Understanding Natural Capital

Natural capital is any natural resource (including plants, animals, minerals, and ecosystems) that provides functions that produce ecosystem goods and services. A forest within a watershed, for example, filters the water that supplies nearby communities.

Any product of an ecosystem function that benefits humans is an ecosystem good or service.

Goods are tangible things like drinking water, timber, fish, crops, and wildlife. Most goods can only be used or owned by one person, and they are generally easy to value and trade in markets.

Services are intangible, but also immensely valuable. Flood protection, water filtration, recreational value, and aesthetic value are a few examples. Ecosystem services often cannot be traded in markets or privately owned, so they are far more difficult to value. 

NATURAL CAPITAL INCREASES IN VALUE

Built capital may provide immediate, near-term benefits, but it also requires maintenance, breaks down, and falls apart, slowly depreciating in value over time. A car provides temporary benefits, but it is unlikely that our great-grandchildren will drive the same car.

Natural capital, on the other hand, appreciates in value. If cared for properly and kept healthy, natural capital can provide benefits far into the future, growing and essentially maintaining itself. A healthy watershed can supply water now and, if kept healthy, may yet still provide water for our great-grandchildren.

LOSE AN ECOSYSTEM, PAY MORE

When an ecosystem service is lost, it must be replaced if that service is to continue. Its replacement is often a new tax district and expensive new infrastructure. Built infrastructure usually costs more and does not perform as well. In the long run, preserving natural capital and the services it freely provides saves money.