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Archive for the ‘Natural Capital’ Category

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LibDem Manifesto – Environmental Coverage

LibDems have the longest section on the environment. You can click on the title above to go to the page where you can see the Manifesto. There are no costings that accompany this manifesto. The summary below shows quotations from the manifesto (in italics with page numbers reported) and some commentary.  The titles are mostly as they appear in the manifesto, unless statements are grouped.

Brexit and Environment

“Maintaining environmental standards: The European Union has created the highest environmental standards in the world. We have a duty to future generations to protect our environment and tackle climate change. Liberal Democrats will ensure that everything is done to maintain those high standards in UK law, including the closest possible co-operation on climate and energy policy.” P.11

 Investment

We will ensure that the National Infrastructure Commission takes fully into account the environmental implications of all national infrastructure decisions.” P.37

Traditional indicators of economic activity such as GDP are poor guides to genuine prosperity and wellbeing. We will therefore introduce a National Wellbeing Strategy covering all aspects of government policy, including health, housing and the environment.” P.39

Devolved Administrations

  • “Provide assistance to areas heavily dependent on fossil fuel industries, such as the north-east of Scotland, to diversify away from these industries.
  • Give the immediate go-ahead to the Swansea Bay tidal lagoon project.” P.44

Keeping Our Country Green

This is the main environment chapter of the manifesto. The priorities are:

  • “Ensuring that four million properties receive insulation retrofits by 2022, prioritising fuel-poor households.
  • Preventing 40,000 deaths a year with our Air Quality Plan to reduce air pollution.
  • Ensuring British farming remains competitive and doesn’t lose out – refocusing support towards producing healthy food and public benefits.” 47

This Section is too long to reproduce here (pages 47 – 54). But as a summary:

Five new green laws are proposed: a Green Transport Act, a Zero-Carbon Britain Act, a Nature Act, a Green Buildings Act, and a Zero-Waste Act to “incorporate existing EU environmental protections, maintain product standards such as for energy efficiency, and establish a framework for continual improvement”. P.47

The Liberal Democrats pledge to pass a Zero-Carbon Britain Act to set new legally binding targets to reduce net greenhouse gas emissions by 80% by 2040 and to zero by 2050.

Energy

The manifesto includes the aim to generate 60% of electricity from renewables by 2030, restore government support for solar PV and onshore wind in appropriate locations and build more interconnectors to underpin this higher reliance on renewables.

Saving energy will be a top infrastructure priority and a new Green Buildings Act will be passed to set new energy efficiency targets, including a long-term ambition for every home in England to reach at least an energy rating of Band C by 2035. The comment I made about overheating when reviewing the Labour manifesto about insulating houses applies here too.

Close to our work the chapter also mentions the Natural Capital Committee (the only manifesto to do so, so far, though of course outcomes are more important than processes). The Liberal Democrats will pass a Nature Act to “put the Natural Capital Committee (NCC) on a statutory footing, set legally binding natural capital targets, including on biodiversity, clean air and water, and empower the NCC to recommend actions to meet these targets”. P.50

International Development

“Provide greater resources for international environmental co-operation, particularly on climate change and on actions to tackle illegal and unsustainable trade in timber, wildlife, ivory and fish.” P.85

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GE 2017

Call me a silly cow but I’m excited about this election because I don’t think it’s only about Brexit!

I think it’s about making a decision on what role we want for the public sector and policy in all areas of government. It’s about the vision for the kind of country we want to live in. A good Brexit deal will then be one which helps us the most in making that vision reality.

It is also for this reason that I’ve read the main parties’ manifestos and will be writing a series on their coverage of environmental issues and policies.

I did this back in 2005. It was the first election I could vote in, in these pastures.

In 2010, I only searched for some key words through the texts.

This year….did I say I am excited about this election?!

So, every day this week you will get a review of the environmental pledges of a political party.  I’ll add the links here as they come online.

Conservative Party manifesto 2017 – environment overview

Labour Party manifesto 2017 – environment overview

Liberal Democrat manifesto 2017 – environment overview

UKIP manifesto 2017 – environment overview

Green Party manifesto 2017 – environment overview

For a final word from me on the manifestos click here

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The Economics of Ecosystems and Biodiversity (TEEB) for Business Coalition recently rebranded itself to the Natural Capital Coalition. This is one example of how the term ‘Natural Capital’ is increasing in popularity…but what is it? Essentially, it is the goods and services that nature provides us. An informative and accessible blog post on the ICAEW* website highlights that, other than sustaining life on Earth, nature provides us with goods and services that people value and should really recognise. There is a business workshop being held on 3April – organised by UKNEE** and University College London – that will be discussing the latest research in how businesses can incorporate natural capital into their accounting structures so that its value can be recognised.

For example, as the UK’s current flooding demonstrates, woodlands and other habitats are good at regulating water and slowing the uptake into rivers.

 

We invest in human capital and physical capital because they are productive; so by conserving their condition, they will continue to generate goods and services for us. Just as by training your employees and purchasing new machinery you are likely to generate more revenue as a business, if we agree that Natural Capital exists, why should we not also invest in improving it? For example, by investing more in the management of woodlands and upstream habitats mentioned previously, one is able to reduce the risk of flooding further downstream. A post in The Guardian by George Monbiot sheds light on this factor in more detail with regards to the recent UK floods.

Often, as the example above illustrates, the benefits of improving natural capital are public, but there are occasions where businesses can identify natural resources that generate a revenue for them at a private level (or reduce revenue if they were to be removed­­). Therefore, instead of having almost a zero value in private decision-making, nature can be recognised as an input in the production process, just like human and physical capital are.

*ICAEW (Institute of Chartered Accountants in England and Wales)

** UK Network of Environmental Economists

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Listening to lots of thoughtful speakers at the World Forum on Natural Capital in Edinburgh, such as the UK’s Natural Capital Committee’s chairman Dieter Helm. The World Bank also highlighting how the emerging data needs to lead to change and the processes for that: such as creating forums in which people can put their problems in context and talk to others facing similar challenges – a bit like weight watchers.

Imagine a world group of countries and corporations concerned about the weight of their impact on nature and the future capacity of natural capital to support our wellbeing – a “weight watchers for nature” if you like. Would the right participants turn up? Like the 1,000 companies that consume 60% of world resources. Peer pressure is needed get them to turn up, based on human stories showing how natural capital is fundamental to individual lives.

How would the meetings work? Participants’ impact would be weighed, their footprint measured, some used to GDP figures might assert that they were in rude health as prosperity was rising. But others might show that when GDP is adjusted to include impacts at natural capital, in some places human wellbeing is not increasing, but declining). In current accounting and GDP figures, nature is usually valued at zero, this is completely wrong. The weight watchers group would soon realise it was using a broken set of scales.

We can’t fix the scales straight away, but we can get them to be more accurate than they are at present. And with better measures, many would see that their weight was not as healthy as they thought, that under their hefty footprint they were crushing nature: cutting of the hand that will feed them and future generations. Some might get depressed and eat more (non-organic, non-fairtrade) chocolate, but some might change. So if the group came back together next year, who would sheepishly sit at the back, having looked under their larger than they realised backsides and found nature crushed and crumpled? And who would be clapped for reducing their weight of impact on nature: The country that had reduced water consumption to stay within the supply available from nature, or the company that has had a net positive impact on biodiversity through its use of land… We are waiting to applaud…

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A shipping lane is being proposed which would go through the Great Barrier Reef so as to improve access to a mining complex.

We must ask some questions that help decide whether the proposed lane should go through the reef or not. Who will benefit or lose out in each scenario, when, and for how long, and by how much?

In economic analysis, as £1 now is worth more than £1 in the future, future costs and benefits are discounted to create a Present Value for each impact, which you can then weigh against each other.  For a project to be recommended on economic analysis grounds only, its benefits over time need to outweigh its costs. In economic terminology Net Present Value (benefits minus costs) > 0 or Benefit Cost Ratio > 1. There are of course many other considerations in making a decision about a project that economic analysis can capture. But let’s see how we can think about this project if we were attempting to do an economic analysis (cost benefit analysis in this case).

Let’s briefly look at the case where the shipping lane does go through the reef. This will not cost the company anything extra than they had already planned. It may, however, have an economic cost to society (a negative externality); reef damage, caused by the ships, will reduce tourism in the area- a huge source of local GDP and employment in Queensland.

We can also look at the case where the shipping lane is diverted to avoid the reef. The tourist numbers and revenues don’t change, but the diversion would cost extra money to the mining and shipping companies in the form of fuel and time.

The comparison of cost of diversion and avoided damage (benefit of diversion) to the reef can conclude:

(a)    if the cost of diverting ships is less than the lost money from tourism and other marketable impacts, the shipping lane should be diverted.

(b)   if the cost of diverting ships outweighs the lost money from tourism and other marketable impacts; the direct lane should go ahead on efficiency grounds.

But hang on a minute, it’s not that simple!

We have to think about the characteristics of the reef that generate values other than the market price and revenues. It’s these social values that are not paid for in a market that are often most important to people and are what make the Great Barrier Reef, well, GREAT.

It’s not that different to what people care about when their house burns down. Do people care about the games console or the expensive pair of new jeans? No, it’s the family photos, the postcards from friends, and the paintings your son made when he was 4 years old that hang in the kitchen.

The same goes for the reef; it’s the bio-diversity, cultural heritage, national pride, the wonder and mystery, and the sheer size of it that are the most ‘valuable’.

These characteristics lead to types of value that cannot be bought, such as: Option value (I may be willing to pay to have the option to see the Reef in the future, even though I have no intention going now); Existence value (I may be willing to pay for the knowledge that the Reef exists without any intention to ever see); and Bequest value (I may be willing to pay so that my descendants can see the Reef).

By including these values, we can build a better understanding of the Total Economic Value of the Reef. ‘But how do you measure them if we can’t buy or sell them?’ I hear you cry. This is where environmental economists earn their money; they realise that these values may be hidden within the price of another good/service that is bought and sold and thus can extract it. Another method is to survey people’s preferences of different scenarios regarding the environmental asset and their associated income in each scenario.

By eliciting these values, we can monetise damage done to the reef that isn’t seen through the market and incorporate it into the decision process.

Accounting for some leeway either side, if the true cost of having a lane directly through the reef i.e. losing all values associated with reef damage, is more than the cost to companies of circumventing the reef, then there is a compelling argument that the direct lane should be shelved.

So what if, even after including these non-marketed values, the damage to the reef is less costly than the cost to the companies of bypassing it?

In reality, we can’t monetise everything and we are never 100% certain what the consequences of reef damage is in the long term; perhaps, with data only available in the future, the costs are found to be so much more than previously thought. In that case, instead of attempting to put a market value on certain attributes, we could just say that, ‘some things are critical for nature and for the people, both now and in the future, and should be protected’.

Yes, economic development may bring us monetary wealth, but perhaps we lose immaterial wealth in the process in terms of wellbeing, morals and principles. Some things are irreplaceable, and should remain that way.

Here is a link to the online petition against the lane.

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This week the UK Natural Capital Committee (more info here) released its first State of Natural Capital report with little fanfare.  It achieved a small amount of press attention, with only four environmental news outlets covering the report (according to Google News). A damp squib in terms of press coverage, which was depressing to those immersed in these concepts and convinced this is the right way forward.

It may be healthy to take a step back and a realistic view on the popularity of Natural Capital as a concept. I used Google Trends to gauge public awareness and interest in the concept.  In order for a fair comparison I compared “Natural Capital” against “Ecosystem Services”  – another environmental economics buzz word.

The Google Trend graph is presented below, with Natural Capital represented in blue and Ecosystem Services  in red:Image

Ecosystem services appears to be getting more ‘heat’ than Natural Capital, despite being around as an idea for less time. Interest in ecosystem services are increasing, while interest in Natural Capital has been flat (or even declining) over the past seven years or so.

Possible reasons for this trend are that ecosystem services as a concept is mutli-disciplinary friendly and less contentious. Consequently it has been adopted across the environmental sector.  Natural Capital, although intertwined with the ideas of ecosystem services, is more difficult to define, and although popular with business may not be popular across the environmental sector.

Perhaps the difference in adoption and interest has its source in concepts themselves. Ecosystem services as a term seeks to capture the benefits flowing from nature without trying to define nature itself. Natural Capital as a concept, shoehorns the matter that makes up nature into a bleak financial framework. For the lay person and those nervous about the ‘commodification’ of nature, Natural Capital is perhaps a step too far.

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