In a study published recently in the Journal of the Association of Environmental and Resource Economists, researchers from Arizona State University (ASU) and Yale University have developed a first-of-its-kind, interdisciplinary equation to estimate the current monetary value of natural resources such as fish stocks, groundwater or forests in the U.S. In assigning natural capital monetary value, the approach will have widespread implications for policymakers and various stakeholders, and will also advocate for the creation of robust asset markets for natural capital, a much-needed advance.
Unlike earlier approaches, the method takes into consideration the “opportunity cost” of losing future units of natural capital that could have helped replenish the resource, providing economic benefits in the long run. It is underpinned by the economic principles also used to value physical or human capital.
“Sustainability can be defined as ensuring that the assets the next generation inherits are worth at least as much as they were when the previous generation received them,” said Abbott. “As humans, we are not going to have zero impact on the environment, but we want to make sure that the value of human, physical and natural capital that we pass on to future generations is worth no less than when we inherited them.”
“We are pursuing this research to help provide better measurements of society’s wealth, so we can know whether we’re moving in a sustainable direction,” Abbott concluded.