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"It's the Environment, Stupid"

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In 2011, the Coalition Government issued its Natural Environment White Paper. In it, it set out its objective "to be the first generation to leave the natural environment in a better state than it inherited". To this end, the Natural Capital Committee (NCC) was set up to look at what parts of our natural environment are being used unsustainably and consider what steps the Government and corporate organisations could take to better protect it.

The natural environment of course has an intrinsic value in itself. But critically, the NCC was tasked with considering how the essential services that the natural environment provides to our society and economy could be improved. These services, which are often taken for granted and counted as free, include the provision of clean air, clean water and food, often referred to as "natural capital".

The idea of natural capital may sound like an abstract concept. It is everything but. In May 2013, the business-led Ecosystems Markets Task Force found that the corporate world was often unaware of its significant reliance on nature. It takes for instance 50,000 litres of water to manufacture a car, 20,000 litres of water to produce a kilo of chocolate and some 35 tonnes of water to manufacture a single tonne of artificial fertiliser. In other words and given the risks of scarcity that can affect key natural resources such as water, a business will be more resilient and successful in the long-term if it is better able to measure, control and reduce its reliance on these resources.

In the last of its three reports that came out on 27 January, the NCC urged the next Government to take the issue of natural capital seriously, by putting in place a 3-part strategy. First, the NCC highlights the urgent need to better measure the state of our natural environment and ensure that accounting systems that are used to measure the state of public and corporate finances should also be used by governments and businesses to monitor and safeguard our natural resources. What isn't measured is unfortunately often ignored.

Second, the NCC highlights a range of key investment projects over the coming 25 years that could significantly improve the state of our natural environment and deliver economic and social benefits. These range from woodland planting and peatland restoration to restoring important commercial fish stocks.

Third and like any long-term infrastructure investment, a reliable stream of finance will be key to ensure that these investment projects can be turned into reality. The NCC makes it clear that materialising these investments doesn't just have to rely on public money but also on Government providing a range of policy signals that can attract or direct private sector investment into these projects. This could include requiring compensation payments from developers and reforming perverse subsidies for example. Allowing the Green Investment Bank to get involved in the financing of new types of natural capital improvement projects (a priority for the Aldersgate Group) could also be key here, as it would help reduce the perceived risks of these projects in the eyes of private investors.

The key trend that comes out of this week's report from the NCC is that investing in long-term projects to improve the state of our natural environment makes clear economic and social sense. Woodland planting near towns and cities could generate net social benefits of up to £500 million per annum, restoring peatland could deliver net benefits of £570 million over 40 years in reduced carbon emissions alone and the NCC believes that the benefits of restoring certain stocks of shellfish could outweigh the costs of doing so by a factor of 6 to 1.

In other words, the NCC report shows us that there is a strong economic case for putting in place ambitious environmental policies. This doesn't just apply to efforts to prevent dangerous levels of climate change; it applies to environmental policy as a whole. Any Government interested in the long-term resilience and success of its national economy should recognise this and incorporate ambitious environmental policies as part of its economic plan.

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