The ownership and funding of natural capital: the case for trusts and a public natural capital fund

Abstract

Unbridled depletion of renewable and non-renewable resources is a direct threat to both the natural capital inherited by future generations and to economic growth. If depreciation of renewable natural capital has breached critical thresholds and if there is a strong intergenerational equity argument in favour of spreading the benefits from depletion of non-renewable over current and future generations, how do we ensure that intergenerational transfers are made? This paper looks to existing structures such as sovereign wealth funds and trusts as a framework for protecting assets and proposes the establishment of an economically efficient natural capital fund, which would receive the economic rents from the depletion of non-renewable resources, plus compensation for damage caused to existing renewable. The paper also considers how such a fund can be protected in terms of its legal structure, governance and, crucially, its ownership of the natural capital assets it seeks to conserve.