Journal Article

Taking natural capital seriously

Dieter Helm

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 30, issue 1, pages 109-125
Published in print January 2014 | ISSN: 0266-903X
Published online May 2014 | e-ISSN: 1460-2121 | DOI: https://dx.doi.org/10.1093/oxrep/gru005
Taking natural capital seriously

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  • Environmental Economics
  • Agricultural, Environmental, and Natural Resource Economics
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The paper sets out a pragmatic case for preserving the aggregate level of natural capital, in the face of the declines in biodiversity and the rising population, and major increases in consumption that economic growth will bring in this century. The accounting framework to achieving this objective is considered, focused on the role of asset registers. Particular attention is paid to renewable assets at risk of falling below critical thresholds. These assets are key components of the balance sheet. Capital maintenance expenditures are required to maintain the value of assets intact, since renewable natural assets should not be depreciated, but rather treated as assets in perpetuity. Within the aggregate, substitutions with other forms of capital are permitted, but only if there is compensation for any detriment to natural capital. Offsetting is one mechanism for achieving this compensation. The case for enhancing the aggregate is considered, and the paper shows how a broader national plan over a generation could contribute to the policy objective of leaving the next generation with a richer endowment of natural capital. The policy instruments for embedding natural capital into public policy are reviewed.

Keywords: environmental accounts and accounting; national income and accounting; consumption; saving; wealth; P48; Q00; Q56; E01

Journal Article.  8795 words. 

Subjects: Environmental Economics ; Agricultural, Environmental, and Natural Resource Economics ; Other Economic Systems ; Macroeconomics and Monetary Economics

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