Humanity is desecrating our earthly home (UNEP 2019). The immediate causes are self-evident. The deeper structural causes are more contentious. The appropriate responses (in policy and practice) are even more controversial: address the root causes or deploy the dynamics which created the problem in the first place.

This paper¹ is concerned with ecosystem degradation as a subset of this broader environmental crisis and is focused on one particular policy approach to managing ecosystem degradation, namely, natural capital accounting and related innovations including bonds, certificates and markets (Obst 2017, KPMG and National Farmers Federation 2019, IDEEA Group 2020, Smith, Ascui et al. 2020, World Bank 2022).

The paper starts with a review of the concepts and disciplines of natural capital accounting. Following this, a number of uncertainties are discussed including measurement challenges and transaction costs, distributional and equity issues, different stakeholder interests, and alternative strategies for achieving the very real objectives which natural capital theory seeks to address.

The paper concludes that while there are some applications where natural capital theory may add value it has significant intrinsic limitations, in particular, tying the value of the environment to its contribution to the human (capitalist) economy; and locking in environmental short termism through the discount rate.

Natural capital accounting is promoted as the basis for attracting private capital into the funding of protection and restoration through the creation of a market in certified improvement. This project (a market in natural capital improvement) promises to be complex, inefficient, and open to manipulation. Much of the support for this project is coming from stakeholders who stand to benefit regardless of its effectiveness in environmental stewardship.

Natural capital accounting obscures the role of profit incentives, competitive pressures, corporate power and globalization in driving extractivism and pollution. Indeed, as an approach to funding conservation it seeks to harness these dynamics.

Paper finalised 19 April 2022
Published here 21 Feb 2023

1. I am not an expert in ecology or accounting. These notes were put together to assist me in thinking through a particular set of choices regarding remnant bush restoration and protection. DGL