Accounting and integrating ecosystem services: European experience
Jean-Louis WeberSpecial Adviser on Economic-Environmental Accounting
European Environment Agency
ProEcoServ Partnership MeetingUNEP Headquarters, Nairobi
7-8th June 2011
GDP and BeyondRecurrent policy demand (“green GDP”…)•For GDP level aggregates • For general policy making (annual budget discussion annual updates, fresh data…)• Remediating environmental and social weaknesses of GDPDebate influenced by welfare economics•Micro economics first, individual preferences for utilities•Wealth more important than current income (because wealth secures future welfare)•Wealth to be calculated as net present value of expected future benefits of assetsDifficulties for national accounting •National accounts are first of all empirical statistics (which can be interpreted by the economic theory (ies)•Market transactions aggregate conflicting individual preferences (they do the job) •Out of the market (e.g. public good, economic externalities, non-priced well being…), need to simulate markets•Theoretical issues: consistency of prices, NPV time horizon, integration of multiple options (including public good), limits to the aggregation of independent local or sector assessments•Statistical issues: collection and update of micro data on individual preferences (the “benefit transfers” issue) Wealth calculations still remain incomplete modeling exercise, not accounting
Wealth is not just about money Invaluable asset no monetary
value…
Paid maintenance/
restoration costs
Estimated cost of repairs (not yet paid)
=Measurement of
asset depreciation
…but maintaining wealth may have a cost
Valuation of E-services Valuation of E-services
NPV & ()
Physical accounts of E-services Physical accounts of
E-services
t1
t2
t2 t1
t2 t1
()
Degradation of ecosystem capital
NPV & ()
…based on mitigation costs
…based on assets values
€€€€
€ € €
Assessment of remediation costs
Asse
ts
Asse
ts €
Flow
s
()
Estimation of ecosystem capital depreciation: 2 possible ways
Account of pressures responsible of degradation
Account of pressures responsible of degradation
Ecosystem Capital Consumption or Depreciation CEC is the monetary estimation of ecosystem depreciation resulting from physical degradation
• alike “fixed capital consumption” (UN System of National Accounts)• alike “capital depreciation” in financial corporate accounts (International Financial Reporting Standard)
CEC measures altogether the depletion of the private or common good (the economic resource, such as timber or managed fish stocks) and the degradation of the public good (such as forest or fisheries)
“To be reliable, the information in financial statements must be complete within the bounds of materiality and cost. An omission can cause information to be false or misleading and thus unreliable and deficient in terms of its relevance” http://www.ifrs-portal.com/Texte_englisch/Framework/index.htm
Therefore, capital depreciation must be estimated and deducted when calculating profit. This is of highest importance for shareholders (dividends, stocks value…) as well as for the fiscal authority…
However, neither IFRS nor SNA record complete Consumption of Ecosystem Capital: IFRS resource only and SNA, nothing…
CEC is an unpaid cost. An unpaid cost is a debt. CEC is the measurement of the increase in ecological debts (to future generations) and should be recorded accordingly.
Coefficients of Ecosystem Services (Un)Sustainability
Flow
sEx
trac
tion
Calculation of total effect on VA of extraction of ES (n)(Source: Jose Acosta, Wuppertal Inst. and EEA-ETCSCP)
From step 1
Activiti es ∑ Fina l use ∑ Output
S1 S2 S3 IO PH GFC EXP FU
G1
G2 T z Y y x
G3
∑ Txt
IMP P
GVA + Txt
Output x - woS2xt
From step 3 ∆x Activiti es ∑ Fina l use ∑ Output - x2
S1 S3 IO PH GFC EXP FU x TE = Total Effect
G1
G3
∑ woS2xt
IMP
GVA
Output
woS2T woS2Y woS2x
woS2P
woS2x
Original input coefficients matrix
S1 S2 S3 New input coefficients matrix
G1 S1 S3
G2 A G1
G3 G3
IMP IMP
GVA GVA
Original final use
FU New final use
woS2A
woS2y
€Total effect
Input-Output Tables €
€
Physical accounts of
E-services
t1
t2 t2 t1
Degradation of ecosystem capital
Asse
ts ()
Ecologically sustainable benefits from ecosystem services: the macro-economic approach
Main outcome of ecosystem capital accounts
• Loss/gain of Ecosystem Capital Potential (degradation/improvement): – Loss of capacity (or potential) to deliver ecosystem services to the economy
(resources) and directly to people (public good)– Capacity/potential integrates quantitative balances and ecosystem health (vigour,
integrity, resilience) – Measurement based on physical accounts of key assets: land, water,
biomass/carbon, biodiversity– Multiple scales: from local units (ecosystem units) to regions, rivers basins and
countries
• Consumption of Ecosystem Capital – Loss of ecosystem capital potential assessed by causes (overharvesting, disposal of
residuals, introduction of species, restructuring)– Unitary costs of remediation by analogy to actual cost of works– CEC is part of the final demand at full costs
• Ecologically sustainable benefits supported by ecosystem assets/services– Benefits as Value Added of agriculture, forestry, fishery, water management…,– Ecological sustainability = no loss of ecosystem capital potential.
Assessment of ecosystem capital accounts: Implicit norms
“JRC input to the Interdepartmental Coordination Group (ICG)” by Andrea Saltelli and Angela Pereira
The 3 issues highlighted:•The relation between (statistical) evidence – policy (based on statistics), and the issue of the explicit and implicit norms contained by indicators•The capacity of composite/aggregated indicators to represent evidences in a fair way regarding policy making prerogatives•The risk of “extreme reduction” in particular when monetary valuation is used as a method for producing aggregates of the most general nature.
Ecosystem capital accounting assumptions:
– Ecosystem degradation is measured from multicriteria diagnosis: assumption that maintenance of good state equals maintenance of ecosystem capacity of delivering full range of services (options)
– Annual maintenance of ecosystem capital’s potential to deliver services: general target expressed in all accounting standards (SNA, IFRS), good farming practices, insurance standards…
– Restoration of historical damages up to stated targets (regulations, plans, Water FD objective of good environmental quality …)
– Mitigation/compensation of observed degradation of capital’s potential: consensus in ELD2004, N2000 management (conservation/ restoration/ replacement) , US wetlands mitigation banking system
– Payment of demand at full costs (domestic and imported): growing public consensus to pay more for fair trade, organic food…
– Recording of non paid costs: not in past flows ecological debt to be recorded in a special financial accounts; debt should vary according to physical degradation and prices of remediation actions.
– Ecologically sustainable benefits vary according to economic activity (+) and ecosystem degradation (-). Their increase is a target… which depends broadly on the reduction of ecosystem degradation
Indicators:
Resource efficiency : CEC, an additional dimension•Improvement of economy’s environmental performance referred as “eco-efficiency” or “first decoupling”. MFA/ GDP…•Inter-generational optimisation of non-renewable resource use in order to maximise the income flow by means of resource savings and/or substitutions between forms of capital (the “weak sustainability” paradigm). •Improvement of the current ratio: value of commodities/ impacts on ecosystems due to extraction & residuals; combines MFA and Life Cycle Analysis; called “second decoupling” or Environmentally Weighted Material Flows…•Maintenance over time of the living and/or cycling natural capital’s capacity to supply altogether economic resource and life support (clean water, clean air, stable climate, food…). Efficiency = no ecosystem capital degradation
Social dimension, wellbeing, consumption patterns:•Final consumption at full costs…•Reflected in the (full) price of imports
Statistical soundness
• Accounts based on objective and comprehensive data– Radiometry observed by satellites– Derived land cover maps– Official statistics, physical (crops, timber, fish, domestic and imported…) and
monetary (maintenance activities, Input-Output Tables and VA by sectors)– Meteo– + sampling (ad hoc or mostly of in situ monitoring data)– + physical modeling
• All data documented• No subjective surveys• In line with current developments in statistics (see next slide on Brazilian population census)
Low Cost ImagesHandheld Devices
(PDA) GIS/Web
Brazilian Geospatial Statistics
Growing Application at IBGE for both Cartography and Statistics
Evolution of Geo-Technologies
Assimilation of statistics into regular grids
UN manual for environmental-economic accounting: SEEA2003Enlargement of SNA1993 (now 2008)
Natural resources EcosystemsEconomic
assets (SNA) Non-economic
assets
Openingstocks
Opening stocks Opening State
SNAtransactions
and otherflows
Changes instocks
Changesin stocks
Economicactivities,
naturalprocesses,
etc.
Changesin state
Closing stocks Closing stocks
Closing state
Described in SNA
RM HASSAN - UN The System of Environmental and Economic Accounting (UN 2003) - RANESA Workshop June 12-16, 2005 Maputo
Volume 1
The SNA satellite accounts for the
environment
expenditure, taxes, hybrid accounts, physical flows,
sub-soil, energy, water land,economic assets depletion
Volume 2
Ecosystem approach to accounting
Ecosystem stocks and quality, valuation…
Revision SEEA2012/13
Negative feedbacks of ecosystem degradation on production and wellbeing
Impacts on ecosystem capacity of delivering services/benefits
First expert meeting on SEEA part 2, ecosystem accounts
• Copenhagen 11-13 May• Co-organised by the EEA, UNSD and the World Bank• Discussion of concepts, accounting units and
classifications• Correspondance between economic and ecosystem units
– Economic assets // Ecosystem assets– Establishments // Land Cover Functional Units– Institutional Units // Socio-Ecological Landscape Units– Commodities // Ecosystem Services
• Discussion of valuation options (SNA compatible…)• Outcome presented to the UNCEEA meeting, 15-17 June
SNA & SEEA: economic and ecosystem assets
Dw
ellin
gs &
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build
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ures
Ma
chin
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and
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pmen
t
Cu
ltiva
ted
bio
log
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re
sour
ces
Inve
nto
ries
Oth
er p
rodu
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Land
Min
eral
and
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rese
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No
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bio
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Wa
ter
and
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natu
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Inta
ngib
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ont
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lice
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…)
Land x xLand cover systems x x O x xBiomass/carbon x x O x OWater O xBiodiversity O O O O OSelf regulating capacity O O O O OHealth, overall regenerative capacity N N N N
x explicitly recorded as economic assetO partly or indirectly recorded as economic assetN not recorded, externality
Assets hold by ecosystem units (forests, agro-systems, wetlands…)
Non produced assetsProduced assetsAssets hold by economic units (enterprises, government bodies, households…)
Main relations between classifications & accounting units
Monetary Statistics of Products
Physical Statistics of Products
Land Use: productive land
functions
Land Cover: biophysical land units
Ecosystems:Socio-ecological landscape units (SELU)
(terrestrial, marine & atmospheric)
Land Functions & Ecosystem Services
Institutional & Production Units
(sectors & industries)
Land Ownership(private & public)
Land Cover Types and derived Land Cover Functional Units
A H e rb a c e o u s c ro p
A 1 H e rb a c e o u s c ro p / S m a ll s ize fie ld s ra in fed (< 2 h a )
A 2 H e rb a c e o u s c ro p / M ed iu m to la rg e s ize fie ld s ra in fe d
A 3 H e rb a c e o u s c ro p / M ed iu m to la rg e s ize fie ld s irr ig a te d
B T re e o r sh ru b c ro p
C M u ltip le o r la y e re d c ro p
D T re e c o v e re d a re a
E S h ru b c o v e re d a re a
F H e rb c o v e re d a re a
G S p a rse n a tu ra l v e g e ta tio n ( te r re s tr ia l/a q u a tic /re g u la r ly f lo o d e d )
H A q u a tic o r re g u la r ly f lo o d e d tre e c o v e re d a re a
I A q u a tic o r re g u la r ly f lo o d e d sh ru b o r h e rb c o v e re d a re a
J B a re a re a s ( te r re s tr ia l o r re g u la r ly f lo o d e d )
K A rtif ic ia l su r fa c e s a n d a s so c ia te d a re a s
L In la n d w a te r b o d ie s
M G la c ie r a n d p e re n n ia l sn o w
01 Urban and associated developed areas 02 Medium to large fields rainfed herbaceous cropland 03 Medium to large fields irrigated herbaceous cropland 04 Permanent crops, agriculture plantations 05 Agriculture associations and mosaics 06 Pastures and natural grassland 07 Forest tree cover 08 Shrubland, bushland, heathland 09 Sparsely vegetated areas 10 Natural vegetation associations and mosaics 11 Barren land 12 Permanent snow and glaciers 13 Open wetlands 14 Inland water bodies 15 Coastal water bodies 16 Sea (per memory)
samplingmapping
Based on FAO LCCS3
Mapping & classification of socio-ecological landscape units (SELU)1- river basins and 2- relief
Courtesy Emil D. Ivanov, 2011Courtesy Emil D. Ivanov, 2011
Mapping & classification of socio-ecological landscape units (SELU) 3- dominant landscape types (urban, intensive agriculture, mosaics, grassland, forests, other natural types and no-dominance)
Courtesy Emil D. Ivanov, 2011Courtesy Emil D. Ivanov, 2011
Application: NECB (net ecosystem carbon balance)here by 1x1 km grid
Courtesy Emil D. Ivanov, 2011Courtesy Emil D. Ivanov, 2011
Classification of socio-ecological landscape units (SELU)Socio-ecological landscape units (SELU)
1. Mountain ecosystem landscapes 1.1 Mountain ecosystems/ Urban and associated developed areas 1.2 Mountain ecosystems/ Broad pattern agriculture 1.3 Mountain ecosystems/ Agriculture associations and mosaics 1.4 Mountain ecosystems/ Pastures and natural grassland 1.5 Mountain ecosystems/ Forest tree cover 1.6 Mountain ecosystems/ Other dominant natural land cover 1.7 Mountain ecosystems/ Composite land cover (no dominant land cover)
2. Highland ecosystem landcapes 2.1 Highland ecosystems/ Urban and associated developed areas 2.2 Highland ecosystems/ Broad pattern agriculture 2.3 Highland ecosystems/ Agriculture associations and mosaics 2.4 Highland ecosystems/ Pastures and natural grassland 2.5 Highland ecosystems/ Forest tree cover 2.6 Highland ecosystems/ Other dominant natural land cover 2.7 Highland ecosystems/ Composite land cover (no dominant land cover)
3. Lowland ecosystems (inland) landscapes 3.1 Lowland ecosystems/ Urban and associated developed areas 3.2 Lowland ecosystems/ Broad pattern agriculture 3.3 Lowland ecosystems/ Agriculture associations and mosaics 3.4 Lowland ecosystems/ Pastures and natural grassland 3.5 Lowland ecosystems/ Forest tree cover 3.6 Lowland ecosystems/ Other dominant natural land cover 3.7 Lowland ecosystems/ Composite land cover (no dominant land cover)
4. Coastal landscapes 4.1 Coastal ecosystems/ Urban and associated developed areas 4.2 Coastal ecosystems/ Broad pattern agriculture 4.3 Coastal ecosystems/ Agriculture associations and mosaics 4.4 Coastal ecosystems/ Pastures and natural grassland 4.5 Coastal ecosystems/ Forest tree cover 4.6 Coastal ecosystems/ Other dominant natural land cover 4.7 Coastal ecosystems/ Composite land cover (no dominant land cover)
5 River systems
Classification of socio-ecological landscape units (SELU)Socio-ecological landscape units (SELU)
1. Mountain ecosystem landscapes 1.1 Mountain ecosystems/ Urban and associated developed areas 1.2 Mountain ecosystems/ Broad pattern agriculture 1.3 Mountain ecosystems/ Agriculture associations and mosaics 1.4 Mountain ecosystems/ Pastures and natural grassland 1.5 Mountain ecosystems/ Forest tree cover 1.6 Mountain ecosystems/ Other dominant natural land cover 1.7 Mountain ecosystems/ Composite land cover (no dominant land cover)
2. Highland ecosystem landcapes 2.1 Highland ecosystems/ Urban and associated developed areas 2.2 Highland ecosystems/ Broad pattern agriculture 2.3 Highland ecosystems/ Agriculture associations and mosaics 2.4 Highland ecosystems/ Pastures and natural grassland 2.5 Highland ecosystems/ Forest tree cover 2.6 Highland ecosystems/ Other dominant natural land cover 2.7 Highland ecosystems/ Composite land cover (no dominant land cover)
3. Lowland ecosystems (inland) landscapes 3.1 Lowland ecosystems/ Urban and associated developed areas 3.2 Lowland ecosystems/ Broad pattern agriculture 3.3 Lowland ecosystems/ Agriculture associations and mosaics 3.4 Lowland ecosystems/ Pastures and natural grassland 3.5 Lowland ecosystems/ Forest tree cover 3.6 Lowland ecosystems/ Other dominant natural land cover 3.7 Lowland ecosystems/ Composite land cover (no dominant land cover)
4. Coastal landscapes 4.1 Coastal ecosystems/ Urban and associated developed areas 4.2 Coastal ecosystems/ Broad pattern agriculture 4.3 Coastal ecosystems/ Agriculture associations and mosaics 4.4 Coastal ecosystems/ Pastures and natural grassland 4.5 Coastal ecosystems/ Forest tree cover 4.6 Coastal ecosystems/ Other dominant natural land cover 4.7 Coastal ecosystems/ Composite land cover (no dominant land cover)
5 River systems
Common International Classification of Ecosystem Services (draft)Theme Class Group
Terrestrial plant and animal foodstuffs
Freshwater plant and animal foodstuffs
Marine plant and animal foodstuffs
Potable water
Biotic materials
Abiotic materials
Renewable biofuels
Renewable abiotic energy sources
Bioremediation
Dilution and sequestration
Air flow regulation
Water flow regulation
Mass flow regulation
Atmospheric regulation
Water quality regulation
Pedogenesis and soil quality regulation
Lifecycle maintenance & habitat protection
Pest and disease control
Gene pool protection
Aesthetic, Heritage
Religious and spiritual
Recreation and community activities
Information & knowledge
Symbolic
Intellectual and Experiential
Provisioning
Regulation and Maintenance
Cultural
Nutrition
Materials
Energy
Regulation of wastes
Flow regulation
Regulation of physical environment
Regulation of biotic environment
CICES: Table E.2: Proposed Thematic, Class and Group Structure – source: EEA- Roy Haines-Young
• Change in Total Ecosystem Potential– Clear and focussed indicator: loss of TEP = ecosystem degradation = future loss of
ecosystem services– Main dimensions (quantity and health) integrated via specific balances and
multicriteria diagnoses– Land/landscape accounts produced for 1990-2000-2006; nowcasting 2010 of
Landscape Ecological Potential under development– Carbon ecosystem accounts (first generation) under production– Water accounts:
• first accounts for soil water stress, 2000-2010 under production; • rivers and aquifers under development
– Biodiversity accounts under test– TEP/ Ecosystem Degradation methodology under test– Accounts supported by existing statistics on resource use and consumption
(agriculture, forestry, fishery…)– Accounts supported by Earth Observation monitoring programmes and by in situ
monitoring
Implementation
Make it happen? Make it simple! : a “Cubist” approach of physical accounts
Multi-criteriarating
Georges Braque – H
arbour in N
ormandy, 1909
Water Index(exergy loss
from evaporation & pollution)
Bio-productivity Index
(carbon, biomass, diversion from
Nature)
Biodiversity Index
(rarefaction,loss of
adaptability)
Dependency Index
(land, soil, energy,water, N,P,K...)
Landscape Index
(the LandscapeEcological Potential)
Health Index (human, wildlife and plants populations)
Total Ecological Potential (terrestrial ecosystems)
Total Ecosystem Potential (terrestrial ecosystems)
Total Ecosystem Potential (terrestrial ecosystems)
Health Index (human, wildlife and plants populations)
Health Index (human, wildlife and plants populations)
Water Index(exergy loss
from evaporation & pollution)
Water Index(exergy loss
from evaporation & pollution)
Landscape Index
(the LandscapeEcological Potential)
Landscape Index
(the LandscapeEcological Potential)
Carbon/BiomassIndex
(carbon, biomass, diversion from
Nature)
Carbon/BiomassIndex
(carbon, biomass, diversion from
Nature)
Biodiversity Index
(rarefaction,loss of
adaptability)
Biodiversity Index
(rarefaction,loss of
adaptability)
Dependency Index
(land, soil, energy,water, N,P,K...)
Dependency Index
(land, soil, energy,water, N,P,K...)
Change in TEP = Ecosystem capital degradation or improvementAll indexes computed by 1 km² grid when possible and then aggregated into functional units
(small catchments, socio-ecological systems, NUTS…)
Corine land cover map (CLC is derived from satellite images)
Green Landscape Index (derived from CLC)
Nature Value (Naturilis, derived from Natura2000 designated areas)
Fragmentation (Effective Mesh Size (MEFF) derived from TeleAtlas Roads and CLC)
Landscape Ecological Potential (LEP) 2000, by 1km² grid cell
LEP 2000 by NUTS 2/3
Land Ecosystem Account: Landscape Ecological Potential
and
Landscape ecosystem potential and change
Improvement
Degradation
Land cover flows 1990-2006 and mean LEP by landscape ecosystem unitsLand cover flows are measured according to the EEA LEAC methodology based on Corine land cover(J-L Weber and E. Ivanov, 2011)
Landscape Ecological Potential change 1990-2006, by ecosystem landscape unit(J-L Weber and E. Ivanov, 2011)
Example of application of the ecosystem accounting methodology for Biomass/carbon
Net Ecosystem Carbon Balance by socio-ecological landscape units (SELU), 2000
Source: Emil D. Ivanov/Jean-Louis Weber, ETCSA/EEA. 2011 Source: Emil D. Ivanov/Jean-Louis Weber, ETCSA/EEA. 2011
Net Ecosystem Carbon Balance by ecosystem landscape units(J-L Weber and E. Ivanov, 2011)
Soil water stress: % of days when no water is available for plants
One point in Germany
One point in Spain
Surplus streaming to rivers or infiltrating to groundwater
Surplus streaming to rivers or infiltrating to groundwater
Source: Blaz Kurnik, EEA, 2011
No water available for plants below this point (Wilting point)
No water available for plants below this point (Wilting point)
Soil water stress in 2001: number of days when no water is available for plants
Provisional re
sults
Source: Blaz Kurnik, EEA, 2011