Skip to main page content
U.S. flag

An official website of the United States government

Dot gov

The .gov means it’s official.
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.

Https

The site is secure.
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Access keys NCBI Homepage MyNCBI Homepage Main Content Main Navigation
. 2016 Mar 1;113(9):2382-7.
doi: 10.1073/pnas.1513779113. Epub 2016 Feb 8.

Measuring the value of groundwater and other forms of natural capital

Eli P Fenichel  1 , Joshua K Abbott  2 , Jude Bayham  3 , Whitney Boone  4 , Erin M K Haacker  5 , Lisa Pfeiffer  6
Affiliations

Measuring the value of groundwater and other forms of natural capital

Eli P Fenichel et al. Proc Natl Acad Sci U S A. .

Abstract

Valuing natural capital is fundamental to measuring sustainability. The United Nations Environment Programme, World Bank, and other agencies have called for inclusion of the value of natural capital in sustainability metrics, such as inclusive wealth. Much has been written about the importance of natural capital, but consistent, rigorous valuation approaches compatible with the pricing of traditional forms of capital have remained elusive. We present a guiding quantitative framework enabling natural capital valuation that is fully consistent with capital theory, accounts for biophysical and economic feedbacks, and can guide interdisciplinary efforts to measure sustainability. We illustrate this framework with an application to groundwater in the Kansas High Plains Aquifer, a rapidly depleting asset supporting significant food production. We develop a 10-y time series (1996-2005) of natural capital asset prices that accounts for technological, institutional, and physical changes. Kansas lost approximately $110 million per year (2005 US dollars) of capital value through groundwater withdrawal and changes in aquifer management during the decade spanning 1996-2005. This annual loss in wealth is approximately equal to the state's 2005 budget surplus, and is substantially more than investments in schools over this period. Furthermore, real investment in agricultural capital also declined over this period. Although Kansas' depletion of water wealth is substantial, it may be tractably managed through careful groundwater management and compensating investments in other natural and traditional assets. Measurement of natural capital value is required to inform management and ongoing investments in natural assets.

Keywords: comprehensive wealth; genuine investment; groundwater; inclusive wealth; sustainability.

PubMed Disclaimer

Conflict of interest statement

The authors declare no conflict of interest.

Figures

Fig. 1.
Fig. 1.
Conceptual model and equation for valuing natural capital.
Fig. 2.
Fig. 2.
The mean acre-feet of water per acre of land and fraction of fields using drop nozzles over time.
Fig. 3.
Fig. 3.
Accounting price function for 1996, 2005, and the mean of those and all years in between using a 3% discount rate. The accounting price function for the mean of all years using a 7% discount rate is also shown. Circles show the price at the mean water stock.
See this image and copyright information in PMC

References

    1. Guerry AD, et al. Natural capital and ecosystem services informing decisions: From promise to practice. Proc Natl Acad Sci USA. 2015;112(24):7348–7355. - PMC - PubMed
    1. United Nations . Inclusive Wealth Report 2014, Measuring Progress Toward Sustainability. Cambridge Univ Press; Cambridge: 2014.
    1. Hamilton K, Clemens M. Genuine savings rates in developing countries. World Bank Econ Rev. 1999;13(2):333–356.
    1. Arrow KJ, Dasgupta P, Goulder LH, Mumford KJ, Oleson K. Sustainability and the measurement of wealth. Environ Dev Econ. 2012;17:317–353.
    1. Pearson LJ, Biggs R, Harris M, Walker B. Measuring sustainable development: the promise and difficulties of implementing Inclusive Wealth in the Goulburn-Broken Catchment, Australia. Sustainability Sci Pract. Policy. 2013;9(1):16–27.

Publication types