Natural capital accounting key for sustainable natural resource management

  • April 18, 2017

Natural resources in diverse forms are abundant across the entire Ghanaian landscape. These resources which constitute natural capital, provide numerous ecosystem services (water cycling, temperature regulation) for human well being. According to the World Bank (2011), natural capital provides about 36% of the total wealth of all developing countries globally. In Ghana, the promotion and mainstreaming of the sustainable development concept into our development agenda has gained increasing acceptance especially among policy makers.

Achieving sustainable development could however be highly hampered by the over exploitation of natural resources across the country especially in the forest and mining regions through illegal chainsaw operations and small scale mining among others.

It is important to mention that promoting efficient natural resource management will place Ghana in a better position to achieve the following Sustainable Development Goals (SDGs);

SDG 2:End hunger, achieve food security and improved nutrition and promote sustainable agriculture

SDG 6:Ensure availability and sustainable management of water and sanitation for all

SDG 11:Make cities and human settlements inclusive, safe, resilient and sustainable

SDG 13:Take urgent action to combat climate change and its impacts by regulating emissions and promoting developments in renewable energy

SDG 14:Conserve and sustainably use the oceans, seas and marine resources for sustainable development

SDG 15:Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss

The challenge of continuous non-sustainable natural resource management in Ghana is not only attributable to the country’s rather poor institutional capacity or ineffective monitoring of stakeholder activities, but also because of the lack of a comprehensive accounting system in our natural resource management process. Accounting for our natural capital is a distinct way of acknowledging the value (in monetary terms) of both the environmental and economic activities and making choices based on those values.

Natural Capital Accounting (NCA), is a concept introduced by the World Bank which involves the conscious effort to calculate the total stocks and flows of natural resources and services in a given ecosystem. The aim is to balance economic activities and environmental impacts taking into account all the costs and benefits including pollution and extent of natural resource depletion in economic accounts and development planning. Conventionally, natural resources/ assets are not included in national accounts. NCA provides the opportunity to capture natural assets in national accounts. It helps to measure the ‘total’ value (and wealth) in our natural resources from both the perspectives of economic value (i.e. production inputs) and depleted value (i.e. value after exploitation).

Benefits of NCA

Ghana, India, Madagascar and Morocco are a few countries putting measures in place to implement NCA. This decision by these countries are attributable to numerous reasons, some of which are briefly discussed below. Through NCA, countries can measure the ‘total’ value (and wealth) in their natural resources as well as its effects on national accounts and economic growth. For example, Mexico’s net national product fell by almost 7% when an adjustment was made to take into account the depletion of oil, forests and groundwater associated with recent levels of recorded economic growth. Accounting for Gross Domestic Product (GDP) for instance, provides information on economic activities (agriculture, manufacturing) and their linkage with improving livelihoods. However, this accounting is void of ‘what is lost’ in an attempt to improve livelihoods.

Thus, GDP provides statistics on overall socio-economic improvements without providing information on how many trees have been cut down or how many rivers have been polluted and their associated costs to provide the numerous needs for the populace. NCA however, captures both scenarios and, therefore, provides a more comprehensively effective way of managing our natural resources sustainably.

One way of to keep our natural resource capital is to manage them in a responsible and sustainable manner. Natural resources can be used sustainably to provide people with shelter, food, medicine, and other services, while also maintaining essential habitats for plants and animals.

The efficiency of natural capital stock availability and accessibility management is enhanced through NCA. By accounting for natural capital, governments are able to include natural assets in national accounting and development planning. They are also directly involved in holistically measuring the total stock of natural resources available for use and after use for socio-economic development as well as their degree of accessibility. This positions state organisations and other stakeholders to properly manage resources as information on the availability; and accessibility of resources is made known through NCA. On the other hand, this information also helps to get the public on board in championing a course for sustainable natural resource use. Natural resource management schemes frameworks or policies can be tested for efficiency over time via NCA. Scarce resource protection and macro-economic indicator effectiveness among others are some key areas that can be tested for efficiency under national resource management options over the long term if NCA is adopted. NCA can for instance, reveal the economic costs and benefits of land use conversion, or of different types of land management. Through resource and/or environmental accounting, the objectives, implementation outcomes and outputs of these, frameworks, or policies become susceptible to scrutiny and review. Other benefits of NCA include improvements in; conservation, recycling, pollution abatement, environmentalism among others.

Is Ghana ready to implement NCA?

Ghana is one of the many countries taking initiatives in relation to implementing NCA. Our economy is characterised by aquatic resources, lakes and rivers, forestry etc. Accounting for natural capital in all or any of these resource fields is a step in the right direction. Despite the country’s challenges with institutional capacity and financial capabilities in supporting natural resource initiatives, Ghana on the whole is fairly well positioned to implement NCA in its natural resource management framework. Most if not all of the various ministries, agencies and departments (MDAs) needed for NCA such as the Ministry of Environment, Science, Technology and Innovation (MESTI), Environmental Protection Agency (EPA) and Forestry Commission (FC) are already set up and fully functioning.

The current global call for environmentalism, natural resource protection and conservation and climate change awareness has also increased the influx of Ghanaian consultants in these areas in the country. Moreover, natural resource management mainstreaming in national development plans in recent times have received positive political attention even though much can still be done in this wise. Across the continent, the Gaborone Declaration for Sustainability in Africa (GDSA) has been adopted as a deliberate African led effort to promote sustainable development across the continent. Within the declaration, countries have committed to implementing all conventions and declarations that promote sustainable development towards achieving the following vision; “To ensure that the contributions of natural capital to sustainable economic growth, maintenance and improvement of social capital and human well-being are quantified and integrated into development and business practice”. The Desktop Scoping Report for the GDSA indicates that Ghana has initiated steps in its forest and timber sector to carry out NCA. The report also indicates the country’s commitment to upscale NCA to the following resource fields; aquatic resources, energy, land, minerals, soil and water. Additionally, Ghana is a party to the Forest Investment Program (FIP) through which the country can account for natural capital in the forest and timber sector. This program is being executed by the Forestry Commission (FC). It is arguably right to say that Ghana is ready and capable of implementing NCA.

Way forward

Since the NCA concept supports the use of the environmental accounting tool, monitor factors such as environmental conservation costs, environmental conservation benefits, and economic benefits associated with such environmental conservation activities can be appropriately monitored. Through the analysis of these factors, the appropriate allocation of resources (financial, human) to environmental conservation activities can, therefore, be ensured. For instance, it will allow management to review account balances model for managing expenditures for environmental conservation projects and investment decisions, and promote risk management to avoid lawsuits.

Also, Ghana needs to develop (or periodically review if already developed) a ‘smart and proactive’ framework for NCA in conformity with the System for Environmental-Economic Accounting. An important component of this framework which needs consideration is the scope of accounting as it is central to policy decision-making. Going forward, the country can institutionalize an Environmental-Economic Accounting Unit to solely oversee the collection and management of environment-economics statistics. By doing so, Ghana will be in a position to determine the economic costs and benefits of exploitation of natural resources and by extension, help determine the forest resources compared with those of sustainable forest management. In this way, it can also show the socio-economic tradeoffs in exploiting natural resources.

The Government should commit to upscaling NCA in the other resource fields as indicated in the GDSA to help promote a holistic national resource accounting. Lessons learnt from the forestry and timer sector resource accounting should be applied to facilitate efficiency of NCA in the sector and where applicable, other resource sectors in the upscaling effort.

Conclusion

Our natural resources are our wealth base as a nation. It is imperative to ensure all resources are sustainably managed regardless of our pace of economic growth and development. The concept of NCA has been proven to be a very effective tool in tackling the issue of achieving effective resource management. Ghana has already taken steps to implement this option of accounting in its forestry and timber sector and hopes to upscale it to other resource sectors including; minerals, water and aquatic resources. With the necessary support from all stakeholders especially policy makers and political leadership, Ghana’s natural resources can be sustainably managed through the implementation of NCA. Implementing NCA is a good step towards ensuring that our natural resources are used for our economic growth and development without harming the very environment that supplies them.

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