Integrating Natural Capital into National Accounts: Three Decades of Promise and Challenge

Abstract

Economists and ecologists have worked for decades on measuring sustainability by supplementing or adjusting traditional economic indicators such as GDP. Given the threats to humanity from climate change, environmental degradation, and biodiversity loss, it is vital to incorporate values of natural capital into national economic decision-making. This review focuses on how natural capital applications, historically applied from local to global scales, address national-scale concerns. However, natural capital data and accounts have been only partially developed in most countries, given a lack of common metrics and monetary values. Existing accounts are often incomplete in both the types of natural capital and ecosystems they include (e.g., water, land, different ecosystem types) and the values they measure (e.g., market vs. nonmarket values). While it is important to continue work to embed natural capital into national economic accounts, the need for practical tools to analyze environmental problems is more urgent. We review alternative options for incorporating natural capital into national-scale decision-making and make recommendations for countries where the data, capacity, and political will to conduct formal natural capital accounting are lacking.