Natural Capital

Definition

Natural capital refers to the stock of natural resources and ecosystems that provide valuable goods and services to support human well-being. It encompasses the land, air, water, and all living organisms that form the natural environment.

5 Must Know Facts For Your Next Test

1. Natural capital provides essential resources for economic production and human well-being, including food, water, energy, and raw materials.
2. The depletion and degradation of natural capital can have significant economic and social consequences, such as reduced agricultural productivity, water scarcity, and loss of biodiversity.
3. Investing in the conservation and restoration of natural capital can generate long-term economic and environmental benefits, including climate regulation, flood control, and recreational opportunities.
4. Incorporating the value of natural capital into decision-making processes can help promote more sustainable and environmentally-friendly economic policies and practices.
5. Sustainable management of natural capital is crucial for ensuring the continued provision of ecosystem services and supporting the well-being of present and future generations.

Review Questions

• Explain how the concept of natural capital relates to the tradeoff between economic output and environmental protection.
  • The concept of natural capital highlights the importance of the natural environment in supporting economic activities and human well-being. However, the pursuit of economic growth often leads to the depletion and degradation of natural capital through activities such as resource extraction, pollution, and habitat destruction. This creates a tradeoff, where increased economic output may come at the cost of environmental protection and the long-term sustainability of natural resources. Recognizing and accounting for the value of natural capital can help policymakers and businesses strike a balance between economic development and environmental preservation, ensuring the continued provision of essential ecosystem services.
• Describe how the sustainable management of natural capital can contribute to resolving the tradeoff between economic output and environmental protection.
  • Sustainable management of natural capital involves the conservation, restoration, and efficient use of natural resources to ensure their long-term availability and the continued provision of ecosystem services. This approach can help resolve the tradeoff between economic output and environmental protection by promoting economic activities that are compatible with the maintenance of natural capital. For example, sustainable agriculture practices, renewable energy sources, and circular economy models can generate economic benefits while minimizing the depletion and degradation of natural resources. By incorporating the value of natural capital into decision-making processes, policymakers and businesses can identify and implement strategies that support both economic development and environmental protection, ultimately leading to more sustainable and resilient economic systems.
• Evaluate the potential role of natural capital accounting in informing policies and practices that aim to balance economic growth and environmental sustainability.
  • Natural capital accounting is the process of measuring, valuing, and incorporating the stocks and flows of natural resources and ecosystem services into economic and financial decision-making. This approach can play a crucial role in informing policies and practices that seek to balance economic growth and environmental sustainability. By quantifying the economic value of natural capital, natural capital accounting can help policymakers and businesses recognize the true costs of environmental degradation and the long-term benefits of investing in the conservation and restoration of natural resources. This information can then be used to design policies, regulations, and incentives that encourage more sustainable production and consumption patterns, promote the efficient use of natural resources, and internalize the environmental externalities associated with economic activities. Ultimately, natural capital accounting can help shift the focus from short-term economic gains to the long-term sustainability of natural capital, enabling the development of more holistic and balanced approaches to economic development.

Related terms

Ecosystem Services:

The benefits that people obtain from ecosystems, such as food, water, flood and disease control, and recreational opportunities.

Environmental Degradation: The deterioration of the environment through depletion of resources such as air, water, and soil, and the destruction of ecosystems.

Sustainability:

The ability to meet the needs of the present without compromising the ability of future generations to meet their own needs.