Environmetal capital, also called 'natural capital', is defined as indispensable resources and benefits, essential for human survival and economic activity, provided by the ecosystem. Natural capital is commonly divided into (1) renewable resources (agricultural crops, vegetation, wild life) and (2) non-renewable resources (fossil fuels and mineral deposits) Natural resources include the atmosphere, freshwater and ground water, land, biodiversity, and capital employed by industries such construction. Environmental capital also includes negative values such as pollution, contamination, and desertification.
Capital in economy is a stock of goods that have power to produce further goods, and this conception includes land that is considered to be a separate factor of production. Classical economics thus identified three types of capital stock: land, labour and human-made capital (often just called 'capital'). Much neo-classical economics in its representation of production functions omitted land and only focused on labour and capital.
Ecological capital is a complex category which performs four distinct types of environmental functions:
- the provision of resources for production, the raw materials that become food, fuels, metals, timber, etc.
- the absorption of wastes from production, both from the production process and from the disposal of consumption goods. Where these wastes add to, or improve the stock of ecological capital (e.g. through recycling or fertilisation of soil by livestock), they can be regarded as investment in such capital. More frequently, where they destroy, pollute or erode, with consequent negative impacts on the ecological, human or manufactured capital stocks, then, as agents of environmental deterioration, they can be regarded as bringing about negative investment, depreciation or capital consumption.
- this type of environmental function does not contribute directly to production, but in many ways is the most important type because it provides the basic context and conditions within which production is possible at all. It comprises basic life-support functions, such as those producing climate and ecosystem stability and shielding of ultraviolet radiation by the ozone layer.
- this type of environmental function contributes to human welfare through what may be called 'amenity services', such as the beauty of wilderness and other natural areas. Both lifesupport functions and amenity services are produced directly by ecological capital independently of human activity, but human activity can certainly have an (often negative) effect on the responsible capital and therefore, on these functions produced by it.
Each type of capital stock may be associated with a type of sustainability. For example, a declining natural capital stock is a sign of environmental unsustainability.
Characteristics of the ecosystems, or natural capital, are environmental functions, defined as 'the capacity of natural processes and components to provide goods and services that satisfy human needs (directly and/or indirectly)'. Environmental functions have been classified in a number of different ways, for example as:
- Regulation functions: regulation of essential ecological processes and life support systems (bio-geochemical cycling, climate regulation, water purification, etc.);
- Production functions: harvesting from natural ecosystems of, for example, food, raw materials and genetic resources;
- Habitat functions: provision by natural ecosystems of refuge and reproduction-habitat to wild plants and animals and thereby contribution to the (in situ) conservation of biological and genetic diversity and evolutionary processes.
- Information functions: provision of many possibilities for recreation and aesthetic enjoyment, cultural and historical information, artistic and spiritual inspiration, education and scientific research.
Environmental sustainability is defined as the maintenance of important, or critical (and therefore essential for environmental sustainability), environmental functions and therefore, the maintenance of the capacity of the capital stock to provide those functions. Criteria for their importance, or criticality, and their sustainable use need to be assessed with regard to the essentially dynamic nature of ecosystems.
The loss of environmental functions may be irreversible and the maintenance of the critical natural capital is essential for environmental sustainability.
- Bussiness Dictionary,[online] http://www.businessdictionary.com/definition/natural-capital.html#ixzz2591qe2YS
- El Serafy, S. (1991). The environment as capital. R. Costanza. Ecological economics: The science and management of sustainability. Columbia University Press, New York, 168–175
- Ekins, P., Simon, S., Deutsch, L., Folke, C., & De Groot, R. (2003). A framework for the practical application of the concepts of critical natural capital and strong sustainability. Ecological Economics, 44(2-3), 165–185