Investment in Natural Capital is an investment in the economy and society but governments have not yet translated this understanding into economic recovery spending - Read a new paper building on our work using the System of Environmental Economic Accounting, 'From Covid-19 to Green Recovery with Natural Capital Accounting', co-authored by our project's Catherine Farrell & Carl Obst...
The COVID-19 pandemic and related social and economic emergencies induced massive public spending (US$2.14 trillion in the first 18 months since April 2019) and increased global debt. Most spending was by high-income countries. Economic recovery programmes provide an opportunity to rebuild natural capital alongside financial, physical, social and human capital, for long-term societal benefit. Yet current decision-making is dominated by economic imperatives and information systems that do not consider society’s dependence on natural capital and the ecosystem services it provides.
New international standards for natural capital accounting (NCA) are now available to integrate environmental information into government decision-making. By revealing the effects of policies that influence natural capital, NCA supports identification, implementation and monitoring of Green Recovery pathways, including where environment and economy are most positively interlinked.
The Dasgupta Review (2021) highlighted that investment in natural capital is an investment in the economy and society, but governments have not yet translated this understanding into economic recovery spending. Around 24% of announced recovery spending is ‘green’ (contributing to environmental objectives) and most is targeted at climate change mitigation, with 3% positive for natural capital, and up to 17% negative (O’Callaghan and Murdock 2021).
The System of Environmental-Economic Accounting (SEEA) has been co-developed by Carl Obst of IDEAA Group/INCASE. The SEEA represents the global standard for NCA and is used by public information agencies like national statistical offices. The SEEA Central Framework (UN 2014) was adopted by the UN in 2012, and was followed by SEEA Ecosystem Accounting (UN 2021) in 2021. These frameworks integrate environmental data with the economic data from the System of National Accounts (SNA) that has played such a key role in decision-making. Among other things the SNA produces the widely used Gross Domestic Product (GDP) that is commonly misused as measure of progress (Coyle 2014). The integration of environmental and economic data serves to identify the dependency of people on the natural capital and ecosystem services they need for wellbeing and economic growth, and the impact of people’s activities on the environment. (Fig 1)
In 2020, 89 countries reported implementing the SEEA Central Framework, and 36 reported SEEA Ecosystem Accounting (UNCEEA 2021).
Having integrated and harmonised environmental and economic data in regularly updated accounts enables decision-makers to move beyond traditional siloed measures of economic success, notably GDP, which is based on obsolete economic theory and a mid-twentieth Century world-view that barely considered the environment (Stiglitz et al. 2010; Coyle 2014; Hamilton and Hepburn 2017; Dasgupta 2021). With NCA, which is based on an expansion of economic theory that recognises the importance of the environment, spending packages can be designed, tested, implemented, monitored and modified to achieve progress...
The imperative now is to turn the combined adoption of the new NCA standards and the unprecedented levels of government spending for economic recovery, to move along the sustainable development pathway. Many options are available to make such a Green Recovery a reality. To achieve this a multidisciplinary effort is needed with people and institutions working together to promote NCA so that it is embedded, trusted and used in decision-making.
You can access the full paper here to read more.