Jean-Louis Weber European Environment Agency jean-louis.weber@eea.europa.eu

1. International Payments for Ecosystem Services (IPES) Publication Review MeetingUNEP, Geneva, 28-29 January 2008Workshop on ecosystem accountingAn introduction to ecosystem accounting Jean-Louis WeberEuropean Environment Agencyjean-louis.weber@eea.europa.eu

2. SEEA2003: expansion of the System of National Accounts (UN SNA1993) in order to include more environmental aspects RM HASSAN - UN The System of Environmental and Economic Accounting (UN 2003) - RANESA Workshop June 12-16, 2005 Maputo

3. Ecosystem approach to SEEA • SEEA2003 revision by 2010 • EEA-UNSD international workshop on land & ecosystem accounting, Nov. 2006 • EEA proposal to UNCEEA and London Group for developing the ecosystem dimension into the SEEA • Clarification paper (LG, Rome, Dec. 2007) • Drafting of a specific handbook (first draft LG Brussels, Sept. 2008) • Additional SEEA module + definition of new aggregates “beyond GDP”

4. The questions behind: Ecological truth & market prices in the SNA (1) • Risks of unsustainable use of the living natural capital are ignored: • The negative impacts of over-harvesting, force-feeding with fertilisers or Nitrogen depositions, intoxication with pesticides or pollution, introduction of species, fragmentation by roads, or soil sealing by urban development have no direct monetary counterpart. • This is the case for private capital and even more for public goods(The tragedy of the Commons). • The natural capital is not even amortised in the national accounts and in accounting books of companies : • No allowance is made for maintaining ecosystems’ critical functions and services. • The full cost of domestic products is not covered in many cases by their price. We don't pay for the full price of our consumption.

5. Ecological truth & market prices in the SNA (2) • The price of imported products does not reflect the full costs of ecosystems degradation in originating countries. • Delocalisation of industrial production is de facto recorded as a “green” performance in importing countries when in many cases it increases the degradation of the global ecosystem (e.g. CO2 emissions higher because of old technologies, loss of biodiversity because ecosystems are less protected). • The actual value for people of free ecosystem services is not accounted (the market tells: price is zero). • Increase of wellbeing resulting from economic growth is not balanced with losses of free services (commercialisation of previously free services, depletion, ecosystem degradation...).

6. Current situation with SEEA2003 • SEEA2003 fully integrated with SNA but • relations to nature are scattered between chapters and unevenly developed. • Ecosystems assets are indeed part of SEEA 2003 structure: forest, water, land and ecosystem accounts, soil (p.m.), fisheries but • few links exist between these assets, considered more as a collection of inventories than interacting systems. • “ecosystem service” is not a well identified concept • Flows between the economic system and the ecosystems are asymmetric, balancing the economic system (backed up by SNA) with a mere interface (“environment” column, “ecosystem inputs”)‏ • No place for feedbacks • Unclear measurement of the value of nature  Develop the ecosystem approach into the SEEA

7. Developing the ecosystem approach into the SEEAImproving integration • Recognize first the interaction of 2 co-evolving systems • Clarify the concept of natural capital by separating non-renewable resources (where the rent and its reinvestment is the interest) from renewable resource (for which the conservation of critical level of stocks in good functioning state is main issue). • Full integration vs. dual integration • Renew approach of valuation with clear distinction of values, costs and their role in decision processes

8. Logic underlying the Millennium Ecosystem Assessment… Minimum levels of service (service limits) Biophysical structure or process (e.g. woodland habitat or net primary productivity ) Function (e.g. slow passage of water, or biomass) Service (e.g. flood protection, or harvestable products) Benefit (e.g. willingness to pay for woodland protection or for more woodland, or harvestable products) Limit pressures via policy action? Maintenance, restoration Σ Pressures Courtesy Roy Haines-Young

9. Developing the ecosystem approach in the SEEABack to the 4 questions • is the renewable natural capital maintained over time at the amount and quality expected by the society?  physical measurement of “quantityquality” in reference to stated social norms • is the full cost of maintaining the natural capital covered by the price of goods and services?  measurement of costs not currently covered for maintaining and restoring domestic ecosystems (provision for depreciation) and addition to value of goods and services • is the full cost of ecosystems services covered by import prices?  calculation andaddition to value of goods and services • is the total of goods and services supplied to final uses by the market (and government institutions) and for free by ecosystems, developing over time?  measure and value free end use services and add these benefits to GDP

10. Ignored Costs Ignored Benefits € € (B) Additional costs necessary to maintain & restore ecosystems up to policy objectives GDP (A) Final Use of Non-Market Ecosystem Services € Ecosystem Services Ecosystem Assets (Stocks, flows, resilience)‏ € (C) Full ecosystem cost of imports Accounting for full ecosystem benefits & costs

11. Beyond the GDP with ecosystem accounting (1) • Stepwise approach to inclusive wealth calculation: • Includes socio-economic features but with an ecosystem focus (human and social capital just partly addressed) • Costs and benefits recorded separately • Natural capital accounts in physical units: • Stocks, flows, resilience, services • Ecosystem state benchmarked against stated policy targets  Net Landscape Ecological Potential, HANPP, E. Footprint

12. From Land cover to ecosystem at macro scale:Net Landscape Ecological Potential 2000, 1 km² grid NLEP = (Vegetation+Nature Value) ---------------------------------- Fragmentation Source: EEA/ETCLUSI from GBLI, NATURILIS and MEFF Methodology: EEA/ETCLUSI

13. Net Landscape Ecological Potential 2000, aggregated by regions Source: EEA/ETCLUSI from GBLI/CLC, NATURILIS and MEFF Methodology: EEA/ETCLUSI

14. Change 1990-2000 in Net Landscape Ecological Potential (NLEP), 1 km² grid Source: EEA/ETCLUSI from GBLI, NATURILIS and MEFF Methodology: EEA/ETCLUSI

15. Beyond the GDP with ecosystem accounting (2) • Computation of additional ecosystems maintenance & restoration costs for meeting policy targets • Domestic ecosystems: allowance for depreciation, to be covered in the next period; virtual domestic debt • + Ecosystems in countries from which Ecosystem Services originate: hidden costs in imports; virtual foreign debt • Full Cost of Goods & Services • Valuation and integration of non-market end use ecosystem services with GDP • Inclusive Domestic Product

16. IDP Ecosystem Services Stocks & flows (quantities) Resilience/Health (qualities) FCGS Costs € Accounting for environmental benefits & costs Benefits: the Demand side € GDP + Final Use of Ecosystem Services = IDP € Final Services Inclusive Domestic Product + (Intermediate consumption) + Additional maintenance cost of the resource + Costs of restoration from ecosystem degradation + Full ecosystem cost of imports Costs: the Supply side Ecosystem Assets Full Cost of Goods & Services

17. Physical flows Monetary flows/valuation Assets valuation Material & Energy Flows Ecosystem Services SNA flows & assets SEEA Integrating Ecosystems Natural capital / assets Rest of the World Subsoil Assets [stocks] Ecosystem Assets [stocks and resilience] Subsoil Assets [stocks] Ecosystem Assets [stocks and resilience] Ecosystem Services NAMEA Additional Ecosystem Maintenance Costs Environmental Expenditures, Taxes Additional Ecosystem Costs in Imports (less in Exports)

18. Production & Consumption Atmosphere/ Climate Economic Assets Water system Infrastructures & Technologies Population CORE LAND COVER ACCOUNT Flora & Fauna Soil Spatially integrated ecosystem accounts Inclusive use of market & non market ecosystem services Ecosystem services Ecosystem assets Land use economic & social functions Stocks Material & energy flows Resilience Intensity of use & full maintenance costs ECOSYSTEM ACCOUNTS

19. Framework of Ecosystem Accounts Spatial integration Economic sectors Accounts of flows of ecosystem goods and services Core accounts of assets & flows (by ecosystem types, raw quantities) Material/energy flows (biomass, water, nutrients, residuals) • Ecosystem Services • Marketed Ecosystem Services (€) • Non-market end use ES (physical units, €) Supply & use of ecosystem goods and services (Use of resource by sectors, supply to consumption & residuals, accumulation, I-O analysis, NAMEA) Counts of stocks diversity / integrity (by ecosystem types, focus on state, health, resilience, stress) Ecosystem types • Natural capital • Natural capital stocks, resilience & wealth, distance to objective (physical units, by sectors) • Natural capital consumption/maintenance costs (€) • Ecosystem assets inclusive wealth (€) Ecosystem Stocks & State Accounts Natural Capital Accounts/ living & cycling natural capital Economic integration

20. € € Framework of Ecosystem Accounts Spatial integration Economic sectors Accounts of flows of ecosystem goods and services Core accounts of assets & flows (by ecosystem types, raw quantities) Material/energy flows (biomass, water, nutrients, residuals) • Ecosystem Services • Marketed Ecosystem Services (€) • Non-market end use ES (physical units, €) Supply & use of ecosystem goods and services (Use of resource by sectors, supply to consumption & residuals, accumulation, I-O analysis, NAMEA) Counts of stocks diversity / integrity (by ecosystem types, focus on state, health, resilience, stress) Ecosystem types • Natural capital • Natural capital stocks, resilience & wealth, distance to objective (physical units, by sectors) • Natural capital consumption/maintenance costs (€) • Ecosystem assets inclusive wealth (€) € Ecosystem Stocks & State Accounts € Natural Capital Accounts/ living & cycling natural capital Economic integration

21.  Basic ecosystem stock flows accounts Stocks & flows • Spatial systems: • Land cover (units, zones, landscape types) • Rivers, river reaches, catchments • Coastal systems • Soil • Biomass (NPP/NEP), Carbon • Nutrients (N,P…) • Water • Species • Other…

22. Data infrastructure of land cover accounts Smallest mapping unit for stock 25ha Change mapped at 5ha

23. LEAC/Land cover accounts’ basic framing

24. Change Matrix (44x43=1932 possible changes) summarized into flows LCF8 LCF5 LCF1 LCF6 LCF4 LCF2 LCF3 LCF7 LCF9 LEAC: from changes to flows of land cover 2000 1990

25. Ecosystem health: counts of health/resilience Ecosystem Distress Syndrome model: 5 types of symptoms • Vigor: e.g. disruptions of nutrients cycling, population dynamics (loss or excess) • Organisation, degradation of substrates: e.g. fragmentation, water stress, change in food chain • Resilience: e.g. change in species composition (invasive…), intoxication • Dependence of systems from artificial input: e.g energy, water, subsidies • Capacity of supporting healthy communities: wildlife, human Source: David J. Rapport

26. Land Use Functions& Ecosystem Services • LUF analysis and mapping • address cross-cutting issues e.g.:Urban/Rural, Agro/Environment • detect & measure ES services = ecosystem functions which benefit to people, somewhere

27. Ecosystems, functions and services

28. Services Capital stocks and functions Nomenclature of ES Ecosystems services Market values Physical measurement and shadow prices

29. Exemple: ES nomenclature used for wetland accounts – 1st draft

30. Challenges for implementation • Classification and measurement • Geographical scales The issue is to play with heterogeneous datasets: • Exhaustive but rather contents-poor geographic datasets, frequently updated by satellite images • Exhaustive, contents-rich but rather poorly geographically detailed socio-economic statistics • Scattered in situ monitoring of the physical world • Detailed analysis and modelling of the socio-ecosystems and valuation of ecosystem services available as case studies • Time scales • Time series • Nowcasting • Infra-annual accounts when relevant • Ecological “surprises”

31. ES: several valuation issues • Services entangled in marketed goods and services: • Under pricing because of externalisation of environmental costs • Under pricing because of low internalisation of environmental benefits • Under pricing because of rent appropriation by buyers (in particular in imports) • Free end use ES: • Physical measurement from social statistics • Prices for individual use • Prices for collective use (in particular regulating ES) • Limit to what is not in price/value of commodities (full property right criteria) • Additional maintenance & restoration costs of ecosystems • Integrated measurement of quantity & quality of ecosystems • Costs in imports (e.g. when products are re-exported)

32. Not only issues, achievements The first phase of GAISP comprises the publication of the following eight Monographs: 1 The Value of Timber, Carbon, Fuelwood, and Non-Timber Forest Produce in India’s Forests 2 Estimating the Value of Agricultural Cropland and Pasture Land in India 3 The Value of India’s Sub-Soil Assets 4 Eco-tourism and Biodiversity Values in India 5 Estimating the Value of Educational Capital Formation in India 6 Investments in Health and Pollution Control and their Value to India 7 Accounting for the Ecological Services of Indian Forests: Soil Conservation, Water Augmentation, and Flood Prevention 8 Estimating the Value of Freshwater Resources in India In this monograph, three ecological services of forest ecosystems, namely, prevention of soil erosion, augmentation of groundwater, and reduction of flood damage have been considered.

33. Perspectives for ecosystem accounting • Correlated regional projects like Eureca!2012 the ecosystem assessment for Europe (now regional project of the forthcoming MA2 (2015) launched by UNEP) • “Beyond GDP” developments • Assessment of benefits provided by biodiversity demanded by the G8+5 in Potsdam, March 2007 as an input to the Convention on Biological Diversity (CBD) – cases studies on wetlands (EEA) and forest (IUCN) • Ecosystem and carbon accounting, continuation of the “Stern report” • Possible interest of EA for business (e.g. UNEP Financial Initiative), IPES – can it help?

34. Work sharing for a fast track implementation/ International level • UN agencies, WB, IMF, OECD (…?) • MA2 context (e.g. WCMC/UNEP: manual on ES currently drafted) • GEO/GEOSS (GMES…) (support regional global monitoring) • International conventions (CBD, IPCC, IGBP, HDP, Ramsar, Desertification… ) • Regional regulations, agreements, conventions • Key NGOs in the domain (IUCN, WWF, ISEE) • UNEP-IPES, UNEP-FI • London group/subgroup + Eurostat + EEA & scientific expert panel: issue paper, outline by end 2008

35. Thanks!