Natural Capital

Biodiversity, Soil Fertility, and Water

“Natural Capital can be defined as the world’s stocks of natural assets which include geology, soil, air, water and all living things. It is from this natural capital that humans derive a wide range of services, often called ecosystem services, which make human life possible. The most obvious ecosystem services include the food we eat, the water we drink and the plant materials we use for fuel, building materials and medicines. There are also many less visible ecosystem services such as the climate regulation ………., or the pollination of crops by insects.” (From World Forum on Natural Capital).

The main issue is that the Natural Capital must be protected. This is a matter of human behavior, and political decisions, but also a matter of communication and making it part of our financial system. But how do we value these ‘world stocks of natural assets’? There is simply no way to calculate the value of the total natural capital, and it is not useful to do so (Sukhdev, 2012; minute 7:50 – 10:50) . It is also not possible to use the Willingness to Pay (since that depends who you ask). However, it is possible to calculate the costs of not damaging nature (Sukhdev, 2012; minute 12:25 – 14:20), which is called prevention costs in the eco-costs system.

The issue of clean air is dealt with in E-LCA, see Table 2 of the webpage on the concept of the eco-costs.
Water pollution is dealt with the issue of eco-toxicity,

acidification, and eutrophication, see eco-costs of emissions.
The issue of water scarcity is dealt with in E-LCA by the ratio of total water withdrawals to available natural water supplies, see eco-costs of resource scarcity.

The issue of biodiversity is dealt with in E-LCA in terms of the eco-costs of land-use change, but in an insufficient way to deal with the production of food.
A solution to deal with soil fertility in E-LCA land-use has recently been proposed (De Laurentiis et al, 2019) for the Environmental Footprint system, however, it lacks practical data at sufficient detail (this is one of the reasons that soil fertility has not been incorporated in the eco-costs system so far).

With regard to the foreground system of the farm itself, however, biodiversity, soil fertility, and water need different analyses in TCA: at the local level of the farm (in contrast to the regional level in LCA).

Biodiversity of land

The Natural Capital of biodiversity in the eco-costs system is valued at 6 euro per m2 of land with a biodiversity of 4000 species of vascular plants per 10.000 km2, see eco-costs of land-use (it is the price of not damaging the rain forest by developing palm oil plantations).
Most of the agricultural production takes place in

Content

regions of 1250-1500 species, eco-costs 1.88 – 2.25 euro per m2 (EU, USA, Australia, Argentina) up to 3000 species, eco-costs 4.5 euro per m2, (e.g. soy beans in Brazil; rice in the Far East).

With regard to the stock of biodiversity, however, the current E-LCA: (1) is not refined enough to take regional differences into account within countries, let alone between local farmers (2) does not account for conservation of biodiversity as it is done by some farmers (e.g. organic farmers). Issue (1) is related to the accuracy of local data. Issue (2) is more fundamental, since the calculation of LCIs is about flows (mass flows of pollutants to Natural Capital, as well as flows that deplete Natural Capital itself), in contrast to the issue of ‘conservation’ which is by definition related to no flow to or from Natural Capital (Note that eco-costs = 0 in situations with no flow and no change).
Both issues should be dealt with in TCA. But how?

Local biodiversity of farms in TCA

To enable the required species richness calculations in TCA, data on farm level are required (in contrast to the 100 km x 100 km grid of the global map at webpage eco-costs of land use). For many western countries, maps are available at a gid of 1 km x 1 km or 5 km x 5 km, which might be applied instead of an actual measurement at the farm itself. Fig. 6.2 shows an example are the maps of the species richness in the Netherlands, see Florbase species map
To determine the eco-costs of biodiversity, the equivalent Species-Area Relationship (SAR) power function of Arrhenius S=cA^z must be applied, where S is the species richness, A is the Area and z = 0.15. The resulting equivalent data for the biodiversity factor and eco-costs are shown in Table 6.2a.

In E-LCA it is common practice to assume that, when land-use is changed from a natural area to an agricultural area, the loss of biodiversity is 100% (neglecting the small biodiversity that is left by conventional farming), since it is incorporated in the standard databases. It makes sense to do the same in TCA. However, when land-use is changed from natural area to organic farmland, it makes sense to take the difference between the two. In the eco-costs system, the biodiversity of the natural situation (the default norm) is the biodiversity of the Global Map of Barthlott , or Table 2.5 at eco-costs of land-use.

The eco-costs of land-use change from nature to a conventional farm or to an organic farm in TCA is explained by an example:
(1) suppose that the farm is in the Netherlands: the norm for nature is 315 species per 1 km2. (1250 species per 10.000 km2 from the World biodiversity map, combined with the equivalent calculation of Table 6.2a)
(2) suppose that the organic farm has 265 species per 1 km2 (either from measurement, or from the detailed map of the Netherlands)
(3) the loss of biodiversity from nature to a conventional farm is then 315 species per 1 km2, resulting in 315 x 6/1000 = 1.89 euro/m2 (see also Table 6.2a)
(4) the loss of biodiversity from nature to an organic farm is then 50 species per 1 km2, resulting in 50 x 6/1000 = 0.30 euro/m2
(5) the gain of converting from conventional to organic is then 265 species per 1 km2, resulting in -265 x 6/1000 = minus 1.59 euro/m2 (note that the eco-costs of this benefit for the biodiversity stock is negative)

So it is not difficult to make a land-use change calculation per m2.
The issue now is to allocate it to a kg food. For the expansion of conventional farming, the loss of biodiversity should be calculated on the basis of the world food production (i.e. the consequences of annual global expansion is to be divided by the annual global production), since there is a global market mix.

Figure 6.2. A species richness map of The Netherlands with a grid of 1 km x 1 km (5 km x 5 km) is also available.

The conversion from conventional farmland to organic farmland is not instantaneous: the build-up of biodiversity is gradual. When the conversion takes 15 years, then the benefit of the land-use change can be allocated directly to 15 years of production. The best approach in TCA, however, is to monitor the progress of species richness each year, and allocate that to the production of that year.

Since it is not realistic to assume that the increase of biodiversity lasts forever, it seems to be logical to introduce eco-costs for conservation of nature that prevents a fallback of the achieved stock. An eco-costs bonus of 3% per year for stock conservation seems arbitrary but logical. In the aforementioned example this would result in -0.03 x 265 x 6/1000 = minus 0.048 euro/m2, to be allocated to the annual production.

species 100 km x 100 km	species 10 km x 10 km	species 5 km x 5 km	species 1 km x 1 km	biodiversity factor	eco-costs (euro/m2)
5000 4000 3000 2000 1500 1250 1000 500 400 200 100 52	2798 2238 1679 1119 839 705 560 280 224 112 56 29	2188 1750 1318 875 656 551 438 219 175 87.5 43.8 22.75 14 5.25 1.75	1250 1000 750 500 375 315 250 125 100 50 25 13 8 3 1	1.25 1.00 0.75 0.50 0.375 0.3125 0.25 0.125 0.1 0.05 0.025 0.013 0.008 0.003 0.001	7.50 6.00 4.50 3.00 2.25 1.875 1.50 0.75 0.6 0.30 0.15 0.078 0.048 0.018 0.006

Table 6.2a. Equivalent data for the biodiversity factor and eco-costs.

Note that the vertical relationships in the columns are linear; note also that a biodiversity factor 1 corresponds with 6 euro eco-costs

Fertile Soil

Fertile Soil is an important aspect of Natural Capital. In the race to the bottom of agricultural prices, crop yields have become a factor 2 – 3 higher since World War II (Corp Yields – Our World in data, 2019). This achieved by an ever increasing use of chemical fertilizers and pesticides, and over-exploitation of the soil. The major indicator of natural soil fertility is the Soil Organic Matter, SOM, which is an indicator for carbon sequestration, water absorption, and the capture of nutrients. A high level of SOM can result in less need for chemical fertilizers, and reduces plant diseases. It stops erosion as well.
The prevention measure of SOM depletion is crop rotation with cover crops. This will stop further degradation, and even will improve the level of SOM by 0.3- 1.1% per 10 years (WUR, 2019).
Notes:
(1) pre-desertification starts at 1.7%, e.g. in Spain
(2) many areas in Belgium, France, Spain, Italy and Greece are below 3.5%, see (Soil Atlas Europe, 2005; page 101 and 112)
(3) 1 kg SOM = 0.58 kg COM (Carbon Organic Matter).

The marginal costs of not depleting the soil is the costs of cover crops, which is on average 200 euro/ha/year ( WUR, 2019), which results in:
eco-costs of SOM = 0.02 euro/m2.

Table 6.2b provides yield data, to convert m2 to kg for cases that specific data of a specific farm are not known.

Water

The eco-costs of water is explained at the webpage eco-costs of resource scarcity . For TCA, the list of water per country is not accurate enough, so the Baseline Water Stress (BWS) interactive Atlas of the of the Aqueduct project must be used.
The eco-costs of water is 1 €/m3 multiplied by the BWS indicator. The BWS is the ratio of total water withdrawals to available renewable surface and groundwater supplies. Water withdrawals include domestic, industrial, irrigation, and agricultural . Available renewable water supplies include rain and rivers. Higher values indicate more scarcity.

crops	yield (ton/ha)	yield (kg/m2)
wheat barley barley oats mais mais mais beans rapeseed flax linseed henp potatoes sugar beet onions	9,2 8,6 6,5 5,2 10,9 43,9 10,5 2,6 3,5 4,6 0,7 7,6 41,5 84,5 43,5	0,92 0,86 0,65 0,52 1,09 4,39 1,05 0,26 0,35 0,46 0,07 0,76 4,15 8,45 4,35

Table 6.2b. Yield of crops in the Netherlands.

References

Sukhdev, P. 2012. “How do we value Nature?”. A video of a 52 min lecture on the findings of the TEEB (The Economics of Ecosystems and Biodiversity) project.
minute 7:50 – 10:50 on the issue of global prices for ecosystem services; minute 12:25 – 14:20 on the issue of valuation of Natural Capital

De Laurentiis et al. Soil quality index: Exploring options for a comprehensive assessment of land use impacts in LCA. Journal of Cleaner Production 215 (2019) 63-74.

Corp Yields – Our World in data, 2019

WUR, Groenbemesters. Project Mineraal Management Plan. Wageningen University & Research. 2019

JRC. Soil Atlas of Europe, European Soil Bureau Network, European Commission, 2005 .page 101 and 112

Recommended Calculation Sheets and Required Data from Farmers

Data for Biodiversity and Soil

Data for Water

Data for Fertilizers (to calculate N2O emissions)

Note: do not forget to apply all other eco-costs with respect to nature as given at Fig. 6.1a and 6.1b (e.g. for carbon footprint, acidification, eutrification and eco-toxicity), see webpage True Cost Accounting