The world’s economy predominantly relies on gross domestic product (GDP) as a measure of economic health and prosperity. But the natural assets that underpin this economic growth – soil for crops, vegetation-absorbing carbon dioxide and water for drinking – are often unaccounted for in economic modelling. To improve recognition and accounting of nature in policy and economic decision-making, a review on the economics of biodiversity, led by Sir Partha Dasgupta of the University of Cambridge, asks that we change our model to one that measures inclusive wealth.
Sir Partha outlined this economic accounting framework for the economics of biodiversity in a webinar organized by the Green Growth Knowledge Partnership (GGKP) and the Economic Statistics Working Group (ESWG). The session is part of an on-going initiative by the GGKP’s Expert Group on Natural Capital to fill knowledge gaps for mainstreaming natural capital in national green growth planning.
The concept of inclusive wealth asks that we aggregate the value of the following nation’s capitals: produced capital (e.g. roads, buildings and factories), human capital (e.g. health and education) and natural capital (e.g. fisheries, minerals and soils) into economic planning and development - yet in many cases the last two are not taken into account.
Hilary Allison, Head of Programme, Ecosystem Assessment of Policy Support, UN Environment Programme World Conservation Monitoring Centre, explained that to evaluate the impact and respond to changes in biodiversity and ecosystem services we must plug the data gaps.
“The paucity of information on how both health value and shared value aspects of well-being are linked to ecosystem services constrains our understanding of how to account for them in decision-making,” she said.
Data for ecosystem assessments should include qualitative, remote sensing data using satellites, and indigenous and local knowledge-related data, among others. She noted there are plenty of sources, with sufficient information, that can help fill data gaps on how ecosystem services link to social and health-related well-being. She also highlighted that these data demands are very context-specific and the right policy questions should therefore be established before the ecosystem assessments begin.
Webinar panellists noted this information gap hinders natural capital accounting policymaking.
Paul Ekins, Professor of Resources and Environment Policy at the UCL Institute for Sustainable Resources also the co-chair of the GGKP Natural Capital Expert Group, explained that the impact of natural capital information on government decision-making is currently profoundly underreported. Natural capital interventions and evaluations are complex, time-consuming and expensive.
To rectify this, Ekins pointed to the Natural Capital Indicator Framework (NCIF), which was built to provide decision-makers with a structured approach to select natural capital indicators for economic development. The framework is especially important in the race to meeting international commitments such as the Sustainable Development Goals (SDGs).
There are examples of where natural capital accounting is put into practice. Deputy Chief Economic Adviser of the United Kingdom’s Office for National Statistics, Richard Heys, explained that accounting for the interlinkages between economic, environmental and social information is underway. In seeking to articulate total capital stock, they are undergoing a process of integrating data series and filling in conceptual (human capital) and empirical (environmental depletion) gaps. But gaps in how we evaluate accounting prices of capital stock remain a sticking point.
Karen Ellis, Director of Sustainable Economy WWF-UK, said, while positive progress is underway on embedding natural capital accounting in economics, two challenges remain: the need to start incorporating nature into economic decision-making now, as there is no need to wait until the metrics are perfected; and the incorrect assumption that readily available data will inevitably be utilised in decision-making.
By adopting the inclusive wealth metric provided in the Dasgupta Review, Ellis suggested that governments build existing natural capital accounts into their annual budget reports or regular fiscal publications. The framework can be built into government spending decisions. This can be done by working with the treasury finance ministries to create a systematic framework, along with creating incentives to encourage governments and businesses to incorporate natural capital into decisions.
Chief Economist of the UK Department of Environment, Food & Rural Affairs (DEFRA), John Curnow, added that globally and nationally, there is consistent work to develop a common language and framework for assessments so that they are accessible and are incorporated into decision-making. That accessibility comes from working with various government departments to apply natural capital tools and frameworks in policy appraisals, such as Enabling Natural Capital Approach (ENCA) and the Green Book.
Moreover, mainstreaming natural capital in our common discourse in a clearly communicated way is vital to embedding this holistic accounting practice in policymakers’ evaluations, says the Economics Editor of the Times, Philip Aldrick. He explained that the language and terminologies used in natural capital accounting need to be communicated in ways that the public can understand. The Dasgupta Review pays close attention to this language.
The recording and presentation materials of the webinar are available here.
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About the GGKP Natural Capital Expert Group
The GGKP Expert Group on Natural Capital explores state-of-the-art methods, models, data and tools to achieve its three goals of pushing forward the knowledge frontier around natural capital and green growth; mainstreaming natural capital in global green growth activities; and supporting stronger implementation of natural capital commitments in national economic plans. The group is comprised of 26 experts from across GGKP’s partner institutions, each with at least 10 years of experience working with natural capital.
For more information, see About the Natural Capital Expert Group.