We propose and explore, both in theory and the laboratory, a mechanism to incentivize optimal individual abatement effort in groups of polluters when individual-level monitoring is costly. The mechanism we propose is a hybrid; rewarding agents for the achievement of a group-level target, while allowing individuals to protect themselves against coordination failure by electing to purchase individual-level monitoring. By exerting optimal individual effort, a monitored agent can guarantee their reward irrespective of group behavior. We show that the unique Nash equilibrium is characterized by group members exerting optimal levels of individual effort while not purchasing monitoring. Thus, the hybrid mechanism disincentivizes free riding without realizing monitoring costs. Laboratory experiments confirm that the hybrid mechanism offers welfare gains compared to stand-alone lump-sum group-level incentives and instruments mandating individual-level monitoring. Moreover, the hybrid mechanism maintains levels of efficiency comparable to a group tax but with more desirable out-of-equilibrium properties.

Recreational-related ecosystem services are culturally and economically significant activities that involve the direct interaction between people and the environment. In this study, we focus on cultural ecosystem services relating to recreational fishing-that is, the direct experiential benefits to individuals and communities associated with recreational fishing. Although monetary valuations of recreational fishing (using welfare values) are well established, their integration into ecosystem accounts remains limited. Ecosystem accounts require exchange values-values that the ecosystem service may realise if a market for such services existed. This paper addresses that gap by developing monetary ecosystem accounts for recreational fishing in the Murray-Darling Basin (MDB), Australia, using the System of Environmental Economic Accounting-Ecosystem Accounting (SEEA EA) framework. We apply the simulated exchange value (SEV) method to estimate accounting values consistent with SEEA EA and complement these with welfare values to provide a more comprehensive view of the benefits derived from recreational fishing. The study presents supply and use tables and auxiliary accounts. As such, it contributes to a small but growing set of examples that can be used to guide future ecosystem account development for recreational fishing as well as other recreational-related ecosystem services.

Nature loss poses a growing risk to the global economy, prompting calls for enhanced business accountability. To support the urgent business transformations required to achieve Nature Positive goals, decision-makers, investors, lenders and other stakeholders need consistent, comparable and decision-useful information on the state of nature and the benefits it provides. This paper presents a conceptual framework for natural capital accounting (NCA), adapting principles from financial accounting to support transparent reporting on business interactions with nature. We propose a set of structured statements-Natural Capital Balance Sheets, Natural Capital Income Statements, and Ecosystem Change Statements-that report on stocks of natural capital and associated ecosystem service flows. This approach is novel in its application of double-entry financial accounting principles to ecological assets, liabilities and equity, offering a structured method for tracking organisational stewardship of nature. The framework builds on established financial reporting practices and aligns with global statistical standards such as the United Nations System of Environmental-Economic Accounting (SEEA). A hypothetical example demonstrates how the framework can be applied to track changes in ecosystem condition and assess progress towards Nature Positive commitments. This work provides a foundation for mainstreaming NCA as a tool for ecological accountability. Further research is needed to operationalise the framework, refine ecological metrics and integrate NCA into governance and reporting systems. As global sustainability standards evolve, this framework offers a foundation for embedding nature into business reporting and decision-making and aligning corporate performance with ecological sustainability.

Using a weight of evidence approach, natural capital outcomes associated with regenerative grazing and silvopastoral systems were compared to those associated with conventional grazing systems. The aim of the review was to better understand how grazing management influences 16 natural capital indicators likely to be material from both an economic and sustainability perspective for grazing enterprises and to assess the evidence for associated impacts, positive or negative, on the natural capital resources required to sustain the system. Material natural capital issues reviewed included water availability and security, water quality, soil health and pasture productivity, biodiversity and climate change and greenhouse gas emissions.The review confirms previous evidence that moderate to high levels of grazing tends to degrade natural capital, relative to light to moderate levels of grazing. In relation to regenerative grazing practices the responses were less clear. Regenerative grazing practices may have a positive impact on natural capital, particularly in relation to soil biodiversity and live weight gain on a per head basis. However, the evidence base suggests that the effect size may be small and may take some years to be realised. For 12 of the 16 indicators reviewed, the natural capital outcomes were inconclusive or unresolved even though for five of these indicators, the evidence base was considered to be robust. For the remainder of these the evidence base was insufficient to support an analysis of potential impacts. Similarly, for silvopastoral grazing management systems, there was some evidence to suggest that this type of grazing management could lead to improved natural capital outcomes. However, the evidence base was generally insufficient to definitively attribute the changes in grazing management practices to natural capital outcomes.Although the evidence base for many of the natural capital outcomes associated with differing grazing management practices is incomplete, it should not be interpreted that this indicates a lack of a beneficial response, where a beneficial response would be characterised by improved natural capital and enterprise productivity. Rather it highlights shortcomings in the underlying evidence. Very few studies have the capacity to fully account for the benefits of changes in management practices on the natural capital outcomes and the productivity of the enterprise simultaneously and over a sufficient period of time to observe change. This was particularly evident in relation to carbon storage. While there have been many studies that have examined changes in the individual stocks, e.g. soil carbon or emissions in relation to grazing management very few studies have examined the whole farm carbon balance. Increased adoption of processes such as natural capital accounting, although in their infancy, could help to address this challenge and facilitate a more systematic analysis an enterprises natural capital and financial performance.

Businesses are embedded within nature. Their supply chains, operations, and products fundamentally depend on and impact nature. These impacts and dependencies can give rise to nature-related risks (as well as related opportunities). However, despite growing expectations from stakeholders, most businesses are currently not adequately measuring and reporting on these. To date, it has not been clear whether this requires the development of entirely new indicators, or whether various existing sustainability reporting frameworks could provide sufficient information on nature-related risks. This paper evaluates the decision-usefulness of existing indicators for the softwood plantation forestry industry in Australia. Decision-usefulness is assessed against three criteria: (1) relevance and completeness; (2) faithful representation; and (3) comparability. The results show some potential for adaptation of indicators already used in sustainability-related corporate accounting and reporting, which could help reduce the reporting burden and encourage uptake. However, gaps remain in measuring the financial consequences for business from nature-related risks and in providing sufficient comparable information to evaluate performance across industries and locations. Implications are discussed in relation to recent recommendations from the Taskforce on Nature-related Financial Disclosures (TNFD) and International Sustainability Standards Board (ISSB) sustainability standards IFRS S1 and S2.

Global biodiversity is in decline, and businesses and society are being required to urgently create new operating models to ameliorate the crisis. Among the strategies proposed to do this, implementing the concept of nature positive has captured worldwide attention. Critical to its success will be effective collaboration between ecologists and businesspeople, driven by a shared understanding of key nature positive terminology, concepts, and risks. To this end, we introduce three core aspects: the ecological concepts in the definition of nature positive (health, abundance, diversity, and resilience), a typology of financial instruments that may be applied to achieving nature positive, and an overview of risks to biodiversity and society. The pivotal findings include that ecological complexity and uncertainty belie the simplicity of the definition of nature positive and that managing risk requires embedding aspirations into existing and emerging biodiversity conservation and restoration science and policy. Although it is challenging, nature positive deserves pursuit.

By embedding a spatially explicit ecosystem services modelling tool within a policy simulator we examine the insights that natural capital analysis can bring to the design of policies for nature recovery. Our study is illustrated through a case example of policies incentivising the establishment of new natural habitat in England. We find that a policy mirroring the current practice of offering payments per hectare of habitat creation fails to break even, delivering less value in improved flows of ecosystem services than public money spent and only 26% of that which is theoretically achievable. Using optimization methods, we discover that progressively more efficient outcomes are delivered by policies that optimally price activities (34%), quantities of environmental change (55%) and ecosystem service value flows (81%). Further, we show that additionally attaining targets for unmonetized ecosystem services (in our case, biodiversity) demands trade-offs in delivery of monetized services. For some policy instruments it is not even possible to achieve the targets. Finally, we establish that extending policy instruments to offer payments for unmonetized services delivers target-achieving and value-maximizing policy designs. Our findings reveal that policy design is of first-order importance in determining the efficiency and efficacy of programmes pursuing nature recovery. This article is part of the theme issue ‘Bringing nature into decision-making’.

Pathways to decarbonisation are commonly explored by government and industry through the use of energy system models. However, such models rarely consider where new energy infrastructure might be located. This is problematic as the spatial context of new renewable energy infrastructure will determine, in part, the environmental, social, and technical impacts of the energy transition. This paper presents the ADVENT-NEV model which brings together innovations in energy and natural capital modelling to identify the optimal locations of multiple renewable energy technologies at a national scale and high spatial resolution. Using Great Britain as a case study, the results show how the spatial distribution of renewable energy technologies changes when a natural capital approach is taken. In particular, the least-cost locations for onshore wind farms and bioenergy crops are highly influenced by the value of carbon sequestration, or emissions associated with their land use change. Siting using a natural capital approach produced appreciable ecosystem service benefits, such that the overall welfare gain to society was estimated at nearly 25 pound B. Overall, this paper demonstrates that under-standing the geospatial context of the energy transition is essential to identifying which renewable energy pathways are consistent with decarbonisation and environmental objectives.

As countries decarbonise, the competition for land between energy generation, nature conservation and food production will likely increase. To counter this, modelling, and sometimes energy policies, use exclusion zones to restrict energy deployment from land deemed as important to society. This paper applies the spatially-explicit ADVENT-NEV model to Great Britain to determine the cost imposed on the energy system when either environmental or food production exclusion zones are applied. Results show that exclusion zones impose a cost of up to £0.63 billion (B), £19.17 B and £1.33 B for the solar, wind, and bioenergy pathways. These costs give an indication of the value being placed on protecting these areas of land. When multiple exclusions are imposed on bioenergy, the high pathway is infeasible indicating a more flexible approach may be needed to meet net zero ambitions. The model also shows how the value of ecosystem services changes when exclusion zones are applied, highlighting how some exclusions increase non-market costs whereas others decrease them. In several cases exclusion zones are shown to increase social costs, the opposite of their intended use. For these exclusions to be justifiable, the unobserved values missing from the model must be as large as these increases.

As countries transition to net zero emissions, the number of land use conflicts between energy generation, nature conservation and food production are expected to rise. Models typically restrict energy deployment from land deemed as providing high societal value (e.g. National Parks, peatland) when exploring future energy pathways to resolve these conflicts. This study applies the spatially explicit ADVENT-NEV model to Great Britain to determine the lower-bound of the implied value being placed on the land excluded. It compares the ‘optimal’ locations for new renewable energy when strict restrictions are applied against those identified when a natural capital approach is used. When energy development is restricted from Areas of Outstanding Natural Beauty, National Parks and high-grade agricultural land the cost of the energy system is shown to increase by approximately 10%. Even limited bioenergy crop expansion is unfeasible if strict restrictions are applied. In particular, results indicate that such restrictions would not be compatible with net zero emissions targets. These restrictions also result in an increase in the spatial footprint of solar farms, wind farms and bioenergy power stations by up to 13.4%, 79.6% and 15.8% respectively. Incorporating the valuation of ecosystem services into renewable energy modelling provides a more nuanced approach than a binary exclusion, highlighting how strict restrictions may not always be best for society. The natural capital approach makes trade-offs between energy, nature conservation and food production more explicit for decision-makers allowing them to take a more holistic approach.

Agroforestry is one nature-based solution that holds significant potential for improving the sustainability and resilience of agricultural systems. Quantifying these benefits is challenging in agroforestry systems, largely due to landscape complexity and the diversity of management approaches. Digital tools designed for agroforestry typically focus on timber and crop production, and not the broader range of benefits usually considered in assessments of ecosystem services and natural capital. The objectives of this review were to identify and evaluate digital tools that quantify natural capital benefits across eight themes applicable to agroforestry systems: timber production and carbon sequestration, agricultural production, microclimate, air quality, water management, biodiversity, pollination, and amenity. We identified and evaluated 63 tools, 9 of which were assessed in further detail using Australia as a case study. No single tool was best suited to quantify benefits across each theme, suggesting that multiple tools or models could be combined to address capability gaps. We find that model complexity, incorporation of spatial processes, accessibility, regional applicability, development speed and interoperability present significant challenges for the tools that were evaluated. We recommend that these challenges be considered as opportunities to develop new, and build upon existing, tools to enhance decision support in agroforestry systems.

As storm-driven coastal flooding increases under climate change, wetlands such as saltmarshes are held as a nature-based solution. Yet evidence supporting wetlands' storm protection role in estuaries-where both waves and upstream surge drive coastal flooding-remains scarce. Here we address this gap using numerical hydrodynamic models within eight contextually diverse estuaries, simulating storms of varying intensity and coupling flood predictions to damage valuation. Saltmarshes reduced flooding across all studied estuaries and particularly for the largest-100 year-storms, for which they mitigated average flood extents by 35% and damages by 37% ($8.4 M). Across all storm scenarios, wetlands delivered mean annual damage savings of $2.7 M per estuary, exceeding annualised values of better studied wetland services such as carbon storage. Spatial decomposition of processes revealed flood mitigation arose from both localised wave attenuation and estuary-scale surge attenuation, with the latter process dominating: mean flood reductions were 17% in the sheltered top third of estuaries, compared to 8% near wave-exposed estuary mouths. Saltmarshes therefore play a generalised role in mitigating storm flooding and associated costs in estuaries via multi-scale processes. Ecosystem service modelling must integrate processes operating across scales or risk grossly underestimating the value of nature-based solutions to the growing threat of storm-driven coastal flooding.

Natural capital is a term for the stocks of natural assets (e.g. natural resources and ecosystems) that yield flows of ecosystem services that benefit the economy and human well-being. Forestry is one of the industries with the greatest dependencies on natural capital, as well as having the potential for substantial positive or negative impacts on natural capital. These dependencies and impacts create direct risks to a forestry enterprise’s ongoing financial viability, which translate into indirect risks for investors and society. There are growing demands from a variety of stakeholders for more reliable information to assess such risks, but at present, these risks are not always well understood, assessed or communicated in a consistent and comparable way. This paper addresses this problem by applying a standardized methodology to develop the first systematic, evidence-based review and financial materiality assessment of natural capital risks for the Australian forestry sector. The vast potential scope of forestry impacts and dependencies on natural capital can be reduced to twenty key areas of relevance to Australian forestry, of which only seven to nine have been assessed as highly financially material for each of the sub-sectors of softwood plantations, hardwood plantations and native forestry. The majority of risks assessed as highly financially material are related to dependencies on natural capital. This is in part due to the fact that current regulations and certification schemes focus on managing impacts, but tend to overlook dependencies. Nearly all of the natural capital risks rated as highly material are likely to be exacerbated by climate change. An improved understanding of natural capital risks is an important input to better decision-making by forestry enterprises, as well as their lenders and investors, forestry regulators and other relevant stakeholders. This paper contributes to the preparedness of the forestry industry and its stakeholders to address questions about vulnerability to future changes and declining trends in natural capital.

The UK government has made formal commitments to reduce GHG emissions (e.g. under the Climate Change Act 2008 and subsequent amendments) and to protect/improve natural capital and the environment (e.g. as part of the 25 Year Environment Plan published in 2018). Meeting these objectives requires an integrated approach to two parallel challenges i) decarbonising the energy system and ii) better understanding and valuation of natural capital and ecosystem services. From an academic perspective this involves bringing together two substantial, but rather weakly connected bodies of research, while also acknowledging that this integration in a UK setting needs to recognise the international context (i.e. a whole systems perspective). The ADVENT project (ADdressing Valuation of Energy and Nature Together) has been funded by the UK National Environment Research Council to develop conceptual frameworks and modelling tools which ‘integrate the analysis of prospective UK energy pathways with considerations relating to the value of natural capital’. A methodology has been implemented to downscale the outputs of pathways from national energy system models and incorporate environmental impacts into the assessment of different options. This has required defining spatially-optimised distributions of investments in new energy infrastructure using a range of financial and welfare criteria. These distributions are then compared in terms of their construction, transport and land opportunity costs, as well as the implications for biodiversity, greenhouse gas emissions, recreation, visual amenity and water resources. This paper will present results from comparing different UK energy pathways through to 2050 in terms of the implications of electricity generation from three types of renewables (bioenergy, solar and onshore wind). The results illustrate that i) individual pathways can vary appreciably in their environmental impacts, ii) overall societal welfare can be enhanced by using spatial modelling to incorporate valuations of such impacts into implementation of pathways and iii) assessment outcomes can be sensitive to modelling assumptions (e.g. regarding the proportion of biomass feedstock from domestic or international sources). More broadly, the results demonstrate how important improvements can be achieved in the integration of environmental considerations into the assessment of future energy pathways at regional and national scales. The approach is now being further refined through the UK Energy Research Centre Phase 4 programme and ADVANCES Landscape Decisions project in the UK, as well as the five-country IRENES project funded by Interreg Europe.

Climate change is expected to impact agricultural land use. Steadily accumulating changes in temperature and water availability can alter the relative profitability of different farming activities and promote land-use changes. There is also potential for high-impact 'climate tipping points', where abrupt, nonlinear change in climate occurs, such as the potential collapse of the Atlantic Meridional Overturning Circulation (AMOC). Here, using data from Great Britain, we develop a methodology to analyse the impacts of a climate tipping point on land use and economic outcomes for agriculture. We show that economic and land-use impacts of such a tipping point are likely to include widespread cessation of arable farming with losses of agricultural output that are an order of magnitude larger than the impacts of climate change without an AMOC collapse. The agricultural effects of AMOC collapse could be ameliorated by technological adaptations such as widespread irrigation, but the amount of water required and the costs appear to be prohibitive in this instance. Collapse of the Atlantic Meridional Overturning Circulation (AMOC) will impact agricultural land use and its economic value in Great Britain. Ritchie et al. model the impacts of smooth (conventional climate change) and abrupt (tipping point change) AMOC collapse on land use, arable farming and related economic outputs in Britain, as well as the economic feasibility of technological adaptations such as widespread irrigation.

Increased pressure on natural resources is expressed globally through land degradation, biodiversity decline and global climate change. In response to recognition that these challenges must be addr...

Natural capital refers to those stocks of assets provided for free by nature which, directly or indirectly, deliver well-being for humans. These include freshwater, fertile soils, clean air and living things. Natural capital stocks deliver flows of services, often called ecosystem services, which (often in combination with flows from other capital including human labour, ingenuity and manufactured goods) produce the benefits upon which humans depend for economic well-being and their very existence. Economic activity depends on natural capital while also affecting the stock of those assets. This relationship between the environment, the economy and human well-being has caught the attention of governments at both global and national levels. But how should governments incorporate the notion of natural capital into policy- and decision-making? We set out to define the notion of natural capital and how it can be brought into the economic analyses which underpin the majority of policy decision-making systems. We consider the means by which changes can be best directed to reflect the underlying science of the environment, the incentives of the economy and the preferences of society.

This paper focuses on the issue of payments for ecosystem services (PES) mechanism design when the activity incentivised through the scheme benefits multiple groups, each of whom might be prepared to contribute to payments made through the scheme. In particular, we examine spatial coordination on the demand side of the market; that is to say, the question of which beneficiary of the PES scheme buys land-management changes on which land parcels. We show through spatial simulation modelling that it is possible for negotiation to lead to Pareto improvements when compared to solutions reached through non-cooperative strategic solutions; however, we also show that this result is not universal and only holds under certain conditions. In particular, the spatial correlation and spatial interdependence of the ecosystem service benefits are key in determining whether negotiation between beneficiaries is optimal and therefore if policy makers and designers of PES schemes should be prioritising bringing together multiple beneficiaries of ecosystem services.

Directly asking respondents in contingent valuation surveys their willingness to pay is one of the few quantitative methods available to assess full economic value (including both use and non-use values) of non-market environmental goods. It therefore remains vitally important to better understand the reasons for consistently observed violations of procedural invariance in such surveys. This paper describes an empirical experiment designed to examine whether uncertainty might provide an explanation for three commonly observed violations of procedural invariance in contingent valuation. In each case, we present a plausible explanation for each anomaly through decision heuristics brought about by respondents trying to answer the question truthfully when their underlying preferences are stable but uncertain. Using a novel semi-parametric estimator, we find little evidence to support the idea that anomalies can be resolved through an uncertainty explanation, but our experiment provides noteworthy insights into the ways uncertain preferences may be shaped by the nature of contingent valuation questions.