Natural capital is everything nature provides us for free. It is what our economy is built upon. We add man-made capital in the shape of houses, factories, offices and physical infrastructure, and human capital with our skills, ideas and science.
Natural capital should, therefore, be at the heart of economics and economic policy – but it isn’t. As a consequence we abuse nature, drive species to extinction, and destroy ecosystems and habitats without much thought to the consequences. The damage won’t go away; as we wipe out perhaps half the species on the planet this century and induce significant climate change, the economic growth we take for granted will be seriously impaired. Put simply, our disregard for natural capital is unsustainable – it will not be sustained.
Just as we try to maintain and enhance our own assets – our houses, cars and our knowledge and skills – so too should the broader economy avoid running down its base of natural capital assets. Some natural assets will be used up – such as the non-renewables like North Sea oil and gas – but even here we should be mindful of compensating future generations for what we will not therefore bequeath to them.
The natural assets that really matter are the renewables – the ones nature keeps on providing us for free, forever – provided we don’t deplete them beyond the threshold of sustainable reproduction. We can for example carry on for hundreds of thousands of years harvesting herring from the North Sea, as long as we do not overfish them. The potential value of all those fish forever is enormous.
For the economy as a whole, national accounts need to provide for this capital maintenance as a first call on its revenue. If they did, and if we had a proper balance sheet, then the economic growth declared would be the sustainable one. It would be lower, too. Put another way, by not maintaining our assets, we are living beyond our means – let alone also borrowing from the future to finance the deficit, and making future generations pay for our excessive current consumption.
A sustainable level of economic growth – driven by all the new technologies that keep coming along – would be lower, but we would nevertheless be better off in the long run. We would not then face the consequences of the loss of so much of our natural environment and climate change.
Unlike the climate change problem, natural capital has a big spatial dimension. Climate change is all about a small number of gases in the atmosphere and it does not matter where they are emitted. Natural capital comes at every level, and location matters. It includes the great global biodiversity hotspots, like the Amazon, and it includes everyone’s backyard and every park and garden. Everyone can therefore make a difference to natural capital in ways that they cannot to the climate change problem.
Think of some of the things you could do today. If your front garden is paved and concreted over, you could break it up and allow wild flowers to flourish, which in turn would help the bees. So barren is much intensive agricultural land , as it is sprayed with pesticides and herbicides and its soils supplemented with nitrogen fertilisers, that bees often find cities much better habitats than the countryside. You could put away the slug pellets and the weed killer.
But the really big gains come from three policy changes, all of which have an impact on the choices we make. The first is compensation: the idea that if damage is done to our natural capital, there must be compensating increases elsewhere. The second is pollution taxes, paying for the damage caused from carbon, pesticides and other emissions. The third is a nature fund, created from the running down of the non-renewables like North Sea oil and gas.
As Britain faces a population increase of around10 million in the next couple of decades, and as all the main political parties are committed to building more than 200,000 houses per year, the HS2 high-speed railway which will initially link London and Birmingham, and more airport runways, there is little doubt that the natural environment faces challenges matched only by the devastation caused by the intensification of agriculture encouraged by the Common Agricultural Policy.
Natural capital is in for a shock, unless compensating improvements are made. These could be really big improvements in complete river catchments like the Thames and new marine protected areas. They can be small and local too; every urban citizen could be guaranteed access to a green space within 500m of where they live, addressing not only the space children need to play outdoors, but also the poor air quality that blights our cities. These are parts of the prize of taking natural capital seriously.