The world's biggest economy recognises its dependence on nature and will make nature count in US economic statistics.
The Biden-Harris Administration recently announced its National Strategy to put nature on the US’s balance sheet. This follows the considerable effort of researchers, including experts from the Bennett Institute, to shape the Strategy, mobilise the public response, and produce the underpinning research, to ensure that nature is counted.
The White House directly approached the Bennett Institute’s Wealth Economy team for their insight on developing US natural capital accounts.
All three experts were asked to comment on the draft of The Strategy:
Said Diane Coyle, Bennett Professor Public Policy: “Without natural capital accounts, the US economy’s national balance sheet is incomplete. Natural capital interacts in important ways with other types of assets, notably physical and human capital. Failure to have natural capital accounts overlooks these correlations and implies a failure to achieve the highest productivity and return to resource use. It is inefficient to ignore natural resources in the economic statistics.” (Read full response.)
“The key challenges of the 21st century will include climate change, habitat loss, biodiversity loss, and air pollution. Implementing The Strategy will empower businesses and government agencies at all levels with the necessary economic data to navigate them. Critics may argue such knowledge is too costly, but there is no evidence that ignorance offers better value,” said Dr Matthew Agarwala, Lead for the Wealth Economy Project at the Bennett Institute for Public Policy, and Senior Policy Fellow at Yale’s Tobin Centre for Economic Policy.
“Climate change and environmental degradation are the result of poor capital and risk management. The Strategy describes a credible pathway to constructing natural capital accounts and offers a crucial new headline macroeconomic indicator ‘Change in Natural Asset Wealth’. It empowers decision makers with the necessary data tools and resources to improve investment decisions that can pave the way towards sustainable, long-term profitability, competitiveness, and prosperity,” commented Dimitri Zenghelis, Special Advisor for the Wealth Economy Project, Bennett Institute for Public Policy. (Read full response.)
The Wealth Economy team also helped shape the broader public response to the US Strategy, drafting and co-signing the joint experts’ letter to the White House, detailing how The Strategy will support growth and well-being, benefit businesses and the public, and improve macroeconomic strategy and risk management across the US economy. The letter was co-signed by world-leading economists, including Professor Sir Partha Dasgupta, Nobel-prize winning economist Joseph Stiglitz, and others. Notably, Yale University’s Sterling Professor of Economics, William Nordhaus, whose Nobel prize was awarded for his work on climate change also worked with the team to submit a response.
In April 2022, the White House Office of Science and Technology Policy invited Prof Diane Coyle to speak at a virtual roundtable to discuss new Biden-Harris Administration initiatives for assessing, accounting for, and finding solutions in nature.
The final Strategy cited core underpinning research by the Bennett Institute including from: GDP: A Brief but Affectionate History by Coyle (2015), Natural Capital Accounting for Sustainable Macroeconomic Strategies by Agarwala & Zenghelis (2020), and Nature Loss and Sovereign Credit Ratings by Agarwala, Burke, Klusak, Kraemer, & Volz, (2022).
The published Strategy includes a direct quote from Agarwala & Zenghelis (2020) stating: “The challenges encountered in valuing capital should not be understated. But neither should they be exaggerated.”
The Strategy was unveiled at the World Economic Forum Annual Meeting in Davos in January 2023. US climate envoy, John Kerry explained that currently, natural capital — the stock of natural resources such as soils, air, water, and forests — isn’t on the nation’s balance sheet. As a result, standard economic indicators alone provide an incomplete view of economic progress.
The natural capital accounting strategy is inclusive of state, territorial, local and tribal governments and organisations and recommends supporting, when appropriate, their collection efforts and needs regarding natural assets
Economists have laid out strategies for valuing nature – including the Bennett Institute’s Wealth Economy Framework and the United Nations’ System of Environmental-Economic Accounting—Ecosystem Accounting (SEEA EA) which the Cambridge-based team also worked on. All helped influence The Strategy which lays out a plan and timeline of 15 years to include natural capital in its accounts.
This announcement is a big step in the direction of better measuring the economic wealth of the nation and more informed policymaking. Once in place, the natural capital accounting system will help the US to address 21st century challenges like climate change, biodiversity loss, and air and water pollution, and to help the country be more resilient and prosperous.
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.
