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Demystifying Natural Capital Accounting: 10 African Countries Sign On

Rachel Kyte's picture

Credit: Juan-Vidal, Creative Commons

We’ve all seen what happens when natural capital is undervalued. Oceans that billions of people rely on for food and income get overfished and become dumping grounds for chemicals and waste. Mangroves that protect shorelines from storms are replaced with resorts.

Many countries are looking beyond GDP to help them address the challenges undervaluing natural capital has created. What they need is a measure of a country’s wealth that includes all of its capital — produced, social, human, and natural capital.

In Botswana at the Summit for Sustainability in Africa this afternoon, 10 African countries endorsed the need to move toward factoring natural capital into systems of national accounting. By Rio +20, the upcoming UN Conference on Sustainable Development, we hope to see 50 countries and 50 private corporations join this effort.

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Africa has several examples of natural capital accounting already at work.

Botswana is piloting water accounts that its government is using to determine how much water each sector of the economy is consuming and where that limited resource is possibly being overused. Knowing that information can help the government weigh economic tradeoffs and create effective incentives for water efficiency.

Biodiversity-rich Madagascar wants to know how to finance more than 60,000 square kilometers of protected areas. Natural capital accounting can help the country calculate the value of the forests in their entirety.

In all, at least 24 counties are using some form of natural capital accounting. For many low-income countries, natural capital is a critical asset that makes almost 36 percent of their total wealth.

We’ve been talking about natural capital accounting for years, but until a few months ago, there wasn’t an agreed methodology to move it forward. That changed when the UN Statistical Commission approved the System for Environmental and Economic Accounts. SEEA provides methods for countries to account for natural resources like minerals, timber, and fisheries. The next step is to expand natural capital accounting to cover ecosystem services like the storm protection provided by mangroves.

A recent study of mangroves in Thailand shows what a different this knowledge can make. When you look at just the timber value of the mangroves, they are valued at around $955 per hectare. Replacing them with shrimp farms would return around $11,000 per hectare. So, conventional economics would favor conversion to shrimp farming. But when you factor in the mangroves’ critical role as storm and flood barriers, their value rises to over $20,000 per hectare. If this information and this kind of thinking been active earlier, the large swathes of mangroves around the Gulf of Thailand that were destroyed for shrimp farming and coastal development, might still be intact.

 

We just released a report to help demystify the concept of natural capital accounting. To help countries overcome the challenges they face in undertaking natural capital accounting, the World Bank also recently launched the Wealth Accounting and the Valuation of Ecosystem Services partnership, or WAVES. It includes UN agencies, national governments, NGOs, institutions, and developed and developing countries — Australia, France, the Netherlands, Norway, Spain, Botswana, Colombia, Costa Rica, Madagascar, and the Philippines. The government of Japan just committed $US3 million to strengthen a partnership that is helping countries value their natural capital.

As we head to Rio, we are seeing increasing interest from ministers of finance in the idea of complementing GDP with a measure that better reflects their countries’ natural assets.

We expect to see that interest grow.

 

Rachel Kyte
Vice President for Sustainable Development
www.worldbank.org/sustainabledevelopment
Twitter: @rkyte365

 

Comments

Submitted by Aprameya Parida on
We are not using our resources in a sustainable manner despite numerous meetings by governments and important organisations.This is because we(old politicians ,bureaucrats ,others )forget about our future generations .Such philosophic thinking about our senior generations( occupying important positions) that death is comimg, so we should not think about 50 years ahead is like guillotining your own children. Next,like shrimp farming will cost us more over mangrove cultivation if you think about from economic and environment points,reminds us the unethical fishing practices in not only oceans but also in rivers.Moreover ,is it a sin to turn vegetarian(even we can lead better life)?Rather we are consuming more than earlier ,even wasting without any considerations.This won't have an impact upon likes of Bill gates,Mukesh Ambanis etc.But we should think world at large ,how each of us will remain happy and our future generations will be a happier lot.

Every country, every individual has to make their own decisions about how best to protect their children's future. Valuing natural wealth is one way governments can and are thinking ahead for those future generations. Improving management of ocean resources and stopping misuse of the oceans is another. So is improving urban and land use planning to avoid creating untenable situations that aren't healthy for people or natural resources. Thinking ahead is critical for current generations as well. As for your plea for vegetarianism, knowing what is in what you eat so you can make healthy food choices that are also good for the planet is an important area where the personal and the political coincide.

Submitted by Johnson Oluata on

Hi.It is not a hidden fact that the accounting profession is not yet very clear on how best to combat the menace of under reporting or non disclosure of Natural Capital, particularly in Africa, do anyone have a brief on this?

Submitted by Blog Admin on
Thanks for the question. For a good introduction to natural capital accounting, why it matters, and how it is being used, try the report Moving Beyond GDP (pdf) . You can learn about how Madagascar and Botswana are using natural capital accounting through our partnership website, Wealth Accounting and the Valuation of Ecosystem Services, or WAVES. The WAVES site also has a list of recent publications on natural capital accounting with more detailed analyses and case studies.

Systematize Natural Capital

We all live in an information economy yet we lack enterprise quality systems to measure and manage the diverse set of resources that make up all the goods and services we rely on. The current lack of significant action to manage ecosystem resources by default assigns a value of zero to natural capital assets.

Integrated Sustainable Management is needed to move the needle on Climate Change. It requires a crucial link between a corporate P&L plus GPD and the natural capital assets that support every economy.

There is needed focus by governments NGO and universities on quantifying how we measure the process of valuing natural capital. Yet what is too often missed is the fact there is enough data today to make directionally accurate decision by leaders of business and governments. The outcome can be efficient decision making that benefits todays stakeholders and future generations.

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