1. OECD WGEIO meeting, Paris 17-18 November 2009 Ecosystem Capital Accounting: towards a fast track implementation in Europe ? Jean-Louis Weber Senior adviser economic-environmental accounting European Environment Agency The same rule of self-destructive financial calculation governs every walk of life. We destroy the beauty of the countryside because the unappropriated splendours of nature have no economic value. We are capable of shutting off the sun and the stars because they do not pay a dividend. John Maynard Keynes 1933 Because National Accounts are based on financial transactions, they account for nothing Nature, to which we dont owe anything in terms of payments but to which we owe everything in terms of livelihood. Bertrand de Jouvenel 1968

2. 2 approaches to ecosystem economics: maximisation of benefits (the financial value of nature) vs. maintenance of options (the quantity*quality of nature) Maximisation of benefits from nature measurement of benefits & losses (e.g. TEEBs COPI study) or of ecosystem services value entangled into commodities or real estates (WB current proposal for SEEA revision). Requires measurement and valuation of ecosystem services & ecosystem assets. Ecosystem depreciation calculated as the difference in ecosystem asset value at two dates. Accounting prices: depends on services and purposes (market prices, production functions, contingent values, assets as NPV of future benefits = financial approach) relevant for planning, project impacts assessments (CBA). Maintenance of options (ecosystems potential of delivering services) measurement of ecosystem capital degradation in physical units (quantity*quality) & valuation limited to remediation costs. Equivalent to the calculation of capital maintenance cost (Consumption of Fixed Capital). No valuation of ecosystem services nor of ecosystem assets. Accounting prices: derived from observed remediation costs (statistics) relevant for National Accounts, as well as for business accounting (options and risks)… and for CBA in addition.

3. 3 – Public Good: non-transferable rights on ecosystem good state (health, sustainable potential), non-rival, non-exclusive use Services valuation, payments for services [PES, purchase] 1 – Produced & Non produced Assets/SNA: mostly private goods Ecosystem resources, services and values: 3 components 2 - Non produced Assets/ Other Services: mostly common goods Regulating Recreating Provisioning Payments for restoring ecosystem potential (permits, taxes)

4. Ecosystem Accounting: Green National Accounts vs. Costs-Benefits Analysis National Accounts = the macro-economic picture adjusted for natural capital depreciation Benefits & Costs Assessments = extended accounts for projects, sectors… +

5. Consumption of Natural Capital & Adjustment of National Accounts for under-investment and over-consumption Final Consumption at Full Cost of Goods & Services = Final Consumption at Purchasers Price + Virtual Consumption of Ecosystem Capital in Imports (minus in Exports) + – Depletion of Sub-soil Assets = Adjusted Disposable (Real) National Income Gross Domestic Product Transfers with the Rest of World – or + = – Consumption of Fixed Capital National Income (NI or NNP) = – Gross National Income Depreciation of (domestic) Ecosystem Capital

6. Sustainable Development & Ecosystem Capital Depreciation: 1 aggregate for 3 pillars Remediation costs of ecosystem capital depreciation Economy: capital maintenance Real disposable Income, net savings, true prices, liabilities, development of green jobs, economic resource Social: sustainable consumption Full price of consumption, consumption patterns, equity, new jobs Environment: alleviation/mitigation of nature degradation Sustainable use of natural resource & public good Double decoupling, the second indicator Sustainable Development = Thriving ecosystems producing altogether: economic resources carbon biodiversity clean air, clean water options for the future (development as freedom – A.S.) Final Consumption [purchaser price] Final Consumption [full cost] Adjusted Disposable National Income National Income Ecosystem Adjusted Net Savings Net Savings Consumption of Ecosystem Capital GDP Consumption of Material/Energy GDP

7. Ecosystem Capital Depreciation, Remediation Costs & EU environmental policies Water Framework Directive full recovery of costs EU Climate change programme offset costs of carbon emission Environmental Liability Directive impacts remediation costs Natura2000 (as application of ELD 2004): restoration or replacement of degraded sites costs

8. Make it happen? Make it simple! : a Cubist Approach Multi-criteria rating Georges Braque – Harbour in Normandy, 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 Landscape Ecological Potential) Health Index (human, wildlife and plants populations) Total Ecological Potential (terrestrial ecosystems) Total Ecological Potential (terrestrial ecosystems ) Health Index (human, wildlife and plants populations) Water Index (exergy loss from evaporation & pollution) Landscape Index (the Landscape Ecological Potential) Bio-productivity Index (carbon, biomass, diversion from Nature) Biodiversity Index (rarefaction, loss of adaptability) Dependency Index (land, soil, energy, water, N,P,K...) Depreciation of Ecosystem Capital = Change in TEP * No valuation of ecosystem services or assets is needed

9. Change in Total Ecological Potential Services Sectors Spatial Units Basic physical balances Spatial Units Health counts Water resource, supply & use Land Use (surfaces & commoditie s) Carbon/ biomass resource, supply & use Water functions & ecosystem services Land functions & ecosystem services Carbon/ biomass functions & ecosystem services Water bodies resource & abstraction Land cover stocks & change Carbon/ biomass resource and extraction/ harvesting Water quantity & quality Landscape patterns Carbon/ Biomass, productivity Human morbidity/ environment & food security Dependency from regulating ecosystem services Biodiversity related ecosystem services Distribution of critical areas for health Natural and semi-natural habitats & species distribution Water, C, energy, NPK, subsidies Ecosystem health factors Biodiversity factors Net external balances by socio- ecosystems LCA: impacts of chemical,, on human and wildlife health Fishing, hunting, harvesting of wild species (non cultivated) Sectors Expenditure accounts Water protection & management Land protection & management Carbon/ biomass Protection & management Health protection Biodiversity protection Agriculture & fishery subsidies Virtual land, water, and carbon use (domestic and in imports) Spatial Units Indexes Water Index (exergy loss from evaporation & pollution) Landscape Index (the Landscape Ecological Potential) Carbon/ biomass Index (carbon, biomass, diversion from Nature) Health Index (human, wildlife and plants populations) Biodiversity Index (rarefaction, loss of adaptability) Dependency Index ( land, soil, energy, water, N,P,K...) Ecosystem capital depreciation Maintenance/ Restoration Costs degradation mean Implementation priorities

10. Accounts & Indexes : e.g. Carbon Ecosystem Accounts Opening stocks by ecosystems Formation of bio-C (Net Ecosystem Production) Withdrawals by activities Net transfers between ecosystems Returns from activities Imports/Exports Storage in the user system Consumption/combustion of bio-C Changes due to natural & multiple causes In situ bio-C storage Final stocks by ecosystems Withdrawal of bio-C Input-Output between sectors Returns of bio-C Imports/Exports Storage in the user system Consumption/combustion of bio-C Combustion of fossil fuel CO 2 /CH 4 emissions Ecosystem Asset Account (Bio-C balances) NPP trends NPP perturbation Change in NPP profiles Consumption of C / Emissions of CO 2 CH 4 Net Carbon Offset Expenditures C taxes and subsidies Net purchase of C permits Ecosystem C-Productivity Counts Sector Accounts (Supply & Use, MFA, NAMEA, Expenditures) Virtual C embodied in Import-Export Virtual C by products

11. Carbon/biomass indexes (parts) Trends in NPP and cumulated annual change 2000-2008 + - Standard deviation of NPP trend 2000-2008 High variability Low variability

12. 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 Index: Landscape Ecological Potential

13. 1990 Change 1990-2000 LEAC/ Landscape Ecological Potential 1990-2000, 1km² grid (Source: Ecosystem Accounting for Mediterranean Wetlands, an EEA feasibility study for TEEB) Land Index: LEP, state and change by 1 km² grid Natural Park of Camargue (France)

14. Water accounts meeting WFD requirements Cost for mitigating impacts of use over water bodies CMI Cost of ecosystem restoration CER Cost of water supply including sewage & treatment (service) CWS Restoration PHYSICAL COSTSMONETARY COSTS Degradation of water quality Water use Impacts on ecosystems Physico- chemical objectives Biological & hydro-morphological objectives Full recovery of water costs of the WFD = CWS + CMI + CER Cost of the effective measures for meeting the objective of the WFD considered in the Program me of Measures of River Basin Management Plan JLW adapted from: Joan Escriù, Jose Manuel Naredo, Antonio Valero 2007

15. Input from conventional environment and resource accounts Physical accounts –MFA (particular interest to impacts, linkage to LCA…) –Input-Output Tables, Hybrid accounts (NAMEA) Environmental protection and resource management expenditures –Statistical source for calculating mean remediation costs + broad use of socio-economic statistics: –Socio-demography, health –Agriculture, forestry, fisheries –Energy –Trade…

16. Ex. Use of agriculture statistics: Virtual Land Use & Agriculture Footprints (input to Dependency Index) Trends in EU virtual land flows: EU agricultural land use through international trade between 1995-2005. Manel van der Sleen, EEA 2009

17. Conclusive remarks Simplified accounts, outcome oriented: measurement of ecosystem capital depreciation Multicriteria diagnosis of ecosystem state from a small set of indexes based on physical accounts: measurement of ecosystem degradation (resource quantity and ecosystem health altogether) Priority integration of land (terrestrial atmosphere) assessment No valuation of ecosystem capital and services; only valuation of remediation costs Messages for green economy (green growth, beyond GDP…): ecosystems), water (inland and sea) and carbon (bio-C, –Reinvestment for maintaining ecosystem capital Adjusted Disposable National Income as performance indicator –Real price of final consumption FC at full cost (environmentally sustainable) –Real price of imports and exports trade at full cost –Environmental liabilities created when full costs are not paid