Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Moving ‘Natural Capital’ From Metaphor to Reality

28.05.2014

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.”


Photo courtesy of John Rae

Kevin Dennehy  
203 436-4842

Kevin Dennehy | Eurek Alert!
Further information:
http://environment.yale.edu/news/article/fenichel-moving-natural-capital-from-metaphor-to-reality/

More articles from Ecology, The Environment and Conservation:

nachricht New approach for environmental test on livestock drugs
27.07.2016 | Universität Zürich

nachricht Managing an endangered river across the US-Mexico border
18.07.2016 | International Institute for Applied Systems Analysis (IIASA)

All articles from Ecology, The Environment and Conservation >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Streamlining accelerated computing for industry

PyFR code combines high accuracy with flexibility to resolve unsteady turbulence problems

Scientists and engineers striving to create the next machine-age marvel--whether it be a more aerodynamic rocket, a faster race car, or a higher-efficiency jet...

Im Focus: X-ray optics on a chip

Waveguides are widely used for filtering, confining, guiding, coupling or splitting beams of visible light. However, creating waveguides that could do the same for X-rays has posed tremendous challenges in fabrication, so they are still only in an early stage of development.

In the latest issue of Acta Crystallographica Section A: Foundations and Advances , Sarah Hoffmann-Urlaub and Tim Salditt report the fabrication and testing of...

Im Focus: Piggyback battery for microchips: TU Graz researchers develop new battery concept

Electrochemists at TU Graz have managed to use monocrystalline semiconductor silicon as an active storage electrode in lithium batteries. This enables an integrated power supply to be made for microchips with a rechargeable battery.

Small electrical gadgets, such as mobile phones, tablets or notebooks, are indispensable accompaniments of everyday life. Integrated circuits in the interiors...

Im Focus: UCI physicists confirm possible discovery of fifth force of nature

Light particle could be key to understanding dark matter in universe

Recent findings indicating the possible discovery of a previously unknown subatomic particle may be evidence of a fifth fundamental force of nature, according...

Im Focus: Wi-fi from lasers

White light from lasers demonstrates data speeds of up to 2 GB/s

A nanocrystalline material that rapidly makes white light out of blue light has been developed by KAUST researchers.

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

The energy transition is not possible without Geotechnics

25.08.2016 | Event News

New Ideas for the Shipping Industry

24.08.2016 | Event News

A week of excellence: 22 of the world’s best computer scientists and mathematicians in Heidelberg

12.08.2016 | Event News

 
Latest News

Symmetry crucial for building key biomaterial collagen in the lab

26.08.2016 | Health and Medicine

Volcanic eruption masked acceleration in sea level rise

26.08.2016 | Earth Sciences

Moth takes advantage of defensive compounds in Physalis fruits

26.08.2016 | Life Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>