Book review: Natural Capital: Valuing The Planet

Putting a value on things we take for granted may save humanity argues Dieter Helm. Noel Baker is impressed by his powerful, commonsense arguments.

Book review: Natural Capital: Valuing The Planet

Dieter Helm

Yale University Press

IT SEEMS the people who are going to save the world for this and future generations might not be swaggering world leaders, eco-warriors, robots or some unlikely superhero. No — it’ll be the accountants.

Well, that’s not quite true, but the humble accountant could certainly find a role for themselves in determining the future of humanity if Dieter Helm’s intriguing and eye-opening book is anything to go by.

Helm is professor of energy policy at the University of Oxford and an economist, but he is also the chair of the world’s first Natural Capital Committee.

Evidently, he loves nature and rambles through the countryside. He also loves the nuts and bolts of economics. Therefore, it’s no surprise he believes now is the time to put a price on nature.

Or as he puts it: “It is time to treat the environment not as a constraint on the economy, but as an integral part of it.”

In short, this generation should put together a balance sheet of natural assets, up to and including entire species or eco-systems, and value them with a view to ensuring the aggregate level of this “natural capital” does not decline over time.

By doing this, it would ensure we pass on a level of natural capital that is of at least the same value as that which we inherited, and by making the environment a central plank of the global economy, we would safeguard both economic growth and quality of life.

It’s certainly an interesting idea, although reading through the book the mind boggles at how humans — in the form of governments or agencies — would go about the world’s largest ever stocktake.

How much is a honey bee worth? Per bee or by the hive? What about a coral reef? Rare fauna? The vast Arctic ice and the humble bog?

In outlining how this theory would work, Helm first explains why such a policy should be pursued.

As he puts it, economics forces choices to be made, and this idea of nature as a commodity is a much better bet than the wooly debate that typically soundtracks the issue of environmental sustainability — a green-tinged muzak that also seldom achieves any real results. Helm is enjoyably blunt when he writes of the arguments heard for banning cars or slashing fossil fuels.

As he puts it “naive Utopianism gets us nowhere”, and later he writes that such theories speak of a retreat from the world rather than an attempt to actively engage with it. And it’s hard to argue with him when he asks why so little has been achieved so far in trying to protect the key aspects of nature that are essential to human life.

Poetic ramblings about the priceless qualities of nature are an obstacle — “If it is priceless there’s no obvious way of sorting out which assets matter most and where efforts at preservation need to be made,” he says.

Helm also believes that many experts in recent decades have been focusing on the wrong assets.

The current campaign ‘keep it in the ground’ aims to persuade companies to keep fossil fuels where they are, rather than extracting them as once they’re used, they’re gone. But according to Helm, “the real concern is the depletion of renewables.”

The problem we have is that once renewables get to the stage where they don’t renew, humanity is in serious trouble. By contrast, he says none of the dire warnings regarding the depletion paths of minerals and fossil fuels have yet come true.

There are numerous strands running through this book and sometimes it can become a little bewildering.

As he outlines how the natural capital model might be applied, I began to think of myself as Homer in the bowling episode of The Simpsons: he starts off reading a book called Advanced Marketing, then switches to one entitled Beginning Marketing, before just looking up the word “marketing” in the dictionary.

However, the core point is easily understood: in a world where annual GDP growth of 3% to 4% per annum is almost expected by right, a system needs to be implemented whereby aggregate natural capital rule is applied, and where natural assets be traded off against man made ones. By implication, this would echo into the future.

Helm argues that by concentrating on the near future of the current and next generation, the model could become self perpetuating beyond that. Each generation would need to pass on a set of assets at least as good as the ones they inherited.

The balance sheet approach would help ensure this is the case, and with an acceptance that not every species or natural asset is going to survive. Hence, the prioritizing of the most important ones, led by renewable assets at risk which are key and of immediate concern.

According to Helm, these should be targeted first, notarised and valued like a modern day equivalent of the Domesday book, treated as assets in perpetuity and ones which cannot be depreciated. It might be an artificial construct, but is it any less likely to work than the imperfect system we have already?

We have already heard about the plight of the aforementioned honeybee and the effect its extinction would have on the food chain.

We are well-versed in how over-fishing could spell disaster. Indeed, the idea of fishing quotas like that under the EU Common Fisheries Policy is one that could slot neatly into the developed notion of natural capital.

“A price has to be put on nature,” according to Helm. We must measure natural capital, beginning with an overwhelming focus on renewable assets and in particular on those at risk of becoming non-renewable. “The uncertainties should be faced head on.”

There must be compensation for pollution, compensation for the depletion of non-renewables and renewables, and there should be judicious use of taxes and permits and subsidies.

There is a moment in this book which will give an Irish reader a wry smile. Explaining how GDP as a way of measuring growth doesn’t work, and in the midst of giving recent macro economics a thorough kicking, Helm rolls out the classic phrase ‘we were all living way beyond our means’.

While some of the theory in the book can be heavy going, the author has a deftness of touch and an eye for a striking image. At one point he talks of “the day of reckoning” and adds of a doomsday scenario where the world effectively consumes itself: “It would be Easter Island all over again.”

We are not there yet, however. Helm sees no reason to think that technological progress will slow and he also believes that we are in the early stages of human capital — “the scale of technical change to come will inevitably dwarf what we now have”.

But we will need more than that and it comes down to a choice: either carry on depleting resources that were previously thought of as infinite and prove right the prophets of doom, or follow a sustainable growth path that has natural capital at its core. The balance sheet, the costings, the accountancy — in essence, we need to keep the books in order.

“A line in the sand needs to be drawn, and once this step is taken the rest will follow,” he argues. It sounds simple, but it needs a collective flicking of a mental switch to put it into practice. That, and in all likelihood, some very good ‘green’ accountants.

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