Natural Capital and the Value of Ecological Services

Report author Skip Pruss

By Skip Pruss

This article is excerpted from the second of four policy briefs by former FLOW board chair, and former director of the Michigan Department of Energy, Labor and Economic Growth, Skip Pruss that make the economic case for government’s role in protecting the environment.

The second policy brief, “Resetting Expectations: The Value of Natural Systems and Government’s Role in Protecting Water,” is available here to read or download as an executive summary or full report. FLOW will unveil the last two briefs in the coming months. (Pruss’ first report in the series also is available here in executive summary and in full.)


The natural world provides a continuous stream of abundant, valuable goods and services. Air, water, soil, flora, and fauna upon which we all depend are relentlessly harvested, used, and abused without an appreciation of our dependency upon this natural capital and the value we derived from it. Nature-based capital, when unimpaired by outside stressors, is continuous and sustainable, providing a constant, renewed flow of natural resources that undergird the global economy.

Natural capital is the feedstock; nature also provides processes that continuously provide beneficial services. The list of ecological services nature provides is limited only by our evolving understanding of science. Fertile soils assisted by microbial action enabling nutrient absorption produce food and fiber and enable life. The hydrologic cycle purifies and refreshes our waters, absorbing floodwaters and recharging aquifers. Terrestrial and aquatic plants purify the air, sequester carbon dioxide, and produce oxygen. As integrated complex systems that thrive in the absence of human interventions, these ecological processes only scratch the surface of the sustainable services nature provides.

Calculating the services natural systems provide in dollars and cents does not mean that money is the only measure of nature’s value to human beings. Humanity depends on nature for inspiration, beauty, and spiritual and physical renewal. Scientific research has shown that living close to nature and spending time outside has significant and wide-ranging health benefits, reducing the risk of stress and disease. An economic measure of ecosystem services is merely one way of expressing their value.

The primary benefits and functions provided by nature-based services are set forth in the National Climate Assessment, a requirement by federal law calling upon the U.S. Global Change Research Program to “conduct a state-of-the-science synthesis of climate impacts and trends across U.S.
regions and sectors every four years.” Those benefits and functions of natural capital include:

  1. Providing provisioning materials, such as food and fiber,
  2. Regulating critical parts of the environment, such as water quality and erosion control,
  3. Providing cultural services, such as recreational opportunities and aesthetic value, and
  4. Providing supporting services, such as nutrient cycling.

The work of understanding and quantifying the economic benefits of natural capital and ecological services is very recent. Herman Daly, a Senior Economist in the Environment Department of the World Bank and co-founder and associate editor of the journal, Ecological Economics, is credited with being among the first to document both the value of natural systems and the costs of degrading the services nature provides. Robert Costanza, Paul Hawken, and Amory Lovins were also among the first to write widely on the abundant benefits of nature-based services as well as to probe deeply into the economic consequences of diminishing these services by degrading the environment.

The field of ecological economics is now well established. A recent report from the United Nations International Science & Policy Platform for Biodiversity and Ecological Services (IPBES), Regional Assessment Report on Biodiversity and Ecosystem Services for the Americasquantified the annual value of ecological services provided by natural systems in the Americas. The analysis, involving the collaboration of over 100 scientists who reviewed more than 4,100 scientific publications, found that 40 percent of the planet’s capacity to provide nature-based services lies in the Americas, having a total annual value estimated at $23.4 trillion. This figure, incomprehensibly large, is even more remarkable given the fact that only 13 percent of the world’s population resides in the Western hemisphere.

We who reside in the United States and Canada enjoy a surfeit of world’s capacity to produce natural capital and ecological services. Eighty-seven percent of the world’s population lives in areas of the planet that offer only 50 percent more nature-based capital and ecological service value than the Americas have with one-sixth the population. North Americans also have a much larger ecological footprint; our relative wealth in natural resources works to conceal both our disproportionate consumption of global ecological services and the magnitude of the environmental challenges facing the rest of the world.

“The health of ecosystems on which we and all other species depend is deteriorating more rapidly than ever. We are eroding the very foundations of our economies, livelihoods, food security, health and quality of life worldwide.”

~IPBES Chair, Sir Robert Watson

The global capacity to produce nature-based capital and ecological services is finite. The “biocapacity” of the earth’s natural systems is a measure of the planet’s ability to supply and reproduce nature-based goods and services and absorb society’s waste products. It is nature’s banking system — a natural endowment that provides trillions of dollars of benefits annually to the global population — that is now being overdrawn.

In most of the developed world the consumption of natural resources exceeds the regenerative capacity of the earth’s natural systems. Quantifying and monetizing the earth’s biocapacity, as well as the ecological footprint of nations, are difficult and complex endeavors, but essential to advancing our understanding of our impacts on the environment and to formulating and implementing strategies that enable better stewardship of the natural systems on which we depend.

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