The urgent need to account for natural capital | La necesidad urgente de contabilizar el capital natural

By German Huanca, Publico.bo:

The forests of Bolivia are burning, wildlife is dying, and water and air are becoming contaminated, altering ecosystem services before the eyes of local communities and the international public. However, these losses are not reflected in the star indicator of governments: Gross Domestic Product (GDP). Since natural capital is not factored into national economic accounting, the true impact on societal well-being is unknown, though we all feel and sense it.

According to the latest official data, Bolivia has burned nearly 7 million hectares (equivalent to 70,000 km²) so far in 2024. If we valued the loss of biodiversity due to these fires and their negative impact on ecosystem services, we would conclude that the fires have a direct effect on the well-being and wealth of Bolivians.

In 1997, economist Robert Constanza developed a methodology for calculating Natural Capital Product (NCP) to make visible the contribution of natural resources. He estimated the value of ecosystem services related to provision (such as wood, water, or food), regulation (of climate, water cycles, soil erosion control, pollination), and culture (linked to leisure, recreation, or broader cultural aspects). Essentially, this reflects the total value of the ecosystem services generated by nature in a country over a year.

For instance, if we focus only on two global public goods, the fires have damaged the capacity to supply water and oxygen, causing health problems and compromising their availability for future generations. If these goods were accounted for in economic indicators, we would know the value lost. If they were regulated by a global entity, Bolivia would be facing exorbitant fines for negatively impacting global common goods.

The fires in Santa Cruz and Beni should prompt economists to turn their attention to the environment, not just as natural resources valued as stock but as living ecosystems whose value lies in the provision of ecosystem services. To grasp the magnitude of the fires, Bolivia has burned an area equivalent to the combined size of Switzerland and Belgium or Costa Rica and El Salvador. Viewed from another perspective, of the 193 United Nations member countries, 73 nations have a surface area smaller than 7 million hectares (70,000 km²). This is simply criminal and cannot go unpunished without identifying the perpetrators and redirecting the process of land allocation with a vision that benefits society as a whole, rather than just corporate groups or political party militants.

To conclude, Bolivia’s national accounts currently only record the price and quantity of final goods in GDP. However, we must take the step of accounting for the Natural Capital Product to know the value of our ecosystem resources and make sound economic policy decisions. Otherwise, we may be sacrificing NCP in favor of GDP, at the cost of the present and future well-being of Bolivians.

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