May 10, 2022

Q&A with Katie Warnell: Accounting for Nature’s Benefits to the U.S.

Nicholas Institute for Environmental Policy Solutions
Q&A with Katie Warnell: Accounting for Nature’s Benefits to the U.S.

On Earth Day, President Joe Biden signed an executive order expanding federal efforts to implement natural solutions to the climate crisis and improve resilience to extreme weather, all while supporting local economies. Among the actions announced, the administration will develop measures called natural capital accounts that connect the value of ecosystem services to economic performance.

Katie Warnell, a policy associate in the Nicholas Institute’s Ecosystem Services Program, spoke about her work piloting natural capital accounts in the United States during a recent webinar hosted by the National Ecosystem Services Partnership (NESP). Warnell offered some insights on natural capital accounting ahead of a second NESP webinar on Wednesday, May 11, at 3 p.m. EDT.

Q: National measures such as gross domestic product (GDP) track the economic health of the United States. What exactly does natural capital accounting measure?

The goods and services that we get from natural ecosystems are not included in traditional economic metrics like GDP because they are not bought and sold in market transactions. Natural capital accounts fill that gap with several types of information. Supply and use tables track the flows of goods and services from ecosystems to people or economic units (such as timber harvested from forests for construction). These flows can be in physical terms (e.g., number of person-days of recreation) or in monetary terms (e.g., value of crops created by wild pollination). Meanwhile, condition metrics track ecosystems’ health and function relevant to their ability to provide goods and services (such as tree density or age in a forest).

Q: How does natural capital accounting help decision makers consider the value of ecosystems when developing policies?

Natural capital accounting allows decision makers to see the value that ecosystems provide to the economy and residents, which is a first step toward making decisions that maintain or enhance—rather than degrade—this value. Some decisions may look like a net positive based on traditional economic measures, but don’t account for potential negative impacts to the many other values provided by natural ecosystems. Because natural capital accounting shows changes in ecosystem goods, services, and condition over time, it can also help identify when and where certain ecosystems, and the value they provide, are at risk of degradation. That can enable appropriate action to be taken to reduce or prevent adverse outcomes for people and ecosystems.

Q: While national governments in the United Kingdom and Canada have started using natural capital accounting, the United States has been slower to adopt the concept. What progress has been made to lay the groundwork for incorporating natural capital accounting into U.S. policy making, and what barriers remain?

Over the past few years, a group of federal agencies and universities (including Duke University’s Nicholas Institute) worked together to develop a set of pilot natural capital accounts for the United States. This exercise created initial accounts that can be updated and expanded in the future, illustrated what the accounts could look like for the U.S., and identified what data is currently available to include in natural capital accounts and what gaps remain. One barrier to incorporating natural capital accounting into U.S. policymaking is that the accounts are most useful when they are as comprehensive as possible (given data limitations) and regularly updated; the pilot accounts that we have so far cover a limited geographic area and subset of ecosystem goods and services. The recent executive order calling for natural capital accounting is an important step toward systematic account creation and use.

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