Over 20 years ago, at the 1992 Earth Summit in Rio de Janeiro, 178 governments adopted a programme of action for sustainable development. Recognising the crucial role of the environment as a source of natural capital, governments agreed to establish systems of integrated environmental and economic accounting. Whereas for most of the last 20 years progress has been slow, this study shows that significant steps have been taken, both at the international and national level, during the last decade.
This study introduces natural capital as the basis for all economic activity. It summarises the benefits and methods of valuing natural assets in their crucial role of providing natural resource inputs and environmental services for economic production. This study reviews international efforts towards valuing ecosystem services, followed by an account of the measures taken by eight countries towards natural capital accounting. As the first such assessment of national approaches to natural capital accounting, the study provides legislators with a wealth of informa-tion about how governments around the world are responding to the challenge of natural resource depletion. Making use of its findings, legislators have a better opportunity than ever to mobilise national support for the implementation of natural capital accounting.
The concept of accounting for natural capital has been around for more than 30 years. However, progress in moving beyond conceptual thinking and experi-mentation toward implementation has been slow. The Millennium Ecosystem Assessment, a landmark study published in 2005, documented the largely declining state of global ecosystem services, noting their past benefits for people and current unsustainable use and degradation. The subsequent TEEB reports in 2009, which document the economic benefits of biodiversity and the cost of ecosystem degradation, along with the 2009 Stiglitz Report, the 2010 GLOBE Natural Capital Action Plan and the 2010 CBDs Aichi Targets, all urged governments to include the value of natural capital in national accounts.
Natural capital is a critical asset, especially for low-income countries where it makes up a significant share (36%) of total wealth. It is important that legislators can explain natural capital accounting as a way of providing detailed information for better management of the economy. This needs to be done in a way that is coherent internationally but also resonates at home with a public concerned about seeing the more immediate benefits of economic growth.
Over the last three years international agencies have began to respond to this challenge. The World Bank WAVES programme launched in 2010, the adoption in the EU of regulations on environmental-economic accounting in 2011, the approval of System of Environmental-Economic Accounting (SEEA) as an international standard, and the creation of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) in 2012 all point to a growing global commitment to better understand and value the benefits of nature to human well-being and economic development. This was reinforced by declarations on natural capital accounting by countries, legislators, financial institutions and NGOs in Rio and Gaborone in 2012.
The eight countries reviewed in this study have all made significant strides towards recognising the value of the natural environment in policy and economic decision-making. The history of payments for ecosystem services (PES) schemes in Colombia will provide a strong foundation for work that is underway to develop sets of sat-ellite environmental accounts. Similarly, the government of Peru recently produced a first version of a guide to implementing satellite environmental accounts. Peru also require that all Environmental Impact Assessments (EIA) include ecosystem service valuations, which is a positive example of how to embed environmental value into the making of policy.
As one of the first countries to create natural resource accounts, Costa Rica is now planning to produce pilot natural capital accounts. The Costa Rican Government has also integrated its Ministry of Environment with water, forests and mining to ensure that formerly competitive departments co-operate better. As with Colombia and Peru, Costa Rica also has a number of successful PES projects.
During the 1990s and early 2000s, the Philippines were one of only a few countries working to develop environmental accounts. With little implementation over the last decade, the Philippine government is now working to strengthen the institu-tionalisation of economic-environmental and natural resource accounting, as well as developing ecosystem accounts for fisheries, coastal and marine eco¬systems and minerals.
If projected growth rates of 4.8% in 2013 and 5.3% in 2014 are to be maintained, Africa will need to protect and enhance its natural resource base. Botswana is one of the continent's best examples of how to harness natural resources effectively. Since becoming one of the first countries to pilot national environmental and natural resource accounting in the 1990s and early 2000s, Botswana is now work-ing on natural capital accounts in a number of priority sectors, including energy and minerals, water and land/ecosystems. This is also true in Georgia, where the environment and natural resources are part of the national accounting system.
The UK National Ecosystem Assessment is notable as one of the first national studies of the benefits that nature provides to society and economic prosperity. The subsequent Natural Capital White Paper includes a commitment to reform national accounts so that, by 2020, they also reflect the country's natural wealth. Germany is also recognised as an international leader, both through the EU and support for programmes and studies such as TEEB reports, and through the integration of ecosystem values into national sustainable development policy since 2002.
While it is clear that all eight countries assessed have made strong commitments towards natural capital accounting, no one country has as yet successfully inte-grated the true value of natural capital into national accounts and economic policy making. Having completed an assessment of national approaches to natural capital accounting, we have reached the following conclusions:
- All eight countries are moving beyond thinking and experimentation towards the proper integration of natural capital into national accounting and policy making process.
- None of the countries is advancing comprehensively on all the necessary fronts – wealth accounting, development of national ecosystem assess-ments, valuation of ecosystem services and institutional and legislative reform.
- The most comprehensive natural capital-specific policies are to be found in developed countries, although these are nonetheless failing to carry out a comprehensive overhaul of policies affecting natural capital. The unsuccessful "structural greening" of the EU Common Agricultural Policy is one such example.
- Substantive progress is taking place in emerging economies, which shows how natural capital accounting is increasingly understood as an indispen-sable instrument supporting decision-making towards sustainable and inclusive socioeconomic development. In particular, the popularity of pay-ment per ecosystem services programmes in developing countries is a testament to the increased awareness of the linkages between environ-mental protection and sustainable economic development.
A thorough understanding of how current and potential policies impact on the environmental services upon which well-being and economic prosperity depend is essential for long-term sustainable growth. Natural capital accounting is a useful and globally recognised tool.
To this end, GLOBE makes the following recommendations based on the findings of the study:
- Legislatures should begin to develop natural capital accounting legislation;
- All government departments should prepare inventories of the natural capital and ecosystems that fall within their remit or are affected by their policy decisions;
- A ministerial position should be created 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;
- The national Finance Ministry should develop 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, and National audit offices should adopt the natural capital approach when examining the effectiveness and efficiency by which government depart-ments use their resources and apply cost–benefit analyses.
Unquestionably, there is still a long way to go before natural capital is main-streamed within our national accounting across the world. However, as this study shows, the direction of travel is clear and the eight countries covered in this study are helping to lead the way.