Natural capital: assets, systems, and policies

Abstract

Natural capital is a concept whose time has come, but is in danger of being greenwashed to suit vested interests, as has happened to sustainability. It is a hard concept based upon assets rather than utility. Natural capital assets provide the foundations for positive freedom, by providing for future generations’ capabilities and choices. This is especially the case for renewable natural capital, which can provide nature’s bounty forever, provided the assets are not driven below critical thresholds. Natural capital assets lend themselves to accounting, to balance sheets, and risk registers, and require capital maintenance. Cost–benefit analysis, being partial and on a project-by-project basis, has a limited role, since the natural environment comes in systems and is less amenable to marginal analysis. Three principles are core to the design of natural capital policies. These are: public goods with public monies; polluter pays; and compensation in the form of net environmental gain.