Accounting and integrating ecosystem services: European experience Jean-Louis Weber Special Adviser on Economic-Environmental Accounting European Environment.

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

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Ma

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Inve

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Land

Min

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and

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eso

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Inta

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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

Thank you!

[email protected]

[email protected]