Towards a green economy Box 1: Changes in natural capital stocks
Conventional economic indicators, such as GDP, provide a distorted lens on economic performance particularly since such measures fail to reflect the extent to which production and consumption activities may be drawing down natural capital. By either depleting natural resources, or degrading the ability of ecosystems to deliver economic benefits, in terms of provision, regulating or cultural services, economic activity may be based on the depreciation of natural capital. Various alternative approaches to adjusting the system of national accounts and aggregate economic indicators are being refined and discussed at the international level (e.g. Integrated Environmental and Economic Accounting – SEEA*
).
The T21 model tracks the evolution of various natural resource stocks over time as highlighted in Figure 12 and in more detail in section VI of
the Technical Background Material. The
green economy scenarios are characterised by investment in and recovery of these stocks, providing a basis for sustained income gains over the medium- to longer-term.
It is insightful to undertake some additional calculations, using relatively simplistic assumptions, to generate some sense of the potential economic magnitude of the improved management of natural capital. The table below presents changes in the value of three resource stocks-fossil fuels, forests and fisheries-over the short- and medium-term in both absolute terms and relative to GDP. The change in physical values for fossil fuels and fish is valued using estimates of the economic value (unit rent), and for forests, using estimates from TEEB. Following the methodology employed by the World Bank (2006), these estimates of depreciation (or appreciation- where changes below are positive), these amounts can be seen as reflecting additional components of a measure of negative net savings in global wealth (as could be represented in asset accounts following system of national accounts).
According to these calculations, annual drawing down fossil fuel stocks is equivalent to 1.8 per cent of current GDP. Under BAU, this remains roughly the same in the short-term and then rises in the medium- to longer-term. The G1 and G2 scenarios reverse this trend with this depreciation, as a ratio to GDP, declining over the period 2010-2050, reaching 0.5 per cent of GDP by 2050 under G2, reflecting the marked reduction in fossil fuel dependence of the global economy in this scenario.
Lower and upper bound values of the value of the depreciation of natural capital in the form of forest land are presented due to the wider range of uncertainty concerning global reference values (see section
VI, Technical Background
Material, which makes use of results from TEEB research). Current depreciation of forestland is thus estimated at between US$ 2.8 billion and US$ 2.6 trillion - spanning three orders of magnitude - which is between 0.01 per cent and 5.4 per cent as a proportion of GDP. Note that the higher range estimates are comparable to, and indeed well above, those for fossil fuels. The green scenarios considerably reduce this loss within the short-term and turn it around into modest positive growth - or appreciation instead of depreciation - by 2050.
Similar improvements can be seen in fish stocks. The current estimate of depletion of this natural asset is valued at US$ 116 billion per year, which is -0.24 per cent when expressed as a ratio to GDP. The green scenarios succeed in reducing this lost and over the medium- to longer-term, stabilising it or turning into a net appreciation.
Although a range of results is only presented for forest resources, due to the wide range of existing measures, the estimates for fossil fuels and fish could also be developed into ranges. These would, however, probably not have the same degree of variability as those for forests.
It is important to bear in mind that even though the results are presented in a way that makes comparison between the estimated depreciation of the different assets comparable, this should be done and interpreted with care. In particular, the three assets are not substitutes for each other. Fossil fuels are a source of energy. Forests, including how they are valued here, provided a range of provisioning and regulating services, both locally but also much more widely, including even globally. Fisheries provide a major source of protein and employment to a substantial proportion of the world’s population but many of these people would not be able to substitute forests for fisheries as a source of food and livelihoods, or vice-versa.
In general, the results underline the substantial economic significance of how the world is currently managing its natural capital, as well as the potential gains that can be won from pursuing a green economy strategy. This allows the global economy to invest in natural capital that is critical for sustained well-being, while reducing the dependence on fossil fuels.