Natural Capital for Inclusive Growth: Options and Tools for South Asia A Policy Dialogue for Senior Policy Makers

A large variety of environmental resources are being degraded at alarming rates, and with them, the capacity to support and sustain human wellbeing. Studies undertaken in different parts of the world over the last two decades or more have highlighted the diverse impacts of human activity on the environment. Since the mid-1980s, one of the primary motivations for these studies was concern that rapid economic growth in some countries was being achieved through the liquidation of natural capital – a temporary strategy that erodes the capacity for sustained advances in wealth and human wellbeing unless this natural capital is converted efficiently into other forms of wealth.

Further, the Millennium Ecosystem Assessment  (2005), an in-depth assessment of the state of ecosystems of the world revealed that approximately 60 per cent of the ecosystem services that support life on Earth – such as fresh water, capture fisheries, air and water regulation, and the regulation of regional climate, natural hazards, and pests – are being degraded or used unsustainably. Scientists warn that the harmful consequences of this degradation could grow significantly worse in the next 50 years. “Any progress achieved in addressing the goals of poverty and hunger eradication, improved health, and environmental protection is unlikely to be sustained if most of the ecosystem services on which humanity relies continue to be degraded”, said the study (MA 2005).

In the years since then, considerable progress in the measurement and valuation of ecosystem services has been made. The recently concluded study on ‘The Economics of Ecosystems and Biodiversity’ (TEEB) pulled together much of the work in this area and succeeded in focusing international policy attention on the economic contribution of ecosystems and biodiversity. Valuation has been widely accepted in the environment community, but engaging Ministries of Finance and economic planning agencies in dialogue about growth and ecosystem services remains a challenge.

One part of the solution to this problem lies in policy making that takes into account the full value of ecosystem services. Another part lies in the regular production and dissemination of macroeconomic aggregates that reflect environmental changes. Both these strategies are vital and complement each other. Valuation is an integral part of accounting, although it also has an independent role in decision making for individual projects. Robust valuation of ecosystem services, together with an understanding of the limits of economic valuation, is important for designing projects. There is ample scope for strengthening the understanding on the value of ecosystem services in policy choices.

In view of all these developments, we propose a high-level policy dialogue that will use the two starting points of valuation and accounting to initiate a dialogue with statisticians, economists, and ecologists on how natural capital can be put into the centre of green growth strategies. 

Objectives of the Policy Dialogue
The Policy Dialogue will bring together senior policy practitioners and statisticians within provincial governments of the Bhutan, North East India, Myanmar and Nepal – a region with the richest base of natural forests and home to globally significant biodiversity hotspots. In partnership with experts on environmental policy, macroeconomists, and natural scientists approaches to augment existing macroeconomic aggregates will be discussed.  

The aims of the Policy Dialogue are to:
  • Evaluate the role of natural capital in economic growth
  • Illustrate and exemplify how inclusive wealth defined to include natural capital should be an integral part of each country’s System of National Accounts (SNA) 
  • Elucidate current efforts at the international level, both within the UN system and in specific countries, that integrate environmental considerations into development policies and growth strategy
  • Illustrate how valuation of ecosystem services can improve public policy decision making
  • Review methods for valuing ecosystem services and identify policy and capacity needs for valuation
  • Identify ways to develop valuation skills and macro-economic aggregates, other than GDP, to measure progress at the country level.
The Policy Dialogue will be a two and a half day event, designed to be interactive with each session providing time for ample participation. The Policy Dialogue will cover the dynamics of the relationship between natural capital and economic growth and demonstrate tools like valuation of environmental goods and services and how they can be integrated into national accounts.  Day 1 will focus on green economy and natural capital and Day 2 will focus on accounting and valuation, with a special emphasis on mountain and hilly regions.

The Policy Dialogue invites approximately 50 participants from multiple small and large provinces of India namely, Assam, Nagaland, Manipur, Mizoram, Arunachal Pradesh and Ministries in Bhutan, Myanmar, and Nepal.  Participants will include forestry officers, statistical officers, economic planning officials, and representatives of influential NGOs. 
Identifying and obtaining the right participants will be critical to the success of the policy dialogue.  Thus, partner institutions will be engaged to first identify countries that have some interest in the theme of the dialogue.  

Resource Persons
The Policy Dialogue will draw in resource persons who can discuss macroeconomic policies and natural capital and environmental valuation issues as well as national accounting. We hope to have a small team of policy makers, economists, ecologists, and national accounts specialists participating as resource persons.  

Associated Partners:
There will be time for break-out groups to discuss how the learning from this policy dialogue can be implemented and the challenges to implementation.  We will also expect participants to come prepared to discuss in some detail their own country’s SNA and where environmental considerations can be incorporated.

For more information contact:

Dr Bhaskar Karky, ICIMOD,  
Dr Pushpam Kumar, UNEP,