Natural capital: economic benefits assessment

Outlines new economic analysis that quantifies the likely economic impacts, measured as output and jobs created, from hypothetical cross-sector regional and national programmes of natural capital investment in Scotland.

Glossary & Abbreviations



Component activity

Activities underlying natural capital interventions, e.g., silviculture, support services to forestry and hunting, classified according to ONS SIC codes.

Employment effect

The impact on jobs attributed to just the direct financial expenditure of the intervention (measured by multiplying financial cost by the Type 1 Employment effect).

Employment effect (Direct + indirect)

The impact on jobs attributed to the Output effect of the intervention (measured by multiplying output effect by the Type 1 Employment effect).

Input-Output (I-O) Model

Input-output analysis is an empirical tool designed to analyse sector interdependencies. The input-output table describes the flows of goods and services through an economy in monetary units for a given time period, usually a year. The input-output modelling approach can be used to estimate the effects on employment resulting from an increase in final demand for the product or service in a given industry. I-O models can estimate the economy-wide employment results from a given level of spending.

Job Leakage

The loss of job creation from one area to another area. This may be from region to region or from country to country.

Location Quotient

A measure to quantify how concentrated a particular industry, cluster or occupation is in a region in relation to the wider nation. A value above 1 indicates that the concentration of a particular industry, cluster or occupation in a region is greater than that of the wider nation.


The ripple effects of spending on natural capital related activities can be estimated using multipliers. Multipliers are measures of the way in which an increase in activity by one firm will lead to an increase in activity by other related firms. Multipliers are estimated by indirect means, using input-output tables. They are calculated by using the estimates for direct, indirect and induced effects, which are also estimated from I-O tables.

1. Direct effect – defined as an increase in demand for the goods produced by any sector leading to an increase in the output of goods from that sector.

2. Indirect effect – as producers increase their outputs in any sector, their suppliers will also have an increase in the demand for their goods, and so on. The shock of the increase in final demand for that good then ripples through the supply chain.

3. Induced effect - as a result of these supply chain effects, the level of income in the economy will increase, and a portion of this income will be spent on other goods and services leading to further increases in demand. This is termed an induced income effect.

Nature-related activity

A nature-related activity is a detailed type or category of spending under each of the seven broad GFI nature outcomes used in the GFI model.

Nature-related outcome

Nature-related outcomes (henceforth referred to as 'GFI outcomes') in the GFI model are based on public policies like the Defra's 25 Year Environment Plan in England and equivalent policies for the Devolved Administrations. The seven GFI model "nature-related outcomes" were used to identify the scale and size of the finance gap for nature across Scotland.

Natural capital intervention

Interventions featured in the environment-economy model that investments flow into, e.g. woodland creation, peatland creation.

Output effect

The direct and indirect impact of any expenditure in the local economy (measured by multiplying financial cost of the intervention by the Type 1 output multiplier).

Standard Industrial Classification (SIC)

The UK Standard Industrial Classification of economic activities, abbreviated as UK SIC, is a five-digit classification providing the framework for collecting and presenting a large range of statistical data according to economic activity.



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