Capital Gains – the Value in Putting a Price on Nature
Posted on: 18 April 2016
Industry, society and human well-being are dependent on the benefits that natural capital brings – and new research shows how we can manage that natural capital to best provide those goods and services.
The research proposes that we should be targeting the natural capital stocks and the attributes that can be most easily manipulated.
Natural capital is a term from the language of economics and industry that is being used to describe the stocks of living things, soil, air and water from which many vital goods and services flow. When resources are scarce or threatened choices need to be made about how we manage them to provide multiple benefits to public and private stakeholders.
For example, we might be aiming to increase soil retention to maintain food production potential and to reduce sedimentation of waterways to achieve water quality goals. Planting trees might be an appropriate action for both these objectives, but how do we decide how many trees, which species, over how extensive an area, and where on the landscape we should plant them to obtain the required return on investment?
Professor of Zoology at Trinity College Dublin, Yvonne Buckley, was part of the research team whose findings have just been published in the journal Conservation Letters.
Professor Buckley said: “New ways of thinking about nature and the relationships between society and nature are influencing governments and industries worldwide and thankfully they are also now gaining momentum in Ireland.”
“Our research provides a means for assessing how the effects of quantity, quality, amount and configuration of natural capital stocks affect ecosystem service provision, which forms the all-important basis for the kind of adaptive decision-making that is required, but which hasn’t been available till now.”
Since many decisions are fuelled by economics, one way to account for the value of natural capital in decision-making is to put a monetary value on natural capital.
A conservative estimate in 2008 valued Ireland’s natural capital at €2.6 billion per year, and, in 2014, Irish woodlands alone were valued at €274 million per year. Part of the economic value of woodland is in its market value (including timber and wood fuel), but woodlands also provide a public good (including providing amenity and recreational space).
In some cases there is an overlap between public goods and market values; for example, by providing outdoor space for recreation there is a market value to tourism and reduced expenditure on public health.
Professor Jane Stout of Trinity, one of the founders of the Irish Forum on Natural Capital (IFNC), said: “Because the value of natural capital is rarely accounted for, it is invisible in decision-making based on economics. The IFNC is working to progress the development and application of the natural capital agenda in Ireland. Our vision is for an Ireland in which natural capital and ecosystem goods and services are valued, protected and restored.”
Climate change and natural capital
Many of the impacts of climate change will be felt via ecosystems and the resultant supply of goods and services to industry and people. Climate mitigation and adaptation strategies commonly use components of ecosystems in an attempt to cut greenhouse gas emissions and sequester carbon, and to adapt to an alternative climate state.
Only by understanding the interactions between climate and our natural capital can we hope to create a resilient and secure future for industry and society.
Professor Dame Georgina Mace, Centre for Biodiversity & Environment Research, University College London, recently visited Trinity to speak at a seminar about the importance of ‘valuing nature in a human dominated world’.
She said: “As a society we should commit to being the first generation to leave the natural environment in a better state than when we inherited it. Most of the impacts of climate change will be mediated through ecosystems, and by not accounting for natural capital we are missing what the economy ultimately depends on.”
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