Measuring the value of natural capital can allow governments and business to redefine conservation expenditures as “investments,” said Eli Fenichel
, an assistant professor at the Yale School of Forestry & Environmental Studies and lead author of the study.
“The idea that we can actually measure changes in the value of natural capital is really important,” he said. “It shows that in places like Kansas, where groundwater is a critically important asset, there is a way to measure and keep tabs on these resources as part of a larger portfolio. And in a world where data is more and more available, it should be possible to do this more often. I think that bodes well for guiding policies aimed at maintaining all of society’s wealth.”
The study’s authors say that achieving sustainability requires that wealth — including the value of natural capital, human capital, as well more traditional contributors to wealth — not decline over time. Indeed, such ideas have been advanced by the United Nations
and the World Bank
. However, a problem with measuring such “inclusive” or “comprehensive” wealth has been measuring the prices of natural capital.
In reference to the Kansas example, Fenichel said, “Most people would agree that losing $1.1 million year over year, or losing wealth at rate of about 6.5 percent for 10 years straight, is poor asset management. Though, it might be reasonable to reallocate assets to a different section of your portfolio. So the loss in water wealth might be ok is it were made up for by investing elsewhere, but if that is not the case, then there is need to be more careful about the rate at which capital is drawn down.
“The key is to convert one form of capital to another in order to allow society to continue to consume more in the future. Because that’s what sustainability is really about. It’s about the ability for society to go on producing and consuming in a way that provides at least a constant, or perhaps improving, quality of life.”