Natural capital approaches for the optimal design of policies for nature recovery

Abstract

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 breakeven, delivering less value in improved flows of ecosystem services than public money spent and only 26% of that which is theoretically-achievable. Using optimisation 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 unmonetised ecosystem services (in our case, biodiversity) demands trade-offs in delivery of monetised 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 unmonetised services delivers targetachieving and value-maximising policy designs. Our findings reveal that policy design is of first-order importance in determining the efficiency and efficacy of programmes pursuing nature recovery.