Natural capital is an idea whose time has come. It takes the analysis of the environment to a new level - way beyond the conventional sustainability and sustainable development approaches which have dominated in the last couple of decades.
The reasons why natural capital is the way to think about the great environmental challenges we face is because of three characteristics. Natural capital is all about assets – the assets nature provides us with for free; it forces us to see the environment as a (or indeed the) key input into the economy – ending the apartheid between economic growth and protecting and enhancing the environment; and by focussing on capital maintenance, it makes a clear distinction between renewable and non-renewable assets.
The damage to the natural environment accelerated during the twentieth century, and now is already reducing economic growth and development. The threat of climate change is widely understood. Perhaps less so is the destruction of biodiversity and ecosystems – from the loss of the great rainforests to the declines of wild flowers, insects, birds and mammals. As these disappear this century, we will come to realise what we have lost, and how much of our economic well-being depends upon a flourishing natural environment.
To stop the rot, we need to keep the aggregate of natural capital from falling further. Indeed it needs to be improved. Not everything can be preserved, but what is damaged should be compensated for with gains elsewhere. Natural capital needs to be maintained and enhanced. For non-renewables – natural capital that can only be used once (such as oil, gas and minerals) –is a matter of which generation uses it. But when it is depleted there needs to be compensation, and the surplus revenues should be used to protect and enhance renewables - the natural capital model just keeps on giving, provide we do not deplete it below the critical thresholds.
BREXIT will be played out in negotiations across a large range of policies. Amongst these, agriculture stands out. In terms of spending, the EU is mainly the Common Agricultural Policy. In the mid 1980s, it accounted for 70% of EU spending, and it has...
Green bonds have been proposed as a way to increase funding for improvements in the natural environment in general, and in natural capital in particular. This note identifies some of the core issues in thinking through how they would work in practice.