Recognizing environmental constraints, and in particular recognizing that many natural assets are close to falling below their thresholds for sustainability does not imply that economic growth must stop or even slow down. Dieter Helm discusses how it is possible to have economic growth while protecting aggregate natural capital.
Professor of Energy Policy at the University of Oxford
Wealth is a stock, not a flow. The country with the highest flow of GDP in a particular year is not necessarily the richest country. The richest country has the highest capital stock, whether endowed or accumulated. While this should in theory be obvious, it is often ignored. A focus on wealth, and changes in wealth, would lead to attention to investment in important assets – whether natural, produced, human, institutional or financial – and sharper attention to sustainability. In this discussion, the panelists consider wealth accounts and policy implications.
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.Full paper
The Natural Capital Committee is an independent advisory body, set up in 2012. It provides advice to the government on the state of England’s natural capital – that is, our natural assets includes forests, rivers, land, minerals and oceans.Read report