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Natural Capital: The Key to Conservation in the 21st Century? | Wildlife Matters

Natural Capital: The Key to Conservation in the 21st Century?

The Age of the Anthropocene is wreaking havoc across the natural world which is resulting in the sixth mass extinction. In 2014, the WWF Living Planet Report revealed that we have lost; 39% of terrestrial, 76% of freshwater and 39% of marine species populations since 1970. More and more conservationists and economists alike are now of the belief that putting a monetary value on nature could provide the only credible solution to environmental degradation in the 21st century. You may recall that I have previously advocated this concept in an article entitled ‘Putting a Value on Nature’. In this article however, I intend to explore natural capital in greater detail and look at its potential incorporation into current economic systems.

Natural capital refers to the ‘stock’ of environmental assets which generate ecosystem goods (food, water, fuel etc) and services (pollination, nut5capitals_0rient cycling, climate regulation etc). Natural capital underpins all other kinds of capital and by not recognising this, it leads to a falsified method of global capital management, conducted at our own peril. The value of global natural capital has been in significant decline ever since the start of industrialisation. These declines and the knock-on effects hadn’t even been recognised until the release of the 2005 UN Millennium Ecosystem Assessment. Since then, natural capital accounting and restoration has very slowly been creeping into government accounting and policy – but nowhere near enough and certainly not at the pace which is required. Exponential growth in global population and GDP is accelerating demand for natural capital. In 2011, global GDP was valued at $75 trillion while global ecosystem services were valued at a staggering $125 trillion (down by £20tn since 1997). At present, natural capital is often ignored in GDP accounting as it is seen to be irrelevant. The focus has predominantly been on financial capital with varying degrees of success and more recently governments and companies have been investing in social capital. It is now time to invest heavily in natural capital accounting and restoration.

There are two types of natural capital: renewable and non-renewable. Non-renewable assets are free assets which are finite and once we have used them, they are gone forever. Examples would include; oil, gas, minerals and so on. Renewable assets are also free assets but can be infinite provided we do not drive them below a threshold, where they cannot be maintained and thus lost for future generations.  Examples would include; fish stocks, freshwater, naturally occurring medicines in species of flora and fauna etc. Previous generations and indeed the current generation have already exploited much of the world’s non-renewable natural capital assets to such an extent that future generations simply will not have access to many of these assets and thus, must seek alternatives. However, renewable natural capital assets are now also at risk of being driven below their thresholds – fish stocks being a prime example. Natural capital accounting allows us to identify the thresholds and implement sustainable capital maintenance, thus preventing depreciation of natural capital assets and safeguarding them for future generations.

The dependency on and vulnerability of natural capital is now widely accepted but how do we incorporate natural capital maintenance into current economic systems around the world? The solution could involve a system of capital substitution and subsequent compensation funded for by a mixture of private investment, green taxes and subsidies. The aggregate level of renewable natural capital should be kept at a constant – taking into account externalities and substitutions etc. Therefore, non-renewable natural capital asset depletion should be compensated for by investing in renewable natural capital assets. So far, as a result of ruthless industrialisation in a bid to accelerate human progress, we have simply been running down the aggregate level of natural capital by substituting natural capital for manufactured capital such as quarries, roads and houses without compensating for it whatsoever. Essentially, under this modified economic system, any damage caused to the environment via infrastructure development or agricultural expansion and so on would be compensated for through green taxes and other charges. First, we need natural capital accounting and then economic policies which reflect the system of substitution and compensation. Frameworks and tools for natural capital accounting have already been developed by the likes of TEEB, the World Bank and Natural Capital Committee. A limited number of companies have already started using them as you can see from the example below.PUMA_T-shirtnaturalcapitalcomp This in theory should deter small and large companies from trashing the environment and if it is absolutely necessary, then they will have to pay for it through green taxes. These taxes, in turn, would be collected by an independent body and funds reallocated to boosting other natural capital assets via projects such as expanding and better managing protected areas or investing in solar technologies etc. In practice, it would mean that the extraction of North Sea oil and gas for instance, would be accounted for as an economic rent which must be compensated for by investing in renewable natural capital assets with a similar value in order to maintain the aggregate level of natural capital.

It should also be mentioned that this concept of natural capital has been met by heavy criticism from some conservationists. They believe this system would essentially provide governments and companies a license to trash nature and that no level of natural capital substitution should be tolerated. I would argue that this is a highly ecological utopian stance which should be reconsidered as it is apparent that we are in fact living in an ecological dystopia. Natural capital accounting and limited substitution is quintessential for sustainable development and environmental conservation in the 21st century. There is not going to be a green revolution any time soon and further development resulting in environmental degradation is inevitable. Natural capital accounting does present challenges, especially for those companies with complex supply chains. Substitution of natural capital is also a challenging issue as choosing which natural capital assets should be given up for development purposes presents tricky decision-making. I would argue that if we are more open to alternative and potentially controversial solutions like this, we will have a better chance of finding a credible solution and solving any challenges that may accompany it.

It may not be a perfect or risk-free solution but so far, we have seen uncontrolled development in the name of human progress without any compensation for the natural capital being destroyed whatsoever. Incorporating this system of natural capital accounting, green taxes, natural capital substitution and compensation offers a promising solution to maintain the aggregate level of natural capital whilst facilitating sustainable development. I genuinely believe, this is the way forward for conservation and offers the most promising solution economically and environmentally.

– Jessen

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