Dasgupta Review makes the case for treating the environment as an economic asset

A sweeping new review makes the case that nature has a fundamental economic value — and our account is badly overdrawn.

Why it matters: The natural capital created by clean water and air, biodiversity and basic resources has been the foundation of human prosperity, but because it has no clear economic value, we too often treat it as infinite. Securing a sustainable future may require treating nature less like lottery winnings and more like a retirement account.

Driving the news: On Tuesday, Cambridge University economist Partha Dasgupta published a major report commissioned by the U.K. government about the underappreciated economics of biodiversity.

• In economic terms, Dasgupta notes that while produced capital — assets like factories and roads — doubled between 1992 and 2014, and human capital has increased by about 13%, the stock of natural capital per person declined by nearly 40%.
• The report cites estimates that current extinction rates are 100–1,000 times higher than the planet's baseline rate and that 20% of species could become extinct within the next several decades.
• Those trends are in large part a consequence of how much Earth has become a support system for a single species: human beings.
• 70% of all birds alive today are poultry — mostly the 23 billion chickens being raised for food at any given moment — while humans themselves and the domesticated species used for livestock now make up 96% of the mass of all mammals on the planet.

The impact: "Estimates of our total impact on nature suggest that we would require 1.6 Earths to maintain the world’s current living standards," Dasgupta writes.

• Last time I checked, we've only got one.

The big picture: The degradation of nature has coincided with revolutionary improvements in the human condition, with the world's final output of goods and services rising more than 13-fold over the past 70 years, to more than $120 trillion in value.

• The report views those two facts as connected. From the richest billionaire to a person who has just emerged from absolute poverty, human prosperity depends on being able to draw from the resources nature provides — at least in market terms — for free.
• One study from 1997 estimated the global flow at the time of the biosphere's services — everything from water to air to pollination — was worth $33 trillion, more than the value of the world's GDP at the time.

The problem is that while nature's bank account may have plenty of zeros, it's not infinite, and as we draw it down, we undercut humanity's future, like a rich family wasting its descendants' inheritance.

• Dasgupta argues we need to look at natural capital as we would other forms of capital, investing it wisely to ensure that future generations enjoy not just natural splendor, but the raw materials an economy depends on.

• To do so, we need to figure out ways to equitably share the planet's natural capital, instituting payments to protect the ecosystems controlled by individual nations and imposing rents for common global resources like the oceans and the atmosphere.

The catch: Any such system would demand a degree of international governance and cooperation — not to mention individual discipline — that appears far beyond what we're currently able to manage.

• And even though Dasgupta is speaking the language of markets, his recommendations demand an overhaul of an economic system that has long been built on the short-term exploitation of natural capital, a fact some critics were quick to point out:

Our thought bubble: One of my underlying assumptions at Future is that technological progress is especially valuable in so far as it can enable us to sidestep our political and even psychological limitations.

• I'm doubtful that nearly 200 countries would ever come together to fairly divvy up the world's natural capital, just like I'm doubtful that human beings can be convinced to significantly curb their patterns of consumption.
• What's more likely to save us is the development of technologies that can enable us to get more out of our stock of natural capital — an approach Dasgupta does praise. We only have one Earth, but the ultimate economic value of the planet depends in large part on what human ingenuity can make of it.

The bottom line: As Dasgupta writes, when it comes to nature, "we are all asset managers."