The State of Natural Capital

NCIn 2012, as part of its policy on environment, the UK Government established a group of economists to feed information to HMS Treasury on the state of UK’s ‘natural wealth’. This Natural Capital Committee, led by Dieter Helm has published its first report. The paper The State of Natural Capitol – Towards a framework for measurement and valuation, is, as it’s subtitle suggests, billed as an interim report. Indeed rather than presenting evidence on the state of the UK’s natural capital its is for the most part a re-articulation of the case for such accounting.

What are we to make of it? Well its is coached in terms which might be expected of any initial report, highlighting the committee’s view of a lack of evidence and calling for significantly more research, though it’s primary conclusion is still very clear:  ‘The evidence that exists indicates we are failing to conserve our natural capital assets and invest in them adequately. In many cases we are increasingly demanding more from them while at the same time eroding their capacity to deliver. The risk is that rather than underpinning future growth and prosperity, degraded natural capital assets will act as a break on progress and development.’  It goes on to state that, ‘There is no inherent incompatibility between preserving and enhancing natural capital and economic growth, as long as growth is properly measured.’

Two particular recommendations in the report are for; the establishment of a much more rigorous evidence framework to better measure and account for natural capital assets, including a requirement for natural capital to be incorporated into national and corporate accounting; AND improving the mechanisms for how this evidence is taken account of during decision making.

However beyond this and its generally cautious approach there is more,  not necessarily because it says anything significantly new; indeed it in large part reiterates concern about the loss and depreciation of natural capital already highlighted in wider global assessments such as TEEB and in the UK’s National Ecosystem Assessment. What is more significant is where this voice is coming from. In the UK context it is the first time an officially sanctioned treasury guidance group has presented such a report, until now the UK has had no governmental mechanism to properly take the value of  the environment into account. In this context its preliminary conclusions are significant; furthermore, the UK Government if the first to have such a specific advisory group, but other States are likely to follow.

Established in May 2012 the principal responsibilities of the UK NCC are to:

  • help the Government better understand how the state of the natural environment affects the performance of the economy and individual wellbeing in England
  • advise the Government on how to ensure England’s ‘natural wealth’ is managed efficiently and sustainably, thereby unlocking opportunities for sustained prosperity and wellbeing

It is clear from the preliminary report that the NCC will be advising that UK research effort, particularly through government funds granted through Research Councils UK, need to be better directed to address the perceived evidence gap. This will be a good thing providing that the NCC’s political masters do not take a perception of lack of evidence as an excuse to undermine a precautionary approach and instead accept the primary case and supporting the need for resources to be mobilised rather than cut back in the environmental management sector. These issues are interlinked, because of the past lack of recognition there is a lack of capacity which needs to recognised and the training and development gap filled. As the report highlights ‘By failing to invest adequately in maintenance and enhancement, we risk missing opportunities that better management and stewardship of natural capital can offer’.

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