Natural Capital: placing nature at the core of the economy

The Conservative government has acknowledged the important advisory role that the Natural Capital Committee (NCC) has played and intends to extend the life of the NCC until at least 2020, the end of this parliament (2020). Further to this, in their manifesto, the Conservative Party outlined that ‘they will work with the NCC to develop a 25 year plan to restore the UK’s biodiversity and ensure that both public and private investment in the environment is directed where it’s needed most’. In his last few months as Chair of NCC, Professor Dieter Helm outlines the importance of valuing nature and presents his practical solutions for incorporating natural capital into the heart of our economy. This blog post is an account of his recent talk and also discusses the role of ecologists in natural capital research.

Professor Helm addressed an audience at the Institute for Public Policy Research (IPPR) on the 21st May 2015.  The seminar at the IPPR marked the publication of Professor Helm’s book, entitled: ‘Natural Capital: valuing the planet’. The event was chaired by Diana Fox Carney (Director of Strategy and Engagement, IPPR), with a response from Martin Harper (Head of Conservation, RSPB).

Can we protect and restore natural capital for future generations?

Natural capital was defined as the ‘elements of nature that produce value to people ‘and ‘the core building block to our economies’. In order to protect and maintain our natural capital for future generations, we need to face up to the two greatest societal challenges (1) climate change and (2) the loss of natural environment and biodiversity.

Professor Helm stated that ‘it is perfectly possible to tackle these challenges and achieve sustainable economic growth. Although the loss of biodiversity and much of our natural environment may be biological and physical processes, the solutions lie in the allocation of scarce resources, in other words, economics’.

Why do we need to value the planet?

Professor Helm then put forward his case for natural capital as the solution, stating that ‘focusing on natural capital is a way of ensuring that the value of nature is embedded in our economy. By making a choice, a price is being put on nature’. Professor Helm outlined the benefits of valuing nature, in terms of conservation and management.  ‘The issue is not what something is ultimately worth but rather how much should be spent to preserve and enhance it’. Valuation will therefore help to determine where conservationists should concentrate their effort and which projects offer the greatest extra benefits.

Professor Helm also acknowledged that valuing nature is a contentious topic and has a range of complexities. Specifically that ‘philosophers have argued that a price cannot be value on nature’ and also that ‘valuing the benefits from nature has implications and is fraught with complications’.  However, that these complexities should not prevent us placing a value on nature, as ‘refusing to price or place an economic value on nature risks an environmental meltdown’. Professor Helm presented the collapse of the cod stocks as an example of what happens when there is no price placed on nature.

What are the solutions?

Professor Helm proposed a number of solutions that would help to maintain and enhance our natural capital. Adapted from his book, he proposed an economic framework that would incorporate natural capital into the heart of our economy, with natural assets at the core.  This framework would include the use of compensation, green taxes and the reduction of perverse subsidies, to ensure that compensation is provided if the environment is damaged.

Alongside this, he recommended the more widespread use of ‘Corporate Natural Capital accounting’ (CNCA). CNCA is a framework, developed by the Natural Capital Committee, eftec, RSPB and PwC, for organisations to take better account of the natural capital they own, depend on or for which they are responsible. The CNCA framework involves the use of a ‘Balance Sheet’, which outlines the value of natural capital assets, how it’s value has changed year on year and the ongoing costs of maintaining the natural asset’s value (capital maintenance). This framework will enable organisations to gather natural capital information in a coherent and comparable format to aid decision making about the management of natural assets, to the benefit of both the organisation and society. All in all, Professor Helm concluded that these proposed solutions would achieve the aim of incorporating natural capital into the core of the economy and would create an economic flow of revenue that would deliver the White Paper policy, stopping the decline of our natural assets and starting the process towards restoration.

These points were then responded to by Martin Harper, Head of Conservation at the RSPB. Martin firstly commented on the huge urgency to halt the loss of biodiversity, ‘there is one generation left to prevent 50% of species heading to extinction’. Martin acknowledged the importance of economics and natural capital in protecting biodiversity. He also commented on the need for Professor Helm’s solutions (e.g. use of compensation measures) to have clear regulatory frameworks, in order for them to be effective. Alongside this, Martin acknowledged the limits of natural capital and economics, stating that society also ‘needs to think about how to deal with the challenges that cannot be solved by economics’.

How can ecologists help?

Ecologists play a vital role in natural capital research as reflected by the recent report by the NCC. The CNCA framework requires a natural capital asset register, an inventory that holds details of all the natural capital asset stocks that are relevant to the accounts, including their condition, as measured by their extent, quality and other relevant factors.  The natural capital asset register utilises biophysical metrics to measure and track the state of natural capital assets, including biodiversity, over time.  However, developing metrics that inform on the complex nature of biodiversity poses a significant challenge.

Ecological expertise are required to develop metrics that help to provide a clear picture on the state of biodiversity. Further research is required to develop biodiversity metrics which consider the following: (1) conservation significance, (2) availability, quality and spatial scale and (3) the likely responses of biodiversity components to human intervention. This ecological input will be fundamental to the development and future application of the natural capital asset register and the CNCA framework.

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