Natural capital
Natural capital refers to the world's ecological system and its natural entities, which are essential for sustaining life and economic activity. This includes nonrenewable resources like oil and minerals, as well as renewable resources such as water, fish, and timber. The concept emphasizes the importance of maintaining ecosystems to ensure they continue to provide vital services, such as pollination and flood control, which are crucial for both environmental health and economic stability.
The term "natural capitalism" highlights a shift towards valuing these natural resources alongside traditional economic factors. Advocates argue for a transformation of established economic models to prioritize the preservation of natural capital, suggesting that doing so can foster a sustainable economy. This perspective is supported by notable figures in ecological economics and has gained traction among some policymakers.
While the transition to recognizing natural capital may pose challenges, especially in regions where traditional capitalism is deeply entrenched, proponents maintain that failure to prioritize these resources could ultimately harm businesses and economies. Efforts to quantify and integrate the value of natural capital into economic assessments are ongoing, with initiatives like the "triple bottom line" approach aiming to balance economic, social, and environmental performance. Organizations like the World Bank are already incorporating natural capital considerations into their economic evaluations, underscoring its growing relevance in contemporary discussions about sustainability and economic health.
On this Page
Subject Terms
Natural capital
Natural capital is of paramount importance for global resources; it dictates that natural resources should be preserved and maintained, rather than destroyed and depleted in the name of consumerism and economic development.
Definition
Natural capital is the total ecological system and all its entities that are not human-made and exist naturally in the world. Examples are rocks, minerals, plants, animals, soil, trees, and water. More specifically, these can be categorized as nonrenewable natural resources, such as oil and minerals, and renewable resources, such as fish, water, and timber. The work of ecosystems must be balanced and maintained in order to continually provide capital. This can happen within a natural system or as a response to human intervention, such as pollination and flood control.
Overview
“Natural capitalism” is a term associated with ecological economists Herman Daly, Robert Costanza, and Lester Brown and was popularized by the II project and entrepreneurs Paul Hawken, Amory Lovins, and L. Hunter Lovins. These ideals are increasingly advocated by politicians such as Al Gore, Barack Obama, and Ralph Nader.
“Capitalism,” broadly defined as a system of economy, and “natural,” pertaining to nature, combine to form the concept of “natural capital” or “natural capitalism.” The concept is multifaceted and best described in the following terms: to progress from valuing human-made manufactured items to valuing the goods and services of nature, including energy, water, waste, production, consumption, trade, and social capital; the maintenance of natural capital ensures a healthy and ensures a sustainable economy in the future. Inherent in the concept is the idea that natural resources should be preserved. Transforming economies would require huge changes to established economic models that have been in place since the Industrial Revolution. Although controversial, the trend would require changes in social, educational, and governmental paradigms. There are currently progressive trends toward this in many countries, including the United States, although changing traditional capitalism in the United States has proven to be difficult because some people believe overhauls in energy and material efficiency will actually reduce economic gains. Advocates of natural capital, however, maintain that it is essential for the health of the population and the environment and thus in the best interest of the global economy to embrace the concepts of natural capitalism.
Further, the dominant argument as to why natural capitalism should prevail over traditional capitalism is that failure to maintain natural resources will result in losses to businesses and economies that support people; natural resources are limited and should be preserved rather than destroyed. In traditional capitalism, goods and services are valued because they are limited; maintaining ecosystems can provide unlimited and expansive capital, as ecosystems can be maintained or destroyed based on human interaction.
Some economists believe natural capitalism assessments influence money supply and inflation, noting that in times of slow economic growth, there is no direct connection between well-being measurements and economic indicators, such as the gross domestic product. Advocates of natural capitalism endorse concepts such as the “triple bottom line” (integrating positive economic, social, and environmental performance), “measuring reform” (for example, soft money and barter systems), and measures of well-being (quality of life). They also propose measuring an ecological, or natural, deficit and social and financial deficits. Plans such as these are difficult to quantify, largely because of the lack of consensus about measuring and auditing the full range of natural capital.
An example of a large organization that utilizes the concept of natural capitalism is the World Bank. It calculates the economic savings rate of a country by taking into account many factors, including its extraction of natural resources and the human and ecological damage caused by carbon dioxide emissions.
Bastien-Olvera, B.A. "Unequal Climate Impacts on Global Values of Natural Capital." Nature, vol. 625, 18 Dec. 2023, pp. 722-727, doi.org/10.1038/s41586-023-06769-z. Accessed 23 Dec. 2024.
"Natural Capital." World Bank Group, 2024, doi.org/10.1038/s41586-023-06769-z. Accessed 23 Dec. 2024.
Zhu, Chunquan and Shivin Kohli. "How to Spot a Nature Crisiswww.weforum.org/stories/2024/06/3-traits-nature-crisis-natural-capital/. Accessed 23 Dec. 2024.