In this episode we explore how the ONS measures our natural environment and the green economy.

Relevant datasets: ONS Environmental Accounts

Transcript

MILES FLETCHER

Welcome again to Statistically Speaking, the official podcast of the UK’s Office for National Statistics. I'm Miles Fletcher and this time we're getting back to nature as we explore the work of the ONS in measuring the economic and social value of the natural environment.

Is classical economic growth - as measured by gross domestic product or GDP - always achieved at the expense of the environment? What price can we put on the amenities our environment provides? What is the green economy and what are green jobs? And what are the key data to watch as policymakers strive for net zero carbon emissions, while also seeking to improve national prosperity?

Our guides through the rich and perhaps under explored landscape of environmental data are ONS’s Deputy Director for Environmental Statistics Analysis, Ian Townsend; Head of Natural Capital Accounts, Gemma Thomas; and Sophie Barrand, Monetary Accounts lead in the Environmental Accounts team.

Welcome to you all.

Ian to come to you first. The ONS is mainly known for measuring the economy and the population of the UK. So, what exactly is its role when it comes to the environment? What are we seeking to achieve? What do we do? What do we publish?

IAN TOWNSEND
So the environment is quite a broad topic that links with a lot of other issues and a lot of different national and devolved government departments and other related bodies producing statistics on the environment. And with all that range of statistics, we tend to focus at the ONS on the intersections between our environment and both the economy and society. This includes measuring what we call the Low Carbon and renewable energy economy, how many green jobs there are, the greenhouse gas emissions produced by different economic sectors, and valuing the services that nature provides to us, as well as providing rapid insights into what people and business think about climate change in the environment and their actions or indeed otherwise.

MF
And what are the major publications that come out of the ONS that people ought to be looking at to get a sense of what we're saying about the environment and its value?

IT
So I mentioned a couple in the introduction there - things like low carbon and renewable energy economy, green jobs, etc... and our emissions figures. But perhaps one that is quite worth bringing to the fore is our natural capital accounts. So, it's something we've done for several years, which basically looks at the value that ecosystems provide to nature and ecosystems provide to us, and the services that provides. So, we bring this out as a report every year - have done so for several years - and that looks beyond the economy, beyond gross domestic product, to look at all those natural resources and we found that in 2021, the total value of all those natural assets was around one and a half trillion pounds. It’s such a big figure, I think it can be quite hard for people to grasp. But a useful comparison might be that it's not that far off the 1.7 trillion pounds that homes in the UK were valued at in 2021 as well.

MF
It's very difficult to arrive at a financial figure or value like that. Can you just give us a brief explanation of how it’s calculated?

IT
Sure. So, there are internationally agreed guidelines that we follow around how to measure or indeed account for the current value of what natural capital could provide for us and our current and future generations. And all that process, all those guidelines are aligned with how we measure the GDP in the economy. It's really quite a complex exercise and includes things like the value of trees, rivers, peatlands, and many other habitats and natural resources in them. We've been developing and improving these approaches for probably at least 10 years, and probably have some of the most developed accounts in this form globally. Our estimates have improved over the years. But there are some things that we don't cover. So, in a way, this is probably best seen as a kind of partial and minimum value, even though it's already very large. And it's also part of a wider mission that the ONS has to capture the value of what's called missing capital, things that we don't currently measure so well in gross domestic product. So that's including social capital as well as natural capital. So that's called ‘inclusive wealth’ and that's another publication the ONS produces that people might be interested to have a look at.

MF
And it's important, I guess, to have this economic value of the environment so that can be compared against the traditional measure of economic progress and prosperity, which of course is GDP. And it's sometimes – and we've heard this in other podcasts - because GDP is like the big beast of the economic statistical world. It's very important, it's very influential, but of course it does have significant weaknesses and omissions, and notably its lack of account for environmental factors being notoriously one of those.

IT
Sure. And actually, there's a process going on right now internationally that would bring some of that into the way that we measure some of the key economic indicators. But I think one of the key things you say is putting out there is a measure of how our natural capital assets are doing. But I think the other real benefit of these statistics, and particularly the natural capital accounts, is that it helps literally to account for nature to give an estimate of some of the benefits that the environment does provide. So, when people make decisions, they can take that into account. We're not exactly saying that nature has this given value. It's more that that's the value that we've estimated so far that provides those. It helps people to make sure that when they're taking their decisions, they take into account what would happen if we reduced or depleted that natural capital, and indeed, the benefits we might get in the future if we were to increase that natural capital as well.

MF
Because – and this is the other side of the question – high per capita GDP often goes with high carbon emissions in an economy, doesn't it? This way, we can look at the other side of the balance sheet and say, well, yes, you might be achieving this high economic performance in traditional terms, but look at the cost on the other side and, as you say, this is part of a big international movement to recognize that called ‘beyond GDP’, which is a topic we've covered in previous podcasts already.

IT
Sure. I think, just getting back to your point around GDP and emissions one of the things that we produce in the ONS is a piece around a different emissions measurements there are, and actually if you look at those, you'll see that over time, all those measures have been reducing. So there is an element to which whilst the economy is expanding, we are actually reducing emissions on all three different measures that are available.

MF
And we say the environment is - we're putting it at 1.5 trillion pounds – that's the capital value of the natural environment, broadly equivalent to the value of all the houses in the UK. Some people might say that's a low figure perhaps you can think we measure human capital being much, much greater than that but that's a debate for another time. But explain for us who is using this number, how does it inform decision making at the moment at national and local level? How might it influence policymakers in future do you think?

IT
Sure, I think it's not necessarily about the big number at the top although that is one that will get a lot of interest from people and as you say, it might be an underestimate. I mentioned that there are some aspects of nature that we don't currently measure. But in terms of how it's used lots and lots of detail that's available underneath that key figure in the natural capital accounts we publish every year, at kind of macro level. The figures we use are important considerations for decision making by UK and devolved governments. So Defra published a policy paper, for example, on the accounts, I think, a couple of years back, which looked at what the key takeaways for policy there were from there, and we think that some of the figures were used in some of the bids that departments put in for the 2021 Spending Review. I think at the micro level figures are