Natural Capital: The True Wealth of Nations

Economists have still not caught up with the most important capital of all: Natural Capital.

Last year the UN Climate Change Convention met in Copenhagen, attracting an incredible media frenzy. In a month's time its sister Convention on Biological Diversity will meet in Nagoya, to discuss why whole species are moving into extinction at a rate that is (barring the loss of the dinosaurs) unprecedented in the entirety of the fossil record of life on this planet. So far this convention has met with total radio silence from the world's press. Why?

Top of the agenda will be the idea of Natural Capital. One of the great advances in economics over the past 100 years was the realization that there is such a thing as human and social capital. A well-functioning judicial or education system is just as much part of the wealth of a nation as its roads, ports and factories. But the irony is that economists have still not caught up with the most important capital of all: Natural Capital.

Natural capital can be defined as the benefits that accrue to human society from the different species of life that inhabit our world. Classical economics values things by seeing how much someone will pay for them. But this is where classical economics is wrong. What it fails to account for are all the "externalities"-- the services people regard as free goods: pollination services, flood protection, climate regulation, soil stabilization, carbon sequestration. Although immensely valuable, these wider benefits do not accrue to the individual property owner. They are benefits to the community at large. Because they are not captured by the land owner they do not feature in his decision about how to dispose of the land. His economic benefit increases. Everyone else's is reduced.

Last month saw the fifth anniversary of the sacking of New Orleans by Hurricane Katrina. In that tragedy 1,800 people died, damage has been estimated at up to $125 billion. Today a new 350 mile strong system of levees is being built at a cost of $16billion. Many saw this as an engineering failure: politicians and administrators had failed to maintain the levees around that city with devastating consequences. That is only partly true. It was actually the inevitable consequence of the failure to properly value Natural Capital.

In 1956 the U.S. Congress gave approval for the construction of The Mississippi River Gulf Outlet (MRGO). The economic case seemed overwhelming. This man-made navigational channel would reduce the passage by 40 miles and straighten the route making it a safer and more efficient passage for shipping than the winding channels of the Mississippi River below New Orleans. MRGO was cut through are shallow estuarine waters and sub-delta marshes. Much wetland was lost by the original excavation, but more important has been the soil erosion and rise in salinity that has seen the destruction of the cypress swamp.

Over 120,000 square miles of wetland habitat have been lost on the Lower Mississippi Basin. Recently the US Army Engineering Corps made an astonishing admission: every levee that had wetland protection in front of it remained intact. Every levee that had no wetland protection was breached.

In 50 years time we will look back and say that our governments were economically illiterate. They simply did not understand the true value of the most important service providers on our planet. We will marvel that they failed to capture and make explicit the value of Natural Capital and ecosystem services in their national accounts.

Barry Gardiner is Labour MP for Brent North and shadow minister for Energy and Climate Change. 

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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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