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Posts Tagged ‘Natural Capital’

We have been working with several Local Nature Partnerships over the last year or so in two specific areas:

  1. to identify the value of the natural environment in social, environmental and economic terms;and
  2. to make the case to businesses and other organisations for investment in the natural environment within their area.

This natural capital analysis fits with the objective of the Local Nature Partnerships which is to make sure that the value of the natural environment, and the value of the services it provides to the economy and the people who live there, is taken into account in local decisions, for example about planning and development.

This fits within the National Planning Policy Framework which outlines the requirements on local authorities to conserve natural capital. Section 11 of the framework relates to “Conserving and enhancing the natural environment”. This acts as a de facto ‘national guideline’ on how/when the planning system should operate in the context of accounting for natural capital.

In terms of more specific guidelines as to how to value natural capital, there is government guidance for policy and decision makers on using an ecosystems approach and valuing ecosystem services, including:

  1. a) Defra (2015) What nature can do for you. A practical introduction to making the most of natural services, assets and resources in policy and decision making
  2. b) Defra (2007) An introductory guide to valuing ecosystem services
  3. c) Other sources on valuing natural capital (ecosystem services)

In terms of Government requirements on local authorities for the natural environment beyond the NPPF:

  • The Natural Environment and Rural Communities Act 2006 requires all public bodies to consider biodiversity conservation;
  • Some habitats and species are protected under the Habitats Directive through the Conservation of Habitats and Species Regulations 2010 in England; the Birds Directive, through the Conservation of Habitats and Species Regulations 2010, and the Wildlife and Countryside Act 1981 (as amended); and
  • The Town and Country Planning Regulations 2011 require an Environmental Impact Assessment (EIA) to be undertaken in which impacts on natural capital will need to be assessed (Schedule 2 of the Regulations sets out ‘exclusion thresholds’ below which EIA does not need to be considered).

While there is no statutory requirement on local authorities to account for the natural environment in a particular way, the above guidance makes it clear that the natural environment should be given consideration. And the guidance available, including those outlined above, illustrate that there is no lack of available methods.

Our work is trying to make it easier for LNPs and local authorities to use these methods in practice. For some examples of this to date, see our case study write-ups. More will follow soon!

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No I don’t mean 5 a day. Not even 7 a day if you live in Australia. I mean 4 a day.  4 power outages a day. This is what people in Lebanon (and no doubt other countries which I haven’t been to in the last 2 weeks) have been experiencing over the last two months or so. During my stay, I counted a total of 31 power outages in the span of 8 days which equates to an average of around 4 power outages a day.
Having 4 power outages a day makes you obsessed with – wait for it – power outages: When did the power go out? When is it coming back? How long has it been since it went out? Shall we turn the generator on? The big one or the small one? How many A/Cs can we turn on?
Besides becoming positively obsessed with power outages, the whole situation makes you appreciate things that you almost certainly always take for granted. ‘Power’ in most countries is contingent upon the provision of oil and gas – a component of natural capital. There are other components of natural capital, from many different habitats, providing things we need which are much more undervalued or not valued at all such as climate regulation, water regulation and biodiversity (among others). The troubling thing is that there are many alternative sources to generate power or electricity but alternatives to ensure the preservation of climate regulation, water regulation and biodiversity are much more difficult if not arguably impossible to conceive of in this context. Just a thought I had in trying to make the most out of power outage number 12.

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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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Is that blood on my hands? No, it is just blackberry juice staining my skin.

Everybody loves a nice walk in the country, especially when there are some blackberry bushes to pick at (being careful not to pick any within a dog’s reach).

Years ago, along my usual walk, I detoured down a small hidden pathway that I knew nobody else took- as the entrance was covered by stinging nettles. This secret path led to some blackberry bushes. When the season was right, I would take berries home to enjoy, ensuring that I only picked the ripest blackberries off the bushes. This went on for years; I would pick ripe berries and leave those that were not ready to pick for the following evenings.

However, this all changed one evening last year when the nettles covering the entrance were removed.

On my usual detour, I saw, to my horror, other people ‘trespassing’ on my secret path- how dare they?! Not only that, they were plundering berries from my usual stash. By the time I arrived to the bush, I found that there were very few ripe berries to be had.

I gathered the remaining ripe berries and went, not-so merrily, on my way.

The following day, I found there to be no ripe blackberries at all. I picked the berries that were as close to being ripe as possible, however I found that these were not as enjoyable. The following day, there were even fewer of these berries; therefore I picked even less-ripe ones, which were definitely not to my satisfaction. This, unfortunately, has been the case ever since.

The fact is, these bushes have enough berries for me (and even a few others, if I’m not being selfish) to be sustainable and replenish each evening with ripe berries. However, as there is nothing stopping the rest of the public accessing these bushes, my efforts to limit myself to only picking the ripest berries is useless because anybody else can pick the ones that I restrained from taking.

People take unripe berries, just because they know that if they don’t, somebody else will and there won’t be any by the time the blackberries would have been ripe. Therefore, it makes sense to the rest of the public to take them now, even if they are not ripe.

My experience here is a trivial example of the ‘tragedy of the commons’. My once-private supply of blackberries was opened up to the rest of the public, whom gladly took the opportunity to pick the berries I had once enjoyed- leaving the resource depleted. As no-one owns this resource, boundaries or exclusion zones cannot be created…and I (usually) have better things to do than to stand guard counting how many blackberries people take.

Nevertheless, I may not have to go searching for a new secret blackberry bush just yet.

Ostrom’s critique of the subject argues that the tragedy of the commons is less prevalent and less difficult to solve than initially thought when a community owns the resource. This is because communities are able to solve the problem amongst themselves. This is promising as I live in a tight-knit, community-orientated, village where few ‘outsiders’ will come walking through. Therefore, if I cross paths with the other foragers, I shall voice my concerns to them and perhaps we can come to some kind of agreement. I may also bring up my issues to the parish council, which will be able to email information to its mailing list or mention it in the local newsletter; however, this may attract people to the blackberry bushes who previously did not know about them, thus potentially exacerbating the problem. Perhaps, then, I will stick to a good old-fashioned sign tied to the bushes explaining the situation and rely on people’s good nature to pick sustainably.

Despite some potential free-riders, this solution could benefit everyone involved as we will have ripe berries to enjoy once again…but maybe just a few less than we’d ideally like.

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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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It’s been over a month since we have posted here which is too long. But we’ve had some new calves who’ve joined the pasture and lots more work to feed them. In August, we’ll have the London Olympics and holidays (not very long ones in this pasture).  So we’ll be back from September again (or earlier if there is something that really bugs us). In the meantime, here are a few summer reads for you:

  • Speaking of the Olympics, if you’re more technically minded you may be interested in this Stated Preference Analysis for an Impact Study on the Olympic Games carried out by eftec in 2004 as part of the London’s (obviously successful) bid to host this year’s Olympics. Even if you’re not technically minded, you might be interested enough to glance at the Executive Summary which details the UK population’s valuation of the intangible benefits and costs of the games.
  • If you were in Southern Ontario, you could have found out the value of the nature around you. We haven’t checked this in detail but we have rated it “pretty cool” in our professional opinion. This is exactly the kind of work we do and of course there are the obvious caveats (the app is unlikely to be able to generate values specifically tailored to specific areas due to the unique properties and relationships humans have with each area) but caveats aside, the app will be able to give people a rough idea of the value of their local environment and perhaps we need to learn from this to make our work more fun!
  • Although we’ve been quiet The Economist has managed some chatter for us – they’ve covered ecosystem services in their Science pages. Let’s hope that after the summer we’ll make it to the main pages, and preferably with better referencing than the 1997 Costanza paper (famously quoted as being “a serious underestimate of infinity”).
  • Unfortunately, it’s not all been good news…. following 2 years of very little rain we’ve had a depressingly (and record-breaking) wet ‘summer’ in London until about three days ago and as if that’s not bad enough, it looks like it may be the early signs of a changing climate, which is making extreme weather events more likely.

With such a wide selection we hope you’ve found something that interests you in our absence, but of course if you really miss us or if you’re inspired to comment on any of the above topics you’re always welcome to Moo with us here!

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Limu and Betsy attended the Rio+20 Business Summit organised by the Aldersgate Group which took place last night. Thoughts from both are below:

Limu:

A fantastic Aldersgate Group event was held on Wednesday evening, featuring a ‘dragons den’ of business ideas for Rio+20. The panel included Secretary of State for the Environment Caroline Spelman, who gave creditably informed responses on the ideas proposed by nine business representatives.

Global food security ‘won’ the vote on the best idea, but the most interesting fact of the evening came from hosts PWC. Giving an insight into their ‘pulse survey’ of global CEOs pre-Rio, they said 70% were ready to substantially increase their sustainability commitments if decisions in Rio led the way. The business world is getting ready to act on sustainability, politicians in Rio need to be able to trust them.

Betsy:

The Rio+20 Business Summit was an interesting setup whereby the representatives of 9 companies had 100 seconds each to sell to the audience and a panel of experts (a Dragon’s Den including Caroline Spelman, our Secretary of State for the Environment) their ‘business pitches’ for how businesses will be involved in obtaining goals that will come out of Rio+20 (the United Nations Conference on Sustainable Development taking place June 20-22 in Rio de Janeiro, marking the 20th anniversary of the 1992 United Nations Conference on Environment and Development). At the end of the night the audience had to vote and prioritise each of the pitches.

Rio+20 has two main themes: 1) a green economy in the context of sustainable development poverty eradication; and 2) the institutional framework for sustainable development. The business pitches we heard last night were for ideas that businesses hoped would make their way into the institutional framework for sustainable development.

To anybody interested in the environment these ideas weren’t new, but it was interesting to see which businesses were focusing on which ideas. The ones put forward were:

1) Natural Capital – Value and maintain the Earth’s natural capital with a commitment to no net loss, holistic policy frameworks and national action plans (B&Q, Matthew Sexton)

2) Sustainable Development Goals – Governments must work with business to secure a commitment to Sustainable Development Goals (Unilever, Karen Hamilton)

3) Circular Economy – Programmes on sustainable consumption and production should provide new leadership on circular economy (Siemens, Ian Bowman)

4) Sustainability Reporting – An international convention to require companies, on a ‘comply or explain’ basis, to integrate sustainability issues in their Annual Report and Accounts (Aviva Investors, Steve Waygood)

5) Information Technology – We need to harness the power of ICT to turn data produced across various systems like buildings, transportation, energy grids, water and air quality, ocean health, corp yields, human health implications of pollution – into actionable solutions and results (Microsoft, Josh Henretig)

6) Transport Strategy – A clear strategy for access to sustainable energy solutions which recognises that transport is essential for linking societies and markets, within and between developed and developing countries (Virgin Atlantic, Sian Foster)

7) Food Security – Governments must place the challenge of feeding over 9 billion people on a sustainable, healthy and affordable diet, top of the agenda (ASDA, Paul Kelly)

8) Energy Efficiency – Governments need a longer-term financial view when investing in green technologies and to lead by example – committing to making public sector assets energy efficient. (Philips, Jayson Otke)

9) Water Security – Governments should commit to working in partnership with the private sector and others to respect, protect and fulfil the right to water and sanitation by 2020 in a way that is compatible with climate and food security goals (PepsiCo, Andrew Slight)

As you can see, many of these 9 pitches are in fact interconnected. For example, including natural capital into national and business accounts will help achieve sustainable development goals. Sustainable development goals can also be helped along by the three enabling pitches (4-6). Food and Water security must go hand-in-hand. So it was quite difficult at the end of the evening, to separate these out when it came to the audience voting (by ranking the pitches for which should be the highest priority).

We did anyway and the results were interesting – I unfortunately wasn’t able to get them all but I’m sure we will see some of the results from Aldersgate soon. I did catch the highest and second highest ranking pitches though – and they were Food Security and Natural Capital respectively. It is refreshing to see Natural Capital being given such a high ranking in priorities, particularly once we saw the breakdown. More of the audience from business had voted for Food Security while more of the audience from NGOs had voted for Natural Capital!

Of course it is a bit unnatural to be comparing these ideas against each other when many go hand in hand, and they address entirely different ways of how we could be working towards sustainable development. But I still have those days where I have to explain the practicalities of environmental economics to environmentalists who vehemently disagree with the idea (and yes I encountered a couple in networking after!) and we even had that sadly misinformed article from George Monbiot, so it is good to see that the NGOs understand us and are on our side. Natural Capital got a large chunk of the business vote too – just not as much as Food Security did. And again, these two ideas are hardly comparable – they can both be implemented and inform each other. But at the end of the day it is heartening to know that environmental economics is going more mainstream and an increasing amount of people from all spectrums of life are engaged with how environmental economic concepts can help them pave the way to sustainable development.

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