The trend for exports is similar to that of business investment – a reflection of how earnings from exports are used to fund new investments. Natural resources exports totalled $308.4 billion in 2014 or 58.3% of all merchandise exports.

After analyzing the statistics, it is evident that Canada’s natural resources are crucial to the country’s economy and well-being. In order to sufficiently protect such vital resources, NHS design and planning can be utilized to limit the permitted land uses and developmental opportunities in environmentally sensitive and plentiful areas such as the Greenbelt system in southern Ontario.

The Greenbelt System

One of the most important and widely recognized protected areas in North America is the Greenbelt in Southern Ontario. The Greenbelt Plan (2017), section 3.2 Natural System, explains that the natural system of the Greenbelt is made up of a Natural Heritage System, and a Water Resource System, which often coincides with the ecological linkages between land-and water-based functions (see Figure 1).

Figure 1 – Greenbelt Plan Area

The Greenbelt’s NHS includes core areas and linkage areas of the Protected Countryside with the highest concentration of sensitive and/or significant natural features and functions. These areas need to be managed as a connected and integrated natural heritage system, given the functional inter-relationship between them, and because this system builds upon the natural systems contained in both the Niagara Escarpment Plan (NEP) and the Oak Ridges Moraine Conservation Plan (ORMCP), and will connect with the NHS. Together, these systems will comprise and function as a connected natural heritage system. In 2005, Ontario’s Greenbelt system was established and recognized internationally for its leadership in fostering agriculture and conserving the environment. At over 8.1 million acres of protected land, the Greenbelt is considered the bedrock that supports a thriving economy in food, farming, environment, and tourism. The Greenbelt was designed to protect key environmentally sensitive land, watersheds, and farmlands that provide essential ecosystem services for quality of life in this densely populated region. Overall, the Greenbelt includes green space, farmland, residential communities, forests, wetlands, and watersheds, within which is habitat for more than 1/3 of Ontario’s species at risk (SAR).

Figures 2 & 3 – Toronto’s Greenbelt

In 2012, the Friends of the Greenbelt Foundation published a report evaluating the economic benefits of the Greenbelt and its assets. Within the report, the economic multiplier effect is explained, in order to understand the types of economic impacts that occur. The economic multiplier effect refers to the idea that a dollar spent on operating a farm in the Greenbelt circulates and re-circulates within the economy, multiplying the effects of the original expenditures on overall economic activity. This ‘effect’ operates at the following levels:

1. Initial (Direct) Effects: Initial expenditures in the Greenbelt on wages and materials are generally referred to as the direct costs of operation.
2. Indirect Effects: Subsequent purchases by suppliers of materials and services to sustain the original and derivative expenditures.
3. Induced Effects: The induced effects emerge when workers in the sector stimulated by initial and indirect expenditures spend their additional income on consumer goods and services.

As well, the report includes an analysis of economic impacts – which aims to demonstrate and quantify the benefits that businesses that directly rely on the Greenbelt’s natural resources, bring to Ontario’s economy. The results of this quantification exercise are illustrated below:

The Economic Benefits of Greenbelt Resources & Activities

General:

• The direct economic impact of Greenbelt-associated activities exceeds $3B province-wide on an annual basis.
• When direct, indirect & induced impacts are combined – the total economic impact rises to over $9.1B annually.

Employment:

• More than 75,000 Ontarian’s owe their direct full-time employment to these Greenbelt-related activities or resources.
• This volume of employment is larger than that of the entire fish, forestry, mining, quarrying & oil & gas extraction sectors in Ontario (43,000). As well, this volume of employment is significantly higher than the utility industry in Ontario (46,300).
• When the volume of employment associated with the Greenbelt is compared to other sector employment in the Toronto Economic Region, it is nearly as large as public administration (93,100); when total employment impacts (direct, indirect & induced) are considered, over 161,000 Ontario full-time jobs are reliant on the Greenbelt

Government:

• All levels of government derive revenues on these impacts exceeding $2.8B.
• The federal government’s share is over $1.5B, with the provincial government collecting $1B & local governments collectively received $307M.

The above economic and employment statistics illustrate just how important the protection of the Greenbelt system is to the provincial and local economies, and for job security within the region. It also illustrates a positive relationship between the economic benefits of the implementation of the NHS and the environmental benefits.

Conclusion

Recognizing the value in ecosystems, landscapes, species and other aspects of biodiversity is a feature of all human societies and communities, and is sometimes sufficient to ensure conservation and sustainable use. This may be the case where spiritual or cultural values of natural features are strong. For example, the existence of sacred features in some cultures has aided in the protection of natural areas and the biodiversity they contain, without the need to place a monetary value on the ‘services’ provided. As well, protected areas, such as national parks, have been established in response to a sense of collective heritage, a perception of shared cultural or social value being placed on treasured landscapes, species, or natural wonders. Protective legislation or voluntary agreements can be appropriate measures where biodiversity values are generally recognized and accepted. In these circumstances, the monetary valuation may be unnecessary or even counterproductive. Nevertheless, demonstrating value in economic terms is often useful for policymakers and others, like businesses, in reaching decisions that consider the full costs and benefits of proposed use of an ecosystem, rather than just those costs or values that enter markets in the form of private goods.

The demonstration of economic value, even if it doesn’t result in specific measures that capture the value, can be an important aid in achieving more efficient use of natural resources. It can also highlight the costs of achieving environmental targets and help identify more efficient means of delivering ecosystem services. Valuation in these circumstances enables policymakers to address trade-offs in a rational manner, correcting the bias typical of much decision-making today, which tends to favour private wealth and physical capital above public wealth and natural capital. Planning for the future requires the maintenance, restoration and enhancement of functions and interconnected natural heritage systems. The services that nature provides have been estimated to be worth over $84 billion annually in southern and eastern Ontario.

A robust natural heritage system with a strongly associated policy framework sets the stage for the planning of healthy, resilient communities. In addition to the policy framework, municipalities must be committed to implementation. This means setting aside budgetary and other resources to allow for the identification, inventory, management, restoration, and securement of core natural areas and connecting corridors. Ultimately, the protection of natural heritage is essential to meeting the needs of Ontario’s expanding population and requires the cooperation of all sectors and interests. Municipal land use planning provides the ideal opportunity to integrate Greenway planning into urban design, agricultural management, and other resource utilization activities, and to achieve multiple long-term benefits for all members of society.

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