The Natural Capital Framework

1. The Natural Capital Framework Presentation to the Seminar ‘Environmental Economics and Natural Capital’ In the series ‘Sustaining Future Ecosystem Services – From Understanding to Action’ By Professor Paul Ekins Professor of Energy and Environment Policy, King’s College London National Liberal Club, London Wednesday 16th April 2008

2. CRITINC Project • DG Research Framework 5 • Making Sustainability Operational: Critical Natural Capital And The Implications Of A Strong Sustainability Criterion (CRITINC) • Ekins, P., Simon, S., Deutsch, L., Folke, C. & de Groot, R. 2003 ‘A Framework for the Practical Application of the Concepts of Critical Natural Capital and Strong Sustainability’ in Special Section of Ecological Economics, edited by Paul Ekins, Carl Folke & Rudolf de Groot, Vol.44 No.2-3, pp.165-185

3. SRDTOOLS Project • DG Research Framework 6 • Methods and tools for evaluating the impact of cohesion policies on sustainable regional development (SRDTOOLS) • Arose out of DG REGIO evaluation of contribution of structural funds to sustainable development (SD) which • Used 4-capitals model of SD, which • Enabled identification of UNsustainable development • Structured dialogue in recognisably economic language • Identified trade-offs between different dimensions of SD BUT did not identify how decisions should be made about trade-offs • Ekins, P., Dresner, S. & Dahlström, K. 2008 (forthcoming) ‘The 4-Capitals Method of Sustainable Development Evaluation’ in European Environment, Special Issue on Sustainable Development Evaluation, edited by Paul Ekins and Simon Dresner

4. The Concept of Capital and 4-Capital Framework • Capital stocks (assets) provide a flow of goods and services which contribute to human well-being. The stock value is the net present value of the flow • Four types of capital recognised: • Manufactured Capital: produced assets used to produce other goods and services, e.g. buildings, transport infrastructure, machines • Natural Capital: traditional natural resources (timber, water, minerals) and other natural assets such as biodiversity, climate, ecosystems • Human Capital: health, wellbeing and productive potential of individuals • Social Capital: social networks that support efficient and cohesive societies, e.g. social trust, norms, political and legal structures

5. Capital and Sustainability • Places Environment in recognisable economic framework on an equal basis with other factors of production (cf ‘externality’ concept) • Capital and sustainability: in the provision of goods and services, capital depreciates; for sustainability it must be replenished (investment) • Economic, social, environmental sustainability • Weak and strong sustainability (substitutability between capitals) • Potential for unsustainable development lies in loss of one or more capital stocks, or in trade-offs made between different forms of capital, and extent to which • Any decline represents a breach of some critical threshold (breach of which threatens system integrity), and if not, whether • Any decline in one form is compensated by increases in other forms

6. Natural Capital • Characteristics, Values and Functions of Nature • Characteristics: air, water, land, habitats • Values: ecological (conservation, existence), social (human health, personal, community, option), economic (production, consumption, employment) • Functions: • Natural capital can only be inferred from the performance of environmental functions • Environmental function: “the capacity of natural processes and components to provide goods and services that satisfy human needs (directly and/or indirectly)” (de Groot 1992, p.7). • de Groot: Regulation, Habitat, Production, Information • CRITINC: Life support, source of resources, sink for wastes, maintenance of human health, other contributions to human welfare (e.g. amenity)

7. Environmental sustainability • Sustainability: capacity for continuance • Environmental sustainability: maintenance of important environmental functions • Importance: • Not substitutable, irreversible loss, ‘immoderate’ losses • Maintenance of health, evidence of threat, economic sustainability

8. Environmental sustainability:maintaining important environmental functions + - Biosphere • Functions of Nature • Life Support • Source • Sink • Functions for Humans • Economy • Human health • Human welfare

9. Critical Threshold Analysis • Environmental Sustainability: possible to articulate principles (e.g. sustainable use of environmental functions) based on scientific evidence and derive environmental thresholds and standards. • Identification of • Critical thresholds (change of state) • Critical trends (may refer to state or pressure) • Policy targets • Analytic questions • What critical thresholds are currently being breached? • What critical trends threaten to breach critical thresholds in the future (traffic lights representation)? • What policy targets have been adopted in relation to these critical thresholds and what is their relation to them? • What policies have been implemented or proposed to meet the policy targets? • Do these policies seem adequate, either to achieve the policy targets or to address the criticality or both? • What is the relationship between these issues of criticality and issues of quality of life?

10. Criteria for Environmental Sustainability (1) • Non-substitutable, irreversible, immoderate cost (Ciracy-Wantrup); Safe minimum standard (Bishop) • Maintenance of biodiversity  • Renewal of renewable resources  • Daly • Limit the human scale (throughput) to the earth’s carrying capacity. • Efficiency (not throughput) increasing technological progress • Renewable resource harvest less than regeneration rate; waste emissions less than assimilative capacities • Non-renewable resource exploitation rate less than the rate of creation of renewable substitutes.

11. Criteria for Environmental Sustainability (2) • Prevention of destabilisation of global environmental features such as climate patterns or the ozone layer  • Maintenance of biodiversity  • Renewal of renewable resources  • Maintenance of a minimum life-expectancy of non-renewable resources  • Ensuring that emissions into air, soil and water do not exceed their critical load for ecosystems nor lead to adverse effects on human health  • Conservation of landscapes of special human or ecological significance  • Avoidance of risk of potentially catastrophic events

12. Functions and Sustainability Principles

13. Measurement: Indicators and CRITINC Framework • Indicators • Frameworks, e.g Quality of Life Counts, 15 Headline, 139 supporting indicators, economic, social, environmental • National wealth, weak sustainability, World Bank Genuine Savings (rich countries are sustainable) • ‘Top 60’ indicators in ten policy fields • Sustainability Gaps • Physical standard, physical SGAP, monetary SGAP (MSGAP) (MSGAP/GDP - unsustainability intensity) • Years-to-Sustainability • CRITINC framework: SGAP plus economic and social indicators

14. Sustainability Gap Calculations

15. The CRITINC Methodology • Identification of the function(s) under threat or investigation, and their placement in the relevant category (source, sink, life-support or human health and welfare). • Relation of the functions back to the natural capital from which they emanate. • Preparation of the various environmental impact matrices. • Derivation of sustainability standards for the functions, if possible, or trends in those cases where sustainability standards cannot be identified. • Where standards have been identified, calculation of the SGAPs in relation to them. • Description of the economic or social aspiration that is putting the function under threat or pressure, in terms of the benefit that its realisation would yield. Investigation of alternative ways of partially or wholly achieving the aspiration. • Application of a system of decision-analysis, such as multi-criteria analysis, to give insights into the implications of closing the SGAPs

16. SRDTOOLS: A nested approach to assessing sustainable development

17. Choosing assessment methods:Taking account of complexity

18. Thank you Paul.Ekins@kcl.org.uk