How the ONS is working towards measuring depletion of UK natural capital

As well as its more traditional social and economic statistics, the Office for National Statistics has been further improving its measurement of what the natural world provides to us through ‘ecosystem services’. This work is part of the wider ‘Wellbeing and Beyond GDP’ agenda to provide a complementary and more holistic view of national prosperity and well-being. In this post Ellen Clowser looks at how we’ve been extending our measurement of natural capital to estimate for the first time how these resources are being depleted.

Depletion happens when we reduce the stock of a natural resource. For non-renewable resources – finite resources that do not replace themselves or do so very slowly – depletion is simple: if we extract the resource, we are reducing the amount available. Extraction of oil and gas, for example, reduces our reserves of these resources. For renewable resources this is more complicated, as the resource stock can regenerate. The population of fish changes as they are born and die. Depletion only occurs when we take fish faster than they are replenished.

Today we have taken the first step towards measuring depletion of our natural resources. Developing estimates of depletion for the UK natural capital accounts: 2024 outlines methods that enable us to calculate depletion for the non-renewable resources of oil and gas, coal, and minerals and metals.

We already estimate the value of our natural resources to the economy each year in the UK natural capital accounts. Oil and gas contributed £8 billion and £5.6 billion to these accounts respectively in 2021. Using our estimates of depletion, we can adjust these values to reflect the natural resources consumed in the process. Taking that depletion into account, the values are estimated to be £5.5 billion for oil and £3 billion for gas in that year. The difference reflects the opportunity cost of extracting reserves now rather than in the future.

Why is this important?

Activities that lead to depletion create a short-term economic boost as an increase in gross domestic product (GDP).

However, this cannot be sustained. So, if we extracted all of our oil and gas reserves this year GDP would increase, but there would then be no reserves left for future years, so the economic value would fall to zero.

For renewables such as fish, even if we didn’t catch every fish in the sea this year, if we take more than can be replenished, we would still see an increase in GDP, but this would reduce the stock size, limiting the capacity for future fishing and catch sizes, potentially even leading to a collapse of the fish population. In contrast, fishing without causing depletion delivers less to GDP this year, but maintains the fish population, allowing future generations to benefit from this resource and produce income in future years.

Going forward

Proposed updates to the System of National Accounts – the rules for the national accounts, including GDP – due in 2025 could see depletion being included in net macroeconomic measures, such as Net Domestic Product (NDP).

If so, comparing GDP and NDP could allow us to measure the longer-term sustainability of the economy. This work aligns with the ‘inclusive wealth’ concept outlined in the HM Treasury-commissioned Dasgupta Review of the Economics of Biodiversity.

We are working with ONS colleagues on developing new indicators such as Net Inclusive Income, and considering depletion in our new indicators will help decision makers to better understand the full impact that current economic activity has both now and into the future, highlighting potential trade-offs between resource depletion and economic growth.

This is only the first step in estimating UK natural resource depletion. These statistics are novel, and we welcome feedback on this research and the methods we have used to produce these estimates to

Ellen Clowser is Natural Capital Accounts Development Lead at the ONS

Ellen Clowser is Natural Capital Accounts Development Lead at the ONS