Natural Capital

In reviewing the responses to our reader survey, it became immediately clear that natural capital is a subject about which you have varying and often passionate opinions. As always, we thank you for sharing these opinions with Leaf Litter.

While 83% of you believe that mainstream economics have contributed to an unsustainable way of life, it is unclear whether or not you see the incorporation of natural capital as a potential solution. While most of you (84%) say you buy into the concept of natural capital, you seem to do so in varying degrees – and in some cases, with reluctance. Here’s what you had to say:

• I buy into it only because economics is the only language many power holders in our society understand. I resent that we must use economic arguments to get people to acknowledge the importance of our home. In essence, it is buying into a model that is responsible for habitat destruction.
• It makes sense to conserve and take stock of preserving what we have and “spending” it frugally.
• I’m hesitant since it sounds like an economical concept. As a sociologist, I tend to address ecosystem services from an esthetic and ethical point of view. However, I can understand the utility of “measuring” or “evaluating” ecosystem services. The concept of natural capital is a useful way to think about the services nature provides to us.
• Measurable variables are costs/expenses that have models in the clean air act, clean water act, anti-smoking campaigns, fuel costs for coal vs. biomass, etc. I’m not an economist but I think that monetary values can be developed and assigned. Another example is the insurance companies that lobbied for deer management in PA. Those car vs. deer accident costs can be evaluated for a natural benefit cost, as can be other things.
• Yes, I think the products of natural systems have value that could be measured and applied in cost/benefit analysis.
• “Natural capital” (“value” of “nature”) is not a concept, but a reality. Our human-centered view of nature and our over-arching market-based social/cultural understanding of everything has no space for anything not condensable to (agreed-upon) market values. Any attempt to do it will suffice only until tangible value (market / money / profit) gets in the way. Other cultures include value of nature inherently; “western” (Judeo-Christian) culture is (still) burdened by its strict separation of “nature” and “man.”
• Yes/no. It has pragmatic value but, as an instrumental utilitarian argument, it runs counter to my ethical paradigm. The binary nature of this survey limits a full examination of the issue. A strong argument can be made that by attributing economic “value” to an organism or system you are in fact “devaluing” it. Utilitarian value is a form of preference ranking and some things should not be subject to a cost/benefit analysis. This issue goes to the core of how we define ourselves. “Natural capital”, while a useful tool for combating non-sustainable liquidation of natural systems fails to address the core issue of respecting the inherent or “intrinsic” value of non-human entities.

Those of you who do not buy into the idea of assigning commercial value to nature’s “goods and services” were very clear about your opposition. Below are some of the responses that best describe this resistance:

• Qualified no – issue is measurability and credibility (acceptance) of the measure. Typically natural capitol metrics tend to measure cost savings rather than significant capital generation.
• Economic values are easily manipulated. Corps of Engineers are experts at this. Numerous studies have tried to put values on indicators such as these. I’ve yet to see one without glaring holes in their model, assumptions, or basis.
• I’m just not sure nature can or should be “dissected” in this way. I can see some advantages to incorporating natural values into the marketplace, yes, but I see more drawbacks in the sense that once “valued” in a commercial sense, they can also be “bought” or “traded” away without any moral/ethical implications, just like other goods and services. I just don’t think clean air, water, land, trees, animals, etc. are just like other “goods & services.”
• I believe that there is a value to ecological services, but after much trial and error, we have yet to find a way to translate this value into the economic system under which almost all business decisions are made. In other words, I believe that our current economic model does not and will not accept values that cannot be traded. To me, this seems like an insurmountable obstacle to getting values for non-tangible services.

46% of you say that your colleagues, clients and/or partners do not buy into the concept of natural capital. When asked why not, 73% of you cited a lack of understanding of the concept and an unwillingness or inability to think about economics and the environment in a new way. In your words:

• They don’t know enough about it. Their frame of reference is based on the economic models of the 1st Industrial Revolution. In fact, our entire economy is based on that, so it’s pretty against-the-grain.
• Long standing paradigms are hard to change.
• [Natural capital is] not tied now to the way we currently think. A conceptual bridge is needed.

16% of you believe your colleagues and clients like the idea of natural capital, but consider it too conceptual to apply to actual work. Here’s how you describe this challenge:

• Generally, I think they might believe in the concept but do not put it into action.
• There is buy-in; however, for many there is an unknown as to how to incorporate the concept into daily living.
• It’s too intangible.
• Still too conceptual for most.

According to 8% of you, questionable valuation prevents your colleagues and clients from buying into the concept of natural capital:

• It’s a great idea. You just can’t get agreement on values. Therefore, you’re not likely to get buy in.
• They do not believe it can be measured objectively.
• Too subjective to quantify.

3% of you say your colleagues and clients “don’t like putting a value on the environment on principle. Despite these barriers to the acceptance and use of natural capital, 44% of you say you have incorporated it into your work. When we asked what you used as ecological health indicators, many of you responded in general terms, such as “biodiversity” and “sustainability.” Here are some other responses:

• carbon cycle, water, air, plant/animal habitat integrity,
• Diatoms
• nutrient levels
• forest composition and structure
• I work on restoration of freshwater aquatic habitat. We try to establish channel morphology and riparian habitat that support a diverse plant and animal community that is appropriate to the setting, and that requires a minimum of ongoing human intervention.
• Total number of insects, trees, grasses, and other typical indicator species and habitat that go with them.
• surface water runoff energy consumption
• Forest acres
• I work for a research branch of the US Forest Service that works to calculate the financial benefits of street trees, mainly in terms of air quality improvement, stormwater interception, carbon dioxide sequestration, energy use reduction and aesthetic improvement
• Sediment, toxic substances, water and air quality, habitat lost, invasive species, etc.
• We have tried to assign values to increasing fishable miles to stream, flood control from an acre of wetland, and increase value of property due to aesthetic improvements.
• In the context of existing conditions (not the memory of how things were before) what re-growth of desired vegetation, and what population increase of desired wildlife is occurring in a project area? Is it self-sustaining and resilient or is maintenance needed?
• human productivity of a certain scale can be indicative of minimal use of technology whose use can contribute to ecological degradation
• water quality and quantity, severe weather, coastal erosion and subsidence, trees
• Green surface area, improved water quality and quantity, reduced erosion and improved biodiversity
• nearby pristine veld with good display of plants & animals (small creatures inc. insects)
• I come from the wildlife management arena: traditionally we have been able to generate an estimate of monetary value/economic impact from catch/effort and interviewing consumers regarding the amount of money they spend to utilize the resource in question. Unfortunately, as participants with other government agencies it is more difficult to assign worth to natural treatment of water quality and air quality
• Population model predicted level of population needed for survival, levels at which recreational fishing is allowable. Then values were different depending on whether each fish was integral to survival of species or if each fish had marginal recreational value.
• improvement of the condition for listed species to reduce regulatory obligations
• floristics analysis
• stream functions; area of wetland and wetland quality; rare species; ground and surface water quality and quantity;
• I was coauthor of a book on Biology of Peatlands. I discuss the question of use, management and conservation of peatlands in Chapter 13.
• Microbial Community characteristics, energy and material flows, resistance and resilience
• at home, not really at work. Recently on Governor’s Task Force on Landfill Alternatives, I argued for composting vs. waste to energy and the resistance was unbelievably strong. It made me realize that a lot of work needs to be done to get people to even begin to grasp the concepts.
• We’re the state water pollution control agency – so the extent to which waters support uses like drinking, swimming, aquatic life is our measure.
• Water quality, timing and delivery of water, and key index species
• In my profession, there is a concept called No Adverse Impact (see the Association of State Floodplain Managers web site — floods.org), whereby, there are different levels to view development and planning concepts in relationship to natural functions.

While there was some overlap in your responses, the lack of a universally accepted set of ecological health indicators to use in determining the value of a project’s natural capital was evident. One reader even questioned the usefulness of indicators he/she uses:

• I have used the concept in the creation of wetland and stream mitigation projects. Ecological health indicators have been measured by a variety of ecological “indices”) e.g., IBI, ICI, QHEI indices for aquatic life, various wetland “value” indices, etc. To me, they are all somewhat “smoke and mirrors” methods to disguise something inherently subjective and intuitive in terms of value as an “objective” number. I don’t much care for any of them.

When we asked what you used to assign value to the goods and services provided by nature, we received a variety of answers, indicating another challenge for which there is no universally accepted answer. Here are some of your responses:

• catch per unit effort; estimates of money spent to use resource (expressed as generated dollars; probably not accurate since this is a redistribution of wealth rather than actual generation of wealth); example- would need to survey how much money consumers divert from grocery stores to fuel and gear costs
• Valuations of goods and services used in recreation. Survey- based contingent valuations- value of species survival and reproduction. Value of survival different from recreational value.
• timber and land values, wildlife values, recreation etc on a forested versus non-forested property
• Where we have substituted natural capital for physical capital – the benefit gained by not spending money – not accurate but a start.
• base value tied to fees-in-lieu for N and P removal, then goes up or down due to other market factors
• The costs we pay to implement the projects are an indicator of value. In other cases, (and far less directly since it’s driven by regulatory compliance), the value is more likely expressed as prices other organizations pay us for wetland mitigation sites, for instance.
• no formal valuation was done; it was just implementation of best practices
• Stormwater Management
• I buy into the article by Costanza et. al. in “Nature” (1999? or so) that sets a baseline value for the entire planet’s ecosystem services. But I don’t know of any models that exist to measure locally. Seems like they would be subjective at best. (But important to try?)
• Land value in relation to traditional infrastructure applications.
• Existing studies by economic researchers and work of internal resource economist.
• Have not done this, but would suggest starting with the cost of services wholly provided by human engineered means.
• resources that are used to generate the electricity necessary to power technology that people use to be productive; when people use technology that works *for* them, they can be more productive and, as such, spend less time using that technology, effectively using less energy; said *working* technology may also use less energy than competing products
• trees have an economic value in terms of dollars saved by helping minimize stormwater runoff and thus lessening the need for capital infrastructure (public works drainage projects) as an example …… beaches can accrete as well as erode, adding value to property, parks, beaches GIS can link resources and improvements to values
• ‘rescue plants’ & ‘rescue animals’
• At the Anacostia Watershed Society, we say to school kids and community groups participating in wetland restoration outings: restored tidal wetlands will clean the river, and help create more seafood (crabs, fish) from our great, watery supermarket–the Chesapeake Bay.
• existing environmental credit markets
• traditional population metrics (i.e. numbers of fish); no economic analysis
• Certified arborists tree replacement values.
• most were ranked rather than assigned values to compare function
• soil as growing medium, fertilizer for garden from compost made from organic materials from my home and yard, increased moisture retention and better tilth of soil from increased organic matter, honeybees for pollination as well as honey & wax (I have 7 hives and also keep Japanese Hornfaced Bees for pollination) birds, preying mantis, ladybugs and other beneficials for pest control, deciduous trees for cooling the house in summer, small pond in yard breeds dragonflies which also prey on mosquitoes and other insects, solar outdoor lights

54% of those of you who have applied natural capital to your work said that you did not assign value to any intangible “quality of life” factors (many of you stated this was because you did not know how). One reader offered a suggestion on how to do this, though:

• Haven’t done this, but would start by finding out the dollars spent for recreation, tourism, and other outdoor activities, then developing a factor that can be applied to the cost of recreating naturally occurring goods and services.

Those of you who did assign value to “quality of life” factors described your methods:

• We assign an “aesthetic and other” benefit to street trees based on an increase in property value due to the presence of trees.
• So far, I have used studies by people like Heschong-Mahone to quantify employee absenteeism, retention, student learning and test scores, etc. There are a lot of anecdotal stories and papers. RMI also has a good paper, “Greening the Building and the Bottom Line.”
• We used (I think) some different methods that looked at people’s willingness to pay for fishing, nice views, less threat from flooding. We may have used other methods as well, but I’m not versed in all the details.
• people are happier when they feel productive and they are productive when they use technology that seems to work and that tends not to break nor work against them
• just went with my gut and trusted ‘my higher self’ knew what it was doing!
• Contingent valuations based on distinctions between people who would use and not use resource. Further subsets of users based on extent and type. Also compared against cost of restoration/protection project minus other benefits and asked if this was worth remaining cost.
• product of public consultation
• Local costs & flooding mitigation

Some of you fellow Leaf Litter readers have actually performed or contributed to research on how ecological functions contribute to economic activity. Check out the following links and notes:

• Ecosystem Services Valuation of Green Infrastructure
• Center for Urban Forest Research
• I don’t have web links, but please check out the work of Dennis King and Lisa Wainger at King and Associates.
• The National Audubon Society has some data on the amount of money that is spent on birding; most state fish and game departments also have data on the dollars spent for various natural/wildland activities. Additionally, many areas in the arid southwest are doing “restoration” projects along rivers and other waterways to put back “functions” that have been destroyed. What would be the cost to encapsulate and indefinitely store a pound of carbon, for example? How many pounds of carbon does a healthy forest store virtually for free? (If the carbon was not stored, what would be the cost of having it in the atmosphere, for example?)
• I wrote an e-presentation for Rand Corporation, who was doing a piece on natural capital for the Council on Environmental Quality. It generally discussed aspects that might be considered natural capital — water, pollination, air, soil.
• no link — but I work natural disasters — one example is the value of the “viewscape” lost in forest fires, another would be the economic impact of beach loss on resort communities, another would be the impact of drought on farming economies … and the rest of the economy … the list is endless
• We are tinkering at the edge – trying to rehabilitate farmland with a blend of concepts – cell grazing – (well documented by Ranching for Profit in the US) and Natural Sequence Farming – [http://www.naturalsequencefarming.com/]
• Masters’ Thesis: Feasibility of Dam Decommissioning as a Management Option, Matilija Dam, Ventura California. Available from University of California, Santa Barbara.
• Scenic America [http://www.scenic.org] did study in 1993 on value of parks.
• contributed to understanding how land use affects flooding and hence, flood damages
• 20 plus years ago I worked with a professor and performed an input-output analysis associated with oil production in the Gulf off Florida’s coast; whereby, ecological returns and support to local communities and economies were analyzed with respect to businesses effected by either having and preserving quality natural systems (sea grass beds) with those generated through the extraction and refinement of oil. The outcome is natural systems touch more businesses, generate more income, and generate more flow of income through more avenues (effects more segments of communities) — some areas were shown not to have great salaries however.

97% of you believe that the value of natural capital should be considered in cost/benefit analyses for land development, public works, ecological restoration, conservation planning and regenerative design projects. Yet a smaller percentage of you (82%) say you would be willing to pay more for consumer goods and services to compensate for the depletion of natural capital. Those of you who would be willing to pay more had this to say:

• You bet. Because our global environmental issues are going to drastically change in the next 10-15 years. It’s like a tax that we’ve ignored. My hope is that there’ll be a hefty tax on gasoline to go towards a failing infrastructure.
• A lot depends on how truly that value would be calculated. If the extra payments were used effectively to strengthen the natural life-support system, that would be important to me. How do we tell the difference between essential and non-essential natural capital? How would the proposed system affect the development of a world-wide system of just societies with equitable distribution of resources?
• Companies are in business to make money – if they see that they can make money by protecting the environment, they will be more likely to adopt sustainable practices.
• Yes, but technically it should not cost more but save us tenfold if the whole process was organic. Waste is what we pay for now.
• While I may be willing to pay more for goods and services (rather, the actual value, not the subsidized value), most of our society is not willing to do so. I vote with my dollars, but many people see voting as only something they do every four years. I vote every day.
• I strongly believe that we cannot afford anymore depletion of natural capital.
• Without including natural resources in the cost of things the true cost is underestimated. When this occurs the true cost may become much more expensive as money must be spent to fix a problem that could have been prevented if the natural resources were preserved.
• As an economic means to control consumption. More specifically, however, I am willing to spend more on revamping education systems to teach concepts of natural capitalism.
• Consumer goods and services should not deplete natural capital. Live off the interest or do without.
• No because this depletion is already built into the economic marketplace, i.e., supply and demand. A resource in demand but short in supply already rises in price. Examples include metals and petroleum.
• …but, I have a good job and disposable income, unlike many Americans and others around the world. In addition, I will only have the choice to spend more if products and services that factor in natural capital costs are readily available. Right now, that’s not the case for most things I buy. And again, I’m not an average person–I have a good job in the environmental field.
• I think most of the public is ready to do this now also, providing a sound-bite approach is taken to educate them on why they need to pay more. It might need a two-by-four: Our species will die out in X years if a-b-c isn’t done within Y years. It will cost $THIS MUCH per person to make this happen.
• The costs of all resources and services whose use led to the creation of another product or service should be built into the value of the latter. Now, where can I find the data describing this? What is the impact of standard goods and service categories on natural capital?
• However, I don’t believe that paying money is the answer – it just continues the diminished responsibility so many of us feel.
• Our taxes in Prince George’s County [MD] already deduct $80/year for stormwater mitigation. Next step: moving our society toward steeper environmental tax/revenue generation for bad behavior—like burning gasoline. Reward good behavior (like riding your bike to work). And tax bad behavior (owning and operating SUVs).
• If the additional monies weren’t eaten up by administrative fees and costs.
• I believe that there is a way to use resources of nature in a respectful and sustainable way. Do I need to spend more money to have a way of living that respects resources of nature? To think so is to address things from an economical point of view. Building another type of society can also rely on new ethical and social standards. Thank you for this survey!
• It would reflect the “true” cost, and eventually lead to restoration of the original resource
• I firmly believe that if taxes took into account impacts to natural resources, a dynamic balance between growth and conservation would be reached.
• A qualified yes- I am in an income bracket where I have the economic luxury to make purchases guided by philosophical choices. I already pay more for goods and services through my taxes and resulting subsidies that do not consider the depletion of natural capital. I would prefer that people understood the true cost of goods. Then natural capital may take on more importance.
• Up to 10% more, which is probably not enough.
• I’ve often said, maybe after listening to Jeremy Rifkin in college, that we aren’t really paying the true cost of certain things in society. Like a cheese doodle or a toasted bagel with lox cream cheese. I like prices to reflect natural resource replacement costs b/c then I would consume less and so would my neighbors.
• If the quality of the goods was high, I would be willing to pay more.
• I would only be willing to pay a marginal bit more. Efficiencies would need to be gained in the mgt. of natural capital before I would be willing as a consumer to cover the full cost.

Those of you who replied that you are not willing to pay more for consumer goods and services to compensate for the depletion of natural capital offered some interesting comments:

• Using economics to justify sustaining ecosystems is shortsighted. Sustaining ecosystems should be paramount (we need it to live), and we should not have to provide an economic argument to say no to over development
• I think we do need to internalize the costs of environmental degradation so that there is an economic incentive to use renewable resources. There should also be a disincentive to consume limited resources.
• Look at the organic food industry. It has grown at least 20% per year for the last several years. So has the solar panel industry. Both of these address natural capital, indirectly and directly. It’s important to keep in mind that people make purchasing choices for a cluster of reasons, environmental benefits being just one. It would probably be a mistake (so far) to market just the natural capital aspects of a product or service. That would narrow the potential market too much.
• We should work hard to NOT deplete natural capital. So we sure as hell shouldn’t be paying MORE to compensate. As for valuation: firm guidelines would need to be in place for projects to consider it as a parameter. Otherwise, it would be a free-for-all.
• Not if they are continuing to be depleted. I would pay more for goods and services that were demonstrated to be regenerative.
• I already pay for organics but to pay for government greed that destroys natural capital is another thing.
• Pay more to avoid depletion of natural capital. These assessments should be cradle to grave where producers should be responsible for disposal. More research is required to establish thresholds of function for natural areas.
• Not if the additional cost is being sent to the government.
• I think it is more acceptable to pay for incorporating ecologically sound practices instead of paying for the depletion of a resource.
• We all pay more when we buy a house with associated infrastructure that required CWA 404/401 compliance. When you folks in MD buy a house, the cost of forest conservation act compliance is passed on in the price of the house. When you buy paper that originated as a stand of SYP, the price of RCW conservation on that paper company’s land is rolled in to the price you pay for their paper. Most goods and services are somehow impacted by environmental regulations, even if it’s just the cost of gasoline or the electric bill. The cost of regulatory compliance is always passed on to the consumer. While regulatory programs and permitting fees do not truly compensate anyone for resource depletion it will be very difficult to add more environmental costs to goods and services, in whatever form, without reforming the onerous regulations now in place.