2 Natural capital
Natural resources contribute to stronger sustainable economic growth in Scotland, and we increase our natural capital to pass on to the next generation.
- Encourage wide acceptance and use of the Natural Capital Asset Index (2012)  , including a comparable measure for the marine environment.
- Use this index to influence decision-making and market-based approaches, so that the wider monetary and non-monetary values for ecosystem services are recognised and accounted for.
- Undertake a major programme of peatland conservation, management and restoration.
The Scottish Government recognises that Scotland's rich and diverse natural environment is a national asset and a source of significant international competitive advantage. Its continuing health and improvement is vital to sustainable economic growth. Many of Scotland's growth sectors, such as tourism, food and drink, depend on high quality air, land and water. There are many other less tangible ways in which nature sustains us, contributing to our health, wellbeing, enjoyment, sense of place and who we are as a nation.
Once the value of this natural asset is recognised, we need to manage and invest in it to maintain its many functions. We need to sustain and improve the health of the ecosystems that support this (see Chapter 1). We need to make efficient use of natural resources, and add to the quality of these to gain better outcomes for our economy and society, now and for the future. In doing this we have to recognise that our impacts on nature and ecosystems extend through trade far beyond our own boundaries.
The value of natural capital - nature's support for prosperity
The value of nature to people and the economic importance of natural systems have been demonstrated by two studies: The Economics of Ecosystems and Biodiversity ( TEEB, 2010)  and the UKNEA (2011)  . These evaluated the benefits that flow from nature (ecosystem services), giving a measure of the value of natural capital.
The UKNEA (2011)  showed that over the past 60 years there have been significant changes to Scotland's natural environment and the way people benefit from it. Production of food from agriculture has increased significantly but many other ecosystem services declined, particularly those related to air, water and soil quality. These tend to be the services that are less visible or that have less market value. Some ecosystem services have shown welcome improvements, while others are still in decline or remain in a reduced state, including marine fisheries and native species diversity. Possible responses to this have been discussed in Chapter 1.
Monetary values for all ecosystem services are impossible to determine. Some services, such as providing the oxygen we breathe, cannot be given a meaningful value. The services that can be given a monetary value, however, have been estimated to be worth between £21.5 and £23 billion per year to Scotland. The Scottish Government is funding research both to develop and improve techniques to assign monetary values to ecosystem services, and to understand the value of these for Scotland. A recent review of ecosystem services (2013)  has shown the clear linkage between the living and the physical environment, providing many services to society.
Examples of nature's services and their values
- The peatland soils of Scotland are estimated to store ten times more carbon than in all of the UKs trees ( UKNEA (2011)  ).
- Lochs in Scotland store almost 35 billion cubic metres of water, and Scottish soils up to 42 billion cubic metres of water ( UKNEA (2011)  ). For comparison, one cubic metre equates to the average daily water use of six people in a household.
- The value of insect pollination services in Scotland is estimated at £43 million per year UKNEA (2011)  .
- The value of coastal wetlands in Scotland has been estimated at £49-76 million per year ( UKNEA working paper).
- Visits to the outdoors made by people living in Scotland generated around £2.3 billion in expenditure in 2010 ( Scottish Recreation Research (2011)  ).
- In 2004, the value of marine biodiversity-related industries in Scotland was estimated to be over £1.2 billion ( Sustainable Seas for All (2008)  ).
An important element of Scotland's natural capital is our farmed and cultivated biodiversity and associated genetic diversity. Work to preserve this is taken forward by many bodies, with the Farm Animal Genetic Resources Expert Committee and the UK Plant Genetic Resources Group providing coordination and leadership. Securing genetic diversity in farmed and cultivated biodiversity ensures the robustness of food production. There are important links with traditional knowledge, and with diversity of farmed habitats for wild species. An example of this work is the Scottish Landrace Protection Scheme, administered by Science and Advice for Scottish Agriculture ( SASA), which is providing a safety net for the continued use of traditional varieties of farm animals and crops in Scottish island communities.
Principles for sustaining the value of Scotland's natural capital
Taken together, evidence from the TEEB and UKNEA reports points to a series of principles that should be reflected in public policy and decision-making to sustain the benefits from Scotland's natural capital:
- The full benefits from nature should be integrated into cost-benefit appraisal of policy, management or development options. Where the value of nature's benefits cannot be measured, the consequences of different options can still be identified through Strategic Environmental Assessment (2005)  and Environmental Impact Assessment (2011)  . We want to minimise negative impacts on nature and to enhance natural capital and the benefits from it. Trade-offs between different ecosystem services should be made more explicit to decision makers, so that changes to public benefits from nature are considered alongside other costs and benefits.
- Safe minimum standards and precautionary approaches should be adopted alongside valuations and assessments. This will ensure that the importance of nature for maintaining resilience to future change is captured, and the presence of tipping points or thresholds is recognised, not least where a small change may lead to a long-term irreversible impact. For example, the EC Water Framework Directive (2000)  and the Marine Strategy Framework Directive (2008)  both identify ecological status standards, which help to assign priorities for restoring water bodies and to judge the significance of proposals for future use of these natural resources. Nature conservation legislation identifies key sites and species, which need to be protected in order to sustain Scotland's natural assets for current and future generations. The Flood Risk Management (Scotland) Act (2009)  requires SEPA to consider whether techniques that restore, enhance or alter natural features and characteristics can contribute to managing flood risk.
- The value of nature should be reflected in incentives and price signals. This can include payments for ecosystem services, reform of environmentally harmful subsidies, tax breaks for conservation, or new markets for sustainably produced goods and services. Market-based mechanisms need to be used in a way that sustains public benefits for current and future generations. The Woodland Carbon Code is a voluntary standard for woodland creation projects in the UK, which estimates the carbon dioxide they sequester. Independent certification to this standard provides assurance and clarity about the carbon savings of these sustainably managed woodlands. A peatland carbon code could enable peatland restoration to be promoted within carbon markets in a similar way. Within the UK, the Ecosystem Markets Task Force aims to identify market-based opportunities for business as a contribution towards nature being properly valued and protected.
- Investment in protecting and building up natural capital can bring economic benefits that greatly outweigh the costs. The TEEB (2010)  study showed that protected places provide economic returns that are 100 times greater than the cost of their protection and maintenance. Maintaining nature's capacity to provide the functions upon which we rely is often cheaper than having to replace them by investing in infrastructure or technical solutions. Taking preventative action before invasive non-native species become widespread will be much less costly than dealing with their economic impacts, such as damage to forestry, crops and infrastructure. These impacts have been estimated to cost up to £1.7 billion per year in Great Britain and possibly as much as £250 million in Scotland.
- The value of natural capital assets should be incorporated into national accounting and business accounting to ensure this is fully considered in assessing the effectiveness and sustainability of Government and business. This is a desirable goal that requires development of data, methods and standards. Companies should already be considering changes to the condition of natural assets that could have a significant impact on their business, as part of their review of the main trends and factors likely to affect their performance. There is a commitment at the UK level to putting 'natural capital at the heart of Government accounting' ( UK Natural Environment White Paper, 2011)  .
Taking account of the benefits from nature:
Scottish Government's Principles for Sustainable
Flood Management Appraisal (2011)  .
An appraisal of options should support decision-making at all levels of flood risk management planning; from strategic flood risk management plans to individual projects. To ensure sustainable actions are taken, the assessment of options should not be limited to impacts that can be measured easily in monetary terms. Other significant impacts such as on health and the environment must be described and valued. Assessment of environmental impacts should include valuing the environment according to the range of goods and services it provides to people, and how provision of these benefits might be altered by different options.
Resource efficiency - making the most of our natural assets
Resource efficiency means preserving the natural assets while increasing the value obtained from them to enhance our prosperity. Some natural assets, such as the extent of our land area, are fixed, while area of sea is set by international agreements. We have real choices to make about how to balance the uses of these in order to ensure they support a prosperous nation. This echoes the perspective of the European Commission in its strategy document ' A resource-efficient Europe' a flagship initiative under the Europe 2010 Strategy  .
The Scottish Government published its Land Use Strategy  in March 2011. This sets out a vision and objectives for Scotland's land resources, and it proposes ten principles to help us meet these objectives in decision and policy-making. 'Responsible stewardship of Scotland's natural resources delivering more benefits to Scotland's people' is one of the three objectives.
Consumer driven innovation can contribute towards more resource-efficient consumption and lead to benefits for biodiversity and ecosystems. For example, the Food and Drink Federation recognises the need to look at the environmental impacts of product sourcing and to consider supply chains (including its global footprint). One cereal company sets a good example of a business which has fully incorporated its commitment to biodiversity into its operations; for over 25 years, it has worked only with grain farmers who dedicate 10% of their land to wildlife habitats.
Several Scottish planning authorities have used planning agreements to secure biodiversity actions to offset damage to sites caused by a development. Scottish Borders Council has been a pioneer of this approach. For a number of renewables developments, the Council reached agreement with developers to pay contributions to fund nearby biodiversity improvements. Partners then took these projects forward, and many yielded multiple benefits including natural flood management, diffuse pollution control and biodiversity gains.
The role of peatlands in a low carbon economy
The Scottish Government's Low Carbon Economic Strategy (2010)  sets out plans for a transition to a low-carbon, highly resource-efficient economy for Scotland. The natural environment has a key role to play here. Over 60% of Scotland's land cover has peat or peaty soils, and Scotland has most of the UK's peatlands. Few other countries have more peatland than Scotland. The blanket and raised bog peatlands are together the most important terrestrial carbon store in Great Britain, while 'active bogs' continue to accumulate more carbon, as well as contributing to water regulation, water quality and supporting biodiversity. A loss of only 1% of the carbon locked up in Scotland's peatland would equate to the total annual Scottish human-related emissions of greenhouse gases.
The IUCN UK Peatland Commission of Inquiry report (2011)  urged a speedy response to protect and restore our peatlands, and warned that delay would lead to far greater costs. The important role of peatlands in mitigating and adapting to climate change is recognised under international climate change agreements. Focused action and investment in peatland restoration provides a cost-effective approach to reducing carbon emissions alongside other measures. The Scottish Government has asked SNH to lead a new programme of work on the conservation, management and restoration of peatlands. This £1.7 million demonstration project will focus on achieving carbon savings and biodiversity gains, with 2,000 hectares of peatland restored over 2.5 years. SNH will work closely with land managers to make this happen. This programme should prepare the way for implementation of the proposal in the draft Second Report on Proposals and Policies ( RPP2)(2013)  .
The Natural Capital Asset Index - looking ahead
SNH has been developing a Natural Capital Asset Index (2012)  ( NCAI) to describe changes across Scotland's ecosystems since the year 2000, with indicative back projections to 1950. Figure 1 shows a broad trend from 1950 to 2010. Analyses of individual ecosystems indicate that three broad habitats (freshwater, coast and urban greenspace) showed an improvement in natural capital between 2000 and 2010, while two declined (moorland and grassland) and two saw little change (woodland and cropland). The NCAI is now being developed in collaboration with the James Hutton Institute and others to improve its robustness, and explore whether regional and marine indices can be produced.
Figure 1. Changes in the Natural Capital Asset of Scotland's principle ecosystems on land since 1950.
Key messages from this Chapter
- Nature supports Scotland's prosperity in ways that are not always visible, but the value is real.
- Scotland should make the most of its natural assets to support sustainable economic growth.
- The economy and wider wellbeing of Scotland's people will benefit from action that enhances nature and ecosystem services.
What will be different as a result of applying the principles in this chapter?
- Public subsidies, incentives and taxes will support the building of natural capital, rather than supporting unsustainable uses of nature.
- Government and large businesses will move towards environmental accounting that shows their impact on natural capital in Scotland and overseas.
- Research and investment will support innovative ways to work with nature and make the most of natural assets to reduce costs and increase benefits to Scotland.
- The NCAI will provide a way of assessing the sustainability of the Scottish economy and its value will be maintained or increased, reversing decades of decline.
- Local Authorities will work towards embracing the NCAI and explore ways of contributing to increase its value.