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Natural capital is a critical asset for low-income countries: Achim Steiner

Apr 17, 2014

By 2050, humanity could devour an estimated 140 billion tonnes of minerals, ores, fossil fuels and biomass per year, said Achim Steiner, UN Under-Secretary-General and UNEP Executive Director.

New Delhi: The green economy transition is already underway in Africa. From harvesting geothermal energy in Kenya and plugging into solar power in Algeria and Tunisia, to investing in green funds in South Africa, and building wind projects in Ethiopia; diverse pathways to greener and more inclusive economies are being pursued across the continent.

On account of its geographical location, Algeria, for example, holds one of the highest solar potentials in the world which is estimated at 13.9 TWh per year. The country receives annual sunshine exposure equivalent to 2,500 KWh/m2. Daily solar energy potential varies from 4.66 kWh/m2 in the north to 7.26 kWh/m2 in the south. Algeria is in a good place to harness this significant potential to lower carbon emissions and support clean power generation.

The next wave of investment and innovation in Africa will be driven by the need for new energy sources, wealth generation and job creation.

Currently, projections point to broad-based acceleration in growth in Sub-Saharan Africa to around 5.5 per cent in 2013-2014, reflecting robust domestic demand and increased investment in export-oriented sectors as the main economic drivers, according to the IMF World Outlook 2013.

As the continent undergoes such unprecedented development, wealth accounting and the valuation of ecosystem services are critical to Africa's future growth.

Natural capital is a critical asset, especially for low-income countries, where it makes up around 36 per cent of total wealth, according to recent World Bank estimates.

The Mau Forest complex in Kenya, for example, provides goods and services worth US$1.5 billion a year through water for hydroelectricity, agriculture, tourism and urban and industrial use, as well as erosion control and carbon sequestration. Alternative accounting has helped spur the government of Kenya to invest in rehabilitating the area and its vital ecological services.

Forestry in Tanzania is officially close to 2.3 per cent of GDP, however research suggests that if the wider benefits are factored in, the real contribution is over 4 per cent of GDP.

Emerging research suggests that the contribution of the value of forests to the GDP of Uganda is around US $136 million, which amounts to about 4 per cent of GDP.

Since 1995, an estimated 486,000 work opportunities were created in South Africa in environmental rehabilitation programmes. In addition, 85,000 jobs were created through formal conservation of protected areas in game ranching and ecotourism.

Natural accounting and valuation, therefore, is not a fringe activity, but a cornerstone of the wealth of nations upon which sustainable, equitable and prosperous societies will be built.

But notwithstanding the fast pace of development, Africa’s countries continue to face persistent challenges.

A fast-growing urban population, globalization and climate change, alongside a need to boost governance, are among the challenges facing Africa if the continent is to put itself firmly on the path to a sustainable future.

According to the World Bank, Africa's population is expected to increase by approximately 800 million people by 2040. This projected increase will put even more pressure on the continent's natural resources.

As of 2005, half of Africa's most biologically rich terrestrial areas shrank by more than 50 per cent due to cultivation, degradation or urbanization.

In Kenya deforestation stripped the country's economy of an estimated US $68 million in 2010, dwarfing the economic benefits gained from industries such as forestry and logging.

Placing a value on natural resources also demands a rethink of the traditional links between resource use and economic prosperity - separating environmental "bads" from economic "goods".

By 2050, humanity could devour an estimated 140 billion tonnes of minerals, ores, fossil fuels and biomass per year - three times its current appetite - unless the economic growth rate is "decoupled" from the rate of natural resource consumption.

According to a report by the International Resource Panel, total resource use grew eight-fold, from 6 billion tonnes in 1900 to 49 billion tonnes in 2000.

In May 2012, 10 African countries, along with various public and private organizations, adopted the Gaborone Declaration, which outlines a set of concrete principles and development goals that include valuing natural capital in the development planning process.

One month later, the Rio+20 Summit outcome document, The Future We Want, called for broader measures of progress to complement conventional indices, such as GDP.

Released alongside the Rio conference in 2012, UNEP’s Inclusive Wealth Report provided a rethink of traditional economic and development yardsticks. It introduced a new indicator, known as the Inclusive Wealth Index (IWI), which is aimed at revealing the true state of a nation's wealth and the sustainability of its growth, beyond GDP.

If measured by GDP, the economies of China, the United States, Brazil and South Africa grew by 422 per cent, 37 per cent, 31 per cent, and 24 per cent respectively between 1990 and 2008. However, when assessed by the IWI, the Chinese and Brazilian economies only increased by 45 per cent and 18 per cent. The United States' grew by just 13 per cent, while South Africa's actually decreased by 1 per cent.

In fact, a full 25 per cent of the countries studied by the report showed a positive trend when measured by GDP per capita and by the Human Development Index (HDI) were found to have a negative IWI per capita. The primary driver of this difference in performance was those countries' declines in natural capital.

Almost 2 years ago, at Rio+20, more than 190 nations gave the green light to an inclusive Green Economy in the context of sustainable development and poverty eradication.

An inclusive Green Economy has the potential to improve human well-being and social equity, while significantly reducing environmental risks and ecological scarcities.

In a Green Economy, growth in income and employment is driven by public and private investment that reduces carbon emissions and pollution, enhances energy and resource efficiency, and prevents the loss of biodiversity and ecosystem services.

These investments need to be catalyzed and supported by targeted public expenditure, policy reforms and regulation changes.

As leading financial institutions increasingly appreciate the imperative of climate change, resource scarcity and other environmental challenges, the current financial 'rules of the game' may not be well suited to accelerate this transition.

The World Economic Forum estimates suggest that globally, investment in infrastructure of an estimated US$6 trillion annually to 2030 is needed to deliver a low-carbon economy. Of this, nearly US$1 trillion is over and above the business-as-usual trajectory.

Such evidence shows that when investments are targeted towards greening key economic sectors, they can produce multiple benefits for the economy, the environment and society.

Last month, I launched in Davos an Inquiry into policy options for guiding the global financial system to invest in the transition to a green economy.

In the wake of the global financial crisis, there is growing recognition that the financial system must be not only sound and stable, but also sustainable in the way it enables the transition to a low-carbon, green economy.

The Inquiry, extending over 18 months to mid-2015, aims to engage, inform and guide policy makers, financial market actors and other stakeholders concerned with the health of the financial system and its potential for shaping the future economy.

In addressing its core aim, it will map current best practice, draw together principles and frameworks, catalyze new thinking and ultimately lay out a series of options for advancing a sustainable financial system.

It will also engage with global financial experts and commission-relevant research, as well as contribute to related initiatives across the UN system and elsewhere.

The green development path should maintain, enhance and, where necessary, rebuild natural capital as a critical economic asset and source of public benefits, especially for the poor whose livelihoods and security depends strongly on nature.

The time has now come to ensure that by 2015 - when the UN's Millennium Development Goals transcend into the Sustainable Development Goals - the global community has the strategies and the policies in place to ensure that nature is fully integrated into economies.

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