Nature¡¯s hidden value: Understanding natural capital investments and ecosystem services
June 09, 2026
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Defining the gap between what markets capture and the investments that sustain our communities
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A bee buzzes past you toward a grove of almond blossoms. Frogs chorus in the evening over a stretch of wetlands. The shade of an oak tree cools the ground beneath you. Our world¡¯s natural systems work quietly around us, offering invaluable benefits. This is natural capital, and it holds the key to unlocking long-term economic resilience.
Natural capital refers to the stock of natural resources¡ªforests, wetlands, fresh water, soils, and biodiversity. These resources are self-renewing and provide measurable benefits over time.
These benefits are called ecosystem services. They include air purification, water filtration, crop pollination, and climate regulation. Most benefits from nature don¡¯t show up in traditional markets, but we rely on them for our wellbeing and our economy. When we understand the value of natural capital and what it provides, we can plan for growth more wisely. And we can weigh trade-offs more clearly. It helps us see how development or business decisions might support, or damage, these natural systems.
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Shade provided by trees adds value to urban greenways.
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If we ignore these benefits, long?term planning tends to focus only on cutting costs today, instead of taking near?term actions that can avoid much higher future costs. Many of nature¡¯s benefits aren¡¯t priced in markets. That means we need to look beyond market prices to truly measure them.
How economic signals capture a portion of natural capital and what gaps remain
Natural capital reveals a hidden layer of value that¡¯s often overlooked but essential for economic health. To weave natural capital into planning decisions, we must weigh the value of natural resources using the same language as all capital expenditure decisions.
Price, value, and cost are often used as if they mean the same thing. They don¡¯t. Each describes a different way of looking at what something is worth¡ªespecially when we talk about natural capital and ecosystem services. What are the differences? Let¡¯s break them down:
Price: The amount paid in a market transaction.
Value: Reflects the benefit that a good or service provides.
- Nonmarket value: The worth of goods and services that are not bought or sold in markets but that still provide benefits and contribute to wellbeing.
Use values: Value that comes from direct use of a good or service.
Nonuse value: Benefits generated by ecosystem services that do not require any actual use. This might include the value people receive from knowing that an environmental amenity exists and is being protected for future generations.
Cost: The captured explicit and implicit resources used to produce or maintain a good or service.
- Explicit cost: The direct, out-of-pocket expenses. This can include labor, materials, or equipment.
- Implicit cost: The opportunity cost of using resources that could have been employed elsewhere. No direct payment is made for implicit costs.
When we understand the differences between price, value, and cost, we can better describe ecosystem services in familiar terms. This makes it easier to include natural capital in planning, investment, and management decisions.
Why price and value differ
The price of a good or service does not necessarily capture its full value. An example begins at an almond grove where an almond grower pays a beekeeper for pollination services. That price represents the grower¡¯s market value for the services.
But bees also create benefits that no one pays for. They may pollinate nearby crops and raise yields for other farms. A healthy bee population also supports pollination of wildflowers, production of honey, and the survival of other plants that serve as the basis of food webs.?
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A bee pollinates a flower, demonstrating the value of pollination services as a key component of natural capital
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These added benefits provide great and measurable value, but they are not included in the price. Fully informed resource management decisions look at both price and value, as compared to more narrowly focused management decisions that might focus on price and ignore the value of resources not captured by prices.
The Deer Grove Forest Preserve Habitat Restoration project is a great example of price and value. As part of our team¡¯s work on the project between 2008 and 2023, we included a return of native plant communities that provide habitat for diverse wildlife. The project created benefits to recreation, water quality, and flood control.
For every dollar the community spent on the Deer Grove it received a $2 return in economic development. The restoration of native plants and vital green space also generates $14 million per year in recreation revenue. ?
Costs of using natural capital
Using natural capital also comes with costs. For example, consider a hydropower dam, which relies on water as natural capital. The explicit cost of building a hydropower dam includes labor, wages, and materials. The implicit cost reflects the ecosystem services lost when water flow is disrupted, such as impacts to water quality and habitat.
Enloe Dam near Oroville, Washington, was built in 1919 to support nearby mines and parts of the town with electricity. The dam was retired in 1958. But it still required an explicit cost for ongoing maintenance. The dam also incurred implicit costs by altering habitats and changing water flow, which harmed fish populations and reduced opportunities for recreation.
Our team evaluated what it would mean to remove Enloe Dam. The review considered the avoided costs of dam maintenance and the nonmarket benefits of increasing fish populations and recreation. The nonmarket benefits include recreation, a use value, and existence value, which is a nonuse value that measures the benefit individuals receive from knowing a resource is protected, even if they may never use it themselves.
We used benefit transfer methods (described below) to estimate the value of removing Enloe Dam. This approach adapts results from similar studies to reflect local conditions.
We drew on studies from the Klamath River Basin and Elwha River. In those cases, households at the local, regional, and national levels showed a willingness to pay between $94 and $165 per year to support habitat restoration.
We adjusted these values to account for differences between those areas and the Enloe Dam site. Based on this analysis, we estimated total benefits of $85.2 billion to $169.8 billion over 50 years. These projected benefits are much higher than the estimated $24 million cost of removing the dam.
Methods for valuing ecosystem services
Many ecosystem services are not sold in markets. How would you price the joy a local park brings you? Or the clean air you breathe? Or the peace you feel walking along the river in your town?
Those things don¡¯t have observable prices. However, measuring these values is essential for informed planning and investment. Because we can¡¯t rely on market data, nonmarket valuation uses other methods to translate the ecological functions that produce ecosystem services that contribute to human wellbeing into economic terms. Below are a few examples of nonmarket valuation techniques.
" }How would you price the joy a local park brings you? Or the clean air you breathe? Or the peace you feel walking along the river in your town?
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1.?Revealed-preference methods
These methods infer the value of real-world actions. The market price method uses prices of ecosystem goods and services sold directly in markets, such as timber or commercial fish. The productivity method looks at how ecosystem services such as water purification or pollination raise the output of marketed goods like drinking water or crops. The hedonic pricing method compares property prices with and without certain environmental features, such as proximity to amenities like recreational parks or disamenities like Superfund or industrial sites. The travel cost method uses the time and money that people spend visiting outdoor recreation areas to estimate the value of those places. Cost-based methods estimate value by calculating what it would cost to replace a lost ecosystem service, such as flood protection or nutrient removal by wetlands.
2.?Stated-preference methods
These methods use public opinion surveys to directly ask people to value a change in ecosystem goods or services. The contingent-valuation method asks people about their willingness to pay for these changes. It may ask if they would support an increase in taxes that would fund efforts to improve water quality in their local lake. Conjoint analysis or choice experiments ask people to select their preferred option out of a set of choices where the options vary in the level of ecosystem goods and services they provide and in their associated costs. Both these methods estimate the public¡¯s willingness to pay for ecosystem goods and services. ?
3.?Benefit-transfer methods
These methods apply results from past studies to a new place or project. For example, we can use a published study on the ecological value of wetlands to estimate the benefits of a planned restoration. The simplest application of benefit-transfer methods, called benefit-value transfer, involves directly using the value of a previous study in a new context. A more complex and detailed approach, called benefit-function transfer, allows for the previous value to be customized and adapted to more closely match the new setting. While benefit transfer is a very commonly used method, care must be taken to ensure that the previous benefit value closely matches the new situation.
How valuing nature supports resource management
Valuation studies help resource managers make informed, actionable decisions. Their usefulness depends on the mission and responsibilities of the managing agency. For public agencies, such as the U.S. Bureau of Land Management (BLM), whose mission spans the long?term health and productivity of public lands, valuation efforts must account for the full range of ecosystem services affected by BLM land?use decisions. These values are incorporated into federal benefit?cost analyses that guide management choices funded by taxpayers.
There are different constraints for local utilities, regional agencies, and private firms. Because their project costs are borne by ratepayers, local taxpayers, or shareholders, they may prioritize valuation studies differently. Some organizations must make decisions that both reflect their commitment to nature as well as the fiduciary responsibilities to the individuals they serve (e.g., ratepayers, stockholders). These decisions can result in increased revenues through things like carbon credits, habitat markets, or groundwater banking. They can also reduce long?term operational risks through improved resilience.
From measurement to meaningful decisions
Any decision involves tradeoffs. Sometimes, we give up one thing to get more of something else. Valuing ecosystem services helps us understand these tradeoffs. Commercial, agricultural, and other uses of land and natural resources generate income. But they also result in costs due to the loss of natural capital and ecosystem services. By putting these potential losses in dollar terms, they can be more easily compared to other kinds of costs.?
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A river flows through trees and rocky banks, illustrating natural capital in action as water, land, and ecosystems interact to sustain life and shape the landscape.
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As we mentioned earlier with Deer Grove, valuing ecosystem services helps show the economic returns from dollars invested in conservation and restoration. Ecosystem service valuation also demonstrates the economic losses that could result from land use decisions.
One example is Green Lake in south-central Wisconsin. Tourists and locals alike enjoy the lake, but nearby commercial, agricultural, and residential land uses threaten its water quality. Cleaning up the lake comes with a cost, but the community believes that the value of clean water likely exceeds the cost of restoration.
Green Lake provides many nonmarket values such as aesthetic beauty and habitat for wildlife. Water quality in Green Lake also generates market value for businesses. When visitors come to Green Lake for recreation, they spend money at restaurants and other local shops.
Our team found that declining water quality and less recreational use in Green Lake could lead to $8 million to $11 million in lost economic activity. Additionally, declines in water clarity could lead to declines in property values between $35 million and $208 million. Estimating the value of these benefits gave local decision-makers a tool to make the argument that investing in water conservation would result in measurable values.
Natural capital may work quietly. It¡¯s the buzzing bees, shady oak trees, and healthy wetlands. But the influence on our lives, economies, and investments is profound.
By distinguishing between price, value, and cost¡ªas well as applying tools to reveal both market and nonmarket benefits¡ªwe gain a clearer picture of how ecosystems support our wellbeing, economic productivity, and resilience over time. Instead of reducing nature to a dollar figure based only on market value, natural capital valuation gives us another view. It allows the benefits that nature provides to be visible in decisions that shape our communities, infrastructure, and landscapes.
It¡¯s essential that we recognize the true value of ecosystems. That way, we can reshape planning, investment, and strategic priorities to provide a resilient economy for future generations.?
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