Environmental Accounting and the EEA

1. Final IN-STREAM conference: Sustainability Indicators for Policy Making Brussels, 27 - 28 September 2011 Environmental Accounting and the EEA Jean-Louis Weber Special Adviser to Economic Environmental Accounting European Environmnent Agency jean-louis.weber@eea.europa.eu

2. Recurrent demands for improved economic indicators and aggregates • Historical pioneer “green accounting” projects: Norway, Canada, France, Philippines, Indonesia, the Netherlands, Spain… • Rio1992, Agenda 21 • UN SEEA1993 to “adjust” the UN System of National Accounts. SEEA revised in 2003 • New SEEA revision by2012/13, including now a special volume on ecosystem accounts and valuation • Recent initiatives: • Beyond GDP Conference 2008 • Potsdam 2008 G8+5 initiative and TEEB • Stiglitz/ Sen/ Fitoussi report on the measurement of economic performance 2009 • New CBD Aishi-Nagoya Strategy 2010: demand for the inclusion of biodiversity and ecosystem value into national accounts • World Bank’s new Global Partnership for “Green Accounting” and Ecosystem Valuation • References to environmental accounts for measuring progress in Green Economy, Green Growth, Resource Efficiency… • In Europe, new Regulation on Environmental Accounts: Eurostat (the economy-environment interface) and the EEA (ecosystem capital accounts)

3. UN manual for environmental-economic accounting: SEEA2003Enlargement of the System of National Accounts RM HASSAN - UN The System of Environmental and Economic Accounting (UN 2003) - RANESA Workshop June 12-16, 2005 Maputo Revision  SEEA2012/13 Impacts on ecosystem capacity of delivering services/benefits Part 1 The SNA satellite accounts for the environment expenditure, taxes, hybrid accounts, physical flows, sub-soil, energy, water, land, economic assets depletion Part 2 Ecosystem capital accounts Ecosystem stocks and quality, ecosystem services, benefits and maintenance costs… Negative feedbacks of ecosystem degradation on production and wellbeing

4. Accounting for the performance(s) of 2 co-evolving systems: resources, productivity and health Economic system Economy performance Economic growth Trade Value-added, income, profit… Consumption Investment Wealth (non-financial and financial assets) Economic health (net savings, assets and debt quality, accountability, prices, well-being, knowledge) Use of natural resources Products & economic assets Fossil energy & materials Biomass/carbon Water Land functional services Ecosystem Ecosystem potential (capacity to deliver services) Ecosystem productivity Flows Accumulation Stocks Ecosystem health (biodiversity, integrity, resilience, interdependence) Capital maintenance (to remediate degradation)

5. The narrative behind Ecosystem Capital Accounts: 1- ecosystems deliver altogether multiple services Source: Gilbert Long, 1972

6. Non-basic eco-product Surplus accessible for harvest/abstraction Basic eco-product Necessary for ecosystem reproduction (conservation of ecosystem health, integrity, functions & services) The narrative behind Ecosystem Capital Accounts: 2- only a surplus is accessible for human use Ecoproduct (of cycling and reproductive systems/ capital) are produced by means of other ecoproducts. The ecosystem production function includes a surplus ecoproduct that can be used by the economy. (from Anthony Friend 2004) Economy Sources: Kling/U Michigan_2005 & Friend/ISEE_2004

7. Non-basic eco-product Basic eco-product The narrative behind Ecosystem Capital Accounts: 2- only a surplus is accessible for human use Challenge = maximise yields while maintaining natural functions and biodiversity Possible compensation = artificial input (irrigation, energy, fertilizers, infrastructures…) Surplus accessible for harvest/abstraction Economy Necessary for ecosystem reproduction (conservation of ecosystem health, integrity, functions & services) Non-sustainable harvest/abstraction Sources: Kling/U Michigan_2005 & Friend/ISEE_2004

8. The narrative behind Ecosystem Capital Accounts: 3 – Ecosystem capital produces altogether 3 broad types of services between which there is no compensation or tradeoff: biomass/carbon AND freshwater AND functional services. Ecosystem capital potential (& degradation) can be measured by combining measurements of these 3 broad services. Total ecosystem capital potential & Ecosystem capital degradation Accessible carbon surplus Accessible ecosystem functional services Accessible water surplus

9. Ecosystem degraded by over-use (j) GDP • Possible • macro economic • aggregates •  Adjusted capital consumption • Final demand at full price The narrative behind Ecosystem Capital Accounts: 4 - Simplified ecosystem capital accounting circuit Non-paid costs needed to remediate ecosystem degradation (€) Healthy ecosystem j ES economic benefits (€) ES economic benefits (€) j ES economic benefits (€) j Economic natural assets/ resources & ecosystem services (jand €) Ecosystem assets/capital j

10. From theory to statistics and accounts Theoretical background (very incomplete…): • Georgescu-Roegen (The Entropy Law and the Economic Process (1971), Odum (emergy), Hollin (panarchy,interaction between scales) • Co-evolving systems (Norgaard) • Ecosystem services: Long (1972), Costanza and De Groot, Millennium Ecosystem Assessment (2003) • Landscape ecology (UK) • Ecosystem units: socio-ecological systems (Gallopin, Carpenter, Rockström, Stockholm Resilience Centre, MA2003…) • Ecosystem health (D. Rapport), resilience (the Resilience Alliance) • from economic-ecological theory to statistical practice and accounts : statistical units and classifications

11. Main relations between classifications & statistical units in the revised SEEA (from UNCEEA 2009 – EEA & FAO)

12. Ecosystem-Economy integrated accounts SEEA Part 2 SEEA Part 1

13. Simplified ecosystem capital accounts in Europe • Make it feasible NOW – keep it simple • Don’t miss important issues: need a good checklist • All ecosystems: land/sea/atmosphere, and for land: urban, agriculture, forest, other natural and soil. • 6 accounts/indexes for 1 diagnosis: • 1-Biomass-Carbon // 2-Water // 3-Land/landscape // 4-Biodiversity // 5-Dependency // 6-Disease prevalence • Diagnosis (instead of mere additions) and quantification: the “ecosystem distress syndrome” approach combined with basic balances of land, carbon, water… • Physical accounts first, followed by valuation of selected flows and of ecosystem depreciation (on the basis of physical degradation and restoration costs – no valuation of stocks) • For EU27, annual accounts to meet the policy agenda

14. Total ecosystem capital potential & change t0 t1 Degradation Improvement

15. Ecosystem physical degradation, sustainable benefits from ecosystem services and non-paid maintenance costs Consumption of ecosystem capital (non-paid costs) Degradation Mean restoration prices Improvement Economic statistics & national accounts Sustainable use coefficients Sustainable benefits (income from key ecosystem services) Sustainable benefits (Value Added from key ecosystem services)

16. Integration of resource efficiency indicators, ecosystem capital accounts & national accounts Total Material Input Conventional DMI/DMC Integrated Carbon Accounts CO2 Fossilenergy Atmosphere/ carbon assimilation Sea/ carbon assimilation DMI Carbon Sea/fisheries Biomass/ carbon Biomass/ carbon DMI Sand/ gravel Sand, gravel Inland Ecosystems DMI other Metals,chemicals Land/ Landscape Integrated water accounts Freshwater DMI Water Water Biodiversity 1st decoupling: from material/energy inputs 2nddecoupling: from environmental impacts GDP

17. Just 3 headline indicators ???? • Intensity of use of the accessible carbon surplus (integrates resource efficiency and ecosystem) • Degradation of the ecosystem capital potential (integrates carbon, water landscape and biodiversity) • Final consumption at the full cost of commodities (in euros, integrates purchaser prices and non paid ecosystem capital degradation)

18. Thank you! Jean-Louis Weber jean-louis.weber@eea.europa.eu jlweber45@gmail.com