Abstract
AbstractThis paper develops a methodology for including ecosystem services in a wealth accounting framework. Accounting for ecosystems and their services leads to adjusting net domestic product (NDP) for the direct benefits provided by the current stock of ecosystems but not for their indirect contributions in terms of protecting or supporting economic activity, property and human lives. When ecosystems are irreversibly converted for economic development, NDP must be further modified to reflect any capital revaluation that occurs with the current conversion of ecological capital to other land uses. The risk of collapse also requires adjustments to NDP, as any capital revaluation associated with ecosystem conversion must be adjusted for this risk, and the discounted minimum value of ecosystems associated with collapse must be subtracted from NDP. These various contributions of ecological capital to wealth accounts are illustrated with the example of mangroves in Thailand over the period 1970–2009.
Highlights
There is an emerging consensus among economists and ecologists that ecosystems should be viewed as economic assets that produce a flow of beneficial goods and services over time.1 For example, as Daily et al (2000, 395) state, ‘the world’s ecosystems are capital assets
Ecosystems should be treated like any other form of wealth in the economy, and by accounting for their contribution to current and future economic wellbeing, we would have a better measure of economic progress
As (Dasgupta, 2008, 3) reminds us, ‘ecosystems are capital assets’ that ‘differ from reproducible capital in three ways: (1) depreciation of natural capital is frequently irreversible, (2) except in a very limited sense, it isn’t possible to replace a depleted or degraded ecosystem by a new one, and (3) ecosystems can collapse abruptly, without much prior warning’. These unique features of ecological capital are important considerations in adjusting net domestic product (NDP) to include the various contributions of ecosystem goods and services
Summary
There is an emerging consensus among economists and ecologists that ecosystems should be viewed as economic assets that produce a flow of beneficial goods and services over time. For example, as Daily et al (2000, 395) state, ‘the world’s ecosystems are capital assets. The purpose of the present paper is to suggest such an accounting approach for ecological capital by adopting and extending the inclusive wealth methodology developed by Dasgupta (2009) Such an accounting framework defines the aggregate wealth as the shadow value of the stocks of all the assets of an economy, which should include reproducible, human. The subsequent section shows how the methodology developed by Dasgupta (2009) and Arrow et al (2012) can be extended to include the contributions of ecological capital in accounting for the aggregate wealth of the economy This methodology helps resolve an important concern over ‘double counting’ ecosystem services in NDP.
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