2 Natural capital and resource use efficiency
Natural resources contribute to stronger sustainable economic growth in Scotland, and we increase our Natural Capital to pass on to the next generation.
- Encourage wide acceptance and use of the Natural Capital Asset Index, including an index measure for the marine environment.
- Inform decision-making and market-based approaches using established values for ecosystem services.
- Begin a programme of peatland restoration and management, as recommended by the IUCN UK Commission of Inquiry on Peatlands.
- Explore the potential for greater use of 'offsetting' to secure benefits for biodiversity whilst minimising costs to business
2.1.1 The Scottish Government recognises that Scotland's rich and diverse natural environment is a national asset and a source of significant international competitive advantage. Its continuing health and improvement is vital to sustainable economic growth. Many of Scotland's growth sectors such as tourism, food and drink depend on high quality air, land and water. There are many other less tangible ways in which our natural assets sustain us, contributing to our health and wellbeing, enjoyment, sense of place and who we are as a nation.
2.1.2 Once the value of this national asset is recognised, we need to manage and invest in it to maintain its function. We need to make efficient use of natural resources, and add to the quality of these to gain better outcomes for our economy and society now and for the future, recognising that our impact on nature and ecosystems extends through trade far beyond our own boundaries.
"Scotland's rich and diverse natural environment is a national asset and a source of significant international competitive advantage."
2.2 The value of natural capital - nature's support for prosperity
2.2.1 The value of nature to people and the economic importance of natural systems have been demonstrated by two studies: The Economics of Ecosystems and Biodiversity (TEEB, 2010) and the UK National Ecosystem Assessment (UKNEA,2011). These evaluated the benefits that flow from nature (ecosystem services), which in turn gives a measure of the value of natural capital.
2.2.2 The UKNEA showed that over the past 60 years there have been significant changes to Scotland's natural environment and the way people benefit from it. Production of food from agriculture has increased significantly but many other ecosystem services declined, particularly those related to air, water and soil quality. These tend to be the services which are less visible or which have less 'market value'. Some ecosystem services have shown welcome improvements in recent years, while others are still in decline or remain in a reduced state, including marine fisheries and wild species diversity. Possible responses to this have been discussed in chapter 1.
2.2.3 Monetary values for all ecosystem services are impossible to determine. Some services, such as providing the oxygen we breathe, cannot be given a meaningful value. The services which can be valued, however, have been estimated to be worth between £21.5 and £23 billion per year to Scotland4. . The Scottish Government is funding research both to develop and improve techniques to assign monetary values to ecosystem services, and to understand the value of these for Scotland.
Examples of nature's services and their value
- The peatland soils of Scotland are estimated to store 10 times more carbon than all UK trees (UKNEA).
- Lochs in Scotland store almost 35 billion cubic metres of water, and soils up to 42 cubic billion metres of water (UKNEA) - for comparison, 1 cubic metre equates to the average daily water use of 6 people in a household.
- The value of insect pollination services in Scotland is estimated at £43 million per year (UKNEA).
- The value of coastal wetlands in Scotland has been estimated as £49-76 million per year (UKNEA working paper).
- Visits to the outdoors made by people living in Scotland generated around £2.3 billion in expenditure in 2010 (Scotland's Environment Web).
- In 2004, the value of marine biodiversity-related industries in Scotland was estimated to be over £1.2 billion (Scotland's Environment Web).
In 2004, the value of marine biodiversity-related industries in Scotland, including marine tourism, was estimated to be over £1.2 billion.
2.3 Principles for sustaining the value of Scotland's natural capital
2.3.1 Taken together, evidence from the TEEB and UKNEA reports points to a series of principles that should be reflected in public policy and decision-making to sustain the benefits from Scotland's natural capital:
1) The full benefits from nature should be integrated into a cost-benefit appraisal of policy, management or development options. Where the value of nature's benefits cannot be measured, the consequences of different options can still be identified, as done through Strategic Environmental Assessment and Environmental Impact Assessment. We want to minimise negative impacts on nature but also to enhance natural capital and the benefits from it. Trade-offs between different ecosystem services should be made more explicit to decision makers, so that changes to public benefits from nature are considered alongside other costs and benefits.
2) Safe minimum standards and precautionary approaches should be adopted alongside valuations and assessments. This will ensure that the importance of nature for maintaining resilience to future change is captured, and the presence of tipping points or thresholds is recognised, not least where a small change may lead to a long-term irreversible impact. For example, the Water and Marine Strategy Framework Directives both identify ecological status standards which help to prioritise action to restore water bodies and to judge the significance of proposals for future use of these natural resources. Nature conservation legislation identifies key sites and species which need to be protected in order to sustain Scotland's natural assets for current and future generations. The Flood Risk Management (Scotland) Act 2009 requires SEPA to consider whether techniques that restore, enhance or alter natural features and characteristics can contribute to managing flood risk.
3) The value of nature should be reflected in incentives and price signals. This can include payments for ecosystem services, reform of environmentally harmful subsidies, tax breaks for conservation, or new markets for sustainably produced goods and services. Market-based mechanisms need to be used in a way that sustains public benefits for current and future generations, and are not always appropriate. The Woodland Carbon Code, for example, is a voluntary standard for woodland creation projects in the UK which make claims about the carbon dioxide they sequester. Independent certification to this standard provides assurance and clarity about the carbon savings of these sustainably managed woodlands. A Peat Carbon Code could enable peatland restoration to be promoted within carbon markets in a similar way.
"Taking preventative action before invasive non-native species become widespread will be much less costly than dealing with their economic impacts."
4) Investment in protecting and building up natural capital can bring economic benefits that greatly outweigh the costs. The TEEB study showed that protected places can deliver economic returns that are 100 times greater than the cost of their protection and maintenance. Maintaining nature's capacity to provide the functions upon which we rely is often cheaper than having to replace them by investing in heavy infrastructure or technical solutions. Taking preventative action before invasive non-native species become widespread will be much less costly than dealing with their economic impacts, such as damage to forestry, crops and infrastructure. These impacts have been estimated as costing up to £2 billion per year in Great Britain - possibly as much as £200 million for Scotland (see also chapter 4).
5) The value of natural capital assets should be incorporated into national accounting and business accounting to ensure this is fully considered in assessing the effectiveness and sustainability of government and business. This is a desirable goal that requires development of data, methodologies and standards. Companies should already be considering changes to the condition of natural assets that could have a significant impact on their business, as part of their review of the main trends and factors likely to affect their performance. There is a commitment at the UK level to putting" natural capital at the heart of Government accounting" (UK Natural Environment White Paper, June 2011).
Taking account of the benefits from nature: Scottish Government Principles for Sustainable Flood Management Appraisal (2011)
An appraisal of options should underpin decision-making at all levels of flood risk management planning - from strategic flood risk management plans to individual projects. To ensure sustainable actions are taken, the assessment of options should not be limited to impacts that can be measured easily in monetary terms. Other significant impacts such as on health and the environment must be described and valued. Assessment of environmental impacts should include valuing the environment according to the range of goods and services it provides to people and how delivery of these benefits might be altered by different options.
2.4 Resource efficiency - making the most of our natural assets
2.4.1 Resource efficiency means preserving the natural assets whilst increasing the value obtained from them to enhance our prosperity. Some natural assets, such as the extent of our land area, are fixed, while sea area is set by international agreements. We have real choices to make about how to balance the uses of these, however, in order to support a prosperous nation. More effective use of natural assets can also help us move towards a sustainable economy. Ensuring a prosperous future for Scotland within natural limits requires us to value and make the best use of our natural assets - or of nature. This echoes the perspective of the European Commission in its strategy document A Resource-efficient Europe:-
"Natural resources underpin the functioning of the European and global economy and our quality of life. These resources include raw materials such as fuels, minerals and metals but also food, soil, water, air, biomass and ecosystems. The pressures on resources are increasing."
2.4.2 The Scottish Government published its Land Use Strategy in March 2011. This sets out a vision and objectives for Scotland's land resources, and it proposes a set of principles to move towards these objectives in decision- and policy-making (see box below).
Land Use Strategy
"A Scotland where we fully recognise, understand and value the importance of our land resources, and where our plans and decisions about land use deliver improved and enduring benefits, enhancing the wellbeing of our nation."
- Land-based businesses working with nature to contribute more to Scotland's prosperity.
- Responsible stewardship of Scotland's natural resources delivering more benefits to Scotland's people.
- Urban and rural communities better connected to the land, with more people enjoying the land and positively influencing land use.
2.4.3 Consumer-driven innovation can contribute towards more resource-efficient consumption and lead to benefits for biodiversity and ecosystems. For example, the Food and Drink Federation recognises the need to look at the environmental impacts of product sourcing and to consider supply chains (including its global footprint). Cereal company Jordans is a good example of a business which has fully incorporated its commitment to biodiversity into its operations: for over 25 years, it has worked only with grain farmers who dedicate 10% of their land to wildlife habitats.
2.5 Biodiversity offsetting
2.5.1 Biodiversity offsetting refers to schemes designed to compensate for losses of biodiversity resulting from development projects; it is also referred to as 'habitat banking' or 'conservation credits'. It can allow for off-site environmental improvements to be funded by a developer as a condition of approval for a development that will have negative impacts on biodiversity elsewhere.
2.5.2 Biodiversity offsetting thus offers potential benefits for biodiversity and in creating a clearer framework for developers to compensate for unavoidable damage. There are risks though, for example if offsetting inadvertently becomes a green light to developments which cause unacceptable levels of damage to a unique resource. An unduly onerous or complicated scheme could increase costs to business. Internationally a set of principles around which to frame schemes has been developed, and there is growing experience on the practicalities of schemes.
"We would welcome comments on biodiversity offsetting in consultation responses."
2.5.3 The Scottish Government is keen to consider the scope for the use of biodiversity offsetting. We would welcome comments on biodiversity offsetting in consultation responses.
2.6 The role of peatlands in a low carbon economy
2.6.1 The Scottish Government's low-carbon growth strategy sets out plans for a transition to a low-carbon, highly resource-efficient economy for Scotland. The natural environment has a key role to play here. Over 60% of Scotland's land cover has peat or peaty soils, and Scotland has most of the UK's peatland resource. Few other countries have more peatland than Scotland. The blanket and raised bog peatlands are the single most important terrestrial carbon store in Britain, while active bogs continue to accumulate more carbon, as well as contributing to water regulation and water quality - and supporting biodiversity. A loss of only 1.5% of the carbon locked up in UK peatlands would equate to the total annual Scottish human-related emissions of greenhouse gases.
2.6.2 The IUCN UK Peatland Commission of Inquiry report (2011) urged a speedy response to protect and restore our peatlands, and warned that delay would lead to far greater costs. The important role of peatlands in mitigating and adapting to climate change is recognised under international climate change agreements. Focused action and investment in peatland restoration provides a cost-effective approach to reduce carbon emissions alongside other measures. The Scottish Government intends to develop a peatland restoration and enhancement programme to take this forward.
2.7 Natural Capital Asset Index - measuring our progress
2.7.1 A measure of natural capital is needed to help track the sustainability of the economy, alongside measures to account for financial capital. Natural capital measures the stock of environmental assets delivering ecosystem services. Scottish Natural Heritage is developing 'Asset Check' indicators of natural capital, as part of a Natural Capital Asset Index for Scotland. The Index reflects the extent and quality of ecosystems and their potential to provide benefits or ecosystem services and it can be measured annually (see also chapter 7).
Natural capital supports the Scottish economy through products such as timber and smokies but other less tangible assets such as this Red-throated diver also play an important role in developing our natural capital.
2.8 Key messages from this Chapter
- Nature supports Scotland's prosperity in ways which may not always be visible but have a very real value.
- Scotland should make the most of its natural assets to support sustainable economic growth.
- Decisions which limit impacts on nature and ecosystem services will have economic benefits.
- Working innovatively with nature can create opportunities to reduce costs and have multiple benefits for society.
2.9 What will be different as a result of applying the principles in this chapter?
- Policy and development options will be chosen that avoid or offset costs to nature.
- Public subsidies, incentives and taxes will support the building of natural capital, rather than supporting unsustainable use of nature.
- Government and large businesses will be moving towards environmental accounting that shows their impact on natural capital in Scotland and overseas.
- Research and investment will support innovative ways to work with nature and make the most of natural assets to reduce costs and increase benefits to Scotland.
- The Natural Capital Asset Index will provide a way of assessing the sustainability of the Scottish economy, and the index value will be maintained or increased.
2a: Does chapter 2 propose the right approach to reach the outcome that natural resources contribute to stronger sustainable economic growth in Scotland, and we increase our Natural Capital to pass on to the next generation.?
2b: What additional steps can you propose, including things that you, or your organisation, can do?