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Accounting for Nature’s Value

Accounting for Nature’s Value

Full Title: Accounting for Nature's Value
Author(s): Raimundo Atal, Peter Howard, Andrew Stawasz, and Derek Sylvan
Publisher(s): Institute for Policy Integrity
Publication Date: June 1, 2024
Full Text: Download Resource
Description (excerpt):

Economists see ecosystems as “natural capital,” a productive asset that contributes to economic activity—and ultimately well-being—by providing “ecosystem services.” This is akin to how machines and knowledge (produced capital and human capital, respectively) contribute to the production of goods and services of benefit to people, imbuing them with economic value that can be quantified. A forest, for example, provides timber that is used in construction, while also filtering the air we breathe, improving people’s health and productivity. The forest’s contribution is then embedded in the value of the products that use timber as well as in the health and economic impacts associated with cleaner air.

National accounts—which measure a country’s aggregate economic activity, including Gross Domestic Product (GDP)—largely ignore natural capital and ecosystem services. This omission occurs because national accounts heavily rely on market transactions to identify and value economic activity, whereas ecosystems’ contributions occur most commonly outside markets. This leads governments, businesses, and decisionmakers to ignore or misidentify some sources and uses of their income and wealth, skewing their decisionmaking.

Recognizing these shortcomings, many countries, including the United States, are increasingly moving towards Natural Capital Accounting (NCA), a system of measuring natural capital and ecosystem services in a way that allows for their integration with national accounts.

All statements and/or propositions in discussion prompts are meant exclusively to stimulate discussion and do not represent the views of OurEnergyPolicy.org, its Partners, Topic Directors or Experts, nor of any individual or organization. Comments by and opinions of Expert participants are their own.

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