Prof Georgina Mace talks about the Natural Capital approach and how it can be used to inform policy decisions

Last month Georgina Mace and Ian Bateman published an important article in Nature Sustainability proposing a practical framework for using the theory of natural capital in policy decisions.  Here Georgina talks about how it can be used:

What is the natural capital approach to decision making?

• Natural capital describes the stock of natural resources that a society has access to for their basic needs. It includes all living things (plants, animals etc.), air, water, soils and minerals. These combine in various ways to yield a flow of benefit to people, and careful management can enhance the sustainability, quality and quantity of those benefits. Natural capital underpins human health and the economy and supports people’s cultural identity.
• Decision-making for natural capital can be difficult because there are many trade-offs. While some people benefit from decisions to use certain resources, others may then lose out, and options for future generations can be foreclosed by apparently straightforward decisions made today. A simple example is cutting down a forest for timber. The timber trader will make money, but the wider benefits from the forest for recreation, carbon stores and biodiversity are reduced or lost. Very often the private benefits (such as timber) are realised for a small number of people, while the public benefits, for which there is no market, are lost and affect a large number of people.
• The approach to decision-making for natural capital that we describe is intended to lay out the widest range of natural capital assets, benefits and actual or potential beneficiaries, so that the consequences of any decision can be well understood and taken into account.

Why do policy makers need to take natural capital into consideration?

• Increasingly, natural resources, including the availability of land, soil used for agriculture and even access to the sea bed, are under pressure. More people need more resources, and without careful management limited resources will simply go to the highest bidder. Because many natural assets are important public goods, Governments will need to take responsibility for managing the natural capital for the good of all citizens.
• There are some important active examples in the UK. As we leave the EU and therefore the Common Agricultural Policy that has paid farmers for food production, we have the opportunity to restructure payment schemes to farmers and landowners. Defra has stated that the new payments scheme will be based on the principle of public money for public good. Thus, the new payments scheme ( ELMS) will reward farmers for benefits such as improved water quality, carbon storage, recreation and biodiversity conservation on their land.
• There are many applications at smaller scale. The Treasury Green Book guides the evaluation of projects such as new roads and bridges, or housing developments. The  framework we present can be used to ensure the cost-benefit evaluation is really inclusive and comprehensive. Another example at a more local scale concerns development in North Devon. The SWEEP project (University of Exeter) is developing tools, models and applications to protect and preserve the area’s natural capital, and ensure that it will support regional economic growth and wellbeing.

What are the limitations policy makers should be aware of?

• Of course, there are many difficulties in applying these principles in practice.
• The approach relies at least partly on monetisation of the benefits. This can be very difficult, for example, valuing health and wellbeing, wildlife or scenic views is contentious, and some people object in principle to the monetisation of nature. Even the value of goods bought and sold in markets, such as food items,  can be difficult to estimate when they are subject to changing demand and affected by taxes and subsidies. We understand these concerns and we suggest approaches that value the change in wellbeing, the so-called social value, should be used to inform decision-making. We also suggest some approaches for benefits such as biodiversity where even social values are very uncertain.
• We also recognise that there are natural assets that have low social value today, but might become much more important in future. For example, 50 years ago we would have had few concerns about losing carbon from soils and vegetation. The relatively new threat from climate change has now put a high price on carbon. Because we need to be risk averse about the future value of natural capital assets, we recommend that intact ecosystems should be retained where possible, and due consideration always given to erring on the side of caution in any development.
• Despite these difficulties, there is no doubt that undertaking a comprehensive natural capital assessment is always better than not doing it; partial knowledge is better than none, and the process itself, involving a wide range of different stakeholder, is valuable in its own right.

How do policy makers practically apply this approach?

• The assessment can be undertaken at a range of scales, certainly from national scale down to landscape/catchment scale. At very small spatial scales it may be less useful, but we have seen it applied successfully by large landowners.
• To be successful, the process needs to be open and inclusive, involving the widest range of potential beneficiaries, as well as some way of representing future generations.