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Understanding Natural Capital: Valuing, Preserving, and Sustaining Resources

This resource delves into the concept of natural capital, including renewable, replenishable, and non-renewable resources. It discusses the dynamic nature of resources, intrinsic value of the environment, sustainability, and sustainable development. The text explores the economic view of resources and the environmental perspective, emphasizing the importance of managing renewable and replenishable resources to generate natural income. Case studies like the New England Groundfish Fisheries exemplify unsustainable practices and their consequences. It also delves into the classifications of natural capital and the changing status of resources influenced by cultural, economic, and technological factors over time. The value of natural capital is examined from ecological, economic, and aesthetic viewpoints, highlighting intrinsic values that are often overlooked in economic evaluations. The importance of balancing value and sustainability for long-term resource management is emphasized.

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Understanding Natural Capital: Valuing, Preserving, and Sustaining Resources

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  1. Resources – Natural Capital IB syllabus: 3.2

  2. Syllabus Statements • 3.2.1: Explain the concept of resources in terms of natural capital • 3.2.2: Define the terms renewable, replenishable, and non-renewable natural capital • 3.2.3: Explain the dynamic nature of the concept of a resource • 3.2.4: Discuss the view that the environment can have its own intrinsic value. • 3.2.5: Explain the concept of sustainability in terms of natural capital and natural income • 3.2.6: Discuss the concept of sustainable development • 3.2.7: Calculate and explain sustainable yield from given data

  3. vocabulary • Natural Income • Natural Capital • Non-renewable • Renewable • Replinishable • Sustainability • Sustainable yield

  4. Economic view • Traditional economy based on land, labor and capital • See environment as only one set of resources within a larger economic sphere • Environmental economists view environment as providing goods and services on which humans depend • Economy is constrained by limits of environmental resources • Environment provides raw materials and means of absorbing wastes

  5. Economic Activity: Classic View

  6. Economic production is the process of converting the natural world into a manufactured world. • Example: trees to paper to trash

  7. Economic Activity: Environmental View

  8. Resources & Natural Capital • Term coined by ecologically minded economists • If properly managed renewable & replenishable resources are forms of wealth that can produce “natural income” • “natural income” = indefinitely available valuable goods and services (based off of renewable and replenishable) • Marketable commodities or goods (timber, grain) • Ecological / Life-support services (flood & erosion protection from forests) • Non-renewable resources = forms of economic capital that cannot generate wealth without being liquidated

  9. Natural Capital & Natural Income • Natural Capital  Standing stocks • Stock = present accumulated amount of capital • Forests, Fish • Natural Income  Flows • Sustainable rate of harvest of a stock • Harvests of timber, fishing

  10. New England Groundfish Fisheries Example

  11. Too many boats, too few fish • November 1994 moves to shut down north atlantic groundfish fishery • Public outcry and economic effects • What caused the collapse • Decades of unsustainable harvest • Magnuson Act of 1976 supported unprecedented growth of the fishing fleet • 570 boats to 900 • Bigger boats with more technology to catch fish • Removing large breeders and young before they can breed • Common syndrome for fisheries collapse • The flow (harvest) was bigger than the stock (population) could support

  12. Classes of Natural Capital I • RENEWABLE NATURAL CAPITAL • Living species, ecosystems • Self producing & self maintaining • May use solar energy in photosynthesis • Can yield marketable goods (wood, meat) • Essential services when left in place (climate regulation)

  13. Classes of Natural Capital II • REPLENISHABLE NATURAL CAPITAL • Non-living & dependent on solar engine for renewal • Groundwater, Ozone layer

  14. Classes of Natural Capital III • NON-RENEWABLE NATURAL CAPITAL • Like inventories • Any use requires liquidating part of the stock • Fossil fuels, Metals, & Minerals • Some may regenerate in a geological time scale

  15. The status of these resources changes over time • Cultural, economic, and technological factors influence a resource’s status over time and space • Uranium – never valued, but with advent of nuclear technologies now extremely valuable • Bluefin Tuna – prior to 1970 exclusively sport fish (.05 / lb)  Japanese specialty market develops –now a single large fish has sold for $180,000 • Solar Power – 1960s space race makes it important  1970s oil embargo makes it critical  1990s competes with dropping oil prices  now peak oil and increasing price make it desirable again

  16. Natural Capital has Value • Ecological, Economic, Aesthetic value • Value assigned based on diverse perspectives • Industrial Societies emphasize monetary & economic valuations of nature • Economic value determined by market price of goods or services produced • Extrinsic Values

  17. Ecosystem Capital: Goods and Services

  18. Natural Capital has Intrinsic Value • Ecological processes have no formal value • Still important though  waste elimination, flood & erosion control, nitrogen fixation, photosynthesis • Essential for existence but taken for granted

  19. Natural Capital has Intrinsic Value • Organisms & Ecosystems valued for aesthetic or intrinsic reasons may not produce commodities identifiable as goods or services • Unpriced & undervalued from economic standpoint • Value from spiritual, ethical, or philosophical perspective • So diverse perspectives needed to evaluate natural capital

  20. Value vs. Sustainability • Hard to compare the values without prices • Attempts being made to acknowledge the diverse values so they are weighed more rigorously against traditional values (GNP, etc.) • Is this kind of valuation possible? • Sustainability debate hinges around the problem of how to weigh conflicting values of natural capital

  21. Wealth of Nations • Determined by 3 components • Produced assets, Natural Capital, Human resources • Complement each other and contribute to well being • Dominant source of national wealth may vary between the 3 components

  22. How Society’s Assets Complement Each Other

  23. Composition of World Wealth

  24. Wealth of Nations • Often represented by GNP (Gross national product) sum of goods and services produced in a country • Shows economic health and wealth • GDP = GNP – net income from abroad • Often used to compare rich and poor countries • Depreciation in materials accounted for • Depreciation of natural capital never taken into account • This is a problem

  25. Example • If a country cuts down 1 million acres of forest • We see positive on income side from timber sales • Only depreciation accounted is in chain saws and trucks • What about the loss of natural services • Situations like this lead to undervaluing natural resources

  26. Sustainability • Living within the means of nature, on the interest or sustainable income generated by natural capital • Societies supporting themselves by depleting essential forms of natural capital is unsustainable • If well being dependent on certain goods or services must harvest with care • Specifically long term harvest or degradation should not exceed rates of capital renewal

  27. Sustainable Development • Term first used in 1987 in Our Common Future • Development that meets current needs without compromising the ability of future generations to meet their own needs • Economist view  stable annual return on investment regardless of environmental impact • Environmentalist view  stable return without environmental degradation • http://www.earthsummit.info/

  28. http://www.binishells.com/index.html

  29. The Earth Summit (1992) and its aftermath • Rio de Janeiro Conference on the Environment and Development • Env. Issues that cross international borders • Pollution, ocean conditions, atmospheric effects, forest destruction, loss of biodiversity • Agenda 21  focus on sustainable development for the 21st century • Reconcile future economic development with environmental protection • Followed by 2002 world summit on sustainable development in Johannesburg

  30. Sustainable Yield • Sustainable Yield = SY • SY = Rate of increase in natural stock • Amount to exploit without depleting initial stock or potential for replenishment • SY for a crop = annual gain in biomass or energy • These gains from growth or recruitment (production of offspring)

  31. Calculating sustainable Yield

  32. Sample Calculation • An average bluefin tuna produces 10 million eggs per year but only 10 of those survive to adult hood. Out of every 10, 3 will migrate to other areas of the ocean. If you start with 5000 tuna, what is the sustainable yield in your fishery? • So what would be a scenario where it would be a simple calculation?

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