What is NATURAL CAPITAL? What does NATURAL CAPITAL mean? NATURAL CAPITAL meaning - NATURAL CAPITAL definition - NATURAL CAPITAL explanation.
Source: Wikipedia.org article, adapted under https://creativecommons.org/licenses/by-sa/3.0/ license.
Natural capital is one approach to ecosystem valuation which revolves around the idea, in contrast to traditional economics, that non-human life produces essential resources. Thus, ecological health is essential to the sustainability of the economy. In Natural Capitalism: Creating the Next Industrial Revolution the author claims that the global economy is within a larger economy of natural resources and ecosystem services that sustain us. In order to continue to reap the benefits of our natural environment, we need to recognize the importance of natural capital within the economy. According to the authors, the "next industrial revolution" depends on the espousal of four central strategies: "the conservation of resources through more effective manufacturing processes, the reuse of materials as found in natural systems, a change in values from quantity to quality, and investing in natural capital, or restoring and sustaining natural resources."
In a traditional economic analysis of the factors of production, natural capital would usually be classified as "land" distinct from traditional "capital". The historical distinction between "land" and "capital" defined “land” as naturally occurring with a fixed supply, whereas “capital”, as originally defined referred only to man-made goods. (e.g., Georgism) It is however, misleading to view "land" as if its productive capacity is fixed, because natural capital can be improved or degraded by the actions of man over time (see Tragedy of the Commons). Moreover, natural capital yields benefits and goods, such as timber or food, which can be harvested by humans. These benefits are similar to those realized by owners of infrastructural capital which yields more goods, such as a factory which produces automobiles just as an apple tree produces apples.
The term 'natural capital' was first used in 1973 by E.F. Schumacher in his book Small Is Beautiful and is closely identified with Herman Daly, Robert Costanza, the Biosphere 2 project, and the Natural Capitalism economic model of Paul Hawken, Amory Lovins, and Hunter Lovins. Recently, it has begun to be used by politicians, notably Ralph Nader, Paul Martin Jr., and agencies of the UK government, including its Natural Capital Committee and the London Health Observatory. All users of the term currently differentiate natural from man-made or infrastructural capital in some way. Indicators adopted by United Nations Environment Programme's World Conservation Monitoring Centre and the Organisation for Economic Co-operation and Development (OECD) to measure natural biodiversity use the term in a slightly more specific way. According to the OECD, natural capital is “natural assets in their role of providing natural resource inputs and environmental services for economic production” and is “generally considered to comprise three principal categories: natural resources stocks, land, and ecosystems.”
Within the international community the basic principle is not controversial, although much uncertainty exists over how best to value different aspects of ecological health, natural capital and ecosystem services. Full cost accounting, triple bottom line, measuring well-being and other proposals for accounting reform often include suggestions to measure an "ecological deficit" or "natural deficit" alongside a social and financial deficit. It is difficult to measure such a deficit without some agreement on methods of valuation and auditing of at least the global forms of natural capital (e.g. value of air, water, soil).