Natural Capital: The Importance of Putting a Price on Nature

For many people it can be difficult to understand the concept of putting a price on nature. In fact, many even considered it wrong to put a dollar value on something that it is inherently priceless.  But we are seeing a shift in this thinking as the concept of natural capital helps us to understand the valuation of the many benefits we receive from nature.

In a 2017 article, Dan Kraus with Nature Conservancy Canada (NCC) stated, “The problem with current economic tools is that nature is often treated as an externality; a variable that cannot be accounted for. But in a world where we are losing species and ecosystems, we can no longer continue to treat nature as an empty line in the ledger book.”

Adopting a natural capital approach can help to bridge the gap between economic and environmental decision making. A natural capital approach identifies the services that nature provides and the benefits these services bring to humans. For example, a wetland not only provides habitat to wildlife, it also provides benefits to people by controlling floods, purifying the air and giving us cleaner and healthier water. By placing a dollar value on these services, it ensures they are incorporated into economic decision making and gives us a better chance of conserving them for the future.

In 2017, NCC and TD Bank Group released a report on the economic valuation of conserving forests in which an economic value was placed on various ecosystem services in 11 forests across Canada. The ecosystem services provided benefits such as carbon storage and water purification, and the results indicated that “the value of the ecological services calculated in the case studies range from $5,800 to $46,000 per hectare per year of ecological services.”

Under the TD forests program, NCC and TD are working together to preserve these forests and the biodiversity within them and, in turn, saving local communities the costs of cleaner water and cleaner air, which are purified through the ecosystem services in the forests.

Read more about the NCC and TD case study of the economic valuation of conserving forests.