Capital is often defined as a stock that possesses the capacity to generate a flow of goods and services that satisfy human needs. It is disaggregated into four different types: manufactured, human, social and natural (Costanza and Daly, 1992; El Serafy, 1991; Ekins et al., 2003). Wealth creation is the process of using these four types of capital in combination to produce the flows of goods and services that people want/need. In order to sustain these flows of goods and services, and ensure their availability for future generations, it is necessary to maintain the level of capital stock. If the capital stock decreases, then it will not be possible to generate the same flow of goods and services. Therefore, maintenance of current capital stocks is a first condition for sustainability.
If sustainability depends on the maintenance of the capital stock, then an important issue is whether it is the total stock of capital that must be maintained, with substitution allowed between the different capital forms, or whether certain components of capital, in particular natural capital, are non-substitutable, i.e. they contribute to welfare in a unique way that cannot be replicated by another capital stock (Ekins et al., 2003). This discussion has led to the definition of different degrees of sustainability, ranging from very weak sustainability, which assumes complete substitutability between the different capital stocks, to very strong, which assumes no substitutability, so that all natural capital must be conserved.
For Costanza and Daly (1992), Weak Sustainability is concerned with maintaining the total capital stock intact, without regard to the partitioning of that capital among the four kinds. This would imply that the various kinds of capital are more or less substitutable, at least within the boundaries of current levels of economic activity and resource endowment.
Strong sustainability, a paradigm favoured by many ecological economists, in contrast, calls for the maintenance of the separate capital stocks, assuming that natural and human-made capital are not perfect substitutes, but complementary. For proponents of strong sustainability, the substitutability of manufactured for natural capital is seriously limited by such characteristics of natural capital as irreversibility, uncertainty and the existence of ‘critical components of natural capital which make a unique contribution to welfare’ (Ekins et al., 2003; Daly, 1991). In this context, the following operational rules have been proposed to ensure sustainable management of natural capital stocks (Daly, 1991; Costanza and Daly, 1992):
1. The scale of human activities in the biosphere should be limited to a level that is within the carrying capacity of natural capital. Sustainability must deal with sufficiency, as well as efficiency, and must put limits to the physical scale.
2. Technological development should focus on allowing for an increase in the efficiency of resource use rather than in increasing throughput (the flow of goods and services from natural to human systems and the associated flow of wastes from human to natural systems).
3. Renewable natural capital stocks, both in source and sink functions, should be managed on a sustainable basis, meaning that: (a) harvesting rates should not exceed regeneration rates; and (b) waste emissions should not exceed the renewable assimilative capacity of the environment.
4. Non-renewable natural resources should be exploited no faster than the rate of creation of renewable substitutes. This is sometimes called ‘El Serafy’s rule’ (1991). The revenue from exhaustible resources is divided into two parts, one of which can be freely spent in consumption provided that the other part is invested into new sustainable sources of energy that will completely substitute for the depleted resources. This is in fact closer to ‘weak sustainability’ than to ‘strong sustainability’.
Costanza, R. and Daly, H. (1992) ‘Natural capital and sustainable development’, Conservation Biology, 6 (1): 37–46.
Daly, H. (1991) ‘Elements of environmental macroeconomics’, in R. Costanza (ed.) Ecological Economics: The Science and Management of Sustainability, New York: Columbia University Press
Ekins, P., Simon, S., Deutsch, L., Folke, C. and De Groot, R. (2003) ‘A framework for the practical application of the concepts of critical natural capital and strong sustainability’, Ecological Economics, 44: 165–185.
El Serafy, S. (1991) ‘The environment as capital’, in R. Costanza (ed.) Ecological Economics: The Science and Management of Sustainability, New York: Columbia University Press.
For further reading:
Dietz, S., Neumayer, E. (2007). ‘Weak and strong sustainability in the SEEA: Concepts and measurement’, Ecological Economics, 61, 617-626.
World Commission on Environment and Development (1987) ‘Our Common Future’, Oxford University Press, Oxford.
This glossary entry is based on a contribution by Paula Antunes
EJOLT glossary editors: Hali Healy, Sylvia Lorek and Beatriz Rodríguez-Labajos