While it is now commonly accepted that economic activity and the state of our environment are linked, many economic measures still fail to incorporate the environment – both the things we draw from it and the pollution we release into it. By developing and calculating measures of productivity that include natural capital, Canada may be able to better understand these linkages. This, in turn, may lead to the identification of strategies that can help Canada become more efficient and innovative in the use and protection of natural capital, and thus more productive and more prosperous.
Using the forestry sector as a case study, this project aims to construct an environmentally adjusted measure of multifactor productivity. In doing so, we aim to add another layer of understanding to the environmental and economic performance of this sector. The proposed measure will have relevance to the Canadian economy as a whole.
Frequently Asked Questions
What is natural capital?
Natural capital comprises the elements of the environment that produce valued goods and services. This includes the resources that we can easily recognize and measure such as minerals and energy, forest timber, agricultural land, fisheries and water, as well as those ecosystems producing services that are often ‘invisible’ to people such as air and water filtration, flood protection, carbon storage, pollination for crops, and habitat for fisheries and wildlife.
For more, see here.
What is productivity?
Productivity describes the relationship between the output of economic activity and the use of inputs in the production process. It is a key measure of how efficient, innovative and competitive a country, company or sector is.
Productivity can be calculated as a ratio at a point in time (the greater the ratio between outputs and inputs, the more productive is the firm, sector or economy) but is more commonly measured over time as productivity growth.
For more, see here
How are economic activity and natural capital connected?
Economic activity relies on the flow of goods and services from natural capital stock, but pollution and other impacts of economic activity may depreciate the value of these stocks. If we extract too much from nature or cause environmental damage we, therefore, risk degrading our natural capital and put our economy at risk.
What is the difference between stocks and flows of natural capital?
The distinction between the stock of national capital and the flow of value it provides is analogous to a bank account that holds a stock of money (i.e. financial capital) and provides a flow of value in the form of interest. The stock represents wealth, while the flow represents income.
Why is natural capital important to Canada?
As a country, Canada controls one of the largest primary resource bases in the world; ranked third in the world for each of forested area, renewable freshwater resources and oil reserves, and ranked seventh for amount of arable land.
Canada’s mining, metals, forestry and energy industry alone “directly and indirectly accounted for almost one fifth of nominal GDP in 2013”. These benefits also extend globally through international trade; in 2009, agricultural, energy, forestry and mining exports accounted for about 51% of Canada’s total exports.
What is an environmentally-adjusted measure of productivity?
Environmentally-adjusted measures of productivity provide an additional layer of insight into a country or company’s operations by incorporating environmental inputs and/or the output of pollution and waste in its calculation. Such a measure is required to obtain a complete account of economic growth and the impact of policy on industries and society.
Environmentally adjusted measures of productivity do not, however, shed light on the ultimate sustainability – economic or environmental – of an industry, country or firm.
Are there other projects I can read about that explore natural capital in some way?
Yes. There are many other projects and events that provide additional information on natural capital, including:
What is the rationale for taking on this project?
Please see here.
Why was the forest products sector chosen as a case study?
Please see here.
Who is involved in this project?
Please see the project’s partners here.
Information on team members can be found here.
When will the project’s findings be made public?
Final results are expected to be disseminated in 2016, but we hope to share interim findings where possible. Please continue to check the project website for information.