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STRENGTHENING INDICATORS AND ACCOUNTING SYSTEMS FOR NATURAL CAPITAL Box 3.8: Practical elements for ecosystem accounting, based on EEA Mediterranean Wetlands case study 1. Ecosystem accounts can be implemented across the three geographical scales most relevant to prevailing governance models and societal welfare considerations. The basic scales are the Global/Continental, the National/Regional and the Local. Each scale corresponds to a different governance framework. The Global/Continental scale is the one of general objectives, stated by international conventions, requiring simplified accounts that monitor main trends and distortions for all countries. The National/Regional scale is where the enforcement of environmental policies and regulations prevails, through environmental agencies, and ministries of economy, statistical offices and courts. The Local scale is the action level: local government, site level, management, projects, case studies, and business. This is the scale where assessing and valuing ecosystem services is essential and feasible because informed actors can express their real preferences. 2. From a policy and data point of view, ecosystem accounting should be prioritised from a top-down perspective, not bottom-up 14 . Each of the three governance scales addressed above can be assigned a mission, an access to data and a time frame. If there is any chance of integrating the environment in economic decision-making, the strategy should consider the three interconnected tiers and their feasibility. 3. Simplified global-scale ecosystem accounts annually updated for assessing losses (gains) in total ecological potential in physical units and the costs of restoring the ecosystem for maintaining their functions and consequently their capacity of delivering their services from one year to the next. This maintenance cost is the ecosystem capital consumption which can be used in two ways: 1/ calculation of the value of domestic and imported products at their full cost in addition to their purchase price and 2/ subtraction from the Gross National Product (altogether with fixed capital consumption) for calculating a new headline aggregate, the Adjusted Disposable National Income (ADNI). Simplified global-scale ecosystem accounts can be produced at short notice on the basis of global monitoring programmes and international statistics. 4. Integrated national economic-environmental accounts with ecosystem accounts. The first task is to compute ecosystem capital consumption and use this to derive ADNI on the basis of national socioeconomic statistics and monitoring systems. The second task is to integrate such ecosystem accounts with the national accounting matrixes and the monetary and physical indicators used for policy making. The process for implementing these national accounts is the revision of the UN SEEA by 2012/2013. 5. Local/private actors are increasingly demanding guidance for taking into account the environment in their everyday decisions on development projects of various types. As the Mediterranean Wetlands case study shows, ecosystem accounts would be very helpful for planning departments and environmental protection agencies to fully internalise environmental considerations when considering e.g. the costsbenefits of development proposals. Businesses are also interested as shown by their response to carbon accounting and recent interest in biodiversity considerations. Progress at this scale could be by developing guidelines based on the general principles but adapted at needs of the various communities of users. 6. Socio-ecological systems are the appropriate analytical units for such accounting. They reflect higher levels of interaction between ecosystem and people. Stocks and flows of land cover, water, biomass/carbon, and species/biodiversity are the priority accounts to be established in view of calculating the ecological potential 15 of many terrestrial socio-ecosystems. A simplified formula as well as a more <strong>TEEB</strong> FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 3: PAGE 30
STRENGTHENING INDICATORS AND ACCOUNTING SYSTEMS FOR NATURAL CAPITAL sophisticated one can be used depending on operational targets, scales and data availability. Ecosystem services are the outcomes of ecosystem functions which are directly or indirectly used by people. UNEP and EEA have taken steps in order to come to an international standard ecosystem services classification to use in environmental accounting and ecosystem assessments more generally. 7. Asset valuation is both very feasible and very useful in the context of cost benefits assessments of impacts of projects. It helps policy makers achieve trade-offs between possible future benefits from new developments and the total present benefits from economic natural resources and main non-market ecosystem services, and to see if benefits compensate losses. In the case of regular national accounting, the method contains several risks. The main one relates to the non-use values – often of a public good nature – which tend to be ignored or inadequately valued because of the problems mentioned previously. For renewable assets the valuation of the stocks is not even necessary. What matters first is that the ecosystems are renewing, that their multiple functions can be maintained over time, whatever the present preference for one or other service they deliver. The degradation of ecological potential can be observed and measured in physical units. It is then possible to calculate a restoration cost in reference either to the average cost of maintenance works or to the benefit losses of reducing extraction or harvesting down to a level compatible with the resilience of the socio-ecological systems. 8. Maintenance of the ecosystem capital is the other approach of valuation. It considers in a holistic way the capacity of ecosystems to deliver services in the present and future. Two elements are to be considered, 1/ actual expenditures for environmental protection and resource management and 2/ additional costs potentially needed to mitigate ecosystem degradation. When the actual expenditures are not sufficient to maintain the ecosystem, additional costs may be necessary and an allowance made accordingly. This is what is done by business and national accounts under the expressions ‘cost of capital maintenance’ or ‘fixed capital consumption’. ‘Ecosystem capital consumption should be calculated in the same way as fixed capital consumption’ and added to it. This would result in an adjustment in the calculation of company profit or national income. As for the fixed capital, this adjustment measures what should be reinvested to maintain an equivalent productive (and in the case of ecosystems, reproductive) capacity of the asset. This is what should be set aside at the end of the accounting period and be made available at the beginning of the following one for restoring capacities. This is an important accounting number which can support actions such as reduced distribution of dividends and accordingly reduced taxes on benefits. 3.4.4 USING AVAILABLE INFORMATION TO MEET POLICY MAKERS’ DEMANDS The data issue requires a strategic response. On the bright side, we have made tremendous progress with data collection in the last 30 years. Earth observation satellites, ground positioning systems, in situ real time monitoring, data bases, geographical information systems and internet are shorthand for a well known story. Public and private organisations have developed capacities and networks which make it possible today to take the first steps towards ecosystem accounting. The dark side has two aspects. The first concerns the lack of guidelines for accounting for ecosystem benefits and costs, especially at local government/agency and business levels. The Mediterranean case study (see Box 3.8) shows that data are regularly collected by the natural park bodies yet compiling them into an integrated framework is a huge effort. We need to make progress on drafting such guidelines at the local level, starting from the needs of local actors for information on physical state, costs and benefits in relation to their mandate. <strong>TEEB</strong> FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 3: PAGE 31
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Part I: The need for action Ch1 The
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ThE EcoNoMIcs of EcosysTEMs AND BIo
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THE GLOBAL BIODIVERSITY CRISIS AND
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1.2 THE GLOBAL BIODIVERSITY CRISIS
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• Enough food could be produced o
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MArINE sysTEMs THE GLOBAL BIODIVERS
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1.2.3 WHAT IS DRIVING THESE LOSSES?
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1.4 THE GLOBAL BIODIVERSITY CRISIS
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EfErENcEs THE GLOBAL BIODIVERSITY C
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THE ECONOMICS OF ECOSYSTEMS AND BIO
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10.1 WHY VALUING ECOSYSTEM SERVICES
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RESPONDING TO THE VALUE OF NATURE B
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10.2.2 BETTER LINKS TO MACRO- ECONO
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10.3 Investing in natural capital s
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as well as the value for money and
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Global National or Regional Local T
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10.4 By taking distributional issue
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has origins and impacts beyond bord
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The ‘Nobel Prize’*-winning econ
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10.5 Biodiversity and ecosystem ser
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Rewarding the provision of services
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Making this a reality will require
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GHK, CE and IEEP - GHK, Cambridge E
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Torras, M. (2000) The Total Economi
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ThE ECoNoMICS of ECoSySTEMS AND BIo
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FRAMEWORK AND GUIDING PRINCIPLES FO
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INTEGRATING ECOSYSTEM AND BIODIVERS
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Economic valuation methods INTEGRAT
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ANNEx 2: sTAGEs of A PoLIcy AssEssM
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Chapter 5: Rewarding benefits throu
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REWARDING BENEFITS THROUGH PAYMENTS
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5.1 REWARDING BENEFITS THROUGH PAYM
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REGULATORY BASELINES AND ADDITIONAL
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could have adverse consequences for
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• some contained an element of te
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• ancillary provisions e.g. possi
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5.4.2 GREENING INTERGOVERNMEN- TAL
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financial flows involved. Building
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considerable patience as such optio
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CERTIFICATION OF SUSTAINABLE FISHER
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While certification systems can sig
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Endnotes REWARDING BENEFITS THROUGH
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44 http://www.mekongtourism.org/sit
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Chapter 6: Reforming Subsidies Chap
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REFORMING SUBSIDIES Key Messages of
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6 Chapter 6 addresses the need for
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6.1.2 HOW BIG ARE EXISTING SUBSIDIE
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6.2 6.2.1 DISTINGUISHING BETWEEN
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through provision of water and ener
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6.3 6.3.1 AGRICULTURE Subsidies to
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Box 6.4: The EU Common Agricultural
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Second, it has to be borne in mind
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• increases the producer price of
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REFORMING SUBSIDIES Box 6.9: Removi
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In the agriculture sector, the pric
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Some consumer energy subsidies may
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6.4 “People who love soft methods
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6.4.2 RESISTANCE TO CHANGE Subsidie
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The multiple policy objectives ofte
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REFORMING SUBSIDIES Social impacts
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The G-20 Heads of State have recent
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REFERENCES Agnew, D.J.; Pearce, J.;
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OECD - Organisation for Economic Co
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Bernd hansjürgens, Christoph Schr
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Key Messages of Chapter 7 Rewarding
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7.1 BASIC PRINCIPLES FoR hALTING oN
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7.2 REGULATING To AvoID DAMAGE: ENv
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y reducing the release of pollutant
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y reducing uncertainties with respe
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This equivalence can involve the sa
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PoTENTIAL BENEFITS oF oFFSETS AND B
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A biodiversity offset should be des
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7.4 SETTING MoRE ACCURATE PRICES: M
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Market-based instruments can be des
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China’s first water use rights sy
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PoTENTIAL CoST SAvINGS ThRoUGh MBIS
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Despite the potential described abo
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Non-market valuation studies can he
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PoLLUTIoN AND oThER DAMAGING ACTIvI
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The 1973 CITES treaty (Convention o
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7.6 MAKING IT hAPPEN - PoLICy MIxES
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has shown the critical need to stre
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Gutman, P. and Davidson, S. (2007)
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· ·· · · · · · · · · ·
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T H E E C O N O M I C S O F E C O S
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