Transforming Economic Policy Through Natural Capital Accounting

Saturday, February 16, 2013
Room 309 (Hynes Convention Center)
Glenn-Marie Lange , The World Bank, Washington, DC
“How we measure development will drive how we do development.” This is the idea behind the World Bank initiated partnership to promote Natural Capital Accounting, called Wealth Accounting and Valuation of Ecosystem Accounting, or WAVES.

The critical role of natural capital in human well-being, especially in poor communities in developing countries, is widely recognized, but ecosystems continue to deteriorate, often in the pursuit of short-term economic growth.  Unless the economic value of all ecosystem services is recognized, their contribution to sustainable economic welfare will be seriously underestimated, resulting in under-investment in sustainable management and ultimately lower incomes. Fully representing these values in the National Accounts is crucial because National Accounts constitute the primary source of information about the economy, and are widely used for assessment of economic performance and policy analysis in all countries.  

“Greening’ the National Accounts extends them for natural capital and provides information to demonstrate the influence of natural capital on the major indicators of macroeconomic performance, such as GDP, employment and the balance of payments, and what can potentially be lost under mismanagement.  Hence, Natural Capital Accounting can be particularly effective for engaging agencies responsible for economy-wide management, like the Planning or Finance Ministries.

Recent initiatives like the Stiglitz-Sen-Fitoussi Report and the Green Growth agenda have called for better indicators and measures of economic performance based, in part, on Natural Capital Accounting. Recent international agreement on methodology for large parts of Natural Capital Accounting (the UN’s System of Environmental and Economic Accounting) provides credible methodology to start implementing the agenda, although much work remains to be done, especially on accounting for regulating services.

This presentation will focus on the challenges of incorporating ecosystem services into natural capital accounting, and identifying the policy questions such accounts can address, at both macroeconomic and sectoral/landscape level.   We draw on the experiences of the new Global Partnership for Wealth Accounting and Valuation of Ecosystem Services (WAVES) and highlight progress in developed and developing countries to extend natural capital accounting for ecosystems; policy advances possible with natural capital accounting; and critical methodological issues such as scaling up values from landscape level to national level, and the challenge of making explicit ecosystem services that are already included in national income but not visible.