Natural capital is the global value of our natural asset. These assets can include soil, air, water, living things. We want to place a value on our natural assets so that we better understand what role they play in our business and governing operations. By placing a value on natural assets we can also devise more sustainable ways to ensure their protection.
Natural capital has increasingly become an economic hot topic as our practices shift to environmentally-conscious ones.
Here are three economic issues of natural capital and how they play into policy development.
Optimizing the Use of Natural Capital
Policy makers must consider environmental risks when they manage natural capital, and they must optimize its use without depleting supply (for example, with fishing authorization or source extraction policies).
The Problem of Externalities
Policy makers can create laws to regulate the sector by using taxes (such as carbon taxes) and subsidies, and assign property rights (such as emission rights) to natural assets, effectively giving a them a price value.
Environmental Protection vs. Growth
It’s possible that emerging countries may have to choose whether to pursue development or environmental protection. This happens more often than one might think, and a clear example can be found in the carbon emissions debate.
For more information on Natural Capital check out the original article by Adriano Pilloni, Environmental Economics Expert.Feature Image: Natural capital places value on our natural assets to discourage choosing between development and the environment. Image via Shutterstock.