System of Environmental-Economic Accounts

1. System of Environmental-Economic Accounts International Seminar on the Implementation of the 2008 SNA in Asia and the Pacific Region and Its Challenges Seoul, Republic of Korea 18-19 September 2012 Daniel Clarke United Nations, ESCAP

2. Background • The System of Environmental-Economic Accounting (SEEA) – Central Framework, was adopted as an international standard by the United Nations Statistical Commission (UNSC) at its forty-third session in 2012. • It is the first international statistical standard for environmental-economic accounting. • The SEEA brings statistics on the environment and its relationship to the economy into the core of official statistics.

3. What is SEEA? • Organising framework for information on • Interactions between environment and economy • Stocks and changes in the stocks of environmental assets • Uses an accounting approach to be both comprehensive and internally consistent • Structures information in monetary and physical terms • Multi-disciplinary framework • Economists meet Scientists meet Statisticians

4. SNA and SEEA • Together, provide representation of both economy and environment as stocks and flows • SEEA was designed to be coherent and complementary with other international standards, recommendations and classifications particularly the System of National Accounts 2008, and also: • the Balance of Payments and International Investment Position (BPM6), • the International Standard Industrial Classification of All Economic Activities (ISIC), and • the Central Product Classification (CPC)

5. Rationale for Environmental-Economic Accounts • Incompleteness of current economic accounts • Don’t incorporate many flows between economy and the environment or flows in physical terms • Do not account effectively for the cost of the use of natural resources • No clear or common definition of environmental activity • Link to information set for sustainable development • Belief in the power of accounting frameworks

6. Strength of an Accounting Approach • Accounting basis from the System of National Accounts (SNA) • Key strengths • Broad coverage but also focus on specific components • Integrated – clear links between production, consumption, investment, profits, saving, financial transactions, natural resources, wealth, productivity • Consistent time series • Measures concepts as distinct from reporting statistics

7. The information pyramid Indicators Accounts (SEEA) Basic Statistics Economic | Environmental |Socio-demographic

8. Problem: Information Silos Data often developed to answer a particular question or problem Difficult to figure out if all information is included Not always easy to see the whole picture, or how it relates to other policy issues

9. Solution: Integrated Information • Help to make sense of the larger picture • Help to identify pieces that are missing • Help to verify reliability of figures • Help to make connections between statistical domains

10. Role of SEEA • A coherent systems-approach to compilation of statistics from disparate sources • Brings discipline to the organisation of environmental, economic and related data • Helps to verify reliability of figures and identify important data gaps in the statistical system • Produces aggregate indicators that provide an overview of performance and sustainability in terms of the stocks and flows of the system

11. Evolution of SEEA • SEEA 1993 • 1st Rio Conference (UN Conference on Sustainable Development) in 1992 recognized the need for more integrated environmental-economic information for policy • Called on UN Statistics Division to develop the system and called on all member states to implement • SEEA 2003 • Updated manual showing emerging best practices and theory • SEEA 2012 • First international standard for environmental-economic accounting • Concerns raised at Rio +20 of limitations of GDP and other accounting aggregates for assessing economic performance and well-being and reinforced importance of implementing decisions of previous UNCSD conferences

12. The SEEA standard 2012 SEEA – The Central Framework (standard) Chapter 1 – Introduction Chapter 2 – Accounting structure Chapter 3 – Physical supply and use Chapter 4 – Monetary transactions Chapter 5 – Asset accounts Chapter 6 – Sequence of accounts, aggregates and indicators 2013 SEEA – Experimental Ecosystem Accounts (state of the art) 2013 SEEA – Applications and Policy Uses (state of the art) Subsystems: SEEA-Water, SEEA-Energy, SEEA-Material flows (MFA), SEEA-Agriculture

13. SEEA Central Framework The international standard for environmental accounting, includes: • Physical flow accounts: • systematic physical description of physical flow including the exraction of natural resources their use and transformation within the economy and the return to the environment. • Water, energy, material flow, air and water emission accounts. • Monetary accounts: • identify environmentally-related transactions presented in the existing SNA flow accounts in order to make them more explicit for analysis • Environmental taxes and subsidies, environmental goods and services, environmental protection expenditures and resource management expenditures • Asset accounts: • Stocks and changes in stocks (flows) of natural resources such as land, forest, water, fish, soil and mineral and energy resources in physical and monetary terms. • Wealth accounts and calculation of depletion. • Environmental Activity Accounts: • SEEA provides internationally-agreed definitions and high-level classifications for environmental protection expenditure and resource management • Combining the accounts: • combine modules of SEEA to form a full-sequence of accounts and integrating physical and monetary accounts • Aggregates such as Green GDP, or Net Saving and productivity/efficiency indicators

14. SEEA Part II: Experimental Ecosystem Accounts • Scope set by concept of ecosystem services (welfare benefits derived from ecosystem functioning) • Adopts change in perspective: • Ecosystem Accounts look at the environment as a collection of ecological systems and focuses on their capacity to provide services to humanity • Objective is to provide the conceptual framework for ecosystem accounts, including agreed concepts and terminology • Development of SEEA Part II is on-going, final version expected by February, 2013

15. SEEA Part III: Extensions and Applications • Audience: Analysts and producers/compilers • Technique based presentation • Input-output and CGE modeling • Resource efficiency and productivity indicators and the use of hybrid tables • Composite indicators • Depletion adjusted saving techniques • Consumption based I-O analysis / footprint techniques • Decomposition analysis

16. SEEA sub-systems • SEEA – Water (interim version finalised in 2007) • SEEA – Energy (under development) • SEEA – Fisheries • SEEA - Agriculture (in planning, FAO) • Fully consistent with SEEA central framework • Elaborate and expand guidance specifically relevant to accounting for water/energy • Intended audience includes specific resources policy and management specialists

17. Basic Accounting Framework for SEEA Territory of reference Economy • Instruments • -Financial/Monetary • -Taxes/subsidies • -Financing • -Resource rent • -Permits • Actors • Enterprises • Households • Government • Non-profit institutions Activities -Production -Consumption -Accumulation Analytical and Policy Frameworks -Productivity analysis -Natural resource management -Climate change -Green Growth/Green Economy Outside territory of reference Outside territory of reference Land/ Resources/ Ecosystem services Emissions/waste Environment Envrironmental Assets (stocks) -Land -Water -Ecosystems -Soil -Etc. 17

18. DPSIR framework Socio-economic Biophysical

19. Four quadrants of sustainability I Improving access to services and resources Managing supply and demand II • Resource efficiency • Decoupling for emissions and resource use • Carbon and energy embedded in products • Environmental goods and services • Green jobs • Environmentally-adjusted aggregates for depletion • Resource rent • Investment in infrastructure • Current & capital costs associated with services and their financing • Losses in distribution • Quantity of resource used Sustainability • Stocks of natural resources • Emissions to water, air and soil and waste generation • Environmental protection expenditures and resource management • Land use and land cover • Conditions and health of ecosystems • Ecosystem regulatory services • Economic instruments to reduce impacts • Greenhouse gas emissions by economic activity • Expenditures on mitigation (e.g. technologies) • Expenditures on adaptation (e.g. dykes, etc.) III Improving the state of environment and reducing impacts Mitigating risks and adapting to IV extreme events

20. Types of SEEA Physical Flow Accounts • Energy accounts • Energy resources, products, residuals, transformation, use • Water accounts • Abstraction, distribution, wastewater, reused water, return flows • Air emission accounts • Solid waste accounts • Generation of waste, collection, incineration, etc • Emissions to water

21. SEEA Asset Accounts • Present stocks and flows of individual environmental assets in physical and monetary terms • Record changes due to growth, extraction, natural and catastrophic loss, reappraisal, revaluation • Valuation using market price concepts • General recommendation for use of Net Present Value models using market based discount rates (where actual market prices do not exist)

22. Depletion and Degradation • Resource depletion: decrease in quantity of stock due to extraction (catastrophic losses not part of depletion) • Depletion is considered to be a cost against income and thus, in the sequence of accounts, depletion may be used to produce adjusted (net) measures of valued added, income and saving (in addition to consumption of fixed capital) • Environmental degradation: changes in the capacity of the environment (or to ecosystem functioning) that provides the full range of potential ecosystem services (welfare benefits) • Both depletion and degradation measures are important to environmental sustainability measurement because economic activity that creates depletion and degradation eventually cannot be sustained. The measures can also be used to estimate indicators of resource life and other indicators for long-term development planning

23. Resource Rent • Defined as the surplus value accruing to the owner, extractor, or user of an environmental asset after all costs and normal return have been taken into account • In practice, calculated as a residual (in relation to normal returns on flows of resources into the economy) • Resource rent = scarcity rent, “unearned income”

24. Environmental Activities • Environmental Goods and Services Sector (EGSS) - “Green economy” • Environmental protection and resource management activity • Types of goods and services • Characteristic and connected products • Adapted goods – cleaner, environmentally friendly • Economic indicators • Production, employment, exports, investment • Functional accounts • Environmental protection expenditure accounts (EPEA)

25. SEEA Aggregates & Indicators • Notion of “Green GDP” • Depletion/degradation to assets • Total physical flows by category (water, energy, etc.) • National expenditure on environmental protection • Total production/value added of environmental goods and services sector (EGSS) • Structural statistics (e.g. water use by agriculture) • Land use/land cover trends • Environmental taxes/total taxes • “Pollutor pays” analysis • Energy supply by renewable resources • Productivity/intensity and decoupling

26. Implementation of SEEA • Like other international statistical standards, it is expected that SEEA will be implemented incrementally taking into account national statistical office resources and requirements. • To support this, the SEEA Central Framework accommodates a flexible and modular approach to implementation within national statistical systems which can be aligned with the particular policy context, data availability and statistical capacity of countries. • At the same time, much benefit of the SEEA comes from the ability to compare and aggregate across modules.

27. Data Sources • In general, to produce minimum set of Central Framework accounts, no specialized surveys or new data collections are needed • Important conventional data sources are: • National accounts (e.g. production in physical and monetary terms) • Emissions inventories • Energy statistics • Trade statistics • Government statistics (e.g. apply SEEA classification to identify EPE) • Additional data sources of relevance: • Records and estimates from surveying of stocks of assets (mineral deposits, forest cover, etc.) • Scientific data from national authorities on hydrology, air quality, waste management, etc.

28. Role of UN ESCAP • At its 3rd Session in December, the ESCAP Committee on Statistics will consider a paper on environment statistics in the context of sustainable development and green economy policies • The paper will propose concrete actions of the ESCAP secretariat in support of countries pursuing SEEA implementation, including contributing to development of training materials and supporting opportunities for advocacy and sharing of experiences between national statistical systems in Asia and the Pacific

29. Some final thoughts Implementation of the SEEA is: • Closely linked to strengthening the statistical system, development of the statistical infrastructure and collection and compilation of basic statistics • Undertaken in stages • Flexible, each country may focus on different priority accounts or themes in the gradual process towards comprehensive accounting (e.g. first on asset accounting or on physical flow accounting for energy and water) • Coordination is key

30. Thank You! Daniel Clarke: clarke@un.org Acknowledgments: Carl Obst, SEEA Editor & Alessandra Alfieri, Chief, Environmental-Economic Accounting Section, UNSD