The Policy and Institutional Context for Natural Capital Accounting

Abstract

Work on natural capital accounting (NCA) needs a new emphasis if it is to change the way government decisions and public policy are made. It must move from a focus on accounts generation (supply side) toward improving decisions on natural capital and helping the decision makers involved (demand side). This is not a mechanical task, but a broadly political one. To inform the shift, this paper examines the nature of both policy and the institutions that inform, formulate, decide, and implement policy. Policy is multifaceted: it is not just “what government says” in formal policy documents. Its facets include policy content, policy processes, stakeholders, and the knowledge and values that underpin them. Policy is a product of context—which is political and dynamic, yet deeply rooted in a country’s institutional settings. Policy might therefore seem “messy”—but this very messiness offers many levers for change, many of them open to NCA. Yet the prize for NCA is not simply to improve one-off policies, but also to get inside the institutional machinery of decision making—so that all aspects of policy become informed by NCA in the future. A country’s economic and political institutions are the most significant determinant of whether it succeeds or struggles, with as much impact on gross domestic product (GDP) and the human development index (HDI) as resource endowments and geography. If the “universal, integrated, and transformative” Sustainable Development Goals (SDGs) are to be achieved, a country’s institutional framework needs to be much more integrated and better informed by natural capital than it has been in recent years. This paper suggests four basic stages of institutional reform that countries tend to go through—from silos, to safeguards, to synergies, to full structural reform—and notes how NCA can play central roles at each stage. This implies that NCA can be built step by step, starting with physical stock accounts of the particular natural capital that a country wishes to safeguard, right through to full wealth accounts that will inform major structural changes in the economy and society Show more