Government investment in natural capital

Government investment in natural capital

E CO L O G I CA L EC O NO M IC S 6 8 (2 0 0 9) 1 72 3–1 73 9 a v a i l a b l e a t w w w. s c i e n c e d i r e c t . c o m w w w. e l s e v i e r. ...

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E CO L O G I CA L EC O NO M IC S 6 8 (2 0 0 9) 1 72 3–1 73 9

a v a i l a b l e a t w w w. s c i e n c e d i r e c t . c o m

w w w. e l s e v i e r. c o m / l o c a t e / e c o l e c o n

ANALYSIS

Government investment in natural capital Joe Ruggeri⁎ Department of Economics, University of New Brunswick, P.O. Box 4400, Fredericton, N.B., Canada E3B 5A3

AR TIC LE D ATA

ABSTR ACT

Article history:

This paper presents a new approach to the measurement of natural capital. A distinguishing

Received 25 October 2007

feature of this approach is the use of investment criteria that are consistent with the main

Received in revised form

features of physical capital, thus maintaining consistency in the measurement of different

27 October 2008

types of capital. This new approach was applied to the expenditures of the federal

Accepted 4 November 2008

government in Canada as recorded in the Public Accounts for fiscal year 2004–05. My results

Available online 7 December 2008

indicate that, in 2004–05, total investment in natural capital by the federal government amounted to 2.6% of net budgetary expenditures. Spending on physical capital, the only

Keywords:

component that is currently included as investment in the National Accounts, represented

Natural capital

only 5% of total investment in natural capital.

Government investment

1.

Introduction

Concerns about the potential economic effects of global warming, the accelerating rate of environmental degradation, and greater awareness of the inter-generational effects of economic activity have stimulated research on the concept and measurement of natural capital. These research efforts have been partially hampered by the lack of a methodological framework for the consistent measurement of capital. Under current practices, only government spending on construction, and on machinery and equipment is treated as public investment. All other government spending, including spending on environmental quality, is treated as current consumption. Similarly, in the private sector, the cost to a firm of building a garage is treated as investment while spending on in-house training is treated as consumption. Such a narrow concept of capital cannot be justified in an economic system where growth is driven by several forms of capital, particularly human capital, an asset inextricably embedded in human beings. Moreover, the functioning of markets and the level of living standards are affected by the quality of civic institutions and by the informal networks that facilitate social cohesion

© 2008 Elsevier B.V. All rights reserved.

(Helliwell, 2002). Finally, the sustainability of human progress rests on our collective capacity to protect the environment from the damaging effects of human activity. If future prosperity depends on the stock of productive assets that we bequeath to future generations, the stock of these resources must be measured accurately to develop policies that support sustainable development. Given that the health of the environment is tracked through selective indicators (NRTEE, 2003), government investment on environmental protection should also be tracked, determining the direction and effectiveness of environmental policy. A new approach to the measurement of public investment in natural capital is presented in this paper. A distinguishing feature of this approach is the use of criteria that are consistent with the main characteristics of physical capital, thus maintaining consistency in the measurement of different types of capital. The new methodology is applied to the information contained in the Public Accounts of Canada for fiscal year 2004–05 to measure federal investment in natural capital. The methodology developed in this paper provides solid economic foundations to the concept and measurement of

⁎ Fax: +1 506 453 4514. E-mail address: [email protected] 0921-8009/$ – see front matter © 2008 Elsevier B.V. All rights reserved. doi:10.1016/j.ecolecon.2008.11.002

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natural capital. It also expands the scope of ecological accounting by shifting the emphasis from short-term human well-being, implicit in green GDP accounting, to long-term sustainable development. The paper is also relevant for policy analysis because it permits the tracking of government investment in natural capital over time and also allows consistent international comparisons of government investment in natural capital.

2. The concept and measurement of natural capital The notion that nature is a crucial asset and that the ecosystem provides valuable services has been extensively evaluated in at least four strands of the literature on environmental issues: (a) definitions of natural capital, (b) what is included in ecosystem services, (c) how we measure the benefits of ecosystem services, and (d) indicators of natural capital. The existing definitions of natural capital contain sufficient differences to allow a breakdown into several categories. The first group identifies natural capital as a stock of natural resources used in the production of market goods and services (World Bank, 2004; European Environment Agency, 2007). The second group also includes ecosystem services while maintaining a link between natural capital and the production of goods and services (Costanza et al., 1991; Berkes and Folke, 1992; Prugh et al., 1995; United Nations, 1997; Hackett, 2001). The third group acknowledges that the benefits of nature extend beyond traditional economic activities and include direct utility “through aesthetic and spiritual appreciation of nature” (Pearce, 1988; Gilpin, 2000; Lantz, 2005; Conservation Economy, 2006). The fourth group recognizes that natural capital “supports life” and “is essential for our survival” (Hawken et al., 1999; NRTEE, 2003; Olewiler, 2004; The Living Planet, 2004; Anielski and Wilson, 2005; Government of Canada, 2007). These definitions offer insights into the scope of natural capital. First, both renewable and non-renewable resources are treated as a stock of natural capital as long as they produce a flow of goods and services. Second, natural capital comprises both tangible (renewable and non-renewable resources and land) and intangible assets (environmental or ecosystem services). Third, natural capital includes intangible “linkages”, often called “living systems”. Fourth, while natural capital is an input into both market and non-market activity, it may also produce direct utility to individuals. Finally, natural capital is a unique asset as it is essential for the “sustained health and survival” of all life forms. The fundamental shortcoming of these definitions is the absence of a consistent conceptual framework that would provide the required foundation for the treatment of these tangible and intangible assets as “capital”. The measurement of natural capital raises two fundamental questions: (a) what items do we classify as natural capital, and (b) how do we value them when they involve nonmarket activity? These questions have been addressed in research that aims at measuring the benefits of local ecosystems in specific areas (for example, Binning et al., 2001; Olewiler, 2004; Anielski and Wilson, 2005) and in studies

directed at the development of a “green GDP.” The former set of studies indicates that, when both market and non-market activities are taken into consideration, the value of the stock of natural capital may be very large. The main purpose of the “environmental accounting” studies (Statistics Canada, 1997; Nordhaus and Kokkelenberg, 1999; UN/UNEP, 2003; Boyd, 2006; Boyd and Banzhaf, 2006) is “the development of national-scale environmental welfare accounting and performance assessment, potentially consistent with national income accounting” (Boyd and Banzhaf, 2006, p.1). Two main features of these studies must be stressed. First, by using the national income accounting system as the foundation, they try to bridge the gap between ecological and economic concepts and measures. Second, by attempting to develop a measure of green GDP that may be used directly as an indicator of human well-being, these studies treat ecological services entirely as consumption. Thus, ecosystem services are viewed as “aspects of nature that society uses, consumes, or enjoys,” and “that directly yield human well-being” (Boyd, 2006, p. 6). Concerns about the potential subjectivity in estimating the value of ecosystem services has led to a different approach to the measurement of natural capital, namely, the development of indicators for tracking changes in the stock of natural capital over time without estimating its values (for example, NRTEE, 2003; U.S. GAO, 2004). For Canada, the National Roundtable on the Environment and the Economy (NRTEE) proposed five indicators of natural capital: (a) air quality, (b) freshwater quality, (c) greenhouse gas emissions, (d) forest cover, and (e) the extent of wetlands. These indicators address major concerns about the effects of changes in ecosystems on the economy and essential supports for life. However, they focus on what capital does rather than what capital is. My paper is an extension of this literature. It presents criteria that may be used to develop consistent definitions of natural capital, to select meaningful natural capital indicators, and to establish a direct link between ecological and economic concepts. Although methodologically my approach is closer to the “green GDP” studies, it differs from them in a fundamental manner. Green GDP accounting treats ecological services as consumption, which directly affects human well-being. In my approach, those services are classified as investment. Focusing on investment sidesteps the valuation issues associated with the estimates of green GDP or the natural capital stock because it deals with a known flow of expenditures. It also avoids the issue of depreciation of this capital stock because it deals with a flow fo expenditures directed at natural capital and with the changes in its value. Moreover, since my analysis is confined to the federal government's investment in natural capital and since the level of spending by the federal government is known, the quantitative analysis simply requires the identification of which spending components can be reasonably allocated to natural capital. The criteria for identifying such expenditures are developed in the next section.

3. Main features of physical capital and criteria for investment in natural capital Many definitions of natural capital seem to have been developed independently of physical capital. In some

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definitions the link between natural and physical capital is confined to the fact that both produce a flow of goods and services over time. In my analysis, consistency with the properties of physical capital is a necessary condition for any asset to be treated as capital. This condition is imposed not to derive a new definition of natural capital for general use, but to ensure comparability in the measurement of investment with respect to any type of capital. The first step in my approach highlights the special features of physical capital while the second step develops the criteria for determining which government expenditures can be treated as investment in natural capital. I started the development of the relevant investment criteria by asking the following questions: (a) What are its defining features? (b) What are its uses? (c) How is it measured? (d) Which of these aspects of physical capital should be used as criteria for the other types of capital?

3.1.

Features

Four major features define the nature of physical capital. First, physical capital is a reproducible asset which is willfully manmade. It may be produced by a machine, but is willed into existence by economic agents and is produced using other capital inputs, materials, and labour services. Second, physical capital may be either tangible or intangible. Until recently, investment in fixed capital according the National Accounts was confined to spending on tangible items such as buildings and equipment. In 2001, spending on computer software was added to the list of investment in fixed capital. A third feature of capital goods is their survivability. Unlike materials that become incorporated into the final product, capital goods are used in the production process, but are not consumed in the process. They are instrumental in the production of a good, but remain separate from it. A closely related feature is durability, whereby the asset can be used repeatedly over an extended period of time.

3.2.

Uses

Firms acquire physical capital to produce other goods and services which generate a flow of income. Hence, physical capital is a factor of production and its use represents an intermediate step in the often complex process of creating utility for consumers. Consumers obtain utility directly (through leisure) or indirectly (through the consumption of goods and services). Whatever the source of utility may be, the ultimate purpose of physical capital is the generation of utility to consumers. This statement highlights the human foundations of any type of capital. Physical capital exists because business owners (human beings acting as economic agents) find it profitable to buy or lease the capital. It is used to produce goods and services which are demanded by consumers (also human beings acting as economic agents) because they receive utility from consumption or use. In theory, the distinction between the sources of direct and indirect utility may be used as criteria for distinguishing investment from consumption. Capital assets generate indirect utility by helping produce goods and services demanded by

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consumers. In practice this distinction is not applied in the conventions of the National Accounts. These conventions must be kept in mind when determining what constitutes investment in natural capital. For example, a stand alone refrigerator in a residential home is treated as a durable consumer good while a built-in refrigeration unit is treated as investment. Yet both units generate the same flow of "refrigeration" services to the homeowner.

3.3.

Measurement

There are two separate aspects of the measurement of physical capital: (a) the list of items included, and (b) the manner in which these items are valued. Investment in fixed capital refers to the purchase of capital goods by business and government and includes residential construction, non-residential construction, and machinery and equipment. The latter includes both tangible and intangible assets (computer software). For residential construction, individuals are treated as firms that purchase the building and rent the housing services to themselves as consumers. For both types of construction, investment includes "conversions resulting in a structural change and major renovations (together referred to as alterations and improvements.)" With respect to investment in machinery and equipment, two features are particularly relevant to my approach. First, the classification of a certain item as a consumer good or a capital good is not determined by the nature of the reproduced good, but by the purpose of its use. For example, an automobile purchased by an individual is treated as a durable consumer good because it provides transportation services directly to the owner, but the same automobile purchased by a business is treated as a capital good because it helps produce services (it is a factor of production) that are sold to consumers. Second, expenditures for repairs and maintenance are not part of investment. Two items in the machinery and equipment category are of particular significance for the identification of other types of capital. They are computers and software. The former is a tangible asset while the latter is an intangible asset. Although they are measured separately in the National Accounts, in practice they cannot be used separately as factors of production. Without software, a computer is useless. Without hardware, software is inoperable.

3.4.

Valuation

For the valuation of physical capital the following issues must be emphasized. First, fixed investment in the National Accounts is measured on the basis of selling prices, which include all costs of production and distribution including normal profits (under conditions of perfect competition) and additional profits in the presence of market power. Second, investment in both residential and non-residential construction includes ancillary costs such as site preparation, real estate commissions, and architectural, legal and engineering fees. In the case of machinery and equipment, the value of investment also includes installation and delivery costs. Third, in the case of

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residential construction, major renovations include both functional and aesthetic components. While both generate utility for the owner, the latter do not provide shelter services but deliver utility directly to the user in a manner similar to a piece of furniture. Fourth, investment in fixed capital includes both purchases and in-house work. For example, investment in software includes prepackaged software, custom software, and own-account software.

3.5.

Selection of criteria

I used the above information on the features, uses and measurement of physical capital to develop the criteria for determining which components of government spending may be treated as investment. First, since fixed investment now includes intangible assets, namely, computer software, tangibility is no longer a defining feature of physical capital. This change emphasizes that our concepts and approaches to the measurement of capital must change as economic structures evolve. Second, this conceptual revision must also apply to the property of reproducibility because what matters is that a tangible or intangible asset is reproducible regardless of the source of reproduction. In the case of physical capital, reproduction is by human means while for natural capital reproduction can be either by human or natural forces. Third, survivability, that is, the capacity of a capital good to be instrumental in the production of other goods and services without being consumed in the production process or becoming incorporated into other goods, and durability, that is, the capacity to be used repeatedly in the production process, are also features of physical capital that will be used as criteria for the determination of investment in natural capital. Three other aspects of physical capital, related to its use or valuation, are also relevant for the selection of the investment criteria. First, due to the treatment of owner-occupied structures and the permanently affixed equipment as fixed investment, even assets that deliver services directly to consumers may be treated as capital. Second, major alterations and improvements, even when they do not affect the function of the capital asset, can be treated as investment. Third, routine repairs and maintenance of structures or equipment are not investment. In summary, a natural resource or an element of the ecosystem will be treated as capital when it meets the following criteria: (a) Is either a tangible or an intangible asset (b) Is reproducible by man or by nature (c) Is not destroyed in production nor is it incorporated into a product (d) Can be used repeatedly over an extended period of time (at least one year) (e) Generates utility directly or indirectly as a factor in the production of other goods and services Once an asset is defined as a capital good, any direct or indirect government expenditure related to its production, sale, installation, and financing will be treated as investment.

4. New approach to the measurement of natural capital The above criteria are applied to the main components of natural capital identified in a variety of definitions.

4.1.

Non-renewable resources

These resources include primarily fossil fuels and minerals and are a stock of wealth that does not meet the criteria of reproducibility, survivability and durability. Fossil fuels are mostly used for energy that is expended in the production of goods and services while minerals generally become incorporated into other products. Therefore, government subsidies for the exploration and exploitation of non-renewable resources will be considered as consumption.

4.2.

Air and water

These two basic natural resources, which are essential for life have properties of non-renewable resources because more of them cannot be produced on a large scale either by human or by natural means, but differ from them because their quantity is not depleted through human activity. Although we cannot increase the quantity of air and water through investment, they are regenerated through ecological cycles, thus giving them the properties of renewable resources. Human activity influences the quality not the quantity of these resources. Although air and water depreciate rapidly when used, they regenerate through natural cycles or human intervention.

4.3.

Atmosphere

In its pure form, the air we breathe is a complex mixture of gases which serves as the vehicle for delivering oxygen to mammals, thus sustaining life. This air is returned to the atmosphere with a high degree of depreciation, as the combustion of oxygen in the body generates carbon dioxide that is expelled when exhaling. Then it is regenerated through natural cycles facilitated by forests. How well air performs this function depends on its quality, which is affected by human and non-human activity that produces a variety of pollutants. In extreme conditions of pollution, air would become incapable of sustaining human life. Air quality meets all the selected criteria for capital: it is a reproducible physical asset with survivability and durability which produces the ultimate service to human beings, the possibility of human survival. In addition, the atmosphere provides a cover that maintains a climate suitable for human existence and protects us from the harmful effects of ultraviolet light. Therefore, the quality of the atmosphere can also be considered a form of natural capital because it meets the suggested criteria in a manner similar to air quality. And its quality, in the sense of preventing global warming and its negative effects (direct plus adjustment costs) is determined by the amount of greenhouse gases in the atmosphere. Any government spending directed at reducing greenhouse gas emissions or sequestering excessive carbon in the atmosphere is an investment in natural capital.

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4.4.

Water

Water is essential for human survival and for the survival of all fauna and flora. It helps the metabolic process by delivering oxygen and nutrients to different parts of the body and removing toxins and waste from the body. Water also regulates body temperature through perspiration, facilitates movement by reducing friction between joints, protects organs by acting as a cushion between them, and facilitates normal body functions. While water is essential to our survival, extremely polluted water has severe and even fatal consequences. Human activity contaminates water by adding harmful nutrients, heavy metals, pesticides, and a variety of toxins. Similar to air, clean water provides life supporting services. As it becomes polluted, the flow of services is impaired. With respect to the above functions, it is the quality of water that represents natural capital and any expenditure that improves the quality of water is an investment in natural capital.

4.5.

Large bodies of fresh water

Freshwater tends to collect in large bodies, such as lakes and ponds, and travels through other large bodies including rivers. In these places water offers other services, the most important being waterways for transportation and recreation, and a habitat for fish. As in the case of drinking water, the capacity of water to deliver these services depends on its quality. Excessively polluted lakes and rivers cannot sustain fish and their value for recreational purposes is severely reduced or even eliminated altogether. Even polluted water may still provide useful services, such as transportation and to a lesser extent irrigation. In this respect the body of water itself is a natural capital. Wetlands are special bodies of water that serve as proxies for the overall health of the ecosystem. As pointed out by the National Roundtable on The Environment and the Economy (NRTEE) :“wetlands are a significant type of natural capital…. They provide habitat, food and protection to many species…. (and) also provide many essential ecosystem services.” Wetlands “ help filter and purify water and to store large quantities of carbon….replenish and store groundwater, control floods and storm waters, reduce erosion and protect shorelines. As well, they indirectly support a range of economic activities such as fishing, farming and recreational activities” (p. 4.6.3) The flow of services provided by wetlands is affected by both their size and their quality. Thus, in the case of water both quantity and quality may be treated as natural capital.

4.6.

Land

Land has similar characteristics to air and water in the sense that the landmass is fixed. Like water, however, its area can change in response to meteorological conditions. For example, global warming has melted part of the arctic ice cap thereby expanding the area covered by water and shrinking the land mass. Land provides three types of services: (a) space, (b) medium for the growth of forests, and (c) soil for agricultural production. The first service refers to the land used for the construction of roads and buildings. It does not provide direct

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benefits, but serves as the basis for the production of services through fixed investment. In this function, land often becomes incorporated into the physical capital that generates goods and services. This component cannot be treated as natural capital because it is an embedded input and its value is already incorporated in the value of physical capital. The land supporting forested areas is inextricably linked to the overall forest habitat. It provides the basis for other assets which produce goods and services. In this case, the natural capital resides not in the land itself but in the assets that it supports, which can be separated into two groups: (a) forest land and (b) agricultural land.

4.7.

Forests

Forests provide a flow of economic and ecosystem services over time, including wildlife habitat, recreational opportunities, and ecosystem services such as mechanisms to clean air and water and sequester carbon. The trees in a forest are natural capital only when they are alive and produce forest cover. When they are cut, they cease to generate ecosystem services and become a material input into the production of other goods. As raw material, they meet the reproducibility criterion but fail the survivability and durability criteria because they are either destroyed in the production process (e.g. wood used for heating purposes) or become incorporated into other products (e.g. paper). The forest is a component of natural capital only to the extent that it provides recreational and ecosystem services (especially the production of oxygen and the sequestration of carbon) and offers a habitat for plants and animals. What represents natural capital is not the allowable annual timber cut, or the market value of the standing timber, but the live forest, its extent and its health which, as suggested by the NRTEE, can be approximated by forest cover. Any government spending on the expansion of the forest cover and the quality of the forest, interpreted as its ability to provide recreational and ecosystem services is an investment in natural capital. Based on the treatment of the aesthetic components of buildings as physical capital, expenditures on parks and forested areas, with the exception of routine maintenance, that increase their aesthetic value to potential visitors should also be treated as investment in natural capital.

4.8.

Agricultural land

In the case of the forest, the quality of the soil may not be as crucial to its growth as other factors, such as forest management including species selection. In the case of agricultural land, soil quality is crucial. Agricultural land provides the basis for the production of food, directly in the case of vegetables and grains or indirectly through fruit trees and the production of animal feed. What provides such services is fertile land. It is the quality of the soil and not the soil itself that produces goods in the same manner as the skills of a worker produce goods and services and not the limbs of a body devoid of a functioning brain. Therefore, government spending on improving the quality of agricultural land is an investment in natural capital. Quality, which is essential for agricultural land, is not as important for shrubland, grassland, marshes and the like.

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These types of land do not produce food for human consumption, but provide an important habitat for wildlife and serve other ecological functions. While it is difficult to identify direct expenditures for this type of land, it is useful to acknowledge that this land is a form of natural capital and that expenditures on the preservation of wildlife habitat should be treated as investment in natural capital.

4.9.

Hydro, solar and wind power

To what extent can these sources of power, which have become important components in the fight against global warming, be considered natural capital? Let us start with hydro power, comparing it to electricity generated from fossil fuels. When fossil fuels generate electricity, the fuel burned is entirely destroyed and is no longer available for other uses. For hydro power, the latent energy in water that drives turbines is released only temporarily, but is not destroyed in the process and the water does not change its composition. It is still available for a variety of other uses, including drinking, irrigation and even additional electricity generation if a suitable site exists downstream. Moreover, through natural cycles, the flow of water to the electricity generating site is perpetually renewed, thus making this power a renewable resource. Also, as a replacement for fossil fuel generation hydro power helps eliminate the air pollution and greenhouse gases that would be released by burning fossil fuel, enhancing two other forms of natural capital. Hydroelectric power, therefore, meets the criteria for being treated as capital. What constitutes natural capital in this case is the power that is actually converted into electricity. Investment in hydroelectric generation is largely in the form of site preparation, construction and equipment, items that are already included as investment in physical capital. Functionally, however, these investments are directed at natural capital. A similar analysis applies to solar and wind power. In either case we have a renewable source of energy that is harnessed through the use of suitable equipment. All three power sources are renewable resources and therefore meet the criterion of reproducibility. They also meet the criteria of separability and durability because they are not consumed when they are harnessed. The equipment used to harness this renewable power is treated as fixed investment when it is purchased by business or government and when it is purchased by individuals and is permanently incorporated into a structure. The research and development expenditures by private firms in the production of solar and wind power equipment are not directly recorded as investment. However, when this equipment is sold, the associated research and development expenditures are incorporated into its selling price and thus become indirectly capital spending. Similarly, government subsidies to industry for research and development in the area of hydro, solar and wind power are not recorded as investment. These subsidies tend to reduce the selling price of the subsidized equipment, thus creating a negative bias on the value of private investment. This bias can be eliminated by treating these subsidies as capital spending. The application of the criteria derived from the properties of physical capital to the major components of natural capital is shown in Table 1. In my calculations I treat as investment in

natural capital all government expenditures directed at the items identified as natural capital in Table 1. Details of the allocation are discussed in the next section.

5.

Methodology

This paper is part of a project aimed at measuring government investment in five types of capital: physical, natural, human, civic and social. The first two types have been defined in this paper and for the other three types general definitions will suffice. Investment in human capital includes spending on the creation, acquisition and dissemination of knowledge. Investment in civic capital and social capital includes spending on formal organizations that promote public participation in policy development and on formal and informal networks that facilitate action towards shared goals, respectively. When we have several types of capital, we face potential overlap in the allocation of investment. In practice, we can make allocations either on the structural features of a capital good (is it human or social capital?) or on its purpose (is investment directed at human capital or natural capital?). If we base our allocation on the structural components, we disaggregate these expenditures into the five types of capital mentioned above. If we focus on the function of these expenditures, we make a single allocation to natural capital. In this paper I combined both approaches and also made a distinction between direct and associated investment in natural capital. The direct component includes governmental expenditures on the aspects of nature that were identified as investment in natural capital in Table 1. All other expenditures are listed as "associated investment". The sum of the two components yields the total investment in natural capital. My calculations are based on the budgetary expenditures of the Canadian federal government for fiscal year 2004–05 as recorded in the Public Accounts (Government of Canada, 2005). Each Ministry breaks down its activities into separate areas and for each area, total budgetary spending is divided into capital expenditures, operating expenditures, and transfers. Capital expenditures include only spending on physical capital as defined in the National Accounts. Transfers include grants and other contributions to individuals, businesses, non-profit organizations, and other governments. The latter are

Table 1 – Application of selected criteria to determine the components of natural capital Items that meet all the criteria and are treated as natural capital Air Quality Quality of the Atmosphere Water Quantity Water Quality Forest Cover Quality of the Forest Size and Quality of Wetlands Quality of Agricultural Land Hydro, Solar, and Wind Power

Items that meet some of the criteria and are not treated as natural capital Fossil Fuels Minerals Landmass (as separate from its quality Timber Resources

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composed of unconditional and conditional payments. In my calculations, unconditional transfers are excluded because there is no specific provincial expenditure attached to them. Some of the transfers are for capital projects, therefore, they are investment in physical capital which is not recorded in the "capital" category of federal spending in the Public Accounts. I added these expenditures to the portion of capital spending assigned to natural capital in measuring the "associated investment in physical capital." The “transfers” category of expenditures provides details on their purpose. In some cases this information allows for an unambiguous allocation. In other cases, the expenditure may involve investment in more than one type of capital, but the information is not sufficient to determine the relative shares. In these cases, the estimation of the total investment does not involve arbitrary decisions, but the allocation among different types of capital does. Operating expenses are Ministry expenditures, largely in the form of wages and salaries, which may involve direct investment, as in the case of internal training programs, or indirect investment as components of the costs associated with fixed capital spending. We need to include a portion of operating expenses as indirect investment to maintain consistency with private investment for which all operating costs are included in the sale price of the capital good. To reduce the potential degree of arbitrariness, the information contained in the Public Accounts has been supplemented by information obtained from other publications, such as annual departmental or Agency Reports.

6.

Federal government investment in Canada

The distribution of total federal investment in natural capital (direct plus associated investment) by department is shown in

Table 2 – Estimated investment in natural capital by the federal government, 2004–05 Ministry

Agriculture and Agri-food Environment Fisheries Foreign Affairs Indian Affairs & Northern Development Natural Resources Solicitor General Transport Western Economic Diversification Total Overall Total ⁎⁎

Total investment ($ thousands)

Percent of grand total

Intensity ratio ⁎ (%)

201,926

6.18

5.13

1,130,380 934,188 19,400 198,039

34.63 28.62 0.59 6.07

77.25 63.44 0.39 3.53

723,530 53,891 2235 1122

22.16 1.65 0.07 0.03

43.91 0.99 0.13 0.36

3,264,701

100.00

12.29 2.72

⁎ Ratio of investment in natural capital to a department's budgetary spending. ⁎⁎ Ratio of investment in natural capital to total program spending by the federal government net of interest on the debt and unconditional transfers to other governments.

Table 3 – Components of investment in natural capital by the federal government, 2004–05 Component A. Natural Capital (Direct) B. Associated Investment Physical Capital Human Capital Civic Capital Social Capital Subtotal Total

Investment ($ thousands)

Percent of total

1,976,614

60.54

170,009 1,083,482 33,445 1151 1,288,087 3,264,701

5.21 33.19 1.02 0.04 39.46 100.00

the first two columns of Table 2. Investment in natural capital can be found in nine federal departments and agencies. In 2004–05, the estimated investment in natural capital amounted to $3.265 billion and represented 2.7% of adjusted federal program spending (total spending net of interest on the public debt and unconditional transfers to other governments). The largest contribution was made by the Environment Ministry which accounted for 34.6% of the total. Other large contributors are the Ministry of Fisheries and Oceans (28.6%) and the Ministry of Natural Resources (22.2%). Together, these three Ministries accounted for 85.4% of total federal investment in natural capital. Moderate contributions were made by the Ministry of Agriculture and Agri-food (6.2%) and the Ministry of Indian Affairs and Northern Development (6.1%). The remaining four Ministries made only a marginal contribution. The last column of Table 2 measures the intensity of investment in natural capital calculated as the ratio of a Ministry's investment to its total budgetary expenditures. For all nine Ministries combined, total investment in natural capital represented 12.3% of budgetary expenditures. The Ministries with the largest contribution to investment in natural capital had the highest investment intensities with shares of investment ranging from 77.2% for the Ministry of the Environment to 63.4% for the Ministry of Fisheries and Oceans and 43.9% for the Ministry of Natural Resources. In all other Ministries, the degree of investment intensity was low to negligible. Table 3 shows the components of total investment in natural capital by type of investment for all Ministries combined. According to this table, the split between direct and associated investment in natural capital is about 60/40. The associated investment is largely in the form of investment in human capital, which accounts for 84.1% of this subtotal. Investment in physical capital, which is the only component recorded in the National Accounts, represents 13.2% of associated investment and only 5.2% of the total.

7.

Conclusion

This paper introduced a new methodology for measuring public investment in natural capital and applied it to the expenditures of the federal government of Canada for fiscal year 2004–05. In determining which expenditures should be treated as investment, I used a set of criteria based on the

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main features, uses, and measurement of physical capital. My results indicate that in 2004–05 total investment in natural capital by the federal government amounted to 2.6% of its net budgetary expenditures. This paper has methodological, empirical, and policy relevance. On the methodology side, it provides a solid economic foundation for defining and measuring human capital, and expands the scope of ecological accounting by separating investment from consumption. On the empirical side, it shows the steps needed to apply this new methodology to government expenditures on the environment. It also allows consistent international comparisons of government investment in natural capital. On the policy side, the result that spending on natural capital by the federal government in Canada is a tiny proportion of its budgetary expenditures indicates that a more aggressive approach to the protection of the environment would not be hampered by financial constraints.

Table A2 – Investment related to natural capital under the "health of the environment" business line Item

Investment in Capital by Type ($ Thousands) Physical Natural Human Civic Social

Capital Transfers Operating⁎⁎ Total

2821

2821

37,529⁎ 63,893 101,422

Total 2821 37,529 191,678 232,028

127,785 127,785

⁎Grants to organizations whose activities support soil and water conservation and development ($38,000); contributions for agriculture and agri-food sector-environment ($32,428,032); contributions towards the implementation of the Climate Change Action Plan 222 ($5,063,332). ⁎⁎Two programs are for human capital and one for natural capital (see notes above).

Table A3 – Investment related to natural capital under the "plant protection" business line Item

Acknowledgement

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

The author is thankful to Vaughan Dickson and Van Lantz for constructive comments, Barry Watson for research assistance, and three anonymous referees for helpful suggestions.

Capital Transfers Operating Total

175

175 282 48,628 49,085

282⁎ 175

48,628 48,628

282

⁎Contributions in support of those initiatives that contribute to the improvement, advancement promotion of the federal inspection system.

Appendix A

Table A1 – Expenditures by the Ministry of Agriculture and Agri-Food, 2004–05

Table A4 – Investment related to natural capital for the ministry of agriculture and agri-food

Item

Item

Spending $ thousands Operating Capital Transfers

Department Security of the Food System Health of the Environment Innovation for Growth Departmental Total Canadian Dairy Commission

Total

199,971

3320

2,523,397

191,678

2821

37,529

232,028

295,985

30,360

58,371

384,716

687,634 3,258

36,501

2,619,297

Canadian Food Inspection Agency Food Safety 350,086 Animal Health 70,062 Plant Protection 48,628 Agency Total 468,776 Canadian Grain 29,547 Commission Farm Credit Canada Total Ministry 1,189,214

2,726,688

Investment in capital by type ($ thousands) Physical Natural Human Civic Social

Capital Transfers Operating Total Percent of Total

2996

2996

37,529 48,628 86,127 2.19

Total 2996 37,811 161,149 201,926 5.13

282 112,521 112,803

3,343,432 3,258

Table A5 – Expenditures by the ministry of the environment: 2004–05, $ thousands 17,481 547 175 18,203

54,704

289 68,810 4,322 73,421

2,692,718

367,856 139,419 53,125 560,400 29, 547 0⁎ 3,936,636

⁎Its spending is totally in the form of non-budgetary expenditures.

Business lines partially or fully devoted to environmental issues: Health of the environment; plant protection.

Item

Spending, $ thousands Operating Capital Transfers

Department Clean Environment Nature Weather and Environment Predictions Management, Administration and Policy Total Department Canadian Environmental Assessment Agency

Total

203,707 168,876 180,035

14,162 3118 21,632

130,595 31,668 5435

348,464 203,662 207,102

162,432

1523

3505

167,460

715,050 17,342

40,435

171,203 931

926,688 18,273

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Table A8 – Investment related to natural capital under the “weather and environmental predictions” business line

Table A5 (continued) Item

Spending, $ thousands Operating Capital Transfers

Parks Canada Agency Stewardship of National Heritage Places Use and Enjoyment by Canadians Corporate Services Total Parks Canada Total

Total

252,712

2223

1712

256,747

199,076

6,853

138

206,067

522 9598 50,033

2836 4686 176,820

52,233 504,021 1,236,411

55,591 518,305 1,463,265

Table A6 – Investment related to natural capital under the “clean environment” business line

14,163

14,163

17,237⁎ 101,888 119,125

14,163 120,787 203,777 338,727

103,550⁎⁎ 101,889 205,439

⁎Grants for the implementation of the Montreal Protocol on substances which deplete the ozone layer ($1231); EcoAction 2000-Community funding initiative ($3406); Climate change action fund ($3872); Contributions to support environmental and sustainable development initiatives (half of $7,525); Environmental clean-up of the Sydney tar ponds and coke oven sites in the Muggah Creek watershed ($5616). ⁎⁎Grants to support environmental research and development ($7); Grant to support the Canada Foundation for Sustainable Development Technology ($100,000); contributions to support environmental research and development ($1392); Contributions for the Sciences Horisons. Internship and the International Environmental Youth Corp program ($2,141). ⁎⁎⁎Split equally between natural and human capital.

Table A7 – Investment related to natural capital under the “nature” business line Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎⁎⁎ Total

Capital Transfers Operating⁎⁎⁎⁎ Total

3118

3118

19,404⁎ 84,438 103,842

3304⁎⁎ 84,438 87,742

898⁎⁎⁎ 898

3118 23,606 168,876 195,600

⁎Contributions to support environmental and sustainable development initiatives (half of $3,192); EcoAction 2000 — Community Funding Initiative (half of $1,796); contribution to the Wildlife Habitat Funding Initiative ($1,747); habitat stewardship contribution program ($10,163). ⁎⁎Contributions to support environmental research and development ($2,440); contribution for the sciences horisons youth internship and the international environmental youth corp program ($864). ⁎⁎⁎EcoAction 2000-community funding initiative (half of $1,796). ⁎⁎⁎⁎Split equally between natural and human capital.

21,632 499⁎ 21,632

499

2563⁎⁎ 180,035 182,421

37⁎⁎⁎ 37

21,632 3099 180,035 204,589

⁎EcoAction 200-Community Funding Initiative (half of $75); climate change action fund ($300); contributions to support environmental and sustainable development initiatives (half of $323). ⁎⁎Grants to support environmental research and development ($79); contributions to support environmental research and development ($2307); contributions for the sciences horizons internship and the international environmental youth corp program ($177). ⁎⁎⁎EcoAction 2000-Community Funding Initiative (half of $75). ⁎⁎⁎⁎Assigned entirely to human capital.

Table A9 – Investment related to natural capital *under the “management, administration and policy" business line Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Investment in Capital by Type ($ Thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎⁎ Total

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Business lines fully or partially devoted to environmental issues: Clean environment; Nature; Weather and environmental predictions; Management, administration and policy; Canadian Environmental Assessment Agency; Parks Canada; Use and enjoyment by Canadians; Corporate services.

Item

Item

Capital Transfers Operating⁎⁎⁎⁎ Total

1523

1523

917⁎ 162,555 163,472

1523 917⁎⁎⁎ 2919 162,555 917 166,997

1085⁎⁎ 1085

⁎Contributions to support environmental and sustainable development initiatives (half of $1835). ⁎⁎Contributions to support environmental research and development ($1085). ⁎⁎⁎Contributions to support environmental and sustainable development initiatives (half of $1835). ⁎⁎⁎⁎Allocated entirely to natural capital.

Table A10 – Investment related to natural capital by the “Canadian environmental assessment agency” Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎⁎⁎ Total

246⁎ 17,342 17,588

235⁎

450⁎

235

450

931 17,342 18,273

⁎Contribution to the province of Quebec–James bay ($246). ⁎⁎Contribution to support the promotion, research and development of environmental assessment ($235). ⁎⁎⁎Contribution for the support of public participation in the environmental assessment review process ($450). ⁎⁎⁎⁎Allocated entirely to natural capital.

Table A11 – Investment related to natural capital under the “use and enjoyment by Canadians" business line Item

Investment in Capital by Type ($ Thousands) Physical Natural Human Civic Social Total

Capital Transfers

6853 138⁎

6853 138 (continued nextpage) page) (continued ononnext

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Table A11 (continued) Item

Investment in Capital by Type ($ Thousands) Physical Natural Human Civic Social Total

Operating⁎⁎ Total

6853

199,076 199,214

199,076 206,067

⁎Contribution in support of activities and projects related to national parks, national marine conservation areas, national historic sites and historic canals ($38). ⁎⁎Allocated entirely to natural capital.

Table A12 – Investment related to natural capital for the ministry of the environment Item

Investment in Capital by Type ($ Thousands) Physical Natural Human Civic Social

Capital Transfers Operating⁎⁎ Total Percent of Total

47,289

47,289 3.23

38,441 565,299 603,740 41.26

110,687 366,362 477,049 32.60

1348

954

1348 0.09

954 0.06

Investment in Capital by Type ($ Thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎ Total

16,549

16,549

16,549 113 70,980 87,642

113⁎ 70,980 71,093

⁎Contributions to support organizations associated with research, development, management, and promotion of fisheries and oceans-related issues (half of $75); contribution to the world maritime university in respect of establishing a Canadian maritime environment protection chair ($75). ⁎⁎Allocated entirely to natural capital.

47,289 151,430 931,661 1,130,380 77.25

Table A15 – Investment related to natural capital under the “icebreaking operations” business on-line Item

Investment in Capital by Type ($ Thousand) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎ Total

48,387 48,387

48,387 48,387

⁎Allocated entirely to natural capital.

Spending, $ thousands Operating Capital Transfers

Department Marine Navigation Services Marine Communications and Traffic Services Icebreaking Operations Rescue, Safety and Environmental Response Fisheries and Oceans Science Habitat Management and Environmental Science Hydrography Fisheries Management Harbours Fleet Management Policy and Internal Services Total

Item

Total

Table A13 – Expenditures by the ministry of fisheries and oceans, 2004–05 Item

Table A14 – Investment related to natural capital under the “marine navigation services" business line

Total

70,980

16,549

150

87,679

71,179

26,688



97,867

Table A16 – Investment related to natural capital under the “rescue, safety and environmental response” business line Item

48,387





100,360



4899

169,146

1164

1347

171,657

90,004

699

957

91,630

33,912 211,894

2281 1027

101 86,517

36,294 299,438

62,894 112,218 222,204

33,014 51,350 51,645

683 25 332

96,591 163,593 274,181

184,387

95,011

1,193,178

Physical Natural Human Civic Social Total

48,387 105,259

1,472,576

Business lines totally or partially devoted to environmental issues: Marine navigation services; Ice-braking operations; Rescue, safety and environmental response; Fisheries and Oceans science; Habitat management and environmental science; Hydrography; Fisheries management; Harbours; Policy and Internal services.

Investment in Capital by Type ($ Thousands)

Capital Transfers Operating⁎⁎ Total

1224⁎ 25,090 25,090

1224

1224 25,090 26,314

⁎Contribution agreements with the coast guard auxilary, including prevention and education (25% of $4,899). ⁎⁎25% of total allocated entirely to natural capital.

Table A17 – Investment related to natural capital under the “fisheries and oceans science" business line Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎ Total

1164

1164

84,573 84,573

1025⁎ 84,573 85,598

1164 1025 169,146 171,335

⁎Grants to support organizations associated with research, development, management and promotion of fisheries and oceans-related issues (half of $290 and half of $352); contributions to the youth employment initiative ($704). ⁎⁎Half to natural capital and half to human capital.

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Table A18 – Investment related to natural capital under the “habitat management and environmental response” business line Item

Item

669

669

45,002 45,002

370⁎ 45,002 45,002

669 370 90,004 91,043

⁎Contributions under the youth employment initiative ($77); contributions to support organizations associated with research, development, management, and promotion of fisheries and ocean related issues (half of $586). ⁎⁎Allocated equally to natural and human capital.

Operating⁎⁎ Total

Item

Investment in Capital by Type ($ Thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎ Total

2281 51⁎ 33,912 33,963

2281

2281 51 33,912 36,244

⁎Grants to organizations associated with research, development, management, and promotion of fisheries and oceans issues (half of $76 and half of $25). ⁎⁎Allocated entirely to human capital.

Physical Natural Human Civic Social Total Capital Transfers Operating⁎⁎⁎⁎ Total

1027

1027

888⁎ 211,894 212,782

302⁎⁎ 302

1027 197⁎⁎⁎ 1387 211,894 197 214,308

⁎Contributions under the Inuvialuit Final Agreement (half of $590); contributions under the aboriginal aquatic resource and oceans management program (half of $1382). ⁎⁎Grants and contributions in support of organizations associated with research, development, management and promotion of fisheries and oceans-related issues (half of $25, half of $104 and half of $475). ⁎⁎⁎Contributions under the Inuvialuit Final Agreement (one-third of $590). ⁎⁎⁎⁎Allocated entirely to natural capital.

Table A21 – Investment related to natural capital under the “harbours” business line Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers

33,014 94⁎

33,014 94 (continued on next page)

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎ Total

51,645

51,645 166 111,102 162,913

166⁎ 51,645

111,102 111,102

166

⁎Contributions to support organizations associated with research, development, management and promotion of fisheries and oceans-related issues (half of $332). ⁎⁎Half of total allocated to natural capital.

Table A23 – Investment related to natural capital for the ministry of fisheries and oceans

Table A20 – Investment related to natural capital under the “fisheries management” business line Investment in capital by type ($ thousands)

62,894 96,002

94

Table A22 – Investment related to natural capital under the “policy and internal services” business line

Item

Item

62,894 62,894

33,014

⁎Contributions to support organizations associated with research, development, management and promotion of fisheries and oceans-related issues (half of $88). ⁎⁎Allocated entirely to natural capital.

Item Table A19 – Investment related to natural capital under the “hydrography” business line

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎ TOTAL

Table A21 (continued)

Investment in capital by type ($ thousands) Physical Natural Human Civic Social

Capital Transfers Operating Total Percent of Total

Total

106,349

106,349 7.22

1001 659,922 660,923 44,88

3232 163,487 166,719 11.32

106,349 4430 823,409 934,188 63.44

197 197 0.01

Table A24 – Expenditures by the ministry of foreign affairs, 2004–05 Item

Spending $ thousands Operating Capital Transfers

Department International Security and Cooperation Assistance to Canadians Abroad Public Diplomacy Corporate Services Services to Partner Departments Passport Services Department Total

270,498

7491

442,263

76,198

2368

80

118,203 271,716 311,097

3370 105,511 8,909

44,680 175

2475 1,050,187

127,649

487,198

Total 720,252

78,252

166,253 377,402 320,006 2475 1,665,034

(continued next page) page) (continued ononnext

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Table A27 – Expenditures by the ministry of Indian and northern affairs, 2004–05

Table A24 (continued) Item

Spending $ thousands Operating Capital Transfers

CIDA Geographic Programs Countries in Transition Multilateral Programs Canadian Partnership Policy Communications Corporate Services Total CIDA International Development Research Centre International Joint Commission Operation and Administration of the Canadian Office Great Lakes Regional Office Total Joint Commission Total ministry

Total

67,875

1,063,497

1,131,372

8756

90,905

99,661

81,453

1,537,344

1,618,797

15,372

263,491

278,863

15,745 10,067 81,425 280,693 119,086

10,555 4323 1314 2,971,429

26,300 14,390 82,739 3,252,122 119,086

5766

5766

2220

2220

7986

7986

1,457,952

127,649

3,458,627

Department Indian and Inuit Affairs Northern Affairs Departmental Management and Administration Office of the Federal Interlocutor Indian Specific Claims Commission Department total Canadian Policy Commission Total ministry

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total 19,400⁎

19,400

19,400

19,400

⁎United Nations voluntary fund for the environment ($925); international environmental agreements ($2,513); permanent secretariat of the UN convention on biological diversity ($1039); Food and agriculture organization ($12,390); Inter-American institute for cooperation on agriculture (half of $4,226); international climate change class contribution ($420).

179,626 122,426

3710

4,811,228

5,168,786

105,223 458

284,849 122,884

16,671

20,380

4551

4551

662,897 967

4973

4,933,580 10

5,601,450 977

663,864

4973

4,933,580

5,602,427

Table A28 – Investment related to natural capital under the “inuit affairs” business line Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total 19,400

19,400

19,400 0.38

19,400 0.38

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎ Total

4973

4973

25,839⁎ 22,629 48,468

4973 25,839 22,629 53,441

⁎Contribution to Indian bands for land and estate management (half of $28,764); contributions for fire suppression on reserve land ($7543); contributions to implement the first nations land management act (half of $7828). ⁎⁎5% of total allocated to natural capital.

Table A29 – Investment related to natural capital under the “northern affairs” business line Item

Capital Transfers Operating Total Percent of total

4973

Business lines totally or partially dedicated to environmental issues: Indian and Inuit affairs; Northern affairs; Canadian polar commission.

Table A26 – Investment related to natural capital for the ministry of foreign affairs Item

352,584

Total

5,044,228

Table A25 – Investment related to natural capital under the “international security and cooperation” business line

Capital Transfers Operating Total

Spending, $ Thousands Operating Capital Transfers

Business lines totally or partially devoted to environmental issues: International security and cooperation.

Item

Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social

Capital Transfers Operating⁎⁎ Total

53,808⁎ 89,813 143,621

Total 53,808 89,813 143,621

⁎Contributions for the purpose of promoting the safe development, use, conservation and protection of the North's natural resources ($42,958); contribution to the Yukon government for forest fire suppression ($10,850). ⁎⁎Half of the total was assigned to natural capital.

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Table A30 – Investment related to natural capital by the Canadian Polar Commission Item

Investment by capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎ Total

10⁎ 967 967

10 967 977

10

Business line totally or partially devoted to environmental issues: All five departmental programs have relevance for natural capital. Table A33 – Investment related to natural capital under the “information dissemination and consensus building “business line” Item

⁎Contributions to research and activities relating to polar regions (0). ⁎⁎Entirely allocated to natural capital.

Table A31 – Investment related to natural capital for the Ministry of Indian and Northern Affairs Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social

Capital 4973 Transfers Operating Total 4973 Percent of 0.09 total

79,647 113,409 193,056 3.45

Total 4973 79,657 113,409 198,039 3.54

10 10

Table A32 – Expenditures by the ministry of natural resources, 2004–05 Item

Spending, $ thousands Operating Capital Transfers

Department Information Dissemination and Consensus Building Economic and Social Benefits Environmental Protection and Mitigation Safety and Security of Canadians Departmental Management Departmental Total Atomic Energy of Canada Canadian Nuclear Safety Commission Health, Safety, Security and Environmental Protection Non-Proliferation and Safeguards Total Commission Cape Breton Development Corp. National Energy Board Northern Pipeline Agency Total Ministry

171,182

2347

16,338

Total

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital 2347 Transfers Operating⁎⁎⁎⁎ Total 2347

10,448⁎ 17,118 27,566

1788⁎⁎ 85,591 87,379

591⁎⁎⁎ 17,118 17,709

2347 12,827 119,827 135,001

⁎Grants and contributions in support of organizations associated with the research, development, management and promotion of activities that contribute to departmental objectives (1/4 of $2,364); model forest program ($4069); forest 2020 green cover ($4417); climate change action fund ($704); action plan 2000 in climate change ($380); first nations forestry program (half of $573). ⁎⁎Grants and contributions in support of organizations associated with the research, development, management and promotion of activities that contribute to departmental objectives (1/4 of $2,364); grants to professors to Canadian universities for research related to forest sector sustainability and competitiveness ($465); Sask. forest centre ($365); first nations forestry program (half of $573); technology and innovation initiative (half of 65); international reporting obligations on the forest sector (half of $95). ⁎⁎⁎Grants and contributions in support of organizations associated with the research, development, management and promotion of activities that contribute to departmental objectives (1/4 of $2364). ⁎⁎⁎⁎50% of the total to human capital and 10% each to natural and civic capital.

189,867

129,680

2400

423,379

555,459

217,291

2812

240,701

460,804

Table A34 – Investment related to natural capital under the “economic and social benefits” business line Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

28,030

492

3353

31,875

73,737

351

791

74,879

619,920 162,838

8402

66,551

684,562

227

6402

66,778

6,402

72,953 60,200

227

38,083

73,180 60,200 38,083

496 954,491

1,312,884

496 8402

684,788

1,647,683

Capital Transfers Operating⁎⁎⁎⁎ Total

2400

2400

7567⁎ 46,093 53,660

3987⁎⁎ 12,968 16,955

1119⁎⁎⁎ 12,968 14,087

2400 12,673 72,029 87,102

⁎Grants and contributions in support of organizations associated with the research, development, management and promotion of activities that contribute to departmental objectives (25% of $1160); clean-up of low level radiation waste in the Port Hope area (2); first nations forestry program (half of $2910); national community tree foundation (half of $904); model forest program ($702) mountain pine beetle ($3528) action plan 2000 on climate change ($530); forest 2000 green cover ($221); support of aboriginal consultations (one third of $1130). ⁎⁎Grants and contributions in support of organizations associated with the research, development, management and promotion of activities that contribute to departmental objectives (25% of $1160); first nations forestry program (half of 2910); forest engineering research institute of Canada ($1889); technology and innovation initiative ($353). ⁎⁎⁎Grants and contributions in support of organizations associated with the research, development, management and promotion of activities that contribute to departmental objectives (25% of $1160); aboriginal consultations (one third of $1130). ⁎⁎⁎⁎25 of total allocated to natural capital; 10% each to human and civic capital.

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Table A35 – Investment Related to Natural Capital Under the “Environmental Protection and Mitigation” Business Line Item

2812

2812

134,582⁎ 108,646 243,228

74,936⁎ 222⁎⁎⁎ 108,646 183,582 222

2812 209,740 217,292 429,844

⁎Support of organizations associated with the research, development, management, and promotion of activities that contribute to departmental objectives (25% of $888); energuide for house retrofit initiative (half of $10,864); Canada foundation for sustainable development technology (half of $100,000); energy efficiency and alternative energy programs (one-third of $41,581); ethanol expansion program (half of $31,160); industrial energy research and development programs to effect research and to increase the efficiency of the use of energy (one-third of $2032); climate change action fund ($8552); support of the production and distribution of electricity from renewable sources (half of $472); carbon dioxide capture and storage ($7500); wind power production initiative ($5463); action plan 2000-climate change ($27,060). ⁎⁎Support of organizations associated with the research, development, management, and promotion of activities that contribute to departmental objectives (25% of $888); energuide for house retrofit initiative (half of $10,864); Canada foundation for sustainable development technology (half of $100,000); energy efficiency and alternative energy programs (one-third of $41,581); industrial energy research and development programs to effect research and to increase the efficiency of the use of energy (one-third of $2032); technology and innovation initiative ($2804); model forest program ($1941). ⁎⁎⁎Support of organizations associated with the research, development, management, and promotion of activities that contribute to departmental objectives (25% of $888). ⁎⁎⁎⁎Allocated equally between natural and human capital.

Table A36 – Investment related to natural capital under the “safety and security of Canadians” business line Item

Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Investment in Capital by Type ($ Thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎⁎⁎ Total

Table A37 (continued)

Investment in capital by type ($ thousands)

Operating⁎⁎⁎⁎ Total

352

24,579 24,635

24,579 25,203

49,158 50,246

56

⁎Support for contributions to departmental objectives (25% of $224). ⁎⁎Support for contributions to departmental objectives (25% of $224); youth employment strategy. ⁎⁎⁎Support for contributions to departmental objectives (25% of $224). ⁎⁎⁎⁎One-third of the total allocated each to natural and human capital.

Table A38 – Investment related to natural capital under the “health, safely, security and environmental protection” business line of the Canadian nuclear safety commission Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating⁎⁎ Total

106⁎ 6655 6761

106 6655 6761

⁎Support of informational system of occupational exposure (half of $88); nuclear standards program ($80); update of a report on radiation and health ($8). ⁎⁎10% of total allocated to human capital.

Table A39 – Investment related to natural capital for the ministry of natural resources Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating Total Percentage of total

8402

8402 0.51

152,676 203,444 356,120 21.61

81,464 245,447 326,911 19.84

2011 30,086 32,097 1.95

8402 236,151 478,977 723,530 43.91

Physical Natural Human Civic Social Total Capital Transfers Operating⁎⁎⁎⁎ Total

492

492

23⁎ 7008 7031

23⁎⁎ 7008 7031

23⁎⁎⁎ 23

492 69 14,016 14,577

⁎Research etc. that contributes to departmental objectives (25% of $92). ⁎⁎Research etc. that contributes to departmental objectives (25% of $92). ⁎⁎⁎Research etc. that contributes to departmental objectives (25% of $92). ⁎⁎⁎⁎25% of the total allocated to each of natural and human capital.

Table A37 – Investment related to natural capital under the “departmental management” business line Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers

352 56⁎

624⁎⁎

56⁎⁎⁎

352 736

Table A40 – Expenditures by the ministry of the solicitor general, 2004–05 Item

Spending, $ thousands Operating Capital Transfers

Department Advice to the Solicitor General First Nations Policing Program Inspector General, CSIS Executive Services Critical Infrastructure National Crime Prevention Centre Departmental Total

Total

20,951

4595

25,546

29,766

62,888

92,648

954

954

50,045 26,828 11,772

108,336 45,176

50,045 135,164 56,948

144,315

220,991

365,306

1737

E CO L O G I CA L EC O NO M IC S 6 8 (2 0 0 9) 1 72 3–1 73 9

Table A42 – Investment related to natural capital for the ministry of the solicitor general

Table A40 (continued) Item

Spending, $ thousands Operating Capital Transfers

Department Canada Border Services Agency Canadian Firearm Centre CSIS Correctional Services Care Custody Reintegration Corporate Management Total Correctional Services National Parole Board Conditional Release Clemency and Pardons Corporate Management Total National Parole Board Residential School Resolution Correctional Investigator RCMP Federal Policing Services Contracting Policing Services National Police Services Protective Policing Services Corporate Infrastructure Total RCMP RCMP External Review Committee RCMP Public Complaints Commission Total Ministry

Total

1,035,374

25,716

80,247

1,061,090 12,562

92,809

278,597

210,757 583,001 493,271 186,878

934 88,761 15,456 435

118 2636 314

211,810 671,762 511,363 187,627

1,473,907

105,587

3067

1,582,562

Capital Transfers Operating Total Percent of Total

31,517 4356

31,517 4356

5289

5289

41,162

41,162

62,207

4418

2872

31,808

608,612

489,847

83,616

573,463

332,790

68,824

401,933 101,388

189,979

16,432

64,236

270,647

1,690,809 873

204,930

64,555

1,960,295 873

4867

4867

336,442

305,594

53,891 0.99

Spending, $ thousands Operating Capital Transfers

Policy Programs and Divestiture Safety and Security Administration Departmental Total Canadian Transp. Agency Transp. Appeal Tribunal Total Ministry

321,987 (135,179)

2,308 26,320

85,915 314,013

832,415 109,710 1,128,935 27,176

20,038 10,265 58,932

20,397 420,325

1271

Total 410,210 205,156 872,851 119,975 1,608,192 27,176 1271

1,157,381

58,932

420,325

1,636,127

Table A44 – Investment related to natural capital under the "programs and divestiture" business line Spending, ($ thousands) Physical Natural Human Civic Social Total Capital Transfers Operating Total

2235

2235

2235

2235

⁎Action plan 200, urban showcase (half of $3320); action plan 2000, freight initiatives ($891); climate change; emission reductions ($526); moving on suistanaible transportation ($658).

Table A45 – Investment related to natural capital for the ministry of transport Item

4,815,230

53,891 0.99

Item

Item 576,804

101,388

53,891

66,625 2872

319

53,891

Table A43 – Expenditures by the ministry of transport, 2004–05

Department

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

5,457,057 Capital Transfers Operating Total Percent of Total

2235

2235

2235 0.14

2235 .99

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating Total

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Table A41 – Investment related to natural capital under the “critical infrastructure” business line Item

Item

53,891⁎

53,891

53,891

53,891

⁎Contributions to the provinces for assistance related to natural disasters (half of $107,782).

Table A46 – Expenditures by the ministry of western economic diversification, 2004–05 Item

Spending, $ thousands Operating

Department WED Total ministry

45,914 45,914

Capital

Transfers

Total

266,217 266,917

312,131 312,131

1738

E C O L O G IC A L E C O N O M IC S 6 8 ( 2 0 09 ) 17 2 3 –1 73 9

Table A47 – Investment related to natural capital by the ministry of western economic diversification Item

Investment in capital by type ($ thousands) Physical Natural Human Civic Social Total

Capital Transfers Operating Total Percent of Total

1122⁎

1122

1133 0.36

1122 0.36

⁎Red river flood protection program.

Table A48 – Federal government investment in natural capital, 2004–05 Total Total Total Total Total Total Total Total Total Grand Total

REFERENCES

2996 86,127 47,289 603,740 106,349 660,923 19,400 4973 193,056 8402 356,120 53,891 2235 1122 170,009 1,976,614

112,803 477,049 166,719

201,926 954 1,130,380 197 934,188 19,400 10 198,039 326,911 32,097 723,530 53,891 2235 1122 1,083,482 33,445 1151 3,264,701 1348

Table A49 – Distribution of investment in natural capital by the federal government, 2004–05 Ministry

Total Investment Percent of $ thousands grand total

Agriculture and Agri-Food Environment Fisheries Foreign Affairs Indian Affairs and Northern Development Natural Resources Solicitor General Transport Western Economic Diversification Total Percent of Adjusted Budgetary Spending

201,926 1,130,380 934,188 19,400 198,039

6.18 34.63 28.62 0.59 6.07

723,530 53,891 2,235 1,122 3,264,701 2.72

22.16 1.65 0.07 0.03 100.00

Table A50 – Intensity of investment in natural capital by department, 2004–05 Ministry

Agriculture and Agri-Food Environment Fisheries Foreign Affairs Indian Affairs and Northern Development Natural Resources Solicitor General Transport Western Economic Diversification Total

Total Total budgetary Ratio investment expenditures percent $ thousands $ thousands 201,926

3,936,636

5.13

1,130,380 934,188 19,400 198,039

1,463,265 1,472,576 5,044,228 5,602,427

77.25 63.44 0.39 3.53

723,530 53,891 2,235 1,122

1,647,683 5,457,057 1,636,127 312,131

43.91 0.99 0.13 0.36

3,264,701

26,572,130

12.29

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