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Natural capital refers to the mineral, plant, and animal formations of the Earth's biosphere when viewed as a means of production of oxygen, water filter, erosion preventer, or provider of other natural services . It is one approach to ecosystem valuation , an alternative to the traditional view of all non-human life as passive natural resources, and to the idea of ecological health.In a traditional classical economic analysis of the factors of production, natural capital would usually be classified as " Land" distinct from " Capital" in its original sense The distinction between "Land" and "Capital" was that land is naturally occurring, whereas capital as originally defined referred only to man-made goods. It may however be argued that it is useful to view many natural systems as "Capital" because they can be improved or degraded by the actions of man over time, so that to view them as if their productive capacity is fixed by nature alone is misleading. More importantly, they yield benefits naturally which are harvested by humans, those being nature's servicesNature's services is an umbrella term for the ways in which nature benefits humans, particularly those benefits that can be measured in economic terms. Robert Costanza and other theorists of natural capital conducted extensive economic analysis of nature', 17 of which were closely analyzed by Robert Costanza . These benefits are in some ways similar to those realized by owners of infrastructural capital which yields more goods, e.g. a factory which produces automobiles just as an apple tree produces apples.
The term was most closely identified with Herman Daly , Robert Costanza , the Biosphere 2Biosphere 2 is a manmade closed ecological system in Oracle, Arizona built by Edward P. Bass, Space Biosphere Ventures and others. It was used to test if and how people could live and study in a closed biosphere, while carrying out scientific experiments. project, and the Natural CapitalismNatural capitalism is a set of trends and economic reforms to reward energy and material efficiency and remove professional standards and accounting conventions that prevent such efficiencies. It emerged in the 1990s as a coherent theory of how to exploit economic model of Paul HawkenPaul Hawken is an American entrepreneur and author. He was an important figure in the natural food movement in the 1970s, and later an author. He wrote many books and articles on intentional community, and on the eco-village and ecology movement. His book, Amory LovinsPhysicist Amory Bloch Lovins is a co- CEO of the Rocky Mountain Institute, and author and co-author of books which make arguments for and popularize energy-efficiency principles to public and corporate audiences. Lovins' works include Factor Four with Hun, and Hunter Lovins until recently, when it began to be used by politicians, notably Ralph NaderRalph Nader (born February 27, 1934) is an activist attorney who opposes the power of large American corporations and has worked for decades on environmental, consumer rights, and pro-democracy issues. Nader has also been a strong critic of recent America, Paul Martin Jr., and agencies of the UK government including the London Health Observatory .
Some economists and politicians, including Martin, believe natural capital measures play a key role in money supplyMoney supply ("monetary aggregates", "money stock"), a macroeconomic concept, is the quantity of money available within the economy to purchase goods, services, and securities. Because (in principle) money is anything that can be used in settlement of a d and inflation measurements in a modern economy. They point to uneconomic growth and a lack of any direct connection between measuring well-being and such indicators as GDP.
Indicators adopted by UNEP, WCMC and the OECD to measure natural biodiversity use the term in a slightly more specific way. However, all users of the term differentiate natural from man-made manufactured capital or infrastructural capital in some way. It does not appear that the basic principle is controversial, although there is much controversy on ecological health indicators, value of nature's services and Earth itself, consistent methods of ecosystem valuation , biodiversity metric s and methods of audit that might apply to these services, systems and biomes.
Full cost accounting, triple bottom line, measuring well-being and other proposals for accounting reform often include proposals to measure an ecological deficit or natural deficit alongside a social deficit and the well-known financial deficit . It would be hard to measure such a deficit without some agreement on methods of valuating and auditing at least the global forms of natural capital, e.g. value of air, water, soil.
The concept of natural capital implies that the savings rate of an economy is an imperfect measure of what the country is actually saving, because it measures only investment in man-made capital. The World Bank now calculates the genuine savings rate of a country, taking into account the extraction of natural resources and the ecological damage caused by CO2-emissions.
