In January, the Biden administration launched an ambitious plan for a valuation of all the United States’ natural resources. But the initiative, which aims to encourage environmentally responsible investment, is naive and confused.

An oil well pumps oil as wind turbines produce energy in Fort Stockton. (Michael Paulsen / Houston Chronicle via Getty Images)

In January, the Joe Biden administration released a national strategy to “develop statistics for environmental-economic decisions.” The aim of the new initiative is to measure and value the United States’ “natural assets” — broadly understood as the health and vitality of the country’s land, waterways, wildlife, and ecosystems — by deploying the concept of “natural capital.” 

The rationale for the strategy is simple. From the perspective of some of the most common indicators of economic output, such as gross domestic product, the financial value of America’s natural assets remains invisible. According to the press release, if these crucial assets remain unaccounted for, the US government, private investors, and business owners will not be able to take into consideration the economic and environmental implications of their decisions. Accordingly, the government officials fear that exclusion of these assets “from the national balance sheet leads to erosion of current and future economic opportunities.”

The idea that large-scale investment in infrastructure required to avert the worst consequences of climate change could be ensured through an elaborate accounting trick is, at the very least, naive.

Commentators have praised the Biden administration’s initiative for its ambition, particularly in its attempt to address the long-term impacts of human-driven climate change. Though wonkish and technocratic in outlook, natural capital accounting seeks to radically change the way the economy is understood by responding to the common criticism that the free-market economy discourages investment decisions which take into consideration long-term consequences. 

As with Biden’s Inflation Reduction Act and CHIPS Act, the new accounting policy comes draped in the flag. Throughout the document can be found numerous references to the benefits the initiative would provide for specifically American families, businesses, and the economy. Government officials also predict that measuring the value of the United States’ natural resources will increase worker productivity, raise property values, derisk supply chains, and increase competitiveness in the private sector.

While the initiative is praiseworthy in ambition and scope, skepticism is difficult to avoid. The idea that large-scale investment in infrastructure required to avert the worst consequences of climate change can be ensured through an elaborate accounting trick is, at the very least, naive. Ultimately, such a proposal forestalls grappling with the question of whether relying entirely on the private sector places limits on meaningful and effective response to climate change.

Translating “Nature” for the Business-Minded

Even before the Biden administration, the US government has long compiled data examining the relationship between economic activity and environmental impact. The issue is that such data is so disparate and unorganized, it hardly serves as a useful resource to inform business risk-management and regulatory decision-making. Through the development of natural capital accounts, these statistics will “be better organized, standardized, and regularly updated,” providing a cohesive set of data to inform decision-making at the private, state, and federal levels. Additionally, such accounts put “nature in the language of economics and business,” supposedly encouraging more responsible investment decisions based on short- and long-term environmental implications.

However, even as mounting evidence of corporate contributions to climate change becomes clearer and more readily accessible, major corporations continue environmentally destructive practices to secure profits. Some of the biggest utilities — including American Electric Power, FirstEnergy, and Southern Company — continue burning gas and coal to produce power, despite ample evidence that CO2 emissions are one of the major driving factors of climate change, and despite numerous sanctions imposed against them. While the administration’s strategy suggests that improving the quality of financial data may keep corporate misbehavior in check, the question remains unanswered as to how business accountability will be enforced.

Over the last decade, as the idea of natural capital accounting has gained traction, some academics have argued that adding a monetary value to ecosystem goods and services would better inform private businesses engaging in a cost-benefit analysis of their actions. For example, if an agricultural corporation is interested in purchasing several acres of forest on which to grow corn, the corporation would, according to the proponents of natural capital, not only have to consider the cost of the land itself, but the cost of the services that land provides — such as soil erosion management, clean air production, and storm barrier protection.

If the financial cost of purchasing and clearing this land outweighs the projected revenue generated by planting and selling agricultural produce, then the corporation might think twice about this business decision. In this sense, units of analysis which take into consideration the effects of climate change might have the capacity to inform progressive policy and business practices.

Corporatizing Ecosystems

Since Biden’s announcement, private equity firms have already sprung up with the aim of making investment decisions which consider the larger environmental effects of doing businesses. For instance, the Intrinsic Exchange Group (IEG), a private finance firm which seeks to make environmentally responsible investment decisions, has proposed the formation of Natural Asset Companies (NACs). NACs are private companies with the right to a particular tract of land and its accompanying ecosystem services. 

According to IEG, the process for forming NACs is as follows: Sites with “substantial ecosystem services or potential for ecosystem restoration” are identified and evaluated. The government would then license the rights to these ecosystem services to a NAC, which would be responsible for site management. Once the NAC is given these rights, it goes live with an initial public offering (IPO). As public investors purchase stocks, the NAC raises capital to fund natural asset management. And as net proceeds are necessarily allocated to natural asset management, surplus profits can be banked in the US government’s budget or sovereign wealth fund.

Theoretically, channeling net proceeds from a NAC’s IPO to natural asset management and restoration sounds promising. But land stewardship is difficult work — especially at the scale that such business models propose. There exists no clear indication as to where this body of laborers would come from or how they would be adequately compensated.

Laying Claim to Natural Assets: From Sea to Shining Sea

The US government is not merely concerned with measuring natural capital within its territorial borders; it is also interested in claiming and measuring natural capital in what it calls “disputed” regions. As Biden’s national strategy puts it, “One reason to do asset accounting is to assert a right over the flow of services from the asset.” Thus, asset accounting can facilitate “strategic claims over disputed areas and resources.” Rhetorically cloaked as “renewing U.S. leadership,” natural capital accounting could provide justification for the United States to undermine the sovereignty of other nations in the name of environmental protection. “Asserting a right” over the ecosystem services outside of US territorial borders may very well become just another means of extraction and exploitation.

Natural capital accounting could provide justification for the United States to undermine the sovereignty of other nations in the name of environmental protection.

The document cites China twice, among several other countries, as one of the United States’ biggest competitors in the race to establish natural capital accounts. The document warns that China’s government could “successfully build on their leadership in this space into a persuasive soft power tool as they promote environmental accounting, often paired with other objectives, globally.” What the US government fails to recognize is a glaring double standard.

Attempts to account for the long-term benefits our ecosystems provide for the economy and people’s livelihoods are worthwhile endeavors. However, measuring and valuating these benefits is not enough to effect major political change on its own. Without mechanisms to enforce corporate responsibility and ensure the just allocation of capital, initiatives seeking to address the consequences of climate change run the risk of collapsing into wishful thinking.


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