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Executive Summary

The aim of the GLOBE Natural Capital Action Plan is to define a clear and targeted set of actions for legislators to ensure the true value of ecosystem services and natural capital is integrated into policy making.

 Following the publication of the Millennium Ecosystem Assessment (MA) and The Economics of Ecosystems and Biodiversity (TEEB) report, we understand better than ever before that our ecosystems are deteriorating and that this is having a significant material impact on our economies and societies. It is also clear that there are a number of interventions that the international community, governments and parliamentarians could have made to arrest this decline, but have chosen not to, partly due to the fact that natural capital is not included in policy making processes.

Therefore, global biodiversity loss continues at an ever-increasing rate and many critical ecosystem services continue to be degraded. This paper, building upon the knowledge of the MA and TEEB studies, sets out a set of practical actions for legislators, governments and auditors.

It is essential that Finance Ministers and Treasuries understand the scientific evidence and the political potential of the natural capital approach. The GLOBE International Secretariat has therefore produced this paper to support the formation of a GLOBE leadership group of legislators that can begin to advance the steps outlined in the paper to engage with these critical
constituencies. The action plan includes the following recommendations:

  • Incorporate the valuation of natural capital into the framework of government accounts,
  • Instruct all government departments to prepare inventories of the natural capital and ecosystems that fall within their ambit or are affected by their policy decisions,
  • Create a ministerial position within the Finance Ministry to work with the department of environment in assessing the value of natural capital in departmental inventories and regulating the use of the country’s natural wealth,
  • Ensure that the national Finance Ministry develops a set of Natural Capital Accounts that is accompanied by an annual report that outlines the status of biodiversity, ecosystem services and natural capital, as appropriate,
  • Encourage national audit offices to adopt the natural capital approach when examining the effectiveness and efficiency by which government departments use their resources and apply cost benefit analyses.

By agreeing to this Natural Capital Action Plan, we are asking legislators to lead a coordinated response to reshaping existing policy and national accounting frameworks to accurately reflect the relationship between the economy and the environment. This document outlines a set of clear practical political actions that will set the world on a path to a more sustainable future.

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Introduction

Ecosystems are deteriorating worldwide, and with them, the capacity to support human wellbeing and sustainable economic growth. The degradation of the natural environment has many causes, but a major contributing factor, as identified in the Millennium Ecosystem Assessment (MA), is the failure to value the numerous services provided by ecosystems. Therefore, part of the solution to this problem must focus on ensuring that policy making takes into account the full value of ecosystem services.

‘Natural capital’ is a useful concept to help achieve this goal. Natural capital refers to those aspects of the natural environment that deliver socio-economic value through ecosystem services. For example, wetlands provide water treatment and purification services; prevent floods by retaining surface runoff; and provide wildlife habitat. Natural capital exists alongside, and often underpins, man-made capital.

The integration of ecosystem valuation into policy making and economic statistics has increasingly focused on ‘greening’ the national income accounts. Currently, natural capital is not comprehensively recorded and therefore not fully recognised in policymaking processes. By not including the value of ecosystem services in the cost benefit analysis of policy options, decision
makers are often choosing solutions that are detrimental to a country’s stock of natural capital. The forestry sector demonstrates this very clearly; the income from harvesting timber is measured and recorded, whereas the simultaneous depletion of important ecosystem services, including climate regulation, carbon sequestration and erosion control, are not.

In order to reconcile economic and environmental interests, the value of natural capital should be integrated into government decision-making. For this to happen three things are required:

  • Scientific information regarding the status and trends of natural capital;
  • Economic valuation methodologies that assign an accurate value to natural capital;
  • Political leadership to ensure the integration of this value into policy making processes.

The focus of the GLOBE Natural Capital Action Plan is on the third part of this process. The first two parts are not yet complete, or perfect, but sufficient information exists and suitable tools have been developed to make preliminary assessments of the real value of natural capital. These tools are continuously being improved for application at a greater scale, and so do not present a block to integrating natural capital into policy.

The real missing link is the political leadership that is necessary to reverse the current trend of ecosystem degradation by recalibrating the measurement of sustainable economic growth. Legislators can play a central role in making the transition to an economy which recognises and takes into account the role of biodiversity and ecosystem services. This document outlines a practical action plan that legislators can follow to accelerate the recognition of natural capital by governments and to ensure that the true value of ecosystem services are integrated in policymaking procedures across all government departments.

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The GLOBE Natural Capital Initiative

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The unsustainable use of natural resources can result in an increase in a country's GDP while it actually becomes poorer. Legislators can play a central role in making the transition to the sustainable economy by recognising and taking into account the value of biodiversity and of ecosystem services through the exercise of their legislative, oversight and budgetary responsibilities.

They can advance this vision by pushing for the implementation of wealth accounting and valuation of ecosystem services as practical tools to operationalise the vision of sustainable development within planetary boundaries, and by advancing legislation foreseeing the embedding of the natural capital approach and ecosystem services values into decision-making across all government departments.

The GLOBE Natural Capital Initiative (GNCI) was launched as part of the implementation of the Legislators Protocol agreed by the 1st World Summit of Legislators held in Rio de Janeiro in 2012.

Since then, with the support of the German Government, the Mava Foundation and Zennström Philanthropies, the GNCI the GNCI has been working with legislators from a range of industrialised and developing countries including Botswana, Colombia, Costa Rica, Georgia, Germany, Ghana, Mexico, Nigeria, Peru, the Philippines and the United Kingdom amongst others, sitting on key select committees (Finance, Public Accounts, Environment and Natural Resources, Planning) keen to advance keen to advance the implementation and long-term integration of the natural capital approach into decision-making across all government departments.

The GNCI has facilitated the development of two editions of the GLOBE Natural Capital Legislation Study providing a comparative review of institutional capacity and legislative frameworks on natural capital accounting (NCA). The second edition, to be launched in June 2014, is being developed in cooperation with University College London, covering over twenty countries.

The GNCI also supports the development (ongoing) of national Natural Capital Action Plans, underpinned by in-depth baseline studies on national natural capital-related law in Colombia, Costa Rica, Ghana, Mexico, Nigeria and South Africa, to help legislators identify priority areas for legislative reform informed by the natural capital approach. It has also contributed to improve the communication between national legislators and national technical experts to accelerate the adoption of NCA and to explore policy applications and options for creating a legal mandate and budgetary support for its long-term institutionalisation, including the national cross-departmental task forces supported by the World Bank Wealth Accounting and the Valuation of Ecosystem Services (WAVES) Programme. The 1st GLOBE Natural Capital Summit held at the German Bundestag in Berlin on 6-8 June 2013 facilitated the North-South and South-South exchange of best legislative practices.

Scope

The countries involved in the GNCI represent a wide range of geographies and development levels to highlight the global relevance of natural capital accounting and demonstrate the importance of early and effective engagement with legislators in order to improve the awareness about natural capital issues within the national parliaments.

In order to maximize the synergies with the progressive technical work in this field, the GNCI engages the parliaments from countries participating in the Wealth Accounting and the Valuation of Ecosystem Services (WAVES) Programme, which is coordinated by the World Bank. These countries include Botswana, Colombia, Costa Rica, the Philippines and Rwanda. However the Initiative is open to legislators from any other countries. Peru and Georgia have also been involved in the GNCI from the start, along with the United Kingdom and Germany, two of the leading developed countries on this subject.

Progress

The preparatory phase of the Initiative started in September 2012 and concluded in June 2013, with the official launch of the GNCI and of the GLOBE Natural Capital Legislation Study at the 1st GLOBE Natural Capital Summit held at the Bundestag in Berlin, which was attended by over 60 legislators from 20 countries. Delegates from the 8 GNCI leading countries and 12 more nations plus the European Parliament attended the Summit to share the progress and challenges in their national context as the start of a process which will support peer-to-peer learning, facilitate the sharing of best practice and give momentum to ongoing national developments.

The delegates adopted a Communiqué calling on their governments and governments everywhere, no later than 2020, to fully incorporate the value of natural capital into national accounting frameworks and to regulate to ensure that businesses make transparent and open to public scrutiny their environmental externalities, such as their impacts upon natural capital, in their annual reports to shareholders.

The Initiative is managed by the GLOBE International Secretariat in collaboration with partners in the legislatures and relevant government departments of GNCI countries. 

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GLOBE Natural Capital Action Plan

To download the GLOBE Natural Capital Action Plan document as a PDF file click here. 

Executive Summary

1 Introduction

2 Valuing Natural Capital

2.1 Introduction
   2.2 Environmental Accounts
      2.2.1 System of Environmental and Economic Accounting (SEEA)
      2.2.2 Wealth Accounting
   2.3 Economic Appraisal
   2.4 How to Avoid Paralysis by Analysis
   2.5 Sequencing

3 The Role of Legislators

   3.1 Mainstreaming Natural Capital across Government
   3.2 Scrutiny of Government Policy Making
   3.3 Ownership of Environmental Accounts
   3.4 Achieving Public Policy Goals by Investing in Natural Capital

4 Recommendations to Governments

   4.1 Requirement for all Government Departments to develop Natural Capital Inventories
   4.2 Creation of a Ministerial Position within the Finance Ministry to Oversee the Management of Natural Capital
   4.3 Creation of a Ministerial Committee on Natural Capital
   4.4 Creation of an Advisory Group to the Ministerial Committee on Natural Capital
   4.5 Integrate the Value of Natural Capital into Policy-making Processes

5 Recommendations to National Audit Offices

   5.1 Recommendations to Audit Offices

References

Acknowledgements

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2. Valuing Natural Capital

2.1 Introduction

This section outlines three approaches to integrating the value of natural capital and ecosystem services into policy making; two for improving national accounting and one for policy and project appraisal. None of these methods are perfect, but they are each a considerable improvement on not including the value of the goods and services provided by the natural world. Equally, it is not possible to attribute an economic value to every ecosystem service, so any attempt to value one service will be a conservative estimate of the true benefits provided by the ecosystem.

2.2. Environmental Accounts

Environmental accounts incorporate the value of natural capital into the national accounting framework. The integration of environmental accounts for stocks and flows of natural resources, environmental expenditure and environmental macroaggregates with other economic data in the national accounts allows for detailed analysis of the relationships between the environment and the economy.

By developing comprehensive environmental accounts, natural capital can be included alongside other forms of capital in national income accounts. This approach will highlight to policy makers the relationship between the environment and the economy, and help ensure that natural capital is used in a sustainable way to support the economy over the long term.

2.2.1. System of Environmental and Economic Accounting (SEEA)

An international standardised framework for environmental accounting is currently being developed through an intergovernmental process and is due for completion in 2012. The most recent version of this framework ‘The Handbook of National Accounting - Integrated Environmental and Economic Accounting’, (commonly referred to as the SEEA), was published in 2003 and includes a book of best practices, reflecting country experiences and providing multiple options for environmental accounting.

This new version will be divided into two volumes; firstly a set of standardised methods for environmental accounting that can be integrated with the System National Accounts (SNA), this will cover natural resource asset accounts; flow accounts for materials, pollutants, energy and resources; expenditure on environmental protection and resource management; and environmentally-adjusted macroeconomic indicators. The second volume will cover the areas where there is not yet a standardized methodology, but where numerous approaches have been developed, such as for ecosystem valuation. Although not yet standardised, these methodologies demonstrate that the economic value of ecosystem services can de estimated and used in policymaking.

2.2.2. Wealth Accounting

The other well-known method for incorporating the value of natural capital into estimates of national wealth is the World Bank’s work on ‘wealth accounting’. This approach emphasises the importance of including changes in natural and social capital within the annual measure of national wealth. This will allow changes in natural capital to be reflected in the macro-level aggregate indicators that describe the state of the economy. Within this approach, the measurement of natural capital includes the valuation of agricultural land, subsoil assets, timber and non-timber forest products. The latest natural capital estimates from the World Bank in 2003 do not include the valuation of ecosystem services, however, this process is ongoing and the valuation methodologies are being updated.

2.3 Economic Appraisal

In addition to developing environmental accounts, the economic appraisal of government policies and projects needs to be made more comprehensive to ensure that the true value of the natural capital and ecosystem services is considered when deciding upon the most cost effective option that achieves the desired objectives. There are a broad range of methodologies that can be used to put an economic value on ecosystem services, however, they have primarily been applied at a landscape or regional scale and vary according to their reliability, accuracy and sophistication.

In addition, obtaining consistent and precise ecosystem valuations can be expensive and time consuming. One approach that minimizes the cost and time of valuing of environmental costs and benefits is to use the ‘value transfer’ method, also known as ‘benefits transfer’. This approach allows information from previous economic valuations to be applied to a new context. For example, the flood protection benefits of a wetland may be calculated using existing estimates of flood protection value
that were derived in a similar context.

2.4 How to Avoid Paralysis by Analysis

The lack of a recognised and consistent approach to valuing natural capital is often quoted as the reason that the true value of the natural environment is not fully integrated into policy and accounting frameworks. However, we believe that there are a number of relatively simple tools and methodologies that can be adopted immediately to ensure that policy decisions better reflect the role that ecosystems play in underpinning our economy and society. Chapter 3 of the GLOBE Natural Capital Action Plan looks at the role of legislators in achieving this transition.

2.5 Sequencing

It will be important for governments and legislators to sequence the introduction of the measures outlined in this paper. We believe that we know enough for action to be taken now, but that as politicians move to implementation and legislation, it will be important for governments and legislators to sequence the interventions. Clearly the decisions involved in this will be different for each government. Most importantly, however, and based on the experience of many GLOBE legislators, it is clear that it is important to begin the process of advancing legislation rather than crafting perfection which will only ever delay action.