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Post-COVID Economic Recovery and Natural Capital: Lessons from Brazil, France, India, and Uganda

This article assesses selected post-COVID policies of the Government of India to understand the extent of incorporating natural capital elements in decision-making.
Multiple Authors
Post-COVID Economic Recovery and Natural Capital: Lessons from Brazil, France, India, and Uganda

Introduction

Without clean water, productive soils, pollination, and many services natural capital provides, our economies and societies cannot function. Natural capital is declining globally at rates unprecedented in human history with grave impacts on people around the world. However, currently, our economies are blind to their dependence on natural capital and, to some extent, their impact on it.

The COVID-19 pandemic, which has arisen from our lack of regard for the natural world, has been a brutal blow globally and exposed the structural inequalities and lack of resilience in all economies, including low-income developing countries. Post-COVID-19 pandemic economic recovery strategies, active in many countries, are high-profile, generally well-resourced, and anticipate significant reforms. In an effort to safeguard lives and increase economic growth, stimulus measures present a huge opportunity to prioritise for the first time safeguarding natural capital, investing in ecosystem resilience, and putting in place mechanisms for integrating natural capital into economic decision making.

The work presented in this report has been funded by the Economics for Nature (E4N) Programme. E4N is a six-year work programme led by the Green Economy Coalition (GEC) and its partners, the Capitals Coalition, Green Growth Knowledge Partnership and WWF France. The GEC coordinated the work, with technical guidance from IIED. In considering the measures that are likely to have a positive or negative impact, the study seeks to highlight the implications of natural capital degradation or benefits from supporting natural capital in each country, highlighting the potential for more or fewer jobs, stronger or weaker economic growth, increased or decreased social inclusion, and other aspects, particularly in considering longer term impacts of policies. By doing so, the study seeks to understand economic decision-making more deeply in the context of integrating natural capital and how this could be tangibly strengthened across different contexts.

This article is an abridged version of the original text, which can be downloaded from the right-hand column. Please access the original text for more detail, research purposes, full references, or to quote text.

Objectives and Methodology

The objectives of this work are as follows:

  • To improve our understanding of what drives the decisions for allocations in public financing, and further, how this understanding can be leveraged to improve natural capital integration in economic decision-making.
  • To address the gap in the broader green recovery literature that would make a strong economic case for investing in nature, since nature is not featuring in any significance, and there is little data of natural capital integration or recommendations on how to strengthen this area.
  • To influence pandemic recovery plans in Brazil, India, Uganda and France to mainstream natural capital in economic decision-making into budgetary, fiscal, monetary and trade policy.
  • To draw general lessons and make recommendations for how countries more broadly can protect, sustainably use, and restore natural capital in their COVID recovery to “build back better” through providing a granular look at how this is being done in different contexts and drawing out what can be learned from the approaches.

Methodology

In this study, our emphasis is on protecting, sustainably using and restoring natural capital, by which we mean nature and biodiversity with a focus on renewable resources and ecosystems, such as forests, water bodies and watersheds – and the biodiversity that they contain. We do not include non-renewable energy and mineral resources in this category because in this definition as we are seeking to focus on primary natural assets that can be protected, sustainably used and maintained as part of a renewable system (i.e. the definition used does not focus on oil, gas, coal and peat resources, or metallic and non-metallic resources beyond acknowledging that using these resources contribute to negative impacts on the environment and climate). We also do not consider all environmental issues more broadly, because we want to highlight this gap in the literature and policy recommendations on the natural capital components of the economy and how they can work as building blocks for sustainable economies.

Natural capital refers to the living and non-living components of ecosystems—apart from people and the products and services they produce— that contribute to building commodities and services of value to humans. Manufactured capital (buildings and machines), human capital (knowledge, skills, experience, and health), social capital (relationships and institutions), financial capital (monetary wealth), are all examples of capital assets along with natural capital. The interactions between these various forms of capitals are also another vital aspect for having a holistic perspective to understanding the capital value in a particular context.

This study does not seek to analyse the initial pandemic response spending, which largely consisted of emergency or crisis spending on health and rescue funding to avoid significant economic and social ramifications such as firm failures and widespread job losses. The response funding was immediate funding reacting to the crisis. The next phase of funding, the recovery funding then moved to longer-term strategic funding, representing key economic decision-making opportunities to support natural capital.

Findings

This study finds the following key lessons:

  • Recovery plans in each country are missing the opportunity to invest in nature and integrate natural capital into decision-making, despite international and country-specific evidence that investments in natural capital can bring economic and social benefits, including driving social inclusion and growth opportunities.
  • Dependence on natural capital means that recovery activities that do not support natural capital will not be economically, environmentally or socially effective in the medium or long term.
  • There is a clear need for coherent national strategies that can underpin natural capital positive decision-making. This requires alignment across actors, policies, and sectors. •In many cases, the impact of an intervention could be made more positive by introducing regulations or standards to guide implementation.
  • Bailouts and subsidies that support businessas-usual businesses and practices without environmental conditionality undermine natural capital.
  • The impact of measures is country-specific, depending on the nature of the natural capital and environment, existing social and economic structures and other location-specific factors. Hence, principles may be more useful than prescriptive interventions in guiding what types of measures and policies will support natural capital across countries.
  • There are still knowledge gaps on the impacts that many measures will have on natural capital, and this is a key barrier in improving practices towards supporting natural capital. Better monitoring, evaluation and learning can help improve understanding and practice.
  • Some of the allocations announced in the recovery plans will not track to what is eventually released and spent. Greater budget transparency, public participation and improved monitoring, evaluation and feedback systems can help bring better accountability to ongoing changes.

Recommendations

Drawing from the country experiences and the cross-country learning, the study makes the following eight recommendations:

1. Governments should take the opportunity presented by the pandemic recovery stimulus packages to invest in natural capital and to integrate natural capital systematically into decisionmaking. These investments bring long-term economic benefits and growth opportunitty.

2. Non-governmental actors have a critical role to play in generating evidence and calling for governments to implement policies that support natural capital.

3. Governments should invest in natural capital as a way to drive social inclusion and deliver societal benefits, such as the strengthening of indigenous rights, joint environmental and social protection schemes and improved environmental quality (cleaner air and water for example), and for directing more support to local and national institutions, such as SMEs and Civil Society Organisations (CSOs), and particularly those run by women, young people and other marginalised groups.

4. Governments should, as a minimum, take steps to mitigate the negative impact on natural capital of decisions based on business-as-usual approaches, through practices like: • Applying regulations to enforce environmental conditions on industries and companies that are supported by public funding.

5. Overall, governments should seek to align their support to activities that strengthen natural capital in a transformative manner.

6. Governments should continuously monitor the implementation of measures for their impacts on natural capital.

7. Governments should strengthen their natural capital accounting systems and their capacity to produce, interpret and promote natural capital data

8. Decision making processes for public spending should include a rigorous appraisal of the intervention’s impact on natural capital.

Suggested Citation:

P. Sejal, et al. (2022). Post-COVID Economic Recovery and Natural Capital : Lessons from Brazil, France, India, and Uganda. Economics for Nature. Retrieved from https://devalt.org/images/L2_ProjectPdfs/synthesis-report-natural-capital-and-covid.pdf?Oid=340

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