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Natural
Capital:
A Critical Foundation of Our Economy
Improving
the information base on natural capital
2.1
Why We Need Improved Information About Natural Capital
In the 2000 spring budget, the Minister
of Finance observed that “we must come to grips with
the fact that the current means of measuring progress are
inadequate.” He then asked the NRTEE to develop a
set of national indicators that Finance Canada and other
decision makers could use to track the impact of current
economic practices on the natural and human assets that
will be needed by future generations of Canadians. The resulting
report, Environment and Sustainable Development Indicators
for Canada (released in May 2003), concluded that Canada’s
indicators and information systems need to take better account
of the natural, human and social capital assets that are
necessary to sustain a dynamic economy and healthy society.
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Tracking more complete information
about Canada’s full set of capital assets would help Canadians
avoid decisions that inadvertently deplete key human and natural
assets, or that under-invest in the protection or enhancement
of assets that may be necessary to realize future development
opportunities. Providing good information on the full range of
important national assets will require significant improvements
in the type and quality of information collected at the national
level.
The NRTEE’s report on indicators
made three major sets of recommendations to ensure that the information
base for making decisions on fiscal and other policy accounts
more fully for natural, human and social capital:
- Statistics Canada should publish annually
the six indicators of natural and human capital identified
by the NRTEE, and the Minister of Finance should incorporate
them in the federal budget statement in order to provide Canadians
with a better context for understanding the overall state
and potential of our economy.
- Statistics Canada should expand Canada’s
System of National Accounts to include information on all
types of capital, including natural capital, and the interactions
among the various types of capital.
- The federal government, through Environment
Canada’s Canadian Information System for the Environment
(CISE), should improve the data structures and information
systems relating to environmental data.
The six indicators identified by the
NRTEE include five for natural capital and one for human capital:
- The Forest Cover indicator tracks changes
in the extent of Canada’s forests – a key natural
resource and provider of ecosystem services such as habitat
for wildlife. Because this indicator is based on satellite
data, it can be regularly updated, something that was not
possible with earlier national forest indicators in Canada.
- The Freshwater Quality indicator shows the
extent to which Canada’s freshwater bodies are meeting
objectives for uses such as swimming, irrigation and sustaining
aquatic life, revealing trends in how many monitored waterways
are classified as “marginal” or “poor.”
The indicator calculated in the report, although still in
a preliminary form, is the first national aggregation of this
type of water quality data in Canada.
- The Air Quality indicator is estimated using
ground-level ozone (“smog”) measurements. This
indicator is the first readily available Canadian measure
of air quality that weights exposure to a pollutant by population.
In other words, this indicator tries to factor in the number
of people who are exposed to low-level ozone, as well as the
ambient concentrations of ozone in different parts of the
country. Ozone is the current focus of the indicator because
of the well-understood links between exposure and health problems.
It is hoped that other pollutants will eventually be incorporated
into the indicator.
- The Greenhouse Gas Emissions indicator, already
calculated by Environment Canada, tracks total annual emissions
of greenhouse gases. All of the gases tracked in this indicator
are likely affecting the stability of the global climate.
- The Extent of Wetlands indicator will track
changes in the total area of wetlands. Wetlands provide many
essential ecosystem services: they supply habitat and food
for many species, purify water and store large quantities
of carbon. Moreover, by retaining and releasing large volumes
of water, they help replenish ground water, control floods
and storm waters, reduce erosion and protect shorelines. Wetlands
also indirectly support a range of economic activities such
as fishing, farming and recreational activities.
Like the forest cover indicator, this
indicator will be based on satellite data. This is the only indicator
that cannot be reported at present, although it could be produced
in approximately two years with suitable funding.
- The Educational Attainment indicator tracks
the percentage of the working-age population with post-secondary
education. This indicator will reveal Canada’s investment
in educating its workforce and will help us understand our
ability to compete in a global, knowledge-based economy.
These indicators are simple and easy
to understand. They illustrate some of the more important natural
and human capital that must be maintained for the future. Reporting
on them in each federal budget would help supplement the information
provided by traditional macroeconomic indicators such as gross
domestic product (GDP). In particular, they would provide a more
balanced set of signals regarding the impacts of current policies
and activities on Canada’s ability to sustain development
into the future. But much remains to be done. More work is required
to refine each indicator, and funding is needed to ensure that
they can be reported on an annual basis.
The indicators provide a quick overview
of the state of some key types of human and natural capital. Detailed
analysis and decision making, however, will necessitate a comprehensive
information system that links all types of capital (natural, human
and social) with economic information.
To create such an information system,
the NRTEE proposes a long-term process to reform Canada’s
System of National Accounts (SNA). As in other countries, Canada’s
SNA provides the information upon which all macroeconomic indicators
are based, but collects very little information about Canada’s
natural, human or social capital. Adding accounts to track these
types of capital makes it possible to study important interactions:
the analysis of climate change, for instance, would greatly benefit
from an information system that would coherently link data on
natural capital (e.g., greenhouse gas emissions) with economic
data (e.g., the activities that lead to greenhouse gas emissions).
The expansion of the SNA, while not modifying any of the existing
economic accounts, would permit analysis of a more complete set
of relevant factors, as well as the development of more informed
and more coherent fiscal, industrial and environmental policies.
Statistics Canada will develop the
new capital accounts within the SNA. However, populating these
accounts with data will require the assistance of many different
data providers. In particular, the NRTEE has concluded that Canada
needs to greatly improve the quantity, quality and accessibility
of information about natural capital. Among other things, this
will require continued support for Environment Canada’s
Canadian Information System for the Environment (CISE).
2.2
Budget Recommendations
This submission’s recommendations
focus on starting to implement the three main recommendations
of the NRTEE’s report on indicators:
- providing funding to develop and regularly
report the small set of natural and human capital indicators
identified by the NRTEE;
- initiating the long-term expansion of Canada’s
System of National Accounts to include information on all
types of capital, including natural capital; and
- funding the Canadian Information System for
the Environment to create consistent national databases on
issues such as biodiversity and water quality.
2.2.1
Develop and Report Environment and Sustainable Development Indicators
The six indicators developed by the
NRTEE will supplement macroeconomic indicators such as GDP, highlight
the importance Canadians attach to national capital assets, and
help track Canada’s progress in preserving and enhancing
the country’s natural capital.
The NRTEE therefore recommends that
Statistics Canada publish the indicators annually and that the
Department of Finance incorporate them into each federal budget
statement. Funding is also required to improve the indicators.
For the time being, efforts should focus on developing the wetlands
indicator (Natural Resources Canada and Environment Canada), and
improving the water quality (Environment Canada) and forest cover
(Natural Resources Canada) indicators.
| Recommendation
1: That Statistics
Canada, Environment Canada and Natural Resources Canada
be provided with $5 million a year to continuously improve
and regularly report the recommended indicators of natural
and human capital. |
2.2.2 Expand the System of National Accounts
The NRTEE recommends that the
System of National Accounts be expanded to include accounts on
the natural, human and social capital so vital to current and
future development. Once developed, the new accounts will help
to create a comprehensive, coherent information system that provides
linkages among environmental, social and economic issues.
Although much can be accomplished in
the short to medium term, fully expanding and improving the SNA
will take several years and will involve several data collection
agencies. Working with other departments such as Environment Canada,
Statistics Canada has prepared a long-term work plan for this
initiative. This work plan requires the allocation of stable,
base-budget funding at a level sufficient to cover both data collection
and data integration costs.
| Recommendation
2: That Statistics
Canada be provided with $20 million a year to begin the
process of collecting and integrating the data needed to
expand Canada’s System of National Accounts so that
it includes all types of natural, human and, eventually,
social capital. |
2.2.3
Support the Canadian Information System for the Environment
Although the System of National
Accounts will provide a structured approach to relating trends
in natural, human and, eventually, social capital to economic
trends, these new accounts will have to be populated with data.
In parallel with the NRTEE’s
work on indicators, Environment Canada has been working on the
Canadian Information System for the Environment, a project that
will dramatically expand the collection, management, integration,
assessment and communication of environmental data and knowledge
at the national level. In particular, CISE will help create databases
that are regularly updated, something that the NRTEE found sorely
lacking, even for critical environmental matters such as water
quality. Over time, CISE will also enhance national consistency
and coherence in environmental data, and will help set national
priorities for monitoring programs. These databases will be the
source for much of the information to be included in the enhanced
System of National Accounts.
CISE also has a key role to play outside
the System of National Accounts by providing access to environmental
information relevant to federal environmental responsibilities
(toxics management, ecosystem quality, climate change, etc.).
Although CISE has been approved in
principle, it has not yet been funded for full-scale operation.
To date, CISE’s activities have been supported by the temporary
reallocation of funds within Environment Canada’s current
budget. To be effective, it needs financial certainty.
| Recommendation
3: That Environment Canada be provided with $20
million a year to enable CISE to become fully operational.
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Providing Information About
Natural Capital
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Measure
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Estimated Cost
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Implementing Agency
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Purpose and Benefits of Measure
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| 1. Develop and regularly report six indicators
of natural and human capital |
$5 million per year to improve and report
the indicators on an annual basis |
Statistics Canada, Environment Canada, Natural
Resources Canada |
Provide tracking of some of Canada’s
key types of natural and human capital to enable informed
decision making |
| 2. Begin to expand the System of National
Accounts to include all types of natural, human and, eventually,
social capital |
$20 million per year to expand and maintain
new capital accounts |
Statistics Canada |
Enable comprehensive assessment of Canada’s
key types of capital. Allow for better analysis of issues
that have both environmental and economic aspects |
| 3. Begin to make fully operational Environment
Canada’s Canadian Information System for the Environment
(CISE) |
$20 million per year to fund CISE |
Environment Canada |
Expand the collection, management, assessment,
and communication of environmental knowledge at a national
level through the creation of a publicly accessible information
system; includes creating cohesive, national databases on
natural capital such as water quality |
Next
set of recommendations
Helping
Rural and Aboriginal Communities
Protect Natural Capital
Investing in Canada's Natural Capital