UK’s Natural Capital: An Overview

nc-overview

Overview 

  • 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.

Background

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 that 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.

What is Natural Capital?

NC is defined as ‘elements of nature that directly or indirectly produce value to people, including ecosystems, species, freshwater, land, minerals, the air and oceans’. The UK’s national accounts do not consider the depreciation of natural assets and many of the benefits of NC are not included in GDP.  The failure to account properly for NC has led to a situation where benefits derived from natural assets are over-exploited for short term gains rather than maintained for their long term benefits.  For example, the destruction of woodland to make way for a new railway would yield financial benefits from reduced transport time, but also incur costs from reductions in carbon sequestration, water filtration and recreational use. By assigning a value to these less obvious benefits of NC, advocates argue that they can be more easily incorporated into decision-making processes and that this would lead to better management of our natural assets. Many national and international NC groups exist, including the UK’s Natural Capital Committee (NCC). The NCC was initially set up for three years (2012 to 2015). Its final report made nine recommendations for improving the UK’s NC. The Government response broadly accepted five of these, including to establish a 25-year plan for the environment -recommendations 1, 2, 4, 6 and 9 – see below for details:

nc-recommendations

Natural Capital Committee Recommendations

The NCC was re-established this year (2016-2020) to provide advice on the development and implementation of the 25-year plan for the environment. The NCC has emphasised the importance of four unfunded ‘pioneer projects’ to Defra to identify good practice and innovative solutions for the plan. These 3-5 year projects include: a ‘Catchment’ Pioneer in Cumbria; an ‘Urban’ Pioneer in the Greater Manchester area; a ‘Landscape’ Pioneer in North Devon; and a ‘Marine’ Pioneer across two sites, one in East Anglia and an additional component in Devon to complement the Landscape Pioneer.

Renewable and Non-Renewable Natural Capital

Natural capital assets are divided into two classes: nonrenewable and renewable.

  • Non-renewable assets cannot regenerate within human timescales and so can only be used once. These assets are traded and therefore have a market price, they include fossil fuels (oil and gas) and minerals such as lithium and phosphorous.
  • Renewable assets such as forests, fish and peat bogs can provide benefits indefinitely so long as they are exploited sustainably. However, renewable assets are frequently degraded through the unsustainable management practices such as deforestation, over-fishing and drainage.

POST is an office of both Houses of Parliament, charged with providing independent and balanced analysis of policy issues that have a basis in science and technology.

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