Natural Capital: Valuing the Planet

By Dieter Helm, Yale University Press, $32.50, 296 pages, ISBN 978-0300210989, Hardcover

Extrapolating from humanity’s current course, the world in which we will find ourselves by the end of the century will be more populous (by several billion), more ecologically impoverished, have fewer non-renewable resources available, and will feature a hotter climate. Dieter Helm suggests in Natural Capital a means for governments and policy makers to prevent this deterioration of the natural resource base that threatens our future economic growth and quality of life.

A professor of Economics at Oxford and the chair of England’s Natural Capital Committee, Helm advocates putting a price on natural resources and ecosystem services, with the goal of keeping the world’s net value of natural capital constant. Our current economic system emphasizes short-term GDP growth decoupled from long-term consequences of ecosystem damage and resource depletion (global warming, soil exhaustion, watershed damage, etc.).

Fixing this situation requires developing an accounting system that assigns value to natural capital, as well as implementing policies to require compensation for resource depletion. For a model of how to extract fossil fuels without depriving future generations, Helm cites Norway’s Oil Fund, established in 1990. The fund invests the profits of petroleum extraction in order to offset future decreases in oil revenue.

This model aims for cost neutrality; money raised by taxing emissions and depletion of resources would fund restoration of natural habitats and defray costs associated with permitted amounts of pollution.  Helm anticipates that controlling emissions and ecosystem damage by taxation and permits rather than banning them outright will draw opposition from those he describes as “fundamentalist” environmentalists.

This rejection of the “save everything” mentality is a key premise of Helm’s system of natural capital management. Rather than aiming for zero growth or zero development, the system permits substitution, in which compensation would be required for loss of wilderness and non-renewable resources. For example, habitat destruction arising from the building of housing developments would be counterbalanced by restoring ecosystems elsewhere.

The refutation of “save everything” is one of several sacred cows slaughtered in Natural Capital. Other radical principles include the following:
  1. We cannot depend on limits to growth (eg, peak oil) to limit population growth or economic development—scarcity will not provide damage control in the near term. Thus, our focus should be on preserving renewable resources.  Failure to maintain our resource base will limit our economic growth more than depletion of fossil fuels.
  2. The “develop now, conserve later” approach to global poverty eradication is wrongheaded. The poor have the most to lose from depreciation of natural capital. Global policy initiatives should not attempt to equalize wealth across the globe in the current generation. Our focus needs to be on the next generation, whom we deprive of natural capital under the assumption that they will be wealthier than us and will be able to cope with the damage. In fact, the coming generations, strained by the burden of anthropogenic global warming and resource degradation, may be less well off than we are today.
  3. Natural resources and ecosystems should not be considered “priceless”—maintaining the net amount of natural capital requires that resources be assigned a finite price. This allows for the preservation of resources in aggregate; economic growth depends on consumption of resources, but the depletion of fossil fuels and damage to renewable resources is permitted provided equivalent substitution is priced in.
  4. Government regulation is an essential part of the system. The current “patchwork quilt” of regulation is insufficient, and in many cases has been developed under the influence of corporate pressure. While private trusts and non-profit organizations would play a role in preservation and restoration, government oversight of non-public assets is needed to maintain accountability.

Most importantly, the author refutes the ideas that we cannot afford the luxury of conservation and that growth and environmental protection are mutually exclusive. As an economist, Helm provides a sorely needed voice of authority to argue that the consequences of business-as-usual are a major threat to our economic future, and that future growth requires taking action now to curb the damage.

Natural Capital provides convincing arguments for an economic system that explicitly values natural resources, and describes realistic policies to conserve those resources. Its approach to sustainability focuses squarely on limiting the damage of consumption rather than reducing demand for natural capital in the first place. Attempts to reduce pressure on natural resources by reducing energy use and eating lower on the food chain are dismissed as attempts to achieve a zero-growth society, a “utopia” that is “never going to happen” (p. 37). Although population projections are repeatedly invoked as part of humanity’s pressure on natural capital, the author does not address the role of policy in reducing population growth, or any other government policies that would reduce demand for natural capital. Readers interested in how government regulation or private action could reduce consumption will not find guidance in this book.

In general, this is not a book in which to find actionable suggestions for the ordinary citizen.  One of the few avenues for action described for the average person is membership in private clubs, which may have an interest in preserving natural habitat for recreational use (eg, fishing). Although not mentioned in the text, a good example of such a club is the Surfrider Foundation, an American non-profit organization dedicated to preservation of coastal habitat. Overall, however, the role of individual action is heavily downplayed.

The future of our society would be brighter if the framework advocated by Natural Capital was adopted by our systems of government. The need for politicians and public policy-makers to understand the principles of natural capital management is compelling. In spite of the author’s experience on England’s Natural Capital Committee, guidance for how such a system would be implemented is a conspicuous omission. It would be beneficial to know what lessons the author has learned from chairing the Committee, and how to best influence public policy and embark upon the path described in the book. Natural Capital gives a thorough description of the desired end result and the reasons for it—one hopes that his next book describes how to get there from here.

Deva O’Neil
Assistant Professor of Physics, Bridgewater College

These contributions have not been peer-refereed. They represent solely the view(s) of the author(s) and not necessarily the view of APS.