Natural Capital: An Overview
The benefits derived from natural resources include food, recreation and clean air and water. The aim of valuing these resources is to quantify better the cost of their degradation. This POSTnote summarises how to value natural capital, discusses the advantages and challenges of approaches and describes some initiatives to secure natural capital for the future.
It has been estimated that the UK's population will rise by nearly 10 million in the next 25 years, increasing demands on natural resources. Evidence suggests degradation of ecosystems will negatively affect human wellbeing. Reports such as the UN's Millennium Ecosystem Assessment and The Economics of Ecosystem and Biodiversity (TEEB) global reports have highlighted the importance of incorporating the natural environment into national accounting frameworks. One way to achieve this is through natural capital (NC) valuation.
Key points in this POSTnote include:
- Natural capital is a term used to describe those elements of the natural environment that provide benefits for humans.
- In 2015, the Natural Capital Committee, a Government advisory group, made nine recommendations on how to account for natural capital. These included the creating of a 25-year plan for the environment.
- Valuing natural capital in this way can help to manage environmental risks and to inform a wide range of decisions.
- There are a number of challenges to accounting for natural capital including a lack of financial, environmental and social data and the UK's use of other countries' natural capital.
An update to this note was made 01 Feb 2017.
Acknowledgements
POSTnotes are based on literature reviews and interviews with a range of stakeholders and are externally peer reviewed. POST would like to thank interviewees and peer reviewers for kindly giving up their time during the preparation of this briefing, including:
- Mike Acreman, Centre for Ecology and Hydrology*
- Professor Nick Hanley, School of Geography and Geosciences, St Andrew University*
- Dr Diane Mitchell, Chief Environment Adviser, NFU*
- Professor Paul van Gardingen, UNESCO Chair of International Development, Scholl of Geosciences, University of Edinburgh
- Professor Ian Bateman, Land, Environment, Economics and Policy Institute, University of Exeter.
- Dr Deanna Donovan, JNCC
- Brendan Freemans, ONS*
- Emily Connors, ONS
- Chris White, AECOM
- Nick Grayson, Climate Change and Sustainability Manager at Birmingham City Council*
- Professor Rosie Hails, Director for Biodiversity and Ecosystem Science, CEH
- Will Evison, PwC Associate Director and Environmental Economist/Natural Capital Coalition
- Rocky Harris, Defra
- Julian Harlow, Natural Capital Committee Secretariat*
*Denotes people who acted as external reviewers of the briefing.