Natural capital

Definition

Natural capital refers to the world's stocks of natural assets, including geology, soil, air, water, and all living things. It is essential in understanding how natural resources contribute to economic value and sustainability. By recognizing natural capital, we can assess the ecological services these assets provide, such as clean air and water, pollination of crops, and climate regulation, which are critical for economic development and human well-being.

5 Must Know Facts For Your Next Test

1. Natural capital emphasizes the value of nature in providing resources and ecosystem services that support life and economic activity.
2. The depletion of natural capital can lead to significant economic consequences, including loss of biodiversity and increased costs for resource extraction.
3. Recognizing natural capital is crucial for policymakers to create sustainable economic models that prioritize environmental health alongside economic growth.
4. Natural capital accounting is a method used to measure the value of natural resources and ecosystem services in monetary terms, helping to inform better decision-making.
5. The concept of natural capital is integral to discussions about climate change and environmental sustainability, as it encourages responsible management of resources.

Review Questions

• How does the concept of natural capital relate to the idea of sustainable development?
  • Natural capital is fundamentally tied to sustainable development as it underscores the importance of preserving natural resources for future generations. By understanding that natural assets provide vital ecosystem services that support human life and economic growth, sustainable development aims to balance resource use with conservation. This relationship emphasizes that without protecting natural capital, we risk undermining our ability to develop sustainably.
• What role does natural capital accounting play in environmental economics and decision-making?
  • Natural capital accounting plays a crucial role in environmental economics by quantifying the economic value of natural resources and ecosystem services. This approach allows policymakers and businesses to integrate environmental considerations into their decision-making processes. By recognizing the monetary value of nature, stakeholders can make informed choices that promote sustainable practices while mitigating the economic risks associated with environmental degradation.
• Evaluate the implications of neglecting natural capital in economic planning and policy-making.
  • Neglecting natural capital in economic planning can have severe implications for both the environment and society. It can lead to resource depletion, loss of biodiversity, and increased vulnerability to climate change impacts. Economically, ignoring the value provided by natural systems can result in higher costs for future resource extraction, increased health problems due to environmental degradation, and ultimately threaten long-term economic stability. This highlights the need for integrated approaches that account for natural capital in order to ensure sustainable growth.

Related terms

ecosystem services: The benefits provided by ecosystems to humans, which include provisioning, regulating, cultural, and supporting services.

sustainable development:

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

environmental economics: A field of economics that examines the economic effects of environmental policies and the economic impact of environmental changes.