A forest can make you money in two very different ways. You can cut it all down and sell the wood once, or you can keep the forest and sell the timber it grows every year, forever. That difference — the difference between the stock and the flow — is the whole idea behind natural capital.
📘 What you need to know
Natural resources are the sources of energy and raw materials that society uses.
Natural capital is the stock of natural resources available on Earth.
Natural capital includes renewable resources, non-renewable resources and ecosystem services.
Natural income is the flow of goods and services that natural capital produces.
Income is sustainable only when the rate of use is no faster than the rate of replacement.
Ecosystem services fall into four groups: supporting, regulating, provisioning and cultural.
Non-renewable natural capital can create wealth once, but it cannot produce a sustainable natural income.
Calling nature “capital” makes its value visible to decision makers, but critics say it is an anthropocentric view that ignores nature’s intrinsic value.
What counts as a natural resource
A natural resource is anything that comes from the natural world and is useful to people. That is a wide net, and it is meant to be.
Sunlight — drives photosynthesis, and powers solar panels.
Air — oxygen to breathe, and moving air for wind turbines.
Water — drinking, washing, irrigating crops, generating hydroelectricity.
Land and soil — farming, building, and space for wildlife to live.
Rocks and minerals — metals, cement, sand, the lithium in a phone battery.
Living things — crops and fish for food, trees for timber, plants for medicines.
Notice that some of these are things you can pick up and sell, and some of them are jobs that nature quietly does for you. Both count. That second group is easy to forget, because nobody sends you a bill for it.
Capital and income: the bank analogy
Environmental scientists borrowed two words from economics, because the maths of a forest turns out to work like the maths of a bank account.
The two definitionsNatural capital = the stock of natural resources on Earth Natural income = the flow of goods and services that stock produces
Put money in a bank and you have capital. Leave it alone and it earns interest, and that interest is your income. Spend only the interest and the account never shrinks. Start dipping into the money itself and the account gets smaller every year, and so does the interest it can pay you.
Nature works the same way. The forest is the capital. The timber it grows each year is the income. Take only the new growth and you can keep harvesting forever. Take the trees themselves and next year there is less forest, so there is less new growth, so there is less to take.
The arrow only keeps flowing if the box on the left stays full. Damage the stock and you cut off your own income.
🏦
Capital or income?
Money in the bank is the capital. The interest it pays you is the income. Live off the interest and you stay rich forever; live off the savings and you end up with nothing. Every natural capital question is a version of that choice.
Goods and services
Natural income comes in two forms, and students lose marks by only writing about the first one.
Type of natural income
What it is
Examples
Goods
Physical things you can harvest, count and sell
Fish caught from the sea, timber from a forest, crops from soil, fresh water from a river
Services
Jobs ecosystems do that keep us alive, usually for free and usually unnoticed
Services are the reason natural capital matters so much. If a wetland is drained, the flood protection it gave for nothing has to be rebuilt in concrete, and the bill is enormous. The service was always worth money — nobody had simply been charged for it.
The four types of ecosystem service
Ecosystem services are the benefits ecosystems provide that support life and human wellbeing. You need to be able to name and sort the four groups.
A quick sorting trick: supporting = the engine, regulating = the thermostat, provisioning = the products, cultural = the meaning.
Regulating services are worth knowing in detail. Water replenishment refills rivers and aquifers from rainfall and snowmelt. Wetlands and floodplains absorb heavy rain, and coastal mangroves take the force out of storm surges. Reed beds and saltmarshes strip pollutants out of water. Forests and oceans lock away carbon dioxide, which slows climate change.
When natural income is sustainable
Natural income is only worth the name if it keeps coming. Take a managed forest as the standard example.
🧩 How sustainable timber production works
Trees are felled for timber, so the stock of forest goes down.
Trees are replanted, or areas are left alone so they regrow naturally.
New growth outpaces the cutting — the forest puts on wood faster than the saws take it away.
The stock stays the same or grows, so the same harvest is still available next year, and the year after.
Say it in the exam like this: the forest is the natural capital, and the timber that can be taken without shrinking the forest is the natural income.
The word “sustainable” is doing real work in this topic, so do not use it loosely. Something is sustainable when the rate of use is equal to or slower than the rate of replacement. If you write that sentence with a real number attached to it, you will pick up marks that vaguer answers miss.
The awkward case: non-renewables. Coal, oil and metal ores are natural capital, and they clearly create wealth. But they do not regrow on any timescale that matters to us, so they cannot produce a natural income. Burn a tonne of coal and there is simply a tonne less coal. Every use of a non-renewable resource is spending the capital.
Is treating nature as capital a good idea?
This framing was invented on purpose, to solve a problem: environments that had no price tag were being treated as though they were worth nothing. But not everyone thinks it was the right fix, and ESS wants you to be able to argue both sides.
The argument for
The argument against
It makes value visible. Putting nature in the same language as money means governments and businesses can see what a wetland is actually worth to them.
It is anthropocentric. It suggests nature exists to serve people, which is an extreme human-centred view.
It encourages investment. If a forest is an asset, protecting it is protecting an asset, not just spending money on scenery.
It ignores intrinsic value. Many people argue a species is worth something in itself, whether or not it is useful to us.
It rewards good management. Thinking in terms of stock and flow pushes societies towards keeping a steady supply of clean water, clean air and fertile soil.
What has no price may get destroyed. If something cannot be priced, a purely economic system may treat it as free to damage.
This is a classic “evaluate” question, and evaluate means both sides plus a judgement. A strong answer says the natural capital model is a useful tool for decision making, but that its value depends on the environmental value system of whoever is using it — an ecocentric thinker would say some things should never have been put on the market at all.
Worked examples
WE 1
Distinguish between natural capital and natural income
Using an example, distinguish between natural capital and natural income. (3 marks)
Point 1: what capital is
Natural capital is the stock of natural resources on Earth, for example a forest.
Point 2: what income is
Natural income is the flow of goods and services that stock produces, for example the timber harvested from that forest each year.
Point 3: the link between them
Income is only sustainable if the harvest is no bigger than the regrowth, otherwise the capital shrinks and future income falls.
Capital is the stock, income is the flow it producesthe word “distinguish” wants both sides compared, so never define one and stop
WE 2
Explain why fossil fuels cannot provide a natural income
Explain why non-renewable resources such as coal are considered natural capital, but cannot produce a sustainable natural income. (3 marks)
Point 1: why it is still capital
Coal is a natural resource that society uses for energy, so it is part of the stock of natural capital.
Point 2: why there is no flow
It formed over millions of years, so it is not replaced on a human timescale. There is no yearly growth to harvest.
Point 3: the consequence
Every tonne burned is a permanent reduction in the stock, so use of coal is always spending capital rather than living off income.
Non-renewable capital can create wealth once, but generates no sustainable flowthe phrase “rate of replacement is far slower than the rate of use” is worth a mark on its own
WE 3
Identify ecosystem services from a described habitat
A coastal mangrove forest shelters young fish, absorbs storm surges, supplies firewood to local villages and attracts tourists. Identify the ecosystem service category each of these belongs to. (4 marks)
Sheltering young fish
A supporting service, because it maintains the ecosystem and its productivity.
Absorbing storm surges
A regulating service, because it stabilises conditions and reduces flood damage.
Supplying firewood
A provisioning service, because it is a physical good taken from the ecosystem.
Attracting tourists
A cultural service, because it comes from people interacting with nature.
One mangrove forest, all four categories at oncethis is why the four groups matter: a single habitat usually delivers all of them
💡 Exam tips
Learn the two definitions word for word: capital is the stock, income is the flow.
If a question says “using an example”, you must name a real resource. No example, no mark.
Write about goods and services, not just goods. Services are where the easy marks hide.
Be able to name all four ecosystem service categories and give one example of each.
For anything about sustainability, compare the rate of use with the rate of replacement.
In evaluation questions, bring in the anthropocentric criticism and the idea of intrinsic value.
⚠ Common mix-ups
Swapping capital and income. The fish in the sea are the capital. The fish you can catch each year without shrinking the population are the income.
Thinking natural capital means money. It is the resources themselves, not their cash value.
Saying all natural capital produces natural income. Non-renewables do not.
Listing only goods. Flood protection and pollination are natural income too.
Confusing supporting and regulating services. Supporting services build the system (soil formation, nutrient cycling); regulating services steady it (climate, floods, pests).
Treating “sustainable” as a synonym for “good”. It has a precise meaning: use at or below the rate of replacement.
Up next: Putting a Value on Natural Capital. You now know nature has value — the harder question is how you measure it, and why the same resource can be treasure in one country and a threat in another.
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