Measurement of natural capital

Natural capital accounting is a tool to measure the changes in the stock and condition of natural capital (ecosystems) at a variety of scales and to integrate the flow and value of ecosystem services into accounting and reporting systems in a standard way.

It is crucial to understand the value of natural capital, going beyond the framework of inclusive wealth. Natural capital accounting is a key focus for ONS, involving state of the art valuation methodologies and international collaboration with the United Nations Statistics Department, the World Bank and UNEP.

This ESCoE project aims to improve methodologies for the valuation of natural resources.

We will use exchange values or appropriation of rent in line with SEEA (System of Environmental Economic Accounting). A variety of techniques will be used to calculate these values where observable market prices are not available.

To analyse trends in sustainability, it is important to have reliable price indices and deflators for natural assets. The project will use market prices where possible and will compile shadow prices in cases where this is not possible.

Timeliness is a key issue. Current estimates for UK natural assets extend only to 2019. This could be addressed by exploiting information available from satellite and other earth-observation data and using recent advances in data science techniques to analyse such information. This will be exploratory territory to find areas of improvement.

Provision of more accurate, more comprehensive and more timely estimates of natural capital can be used on their own or as part of wider measures of effective national product, income and wealth.

Better measures of the development of natural assets will also underpin informed public discussion and to help effective policymaking and wider decision making.