Natural Capital as a Stock Option

TL;DR

The paper proposes viewing natural capital as a stock option to promote efficient internalization of ecosystem maintenance and restoration, addressing climate crisis impacts caused by high fossil fuel consumption.

Contribution

It introduces the novel idea of modeling natural capital as a stock option to incentivize sustainable ecosystem management.

Findings

Highlights the unsustainability of current fossil fuel-driven economy.

Suggests natural capital as a financial instrument for ecosystem preservation.

Proposes a strategic framework for internalizing environmental costs.

Abstract

The unfolding climate crisis is a physical manifestation of the damage that market economy, driven by the high intensity consumption of fossil fuels, has inflicted on the Earth System and on the stability conditions that were established by a complex conjugation of natural factors during the Holoecene. The magnitude of the human activities and its predatory nature is such that it is no longer possible to consider the Earth System and the services it provides for the habitability of the planet, the so-called natural capital, as an economical externality. Thus one is left with two main choices in what concerns the sustainability of the planet's habitability: radical economic degrowth or highly efficient solutions to internalise the maintenance and the restoration of ecosystems and the services of the Earth System. It is proposed that an interesting strategy for the latter is to consider the natural capital as a stock option.