Ben Milligan is a Senior Research Associate at the UCL Centre for Law and Environment and Institute for Sustainable Resources. His research focuses on law and sustainable development, governance of natural assets, as well as governance of oceans. We were absolutely thrilled to have Ben conduct a seminar for us on Natural Capital.
In the twentieth century, we are faced with the extraordinary challenge of protecting the environment while simultaneously tackling poverty and development issues. Business as usual doesn’t appear to be a solution, hence the recent move towards trying to embed the role of environment in economic policy making. Ben talked about the emerging idea in legal and policy making that the environment is not an obstacle to development but rather an asset on which the economy and development is built. This idea is conceptualised through the notion of “natural capital”
One of the key transitions in the last few years has been changing our response to how the environment benefits development, moving from the historical approach – that the economy converts the environment by turning it into assets (E.g.: extraction of resources which are input in the economy) to the environment is an asset and isn’t separate from the economy.
In the historical approach the assets created in turn affect the environment through waste, pollution etc. Therefore the only perceived solutions are either limiting the levels of extraction or the levels of pollution because the model implies that economy and environment are separate entities
Ben referred to the United Nations’ Millennium Ecosystem Assessment was the first major global attempt to evaluate the state of the environment in physical terms and also looked at how the environment benefits human beings and how we are affected by environmental changes. Ben recommended the reading of this UN Assessment which he deems “very interesting”. The UN Millennium Ecosystem Assessment concluded that over the last fifty years humans have changed ecosystems more rapidly and extensively than ever before in the history of mankind, causing substantial and irreversible losses.
Dramatic environmental changes in the last century are regarded in a very negative light. However, Ben reminds us that it was also paralleled by an unprecedented global rise of living standards. As the Oxford Martin Commission for Future Generations states, “now is the best time in history to be alive” – on average life is better than any time in human history. We have therefore extracted thing from the environment to benefit society but this isn’t sustainable anymore and there have been negative impacts such as the reduction of ecosystem services, the increased risk of non-linear changes and the exacerbation of poverty for some groups of people. It is claimed that the benefits that future generations will reap from environment systems will decline is we do not change the model.
The new model looks at the wealth of an economy in amore holistic way. In this model, the environment is an asset and economy, society and environment are not separate entities.The environment should be considered as wealth and and the most important single asset we have because it underpins all other assets we enjoy – be they economic or social.
One cannot enjoy development unless you properly manage the environment so Ben calls for sustainable development. Development is unsustainable when produced & financial and human & societal assets are created at the expensive of natural assets. Natural assets are converted and depleted and the newly created assets damage them.
In sustainable development net assets are converted and substituted without net loss. The assets produced do not create damage (or if they do impact offsetting for net maintenance of the asset is put into place) but rather there is investment in conservation, restoration and enhancement. This is underpinned by many advances in environment sciences and environment economics
When questioned about the efficacy of Offsetting, ben answered that offsetting is a nice theoretical system with practical problems to it. Many ecosystems cannot simply be replaced in a different location. They are complex and evolve over time. Ben takes the example of mangrove systems that cannot quickly be replaced.
But what exactly are natural assets/capital? Ben explains that they are found in the biophysical environment under the forms of abiotic (i.e.: non-living) assets and ecosystem assets (non-living and living parts that interact to form systems). then provide ecosystem services ( a term coined by the Millennium Ecosystem Assessment). Their roles vary from provisioning (e.g.: water, natural plants, animals…) to regulating (i.e.: maintaining conditions essential to life such as water flow, atmosphere and spread of disease regulation), providing cultural services such as, but not limited to, non-extractive recreation, spiritual and religious opportunities.
In order to manage these assets, Ben explains that they need to be measured, in both physical and monetary terms. Currently, Gross Domestic Product (GDP) is the predominant yardstick by which we assess the health of an economy. However, GDP doesn’t cover natural assets. It additionally measures wealth, production and flows rather than growth and stocks.
A country’s GDP can therefore remain positive while natural assets are being depleted, as is the case in many African countries. It is for this reason, Ben argues, that we need complementary tools to supplement and go beyond GDP.
Natural capital accounting is one of the ways of measuring the status of natural assets.
For this reason the United Nations’ Framework for Environmental Economic Accounting was created as a framework within which intellectual work on this is being done. It undertakes biophysical accounting but also incorporates the monetary component.
Ben ended the seminar by giving examples of opportunities and challenges of including natural capital in policy and decision-making.
Costa Rica is widely considered as an exemplar of managing the environment through the idea of natural assets.Costa Rica had a problem with deforestation because of land clearing for agriculture done by poor people needy for monetary remuneration. To counter this the state passed a legislation recognising that the forest was a natural asset of the state and introduced a scheme known as “payments for ecosystems services”. Landowners would be paid by the government for maintaining forests. This radically transformed forestry management in Costa Rica and led to the emergence of an ecotourism industry.
Another example is a top-down public sector approach in the Philippines that consisted in replanting mangroves that had been cut down. This provided a good return on investment because helped protect cities from natural disasters such as cyclones. Additionally, it protected fish population levels to be maintained. A important necessity, considering fish has a major place in local diets. This examples shows that managing the environment through the idea of natural assets entails benefits such as, but not limited to, cleaner water and disaster risk reduction.
Another idea is payments for watershed services. To stop upstream activities can have negative impacts downstream, upstream owners receive benefits in return for the services they provide for free to the downstream people.
In Florida, the natural environment is being used to replace traditional infrastructure. While protecting human settlements from adverse weather, natural “infrastructure” also has other benefits, such as the preservation of ecosystems and a recreational value.
Corporations are also installing similar schemes. Ben shares the example of Shell who is planning to use oyster beds as a replacement for concrete walls for shoreline protection. An additional benefit of these for the company is that they maintain themselves meaning, there is no need to reinvest
Another developing idea is the use of wetlands to filet water instead of water treatment facilities for chemical companies
But Ben warns that we need to give a monetary value to environment benefits in order to do all these things. Their current value in markets is not representative of their real value. We can nevertheless observe a gradual reorientation of environment policy. Preserving the environment isn’t necessarily synonymous to abstaining from doing certain things but rather equates living in connection with it for improved lifestyles and well-being.