Countries with ‘ecological deficit’ are those that have a greater and faster demand on their natural resource base than what the ecosystems within theirterritories are able to replenish. Countries with ecological deficits form an economically, ideologically and geographically diverse group, including the United States, Iran, Switzerland and Nigeria. The consequences of growing ecological deficits, Global Footprint Network argues in a recent report, include a severe loss in economic competitiveness and increased threats to human security.
Governments around the world are waking up to the fact that nature’s ‘services’, from the production of food and the provision of clean water to the protection against floods, is an essential input for their economy and their entire populations. In a world of climate change and accelerated resource degradation, the natural capital agenda is likely to become one of the central themes for national economies in the 21st century.
Parliamentarians have a critical role to play in ensuring the stewardship of their natural capital and the steady flow of services they provide. A partnership between GLOBE International, the Zoological Society of London and Volans is exploring how legislators around the world can become champions of this agenda. But what can they do? How can they frame this new political agenda? Alejandro Litovsky of Volans poses these questions to Dr. Mathis Wackernagel, Founder and President of the Global Footprint Network
Alejandro Litovsky: How important is the natural capital agenda for legislators?
Mathis Wackernagel: We are now living in a world of global overshoot. That was not the case when I was born in 1962. Back then, humanity’s demand for ecological services and resources was about half of what the biosphere could regenerate. Today, human demand may be over 40 percent larger than what the biosphere can renew. It takes a year and five months to regenerate what humanity uses in one year.
In the current context, running ecological deficits is risky for any country. Protecting one’s ecological assets, and investing in their restoration, is becoming a central economic strategy for building a resilient and prosperous economy.
In a world with rapidly advancing climate change and resource degradation, countries that are unprepared for that new world will have difficulties to operate. You cannot adjust the ecological dependence of your economies or cities within a week or a year, but need to plan decades ahead. We do this in other domains: education policy, transportation infrastructure or defense. To succeed, we now need to employ such longer-term thinking as vigorously in the resource domain.
AL: So what are the most important things that legislators can do to respond to this agenda?
MW: Avoid counting as ‘income’ in the country’s national accounts what in reality is the liquidation of natural capital. This may sound excessively basic, yet the truth is that most nations still do not make this distinction.
For governments to shift, and understand their self-interest in protecting and restoring their natural capital, it is important for governments to start tracking their resource situation more carefully, in particular in regard to whether the country is running an ecological deficit.
AL: Can you think of a case where a government is showing signs of progress?
MW: There are many innovative or proven approaches, but the bottom line is that looking at isolated initiatives shouldn’t sidetrack our attention on truly future-proofing our economies. For example, many governments are putting major investments into alternative energy and clean tech, compensating for ecological services, providing conservation easements, investing in low-carbon cities (e.g. Masdar in the United Arab Emirates), aggressively setting energy standards for buildings or entire cities (e.g. the ‘2000 Watt Society’ bringing energy use down to 2000 W per person in Switzerland), and even initiatives to keep oil under the ground as in the case of the Yasuni-ITT Initiative in Ecuador. These efforts are essential. They are leading the way. And they need to be scaled up massively to turn around current resource trends.
How do we radically scale up to meet the size of the challenge at hand? I believe we need a fundamental shift in the way we approach governance and decision-making. It begins with understanding and valuing natural capital as an ever more central factor in a country’s overall wealth . Current resource trends suggest that in coming decades, with increasing resource scarcity, access to natural capital will be an increasingly central factor for country’s ability to provide a high quality of life for its citizens.
Just as decisions needed to be rooted in sound fiscal policy, they also need to be rooted in sound ecological accounting. Nations need to carefully monitor how many resources they have and how many the use. Are they in ecological deficit or not? Are they investing in opportunities that will make them more resilient and successful in the face of ecological constraints, or traps that will lock them into energy- and resource-gobbling patterns of consumption for decades to come?
AL: Why do you think governments find it difficult to ‘see’ the significance of natural capital, and recognize their unique role as stewards of its value?
Modern economic theory typically ignores resources as a production factor, and takes nature’s inputs as basically being freely available. And even when the issue is studied in mainstream economic thinking, most focus on looking at the falling prices of resources in the 20th century, or on the possibilities of resource substitution. As a result, they are comfortable in thinking that resources are not a limiting factor in the economic process. This is, however, a grave misperception. Reality is that very often prices fail to reflect resource scarcity until it is too late. Many (if not most) of the most serious crises resulting from ecological overuse – from the collapse of commercial fisheries, to deforestation leading to increased floods, to the pollution of freshwater tables, to radical temperature changes – have not been predicted (nor avoided) by the free-market’s price signals.
Another error in mainstream economic thinking is to believe that the substitution of resources is easy and automatic. In reality, resources can get scarce in absolute terms, and as a result there is disruption and volatility – far more dangerous to economic health than price increases.
AL: What do you see as the greatest barrier to the involvement of legislators with the agenda on natural capital?
MW: Basic knowledge and tools. Very few legislators have natural science backgrounds and can fully appreciate our dependence on nature, and the cumulative effect that natural capital depletion around the world may have on the economic stability of their countries.
Economic advisors have few, if any plans on how to deal with economies that are no longer able to grow. Their main advice is to keep economies growing in order to maintain stability – which works well in the short term, as long such growth is an option. But what if an economy is forced into zero or negative growth? In fact, what if growing resource constraints increasingly accelerated contractions in the economy, as showed in practice by the 2007-2008 oil price spike, the subsequent food crisis (accelerated by rice export restrictions), the 2010 Haiti earthquake, or the Russian cereal export restrictions of 2010 triggered by drought-related poor harvests?
Forced shrinkage can be brutal, and highly destabilizing, if not managed well.
AL: How do you think this barrier can be overcome?
MW: We live in a funny world: we insist on carefully kept accounting books for one kind of resources (the financial ones) and worry rightly about spending more than we earn. Yet few countries keep consistent track of their ecological resource balance. Few have accounts to tell them how much biocapacity they have versus how much they use. One reason for this is there is simply a lack of expertise as to this kind of accounting, as well as a shortage of available tools.
We’re working, through trainings and our partner network, to raise that level of expertise. And we are working with governments to help them manage these most valuable of assets, to recognize their significance, and to make choices aligned with the reality of natural capital constraints, and ultimately with the long-term stability of their economies and population.
AL: In doing so, will legislators have to balance perceived tensions between ‘natural capital’ and ‘economic capital’ (e.g. development and infrastructure projects, etc.) and how should they think about resolving these trade offs?
MW: The ultimate question for any country is – how can we squeeze lasting well-being out of the physical constraints that we face? Given the capacity to regenerate natural services and resources in our country, and in the world, what is the best economic strategy for securing human well-being? But this cannot be answered without engaging with one particular question which is still missing in the policy debate: What is our country’s optimal resource consumption?
What level of resource consumption is in our country’s best interest as we move into an ecologically constrained future? If you accept ecological constraints (or the reality that the planet is not expanding), logically, every population, region or and country, has to determine its own optimal level of resource consumption.
A consumption rate that is too low can lead to inadequate food, shelter and health services. Conversely, a consumption rate that is too high can erode a resource base (think about collapsing fisheries or aquifers) and put a population at risk. It is quite simple: domestic ecological deficits in a world that is already having a significant ecological overshoot will become an increasing liability to national economies.
The optimal resource consumption for a country or region depends on three factors:
1. The amount of biocapacity in their country,
2. The amount of biocapacity in the world as a whole, and
3. The country’s purchasing power compared to the world’s average.
If the country’s purchasing power is below the worldwide average, then it is unlikely the region will be able to maintain a positive biocapacity trade balance. Countries with low purchasing power will most likely not be able to access biocapacity from elsewhere by importing goods and services. Rather, they may in fact end up selling biocapacity to countries with purchasing power.
AL: All right, the argument is clear and compelling, so what can legislators do about this on Monday morning?
MW: We work with nations to start measuring how much biocapacity they have and how much they use. In Ecuador, for instance, they had over four times more biocapacity than demand on biocapacity back in 1961. Today, they may already be in an ecological deficit situation. The national planning ministry recognized the threat this poses to Ecuador’s economic health and has made it a national goal to move Ecuador out of its ecological deficit. This is what we believe any nation would need to consider.
AL: What do you say to parliamentarians that are intrigued by this agenda?
MW: Start to measure your resource trends and ask yourself: what do these trends mean for our country’s competitiveness?
Find out more about how the Ecological Footprint can be used by legislators around the world at www.footprintnetwork.org