Economists have long touted the importance of quantifying nature’s value — from the natural treatment of pollution by wetlands to the carbon storage capacity of forests — and including it in measures of national wealth.
But so far, achieving an actual measurable value for this “natural capital” has remained elusive, says Eli Fenichel, an assistant professor of bioeconomics and ecosystems management at the Yale School of Forestry & Environmental Studies.
In a new paper, Fenichel and co-author Joshua Abbott of Arizona State University report developing an approach to calculate a fair and consistent price for natural capital stocks that is grounded in the same theory of economic capital that governs the pricing of other capital assets, from stock prices to factories.
The researchers show the importance of valuing natural resources as a capital asset that stores wealth for the long term rather than simply as commodities that are bought and sold in the day-to-day by developing a formula that combines economic with biophysical measurements and quantifies the feedbacks between nature and human behavior.
“Our approach to valuation illustrates the critical importance of understanding the feedbacks between the state of natural capital stocks, human behavior impacting those stocks, and the role of policy in shaping that feedback,” Fenichel said.
Reef fish in Gulf of Mexico provide a useful example. According to the study, live reef fish in the Gulf were worth just over $3 per pound in 2004. Three years later, when policymakers reformed and improved management by introducing a conservation incentive, allowing fishermen to trade the rights to catch a pound of fish — and thus creating a market for the fish as a capital asset — the price per pound jumped to just below $9 per pound.
Overall, their analysis found that the Gulf’s reef fish contributed more than $256 million to the national wealth in 2004 — and perhaps triple that amount by 2007 as a result of the management change. But existing models of national wealth have neglected these contributions, Fenichel said.
The paper was published as the lead article in the inaugural issue of the Journal of the Association of Environmental and Resource Economists.
Although economists have attempted for decades to put a price on nature, earlier models failed to measure the “opportunity cost” of losing future units of natural capital stock: for example, the cost of harvesting a fish today rather than letting it reproduce and harvesting some of its babies later.
“We have learned a lot about natural resource management using models that ask how would we make decisions under idealized market conditions,” Fenichel said. “But those models generate prices based on the assumption that resource use is optimally balanced through time — thus revealing the maximum potential value of a natural asset. Unfortunately, most natural capital or natural stocks are not particularly well managed.”
The new framework moves beyond idealized management by basing prices on policies that are actually in place, inefficient as they may be, to create an accurate picture of a society’s wealth, the authors say. These insights can inform policies that would manage natural resources more sustainably.
“It’s similar to investors being able to see the share price of a firm, assess the capital it holds, and then determine whether they can do a better job managing the company,” said Abbott, an associate professor at ASU’s School of Sustainability. In that scenario, the investor can reorganize the firm, improving management, and enjoy the increase in wealth as the share price increases. “The problem with nature,” he says, “is that we don’t see those share prices for natural assets, which is why an approach like this is needed.”
Fenichel said, “I’d love to see this approach applied to all U.S. fish stocks, forests, groundwater, and other resources. Until we have credible prices for natural assets that policymakers can put into national accounting schemes, the value of these natural assets is treated as if it were ‘zero.’
“And we’re not going to effectively manage those things that matter most to us as long as we’re valuing them as ‘zero.’”
Critically, he added, the paper also calls attention to the importance of interdisciplinary perspective when assessing the value for natural systems. “This paper lays out a strong, conceptual framework for how economists and natural scientists must come together to really understand how we are currently valuing our environment.”
Kevin Dennehy | Eurek Alert!
Savannahs help to slow climate change
22.05.2015 | Max-Planck-Institut für Biogeochemie
Surviving Harsh Environments Becomes a Death-Trap for Specialist Corals
21.05.2015 | University of Southampton
Physicists have developed an innovative method that could enable the efficient use of nanocomponents in electronic circuits. To achieve this, they have developed a layout in which a nanocomponent is connected to two electrical conductors, which uncouple the electrical signal in a highly efficient manner. The scientists at the Department of Physics and the Swiss Nanoscience Institute at the University of Basel have published their results in the scientific journal “Nature Communications” together with their colleagues from ETH Zurich.
Electronic components are becoming smaller and smaller. Components measuring just a few nanometers – the size of around ten atoms – are already being produced...
Development and implementation of an advanced automobile parking navigation platform for parking services
To fulfill the requirements of the industry, PolyU researchers developed the Advanced Automobile Parking Navigation Platform, which includes smart devices,...
The world's first electrical car and passenger ferry powered by batteries has entered service in Norway. The ferry only uses 150 kWh per route, which...
On Tuesday, 19 May 2015 the research icebreaker Polarstern will leave its home port in Bremerhaven, setting a course for the Arctic. Led by Dr Ilka Peeken from the Alfred Wegener Institute, Helmholtz Centre for Polar and Marine Research (AWI) a team of 53 researchers from 11 countries will investigate the effects of climate change in the Arctic, from the surface ice floes down to the seafloor.
RV Polarstern will enter the sea-ice zone north of Spitsbergen. Covering two shallow regions on their way to deeper waters, the scientists on board will focus...
Nanoengineers at the University of California, San Diego developed a gel filled with toxin-absorbing nanosponges that could lead to an effective treatment for skin and wound infections caused by MRSA (methicillin-resistant Staphylococcus aureus), an antibiotic-resistant bacteria. This "nanosponge-hydrogel" minimized the growth of skin lesions on mice infected with MRSA - without the use of antibiotics. The researchers recently published their findings online in Advanced Materials.
To make the nanosponge-hydrogel, the team mixed nanosponges, which are nanoparticles that absorb dangerous toxins produced by MRSA, E. coli and other...
20.05.2015 | Event News
18.05.2015 | Event News
12.05.2015 | Event News
22.05.2015 | Materials Sciences
22.05.2015 | Information Technology
22.05.2015 | Materials Sciences