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Natural capital is the world's stock of
natural resource Natural resources are resource Resource refers to all the materials available in our environment which help us to satisfy our needs and wants. Resources can broadly be classified upon their availability — they are classified into renewabl ...
s, which includes geology, soils, air, water and all living organisms. Some natural capital assets provide people with free goods and services, often called
ecosystem services Ecosystem services are the many and varied benefits to humans provided by the natural environment and from healthy . Such ecosystems include, for example, s, s, s and s. These ecosystems, functioning in healthy relationship, offer such things ...
. All of these underpin our economy and society, and thus make human life possible. It is an extension of the economic notion of
capital Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the letters that are in larger uppercase or capitals (or more formally ''majuscule'') and smaller lowercase (or more formally ''minusc ...
(resources which enable the production of more resources) to goods and services provided by the natural environment. For example, a well-maintained forest or river may provide an indefinitely sustainable flow of new trees or fish, whereas over-use of those resources may lead to a permanent decline in timber availability or fish stocks. Natural capital also provides people with essential services, like water catchment,
erosion control Erosion control is the practice of preventing or controlling wind or water erosion In earth science Earth science or geoscience includes all fields of natural science Natural science is a branch of science Science (from the L ...
and crop
pollination Pollination is the transfer of pollen Pollen is a powdery substance consisting of pollen grains which are Sporophyte, microsporophytes of spermatophyta, seed plants, which produce male gametes (sperm cells). Pollen grains have a hard coat ...

pollination
by insects, which in turn ensure the long-term viability of other natural resources. Since the continuous supply of services from the available natural capital assets is dependent upon a healthy, functioning environment, the structure and diversity of habitats and ecosystems are important components of natural capital. Methods, called 'natural capital asset checks', help decision-makers understand how changes in the current and future performance of natural capital assets will impact human well-being and the economy.


History of the concept

The term 'natural capital' was first used in 1973 by
E.F. Schumacher Ernst Friedrich Schumacher (16 August 1911 – 4 September 1977) was a German-British statistician and economist who is best known for his proposals for human-scale, Decentralization, decentralised and appropriate technology, appropriate techno ...
in his book ''
Small Is Beautiful ''Small Is Beautiful: A Study of Economics As If People Mattered'' is a collection of essays by German-born British economist E. F. Schumacher. The phrase "Small Is Beautiful" came from a principle espoused by Schumacher's teacher Leopo ...
'' and was developed further by
Herman Daly Herman Edward Daly (born July 21, 1938) is an American ecological and Georgist economist and emeritus professor at the University of Maryland School of Public Policy, School of Public Policy of University of Maryland, College Park in the United S ...
,
Robert Costanza Robert Costanza (born September 14, 1950) is an American/Australian ecological economist and Professor of Public Policy at the Crawford School of Public Policy at The Australian National University. He is a Fellow of the Academy of the Social ...

Robert Costanza
, and other founders of the science of Ecological Economics, as part of a comprehensive critique of the shortcomings of conventional economics. Natural capital is a concept central to economic assessment ecosystem services valuation which revolves around the idea, that non-human life produces goods and services that are essential to life. Thus, natural capital is essential to the sustainability of the economy. In a traditional economic analysis of the factors of production, natural capital would usually be classified as "land" distinct from traditional "capital." The historical distinction between "land" and "capital" defined “land” as naturally occurring with a fixed supply, whereas “capital,” as originally defined referred only to man-made goods. (e.g.,
Georgism Georgism, also called in modern times geoism and known historically as the single tax movement, is an economic ideology An economic ideology distinguishes itself from economic theory in being Normative economics, normative rather than just expl ...
) It is, however, misleading to view "land" as if its productive capacity is fixed, because natural capital can be improved or degraded by the actions of man over time (see
Environmental degradation Environmental degradation is the deterioration of the environment Environment most often refers to: __NOTOC__ * Natural environment, all living and non-living things occurring naturally * Biophysical environment, the physical and biological facto ...
). Moreover, natural capital yields benefits and goods, such as timber or food, which can be harvested by humans. These benefits are similar to those realized by owners of infrastructural capital which yields more goods, such as a factory that produces automobiles just as an apple tree produces apples. Ecologists are teaming up with economists to measure and express values of the wealth of ecosystems as a way of finding solutions to the biodiversity crisis. Some researchers have attempted to place a dollar figure on ecosystem services such as the value that the Canadian boreal forest's contribution to global ecosystem services. If ecologically intact, the boreal forest has an estimated value of US$3.7 trillion. The boreal forest ecosystem is one of the planet's great atmospheric regulators and it stores more carbon than any other biome on the planet. The annual value for ecological services of the Boreal Forest is estimated at US$93.2 billion, or 2.5 greater than the annual value of resource extraction. The economic value of 17 ecosystem services for the entire biosphere (calculated in 1997) has an estimated average value of US$33 trillion per year. These ecological economic values are not currently included in calculations of national income accounts, the GDP and they have no price attributes because they exist mostly outside of the global markets. The loss of natural capital continues to accelerate and goes undetected or ignored by mainstream monetary analysis. Within the international community the basic principle is not controversial, although much uncertainty exists over how best to value different aspects of ecological health, natural capital and ecosystem services. Full-cost accounting, triple bottom line, measuring well-being and other proposals for accounting reform often include suggestions to measure an "ecological deficit" or "natural deficit" alongside a social and financial deficit. It is difficult to measure such a deficit without some agreement on methods of valuation and auditing of at least the global forms of natural capital (e.g. value of air, water, soil). All uses of the term currently differentiate natural from man-made or infrastructural capital in some way. Indicators adopted by United Nations Environment Programme's
World Conservation Monitoring CentreThe UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) is an collaboration centre of UN Environment Programme, based in Cambridge Cambridge ( ) is a College town, university city and the county town of Cambridgeshire, Engl ...
and the
Organisation for Economic Co-operation and Development The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) is an intergovernmental economic organisation with 38 member countries, founded in 1961 to st ...

Organisation for Economic Co-operation and Development
(OECD) to measure natural biodiversity use the term in a slightly more specific way. According to the OECD, natural capital is “natural assets in their role of providing natural resource inputs and environmental services for economic production” and is “generally considered to comprise three principal categories: natural resources stocks, land, and ecosystems.” The concept of "natural capital" has also been used by the
Biosphere 2 Biosphere 2 is an American Earth system science Earth system science (ESS) is the application of systems science Systems science is an interdisciplinary Interdisciplinarity or interdisciplinary studies involves the combination of two or ...

Biosphere 2
project, and the Natural Capitalism economic model of
Paul Hawken Paul Gerard Hawken (born 8 February 1946) is an American environmentalist Image:Voynet Montreuil 2008-01-06.jpg, Dominique Voynet, 2008 An environmentalist is a person who is concerned with and/or advocates for the protection of the environment. A ...

Paul Hawken
,
Amory Lovins Amory Bloch Lovins (born 13 November 1947) is an American writer, physicist, and Chairman/Chief Scientist of the Rocky Mountain Institute. He has written on energy policy and related areas for four decades, and served on the National Petroleum Cou ...

Amory Lovins
, and
Hunter Lovins L. Hunter Lovins (née Sheldon, born February 26, 1950 in Middlebury, Vermont) is an American environmentalist, author, sustainable development proponent, co-founder of Rocky Mountain Institute, and president of the nonprofit organization Natural C ...

Hunter Lovins
. Recently, it has begun to be used by politicians, notably Ralph Nader, Paul Martin Jr., and agencies of the UK government, including its
Natural Capital Committee The Natural Capital Committee (NCC) is an independent body set up in 2012, initially for a three-year period, to report to the UK Government and advise on how to value nature and to ensure England's ‘natural wealth’ is managed efficiently and s ...

Natural Capital Committee
and the London Health Observatory. In '' Natural Capitalism: Creating the Next Industrial Revolution'' the author claims that the "next industrial revolution" depends on the espousal of four central strategies: "the conservation of resources through more effective
manufacturing Manufacturing is the creation or Production (economics), production of goods with the help of equipment, Work (human activity), labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector ...
processes, the reuse of materials as found in natural systems, a change in values from quantity to quality, and investing in natural capital, or restoring and sustaining
natural resources Natural resources are resource Resource refers to all the materials available in our environment which help us to satisfy our needs and wants. Resources can broadly be classified upon their availability — they are classified into renewabl ...
."Book Review: Natural Capitalism
fro
Socialfunds.com
Retrieved April 2009.


Natural capital declaration

In June 2012 a 'natural capital declaration' (NCD) was launched at the
Rio+20 Rio or Río is the Portuguese, Spanish, Italian, and Maltese word for "river A river is a natural flowing watercourse, usually freshwater, flowing towards an ocean, sea, lake or another river. In some cases, a river flows into the ground a ...

Rio+20
summit held in Brazil. An initiative of the global finance sector, it was signed by 40
CEOs Kea ( el, Κέα), also known as Tzia ( el, Τζια) and in antiquity Antiquity or Antiquities may refer to Historical objects or periods Artifacts * Antiquities, objects or artifacts surviving from ancient cultures Eras Any period before t ...
to 'integrate natural capital considerations into loans, equity, fixed income and insurance products, as well as in accounting, disclosure and reporting frameworks.' They worked with supporting organisations to develop tools and metrics to integrate natural capital factors into existing business structures. In summary, its four key aims are to: *Increase understanding of business dependency on natural capital assets; *Support development of tools to integrate natural capital considerations into the decision-making process of all financial products and services; *Help build a global consensus on integrating natural capital into private sector accounting and decision-making; *Encourage a consensus on integrated reporting to include natural capital as one of the key components of an organisation's success.


Natural Capital Protocol

In July 2016, the Natural Capital Coalition (now known as Capitals Coalition) released the Natural Capital Protocol. The Protocol provides a standardised framework for organisations to identify, measure and value their direct and indirect impacts and dependencies on natural capital. The Protocol harmonises existing tools and methodologies, and guides organisations towards the information they need to make strategic and operational decisions that include impacts and dependencies on natural capital. The Protocol was developed in a unique collaboration between 38 organisations who signed voluntary, pre-competitive contracts. This collaboration was led by Mark Gough, who is now the CEO of the Capitals Coalition. The Protocol is available on a creative commons license and is free for organisations to apply.


Internationally agreed standard

Environmental-economic accounts provide the conceptual framework for integrated statistics on the environment and its relationship with the economy, including the impacts of the economy on the environment and the contribution of the environment to the economy. A coherent set of indicators and descriptive statistics can be derived from the accounts that inform a wide range of policies. These include, but are not limited to: *
Green economy A green economy is an economy An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organizatio ...
/
green growthGreen growth is a term to describe a path of economic growth that is environmentally sustainable. It is based on the understanding that as long as economic growth remains a predominant goal, a decoupling of economic growth from resource use and adve ...
*
Natural resource management Natural resource management (NRM) is the management of natural resource Natural resources are resource Resource refers to all the materials available in our environment which help us to satisfy our needs and wants. Resources can broadl ...
*
Sustainable development Sustainable development is the organizing principle for meeting human development goals while simultaneously sustaining the ability of natural systems to provide the natural resources and ecosystem services Social forestry in India, Social ...

Sustainable development
The
System of Integrated Environmental and Economic AccountingSystem of Environmental-Economic Accounting (SEEA)System of Environmental-Economic Accounting 2012: Central Framework – final, official publication 2012, UN, EC, IMF, OECD and World Ban"System of Integrated Environmental and Economic Accounting" Un ...
(SEEA) contains the internationally agreed standard concepts, definitions, classifications, accounting rules and tables for producing internationally comparable statistics on the environment and its relationship with the economy. The SEEA is a flexible system in the sense that its implementation can be adapted to countries' specific situations and priorities. Coordination of the implementation of the SEEA and ongoing work on new methodological developments is managed and supervised by the UN Committee of Experts on Environmental-Economic Accounting (UNCEEA). The final, official version of the SEEA Central Framework was published in February 2014. In March 2021, the
United Nations Statistical Commission The United Nations Statistical Commission (StatCom) is a Functional Commission of the United Nations Economic and Social Council The United Nations Economic and Social Council (ECOSOC; french: Conseil économique et social des Nations unies, ) ...
adopted the SEEA Ecosystem Accounting (SEEA EA) standard at its 52nd session. The SEEA EA is a statistical framework that provides a coherent accounting approach to the measurement of ecosystems. Ecosystem accounts enable the presentation of data and indicators of ecosystem extent, ecosystem condition, and ecosystem services in both physical and monetary terms in a spatially explicit way. Following its adoption, the Statistics Division of the
United Nations Department of Economic and Social Affairs The United Nations Department of Economic and Social Affairs (UN DESA) is part of the United Nations Secretariat The United Nations Secretariat (french: link=no, Secrétariat des Nations unies) is one of the six major organs of the United N ...
(UN DESA) in collaboration with the
United Nations Environment Programme The United Nations Environment Programme (UNEP) is responsible for coordinating responses to environmental issues within the United Nations system. It was established by Maurice Strong Maurice Frederick Strong, (April 29, 1929 – November 27, 20 ...
(UNEP) and the Basque Centre for Climate Change (BC3) released the ARIES for SEEA Explorer in April 2021, an
artificial intelligence Artificial intelligence (AI) is intelligence Intelligence has been defined in many ways: the capacity for abstraction Abstraction in its main sense is a conceptual process where general rules and concept Concepts are defined as abstra ...

artificial intelligence
-powered tool based on the Artificial Intelligence for Environment and Sustainability (ARIES) platform for rapid, standardized and customizable natural capital accounting. The ARIES for SEEA Explorer was made available on the UN Global Platform in order to accelerate SEEA’s implementation worldwide.


Private sector approaches

Some studies envisage a private sector natural capital 'ecosystem', including investors, assets and regulators.


Criticism

Whilst measuring the components of natural capital in any region is a relatively straightforward process, both the task and the rationale of putting a monetary valuation on them, or on the value of the goods and services they freely give us, has proved more contentious. Within the UK, ''
Guardian Guardian or The Guardian may refer to: *Legal guardian A legal guardian is a person who has been appointed by a court or otherwise has the legal authority (and the corresponding duty) to care for the personal and property Property (''latin: R ...

Guardian
'' columnist,
George Monbiot #REDIRECT George Monbiot George Joshua Richard Monbiot ( ; born 27 January 1963) is a British writer known for his environmental and political activism. He writes a weekly column for ''The Guardian ''The Guardian'' is a British daily news ...

George Monbiot
, has been critical of the work of the government's
Natural Capital Committee The Natural Capital Committee (NCC) is an independent body set up in 2012, initially for a three-year period, to report to the UK Government and advise on how to value nature and to ensure England's ‘natural wealth’ is managed efficiently and s ...

Natural Capital Committee
and of other attempts to place any sort of monetary value on natural capital assets, or on the free
ecosystem services Ecosystem services are the many and varied benefits to humans provided by the natural environment and from healthy . Such ecosystems include, for example, s, s, s and s. These ecosystems, functioning in healthy relationship, offer such things ...
they provide us with. In a speech referring to a report to government which suggested that better protection of the UK's freshwater ecosystems would yield an enhancement in aesthetic value of £700m, he derided attempts 'to compare things which cannot be directly compared'. He went on to say: Others have defended efforts to integrate the valuation of natural capital into local and national economic decision-making, arguing that it puts the environment on a more balanced footing when weighed against other commercial pressures, and that 'valuation' of those assets is not the same as monetisation.


See also

*
Bioeconomics (biophysical) Thermoeconomics, also referred to as biophysical economics, is a school of heterodox economics that applies the laws of thermodynamics, laws of statistical mechanics to economic theory. Thermoeconomics can be thought of as the statistical physics ...
*
Biocapacity The biocapacity or biological capacity of an ecosystem is an estimate of its production of certain biological materials such as natural resources, and its absorption and filtering of other materials such as carbon dioxide from the atmosphere. B ...
*
Conservation biology Conservation biology is the study of the conservation of nature and of Earth's biodiversity with the aim of protecting species, their habitats, and ecosystems from excessive rates of extinction and the erosion of biotic interactions. It is an int ...
* Earth Economics (organization) *
Ecodynamics Ecodynamics is a part of applied economics. It covers knowledge on monetary value, the usage of money, and the money flow.Trond AndresenFundamental financial accumulation dynamics Department of Engineering Cybernetics, NT, Trondheim, Norway, August ...
*
Ecological deficit Ecological debt refers to the accumulated debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differ ...
*
Ecological economics Ecological economics, bioeconomics, ecolonomy, eco-economics, or ecol-econ is both a transdisciplinary Transdisciplinarity connotes a research strategy that crosses many disciplinary boundaries to create a holistic Holism (from Greek Greek m ...
*
Ecological footprint The ecological footprint is a method promoted by the Global Footprint Network Global Footprint Network, founded in 2003, is an independent think tank A think tank, or policy institute, is a research institute A research institute, research ce ...
*
Ecology Ecology (from el, οἶκος, "house" and el, -λογία, label=none, "study of") is the study of the relationships between living organisms, including humans, and their physical environment. Ecology considers organisms In biol ...
*
Econophysics Econophysics is a heterodox interdisciplinary research field, applying theories and methods originally developed by physicists in order to solve problems in economics Economics () is the social science that studies how people interact wit ...
*
Ecosystem services Ecosystem services are the many and varied benefits to humans provided by the natural environment and from healthy . Such ecosystems include, for example, s, s, s and s. These ecosystems, functioning in healthy relationship, offer such things ...
*
Energy accountingEnergy accounting is a system used to measure, analyze and report the energy consumption Energy consumption is the amount of energy or power used. Biology In the body, energy consumption is part of energy homeostasis. It derived from food energy ...
*
Environmental degradation Environmental degradation is the deterioration of the environment Environment most often refers to: __NOTOC__ * Natural environment, all living and non-living things occurring naturally * Biophysical environment, the physical and biological facto ...
*
Environmental economics Environmental economics is a sub-field of economics Economics () is a social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and ser ...
*
Environmental protection Environmental protection is the practice of protecting the natural environment The natural environment or natural world encompasses all and non-living things occurring , meaning in this case not . The term is most often applied to the or s ...
*
Habitat conservation Habitat conservation is a management practice that seeks to conserve, protect and restore habitat Ibex in an alpine habitat In ecology Ecology (from el, οἶκος, "house" and el, -λογία, label=none, "study of") is the ...
* Natural capital accounting *
Natural Capital Committee The Natural Capital Committee (NCC) is an independent body set up in 2012, initially for a three-year period, to report to the UK Government and advise on how to value nature and to ensure England's ‘natural wealth’ is managed efficiently and s ...

Natural Capital Committee
* Natural Capital Initiative *
Oil depletion Oil depletion is the decline in oil production of a well, oil field, or geographic area. The Hubbert peak theory makes predictions of production rates based on prior discovery rates and anticipated production rates. Hubbert curves predict that t ...
*
Payment for ecosystem services Payments for ecosystem services (PES), also known as payments for environmental services (or benefits), are incentives offered to farmers or landowners in exchange for managing their land to provide some sort of ecological service. They have been d ...
*
Population dynamics Population dynamics is the type of mathematics used to model and study the size and age composition of population Population typically refers the number of people in a single area whether it be a city or town, region, country, or the world. ...
*
Renewable resource A renewable resource, also known as a flow resource, is a natural resource Natural resources are resource Resource refers to all the materials available in our environment which help us to satisfy our needs and wants. Resources can bro ...
*
Sustainability Sustainability is the capacity to endure in a relatively ongoing way across various domains of life. In the 21st century, it refers generally to the capacity for Earth's biosphere and human civilization to co-exist. For many, sustainability is ...

Sustainability
*
Sustainable development Sustainable development is the organizing principle for meeting human development goals while simultaneously sustaining the ability of natural systems to provide the natural resources and ecosystem services Social forestry in India, Social ...

Sustainable development
*
The Economics of Ecosystems and Biodiversity framed The Economics of Ecosystems and Biodiversity (TEEB) was a study led by Pavan Sukhdev from 2007 to 2011. It is an international initiative to draw attention to the global economic benefits of biodiversity Biodiversity is the biological va ...
*
Thermoeconomics Thermoeconomics, also referred to as biophysical economics, is a school of heterodox economics Heterodox economics is any economic thought or theory that contrasts with orthodox schools of economic thought, or that may be beyond neoclassical econo ...


References


Notes


Further reading

* Pearce, D. 1993. Blueprint 3: Measuring Sustainable Development. Earthscan. * Jansson, AnnMari; et al. (1994). Investing in Natural Capital : The Ecological Economics Approach to Sustainability. Washington, D.C.: Island Press, 504 pp. . * Daily, Gretchen C. (editor) (1997). Nature's Services: Societal Dependence on Natural Ecosystems. Washington, D.C.: Island Press, 392 pp. . * Prugh, Thomas; Robert Costanza et al. (1999). Natural capital and human economic survival. Solomons, Md.: International Society for Ecological Economics, 180 pp. . *
Helm, Dieter
Helm, Dieter
(2015). Natural Capital - Valuing Our Planet. Yale University Press; 277 pp. 


External links

* Costanza, Robert (Lead Author); Cutler J. Cleveland (Topic Editor). 2008
"Natural capital."
In: Encyclopedia of Earth. Eds. Cutler J. Cleveland (Washington, D.C.: Environmental Information Coalition, National Council for Science and the Environment). First published in the Encyclopedia of Earth February 26, 2007; Last revised July 31, 2008; Retrieved September 5, 2008. * Earth Economics Natural Capital Accounting Solutions Articl
Natural Capital Project.
A joint venture among The Woods Institute for the Environment at
Stanford University Stanford University, officially Leland Stanford Junior University, is a private Private or privates may refer to: Music * "In Private "In Private" was the third single in a row to be a charting success for United Kingdom, British singer Du ...

Stanford University
, The Nature Conservancy,
World Wildlife Fund In its most general sense, the term "world" refers to the totality of entities, to the whole of reality or to everything that is. The nature of the world has been conceptualized differently in different fields. Some conceptions see the worl ...
. * NOAA Economic
US Economic Benefits of Natural Systems to Business and Society.
* Ecosystem Valuation Toolki

* Lacombe Morgane and Aronson James, 2009
Restoring Natural Capital in Arid and Semiarid Regions Combining Ecosystem Health with Human Wellbeing
. Les dossiers thématiques du CSFD. N° 7. * Earth Economic

* http://unstats.un.org/unsd/envaccounting/seea.asp System of Environmental-Economic Accounting (SEEA) * http://www.naturalcapitalcoalition.com * http://naturalcapitalforum.com in 2015 * http://teebweb.org The Economics of Ecosystems and Biodiversity (TEEB) * https://web.archive.org/web/20150426071137/http://unstats.un.org/unsd/envaccounting/White_cover.pdf SEEA Central Framework * https://web.archive.org/web/20160909034301/http://envisionation.co.uk/index.php/blogs/nick-breeze-blogs/151-partha-dasgupta-natural-capital Nick Breeze Interview with Economist Sir Partha Dasgupta, "What is Natural Capital?" {{DEFAULTSORT:Natural Capital
Capital (economics) {{Cat main This category is about the Capital (economics), economic concept of capital; for capital cities, see :Capitals, Capitals; other uses, see Capital (disambiguation). Factors of production Capitalism ...
Natural resources Ecological economics Environmental social science concepts