How well are we doing?
Natural capital accounts
How well are we doing?
Natural resources, like water or minerals, and natural services, like pollination or the nitrogen cycle, are fundamental to life on earth. They form the foundations of our societies and our economies, but these crucial resources are badly measured, and thus poorly integrated into economic planning. Natural capital accounts help us to track the stocks of natural “capital” – such as mineral reserves, clean air, a stable climate, or biodiversity – and flows of services and benefits to the economy and our societies.
Natural capital accounting is a rapidly evolving field. Creating even basic capital accounts is a challenging process, but quite many countries are starting to take their first steps - in part thanks to international efforts driven by the United Nations and the World Bank. Of the 20 countries surveyed, only Senegal lacked any natural capital initiatives whatsoever, and there is a growing group of countries who have collected different kinds of natural capital accounts who are now ready to influence policymaking.
Botswana, Canada, India, and Costa Rica all scored well with natural capital strategies in place and some accounts developed. The United Kingdom, Uganda, and especially Sweden are recognised as global leaders in development of comprehensive accounts and integration with policymaking processes. Globally, the World Bank’s Wealth Accounting and Valuation of Ecosystem Services (WAVES) Partnership has been key, enabling national statistical agencies to develop natural capital expertise. The Gaborone Declaration for Sustainability in Africa initiative has driven ambition amongst African countries, with the European Union’s Seventh Environment Action Programme performing a similar role amongst member states.
About this policy
Natural capital accounts are in some ways quite simple physical and statistical accounts that track national stocks of natural resources and the flows of services and benefits to society. They can also attempt to provide a relative or financial value of these 'capital accounts' to the economy, in a comparable way to other kinds of capital - such as human, or financial capital
This extra information is vital because most current policymaking either ignores or marginalises the importance of nature, especially intangible or complex natural processes like climate change. Nature’s value remains largely invisible to traditional economic models, and the politicians and businesses who use them – leading to harmful and sometimes dangerous policies. Natural capital accounts can help make the value of nature “visible” in policymaking, and so guide governments, businesses and people towards more sustainable decisions.
Measuring the worth of nature is a complex and controversial process, however. It requires methodological rigour, combined with a sensitivity to how nature’s value is perceived differently according to context, community, and purpose. A single mountain, for example, may be assessed according to the value of the mineral deposits it contains, the economic impact of tourists who visit it, the myriad of complex ecosystems it supports, its meteorological impact on weather and climate, the spiritual value it has for local communities – and many others besides.
Case Study: United Kingdom
The UK’s natural capital accounts are considered amongst the best in the world. Compiled by the Office for National Statistics (ONS) since 2011, these accounts have been successfully integrated into policymaking and underpin the 25 Year Environment Plan, launched in 2018. In addition to monitoring physical stocks and flows of natural assets, the accounts also attempt to make a partial economic valuation of UK nature; in 2015, for example, the value of UK natural capital was estimated to be £761 billion, with “58% of this value… attributable to cultural and regulating services (recreation, pollution removal and carbon sequestration).”
Case Study: Costa Rica
Costa Rican accounts are managed by the Central Bank of Costa Rica (BCCR) and since 2012 have covered water, energy and forestry. For the BCCR, the concept of sustainability is central to its mandate - as is the promotion of ‘sustainable economic growth and efficient use of Costa Rica's productive resources’, including natural resources. Integration of capital accounts into policymaking is at an early stage, but the Integrated Economic-Environmental Modelling (IEEM) Platform allows estimation of the economic and environmental impact of policies simultaneously.