21 May 2021
Dr William Stiles: IBERS, Aberystwyth University.
Take home messages:
- Natural capital is the part of nature that delivers goods and services of value to human societies.
- Increasingly, the value of natural capital is being incorporated into value assessments of land management production systems to adequately quantify the benefits derived.
- This approach can allow features such as carbon storage potential to be recognised and valued.
Natural capital assets are the features of nature from which human population derive benefit or value. This can include ecosystems, species, soils, minerals, freshwater, and the air. From certain natural capital assets, goods and services are provided by natural processes and as a consequence of ecosystem function. These are referred to as ecosystem services.
Ecosystem services are of significant importance to human societies, as the benefits derived from certain natural processes can be substantial - and free. Yet, this can often result in such goods and services being taken for granted, or simply not recognised as of value, which can lead to loss of service where inadequate or inappropriate land management is undertaken.
Increasingly, the value derived from natural capital assets, and the ecosystem services they provide, is being considered in value assessments. This can include the potential for carbon storage, pollination, water purification and others. Recognising the need to protect these services has resulted in the development of natural capital accounting as a concept, to fully value the contribution of natural processes to human health and wellbeing. This approach can offer a more complete picture of the total worth of resources available from landscapes and ecosystems, recognising these features as ‘assets’ and valuing them accordingly.
Where such a change in philosophy is implemented it can result in landscape management agendas which focus beyond food and fibre production, justifying management which maintains and enhances the benefits we derive from natural capital. This is an essential change for the land management sector for the future, as the need to provide nature-based solutions to challenges such as climate and environmental change may potentially conflict with traditional production. In this context, natural capital accounting may allow all the benefits to society derived from land management activities to be appropriately recognised.
Adequately valuing the components of ecosystems from which we derive benefits means that management can be tailored to enhance those services, or at the very least, tailored to avoid damage or impact. As such, this offers a system where land management actions which improve or retain natural capital assets can be compensated accordingly. Recognising the value of natural capital assets can also allow investment to be made for the purposes of protection or restoration, which could potentially offer a vehicle for investment from the private sector.
Why assess natural capital?
Understanding natural capital, both in terms of concept and potential actions, is essential for all land-management businesses and organisations. Understanding the principles of natural capital can allow land managers to make informed decisions based on a fuller comprehension of total system value, and the consequences, direc and indirect, to natural capital stock of certain management actions.
In this context, the principles of natural capital can help visualise how to meet the challenges of the modern age, such as managing climate and environmental change. Using natural systems and processes to deliver climate change mitigation goals, such as carbon reductions, is vastly more cost effective than utilising engineered solutions. When management is implemented appropriately it is also possible to enhance natural capital asset stock and ecosystem service provision, increasing intrinsic value. Such increases in value may offer the necessary incentive or motivation for engaging with climate-friendly land management approaches. For instance, in terms of forestry, existing stocks of bio carbon should be considered more important than the creation of new stocks. Thus, recognising and quantifying the value of the existing tree stock beyond its timber value, by articulating the value of retaining the living trees in situ, could help shape forestry agendas and policy in future.
The natural capital approach
Currently, there is no one system for the quantification or assessment of natural capital, but standardised approaches are beginning to emerge. Tools such as the UK natural capital accounts offer an insight into the UK value for ecosystem services based on accounting methods, but this is still recognised to be an evolving system.
At the heart of any approach is an understanding of the science of ecosystem services, of the biological and physical factors which govern ecosystem service provision and delivery, and which can limit their potential. Understanding cause and effect in this way can allow value in monetary terms to be recognised. For example, if carbon capture and sequestration as an action has a monetary value, then the role of woodland creation in this process can have its value recognised. This could allow the benefit of this action to be weighed against the benefit of other products from land management, such as food or fibre production.
Economic value of such services will vary between services. The value of, say, recreation potential will differ to that of carbon storage, or food and fibre production. Nevertheless, each service does provide benefit. Therefore the difference in value will be divined subject to what people are willing to pay to enhance a feature, or to avoid its loss. In this sense, values can either be positive (the benefit of ecosystem service provision) or negative (the cost of environmental damage or pollution) depending on context.
Challenges and limitations of using the natural capital approach
Much uncertainty exists when using non-market valuation evidence, as this evidence is typically derived from principle and modelling rather than historical data. Where uncertainties or methodological limitations are encountered, these should be presented clearly to allow consideration and scrutiny. The act of valuation may also potentially offer unfair comparisons in terms of the value of an ecosystem service compared to the value of an intervention (such as an infrastructure development). In its simplest sense, the loss of the natural capital may be economically justifiable, but the wider effects to associated natural systems, and potentially to wider society, may mean greater environmental loss than that which has been valued.
In a similar vein, some caution is needed with regard to the interpretation of the insight offered by natural capital valuation. It is entirely possible that focussing on single-issue elements within the wider framework of natural capital could result in scenarios where management focusses on one factor to the detriment of others in the system. A key lesson to take from this principle is the benefit of management that promotes ecosystem function and resilience. Natural capital assets will grow where management allows for ecosystem function. Any management system that imposes constraint on ecosystem processes to augment a singular element, can reduce the overall value and quality of the wider ecosystem, which can lead to degradation and loss of overall service provision.
An example of this could be the expansion of tree cover in the UK for the purposes of carbon sequestration. As a nation, we need to increase tree cover to mitigate the effects of climate change. However, when this concept is distilled down to its most basic principle, the argument could be made for monocultural plantations of the fastest growing tree species. Overall this could promote a disadvantageous strategy, as such an approach would neglect to create resilient ecosystems with all the wider benefits that provides. In other words: yes it would sequester carbon, no it wouldn’t promote ecosystem function, soil health, or general biodiversity. There is also an argument that such an approach would be inherently short-termist as the potential life of a monoculture stand of conifers compared to a functioning mixed woodland is considerably shorter. Thus, limiting the potential for carbon storage over the longer term.
There are also scenarios where tree planting could do more harm than good, such as where soils are primarily organic. In such instances, the potential carbon loss from soil would outweigh the potential sequestration benefits. Similarly, if the push for tree cover expansion is to the detriment of other priority habitat, such as species rich grassland, heath, or peatland environments, then this may adversely influence the beneficial services derived from these ecosystems.
Natural capital is not an environmental assessment, it is not a system which would be employed to show the adverse effects of actions such as development. Instead, this approach allows the full value of natural assets to be recognised in order to preserve and enhance those stocks, for the benefit of the landscape and land management system within which these assets exist.
Applying the principles of natural capital can offer a system to value all of the components of a landscape, to ensure the benefits derived from natural process are adequately valued, or at the least, not entirely overlooked. This could also offer a system to appropriately remunerate land managers for all the benefits derived from their activities, beyond the commodities produced which are supported by the market. This could help to ensure they are appropriately incentivised to enhance ecosystem service provision in the future.
Economic values could be considered subjective and entirely reflective of the preferences of humans, which can be driven from various factors including culture, tradition, income, and others. Yet, even when values are subjective, their measurement is typically not. Thus, this approach still represents a method to gauge environmental change, and to recognise the effect and influence of land management actions, on the components of natural systems from which human societies derive benefit.